What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-22 · 227 added, 232 removed, 320 unchanged (59% of the section changed)

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metropolitan area with high barriers to entry and vibrant urban amenities.

Over half of our portfolio is in National Landing, where we serve as the developer for Amazon's 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 WHI Impact Pool, the JBG Legacy Funds and other third parties.

Approximately two-thirds of our portfolio is in National Landing, which is anchored by four key demand drivers:

Amazon's new headquarters, which is being developed by us;

Virginia Tech's under-construction $1 billion Innovation Campus;

the submarket’s proximity to the Pentagon;

and our deployment of next-generation public and private 5G digital infrastructure.

In addition, 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.

Substantially all our assets are held by, and our operations are conducted through, JBG SMITH LP.

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

The accompanying consolidated financial statements are prepared in accordance with 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 consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods.

Actual results could differ from these estimates.

We have elected to be taxed as a REIT under sections 856-860 of the Code.

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

As of December 31, 2021, our Operating Portfolio consisted of 64 operating assets comprising 42 commercial assets totaling 13.1 million square feet (11.3 million square feet at our share) and 22 multifamily assets totaling 8,208 units (6,557 units at our share).

Additionally, we have:

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

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

and (iii) 25 future development pipeline assets totaling 14.3 million square feet (11.6 million square feet at our share) of estimated potential development density.

We 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.

As of December 31, 2022, our Operating Portfolio consisted of 51 operating assets comprising 31 commercial assets totaling 9.7 million square feet (8.4 million square feet at our share), 18 multifamily assets totaling 6,756 units (6,755 units at our share) and two wholly owned land assets for which we are the ground lessor.

Additionally, we have two under-construction multifamily assets with 1,583 units (1,583 units at our share) and 20 assets in the development pipeline totaling 12.5 million square feet (9.7 million square feet at our share) of estimated potential development density.

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

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.

Additionally, the cutting-edge digital infrastructure investments we are making in National Landing, including the purchase of CBRS wireless spectrum 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.

March 2019, we executed purchase and sale agreements with Amazon for two of our National Landing development sites, Metropolitan Park and Pen Place, on which Amazon is constructing its new headquarters.

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, and we expect Amazon to begin construction of four new buildings (three office towers and The Helix) in 2022.

In December 2021, we finalized the agreement for the sale of Pen Place to Amazon for $198.0 million, which represents a $48.1 million increase over the previously estimated contract value.

Additionally, the cutting-edge digital infrastructure investments we are making, including our ownership of Citizens Broadband Radio Service wireless spectrum in National Landing and our agreements with AT&T and Federated Wireless, are advancing our efforts to make National Landing among the first 5G-operable submarkets in the nation.

Amazon's new headquarters is located in National Landing.

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

We sold Amazon two of our National Landing development sites, Metropolitan Park and Pen Place.

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

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

We expect to deliver Metropolitan Park and Amazon to occupy it this summer.

A fundamental component of our strategy to maximize long-term 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.

Since 2017, we have completed the sale, recapitalization and/or ground lease of $1.7 billion of primarily office assets.

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 will enable 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 are the greatest.

We evaluate development, acquisition, disposition, share repurchases and other investment decisions based on how they may impact

long-term NAV per share.

We intend to continue to opportunistically sell or recapitalize assets 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.

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.

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.

Occupancy of our commercial portfolio declined by 480 basis points from December 31, 2020, the majority of which was related to pre-pandemic decision making, although we had two civilian agency GSA tenants that reduced their leased square footage due to a planned shift toward working from home.

Parking revenue in our commercial portfolio was approximately 65% of pre-pandemic levels of approximately $30 million annually due to delayed return-to-the-office plans for many of our office tenants.

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

Although asking rents in our portfolio ended the year above pre-pandemic levels, average in-place rents ended the year approximately 9% below asking rents.

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

In 2021 and 2020, we recorded $1.1 million and $11.2 million of credit losses against billed rent receivables, and $19.6 million against deferred (straight-line) rent receivables in 2020.

These losses were due to the effects of COVID-19, primarily from co-working and retail tenants, that were unable to pay rent while businesses were closed, not operating at full capacity or while employees continue to work from home.

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

We provided rent deferrals that had been contractually due during 2020 and 2021 totaling $10.1 million, of which $4.0 million was subsequently abated and $1.2 million was collected.

During 2021, revenue for the majority of these tenants continued to be recognized on the cash basis of accounting.

While we have seen some improvement in performance and cash collections, our retailers and co-working tenants are still experiencing some impact from the effects of COVID-19 and may continue to experience such impact.

During the fourth quarter of 2021, we received $4.5 million of business interruption insurance proceeds for COVID-19 related losses, which were included in "Interest and other income (loss), net"

in our consolidated statement of operations.

We anticipate 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.

However, curbed lending activity has significantly slowed down the pace of asset sales and we expect this reduced activity to continue into 2023.

As we look to preserve balance sheet strength and flexibility, any new development or acquisition will be largely dependent on executing additional dispositions.

In the meantime, we continue to advance our two under-construction multifamily assets in National Landing, 1900 Crystal Drive and 2000/2001 South Bell Street, totaling 1,583 units.

Our office portfolio occupancy as of December 31, 2022 increased by 220 basis points compared to December 31, 2021.

Although 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 were able to execute 936,000 square feet of office leases during the year at our share, over 20% of which comprised new leases in National Landing.

We have 739,700 square feet of office leases expiring in 2023 with another 40,400 square feet currently in month-to-month status.

Our ability to renew or re-lease this space will impact our occupancy in 2023.

Our multifamily portfolio occupancy as of December 31, 2022 increased by 180 basis points compared to December 31, 2021.

For fourth quarter lease expirations, we increased rents by 9.7% upon renewal while achieving a 55.7% renewal rate across our portfolio.

Operating Results

Highlights of operating results for the year ended December 31, 2022 included:

● net loss attributable to common shareholders of $79.3 million, or $0.63 per diluted common share, for 2021 as compared to $62.3 million, or $0.49 per diluted common share, for 2020;

● third-party real estate services revenue, including reimbursements, of $114.0 million for 2021 as compared to $113.9 million for 2020;

● operating commercial portfolio leased and occupied percentages at our share of 84.9% and 82.9% as of December 31, 2021 compared to 88.1% and 87.7% as of December 31, 2020;

● operating multifamily portfolio leased and occupied percentages (1) at our share of 93.6% and 91.8% as of December 31, 2021 and 87.3% and 81.7% as of December 31, 2020.

The in-service operating multifamily portfolio was 95.4% leased and 93.4% occupied as of December 31, 2021 as compared to 91.0% leased and 87.3% occupied as of December 31, 2020;

● the leasing of 1.7 million square feet at our share, at an initial rent (2) of $45.58 per square foot and a GAAP-basis weighted average rent per square foot (3) of $44.58 for 2021;

● a decrease in same store (4) NOI of 0.9% to $299.7 million for 2021 as compared to $302.3 million for 2020.

● net income attributable to common shareholders of $85.4 million, or $0.70 per diluted common share, compared to a net loss attributable to common shareholders of $79.3 million, or $0.63 per diluted common share, for 2021;

● third-party real estate services revenue, including reimbursements, of $89.0 million compared to $114.0 million for 2021;

● operating commercial portfolio leased and occupied percentages at our share of 88.5% and 85.1% compared to 84.9% and 82.9% as of December 31, 2021;

● operating multifamily portfolio leased and occupied percentages (1) at our share of 94.5% and 93.6% compared to 93.6% and 91.8% as of December 31, 2021;

● the leasing of 936,000 square feet at our share, at an initial rent (2) of $46.41 per square foot and a GAAP-basis weighted average rent per square foot (3) of $45.44;

● an increase in same store (4) NOI of 12.1% to $302.3 million compared to $269.7 million for 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 at our share.

(2) Represents the cash basis weighted average starting rent per square foot, 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.

(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 year ended December 31, 2022 included:

● the acquisition of The Batley, a 432-unit multifamily asset in the Union Market submarket of Washington, D.C., for $205.3 million, exclusive of $3.1 million of transaction costs that were capitalized as part of the acquisition, which we intend to use as a replacement property in a like-kind exchange for the sale of Pen Place to Amazon.

● the acquisition of the remaining 50.0% ownership interest in 8001 Woodmont, a 322-unit multifamily asset in Bethesda, Maryland previously owned by an unconsolidated real estate venture, for a purchase price of $115.0 million, including the assumption of the $51.9 million mortgage loan at our share.

The asset was encumbered by a $103.8 million mortgage loan.

See Note 3 to the consolidated financial statements for additional information;

● 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.

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.

● the acquisition of the remaining 36.0% ownership interest in Atlantic Plumbing, a 310-unit multifamily asset in Washington, D.C.

previously owned by an unconsolidated real estate venture, which was encumbered by a $100.0 million mortgage loan, for a purchase price of $19.7 million and our partner’s share of the working capital.

See Note 3 to the consolidated financial statements for additional information;

● the lease of the land underlying 2000/2001 South Bell Street located in National Landing to a lessee, which plans to construct a 775-unit multifamily asset comprising two towers with ground floor retail.

The ground lessee has engaged us to be the development manager for the construction of 2000/2001 South Bell Street, and separately, we are the lessee in a master lease of the asset.

● the sale of the Universal Buildings, Pen Place, a development parcel and a land option for an aggregate gross sales price of $435.4 million.

See Note 3 to the consolidated 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 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.

● 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.

See Note 5 to the consolidated financial statements for additional information;

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See Note 5 to the consolidated financial statements for additional information;

● execution of two separate mortgage loans with a principal balance of $190.0 million, collateralized by 1225 S.

Clark Street and 1215 S.

Clark Street;

● borrowings of $300.0 million under our revolving credit facility;

● the acquisition of an additional 3.7% interest in The Wren, a multifamily asset owned by a consolidated real estate venture, for $9.5 million, increasing our ownership interest to 99.7%;

● the sale of investments in equity securities during the first quarter of 2022 which had been carried at cost, resulting in a realized gain of $13.9 million;

● the amendment of our $200.0 million Tranche A-1 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 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.

See Note 9 to the consolidated financial statements for additional information;

● the amendment of our $200.0 million Tranche A-2 Term Loan 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 with the remaining $50.0 million 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.

See Note 9 to the consolidated financial statements for additional information;

● the repayment of the outstanding balance on our revolving credit facility totaling $300.0 million, and the amendment of the interest rate 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;

● a new mortgage loan 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;

● the payment of dividends totaling $107.7 million and distributions to our noncontrolling interests of $16.4 million;

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Activity subsequent to December 31, 2022 included:

● a definitive agreement with affiliates of Fortress Investment Group LLC, entered into on February 11, 2022, to form a real estate venture in which we will have a noncontrolling interest.

The unconsolidated real estate venture will acquire a 1.6 million square foot portfolio of four wholly owned commercial assets from us.

The assets include 7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2.

The transaction is expected to close in the first half of 2022, subject to financing and customary closing conditions;

● the amendment of the Tranche A-1 Term Loan to extend the maturity date to January 2025 with two one-year extension options, and to amend the interest rate to SOFR plus 1.05% to SOFR plus 1.65%, in each case including a credit spread adjustment;

● the sale by one of our unconsolidated real estate ventures of The Alaire, The Terano and 12511 Parklawn Drive, multifamily and future development assets located in Rockville, Maryland, for $137.5 million.

Our ownership in these assets ranged from 1.8% to 18.0%.

● a $187.6 million loan facility, collateralized by The Wren and F1RST Residences.

The loan has a seven-year term and a fixed interest rate of 5.13%.

This loan is the initial advance under a Fannie Mae multifamily credit facility, which provides flexibility for collateral substitutions, future advances tied to performance, ability to mix fixed and floating rates, as well as stagger maturities.

Proceeds from the loan were used to repay the mortgage loan on 2121 Crystal Drive, which had a fixed interest rate of 5.51%.

Critical Accounting Estimates

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Asset Acquisitions

We account for asset acquisitions at cost, which includes the consolidation of previously unconsolidated real estate ventures, including transaction costs, plus the fair value of any assumed debt.

We account for asset acquisitions, which includes the consolidation of previously unconsolidated real estate ventures, at cost, including transaction costs, plus the fair value of any assumed debt.

We estimate the fair values of acquired assets and liabilities assumed based on our evaluation of information and estimates available at the date of acquisition.

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approach whereby we use discounted cash flow models with inputs and assumptions that we believe are consistent with current market conditions for similar assets.

The most significant assumptions in determining the allocation of the purchase price to buildings are the exit capitalization rate, discount rate, estimated market rents and hypothetical expected lease-up periods.

We assess the fair value of land based on market comparisons and development projects using an income approach of cost plus a margin.

Sensitivity of Estimate to Change:

While our methodology did not change in 2021, if the estimates and assumptions in our discounted cash flow models used to value our buildings or our projections of land value change based on market conditions or other factors, our evaluation of fair values may be different and such differences could be material to our consolidated financial statements.

While our methodology did not change in 2022, to the extent the estimates and assumptions in our discounted cash flow models used to value our buildings or our projections of land value change due to market conditions or other factors, our estimated fair values may be different and such differences could be material to our consolidated financial statements.

Real estate is carried at cost, net of accumulated depreciation and amortization.

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Our real estate and related intangible assets are reviewed for impairment whenever there are changes in circumstances or indicators that the carrying amount of the assets may not be recoverable.

These indicators may include operating performance, shortened anticipated holding periods, costs in excess of budgets for under-construction assets and adverse changes in circumstances.

These indicators may include declining operating performance, below average occupancy, shortened anticipated holding periods, costs in excess of budgets for under-construction assets and other adverse changes.

An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.

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Sensitivity of Estimate to Change:

While our methodology did not change in 2021, if our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions, anticipated selling prices or other factors, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.

While our methodology did not change in 2022, if our estimates of future cash flows, anticipated holding periods, asset strategy or fair values change, based on market conditions, anticipated selling prices or

other factors, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements.

Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.

Longer anticipated holding periods for real estate assets directly reduce the likelihood of recording an impairment loss.

If there is a change in the strategy for an asset or if market conditions dictate an earlier sale date, an impairment loss may be recognized, and such loss could be material.

In connection with the preparation and review of our 2021 annual consolidated financial statements, we recorded impairment losses totaling $25.1 million related to 7200 Wisconsin Avenue, RTC-West and a future development parcel, which are non-core assets that were written down to their estimated fair value due to shortened anticipated holding periods, based on contracts under negotiation as of December 31, 2021.

If there is a change in the strategy for an asset or if market conditions dictate a shorter holding period, an impairment loss may be recognized, and such loss could be material.

Investments in Real Estate Ventures

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We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary.

These factors include the age of the venture, our intent and ability to retain our investment in the entity, financial condition and long-term prospects of the entity and relationships with our partners and banks.

These factors include the age of the venture, our intent and ability to retain our investment in the real estate venture, financial condition and long-term prospects of the real estate venture and relationships with our partners and banks.

If we believe that the decline in the fair value of the investment is temporary, no impairment loss is recorded.

If our analysis indicates that there is an other-than temporary impairment related to the investment in a particular real estate venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment.

In the event our investment in a real estate venture is reduced to zero, and we are not obligated to provide for additional losses, have not guaranteed its obligations or otherwise committed to providing financial support, we will discontinue the equity method of accounting until such point that our share of net income equals the share of net losses not recognized during the period the equity method was suspended.

Sensitivity of Estimate to Change:

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We periodically evaluate the collectability of amounts due from tenants and recognize an adjustment to property rental revenue for accounts receivable and deferred rent receivable if we conclude it is not probable we will collect the remaining lease payments under the lease agreements.

We exercise judgment in assessing the probability of collection and consider payment history and current credit status in making this determination.

We exercise judgment in assessing the probability of collection and consider payment history, current credit status and economic outlook in making this determination.

Sensitivity of Estimate to Change:

If the probability of collection changes, due to tenant creditworthiness, changes to tenant payment patterns or economic trends, including the impact of COVID-19, our evaluation of collectability may be different and such differences could be material to our consolidated financial statements.

Due to the impact of COVID-19, during 2020, we began recognizing revenue from substantially all co-working tenants and retailers except for grocers, pharmacies, essential businesses and certain national credit tenants on the cash basis of accounting.

During 2021, revenue for the majority of these tenants continued to be recognized on the cash basis of accounting.

If the probability of collection changes, due to tenant creditworthiness, changes to tenant payment patterns or economic trends, our evaluation of collectability may be different and such differences could be material to our consolidated financial statements.

Recent Accounting Pronouncements

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Results of Operations

The following section discusses certain line items from our 2021 and 2020 consolidated statements of operations and the year-to-year comparisons between 2021 and 2020.

Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations"

The following section discusses certain line items from our consolidated statements of operations and the year-to-year comparisons between 2022 and 2021.

Discussions of the year-to-year comparisons between 2021 and 2020 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations"

in Part II, Item 7 of Annual Report on Form 10-K for the year ended December 31, 2021 , filed with the SEC on February 22, 2022, which is incorporated herein by reference.

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

In 2022, we sold the Universal Buildings and Pen Place, and sold 7200 Wisconsin Avenue, 1730 M Street, RTC-West/RTC-West Trophy Office/RTC-West Land ("RTC-West") and Courthouse Plaza 1 and 2 to an unconsolidated real estate venture.

We collectively refer to these assets as the "Disposed Properties"

in the discussion below.

In 2022, we acquired the remaining 36.0% ownership interest in Atlantic Plumbing and the remaining 50.0% ownership interest in 8001 Woodmont, which were previously owned by unconsolidated real estate ventures and consolidated upon acquisition.

In November 2021, we acquired The Batley.

In January 2020, we sold Metropolitan Park.

In December 2020, we acquired the Americana Portfolio.

Comparison of the Year Ended December 31, 2022 to 2021

The following summarizes certain line items from our consolidated statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the year ended December 31, 2021 as compared to the same period in 2020:

Year Ended December 31,

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Loss from unconsolidated real estate ventures, net

Interest and other income (loss), net

Interest and other income, net

Interest expense

Gain on sale of real estate

Gain on the sale of real estate, net

Impairment loss

* Not meaningful.

Property rental revenue increased by $40.6 million, or 8.9%, to $499.6 million in 2021 from $459.0 million in 2020.

The increase was primarily due to (i) a $25.0 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 in 2021, (ii) an $18.6 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) an $8.7 million increase related to 1770 Crystal Drive, which was placed into service in the fourth quarter of 2020, (iv) a $4.4 million increase related to the commencement of a lease with Amazon at 2100 Crystal Drive and (v) a $3.7 million increase related to 1225 S.

Clark Street due to the commencement of a lease.

The increase in property rental revenue was partially offset by (i) an $11.3 million decrease related to lower occupancy at the Universal Buildings, 2011 Crystal Drive, 2101 L Street and RTC-West, (ii) a $4.8 million decrease related to 1901 South Bell Street due to tenant reimbursements for construction services in 2020 and (iii) a $3.0 million decrease related to RiverHouse Apartments and The Bartlett due to increased rent concessions and lower market rents.

Third-party real estate services revenue, including reimbursements, increased by $64,000, or 0.1%, to $114.0 million in 2021 from $113.9 million in 2020.

The increase was primarily due to a $14.0 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 $8.5 million decrease in reimbursements revenue and a $2.5 million decrease in construction management fees due to the timing of construction projects and a $2.1 million decrease in property and asset management fees due to the sale of assets within the JBG Legacy Funds.

Depreciation and amortization expense increased by $14.5 million, or 6.6%, to $236.3 million in 2021 from $221.8 million in 2020.

The increase was primarily due to (i) an $8.6 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 $6.5 million increase related to the Universal Buildings due to the write-off of certain tenant improvements, (iii) a $6.2 million increase related to 2345 Crystal Drive due to an increase in tenant improvements, (iv) a $3.0 million increase due to 1770 Crystal Drive being placed into service, (v) a $2.3 million increase related to Crystal Drive Retail due to the acceleration of depreciation of certain assets, (vi) a $2.1 million increase related to The Batley, which was acquired in November 2021, and (vii) a $2.0 million increase related to 1550 Crystal Drive as additional space was placed into service.

The increase in depreciation and amortization expense was partially offset by a $16.0 million decrease related to 2000/2001 South Bell Street as the existing buildings were demolished and we commenced construction on two new buildings in January 2022.

Property operating expense increased by $5.0 million, or 3.4%, to $150.6 million in 2021 from $145.6 million in 2020.

The increase was primarily due to (i) a $4.0 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 $3.1 million increase related to 2451 Crystal Drive due to costs incurred for construction management services provided to tenants, (iii) a $2.0 million increase due to 1770 Crystal Drive being placed into service and (iv) a $1.1 million increase at Courthouse Plaza 1 and 2 primarily related to ground rent expense.

The increase in property operating expense was partially offset by a $5.5 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 decreased by $135,000, or 0.2%, to $70.8 million in 2021 from $71.0 million in 2020.

The decrease was primarily due to a $1.8 million decrease related to Courthouse Plaza 1 and 2 due to a tax refund received in 2021 related to prior years and a decrease in real estate tax assessments for various properties located in National Landing.

The decrease in real estate tax expense was partially offset by (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 $717,000 increase related to 5 M Street Southwest due to an increase in its applicable tax rate in 2021 and (iii) a $617,000 increase due to 1770 Crystal Drive being placed into service.

Property rental revenue decreased by $7.8 million, or 1.6%, to $491.7 million in 2022 from $499.6 million in 2021.

The decrease was primarily due to a $50.2 million decrease in revenue from our commercial assets, partially offset by a $40.2 million increase in revenue from our multifamily assets.

The decrease in revenue from our commercial assets was primarily due to (i) a $55.4 million decrease related to the Disposed Properties and (ii) a $2.1 million decrease related to 2451 Crystal Drive due to construction management services provided to tenants in 2021, partially offset by (iii) a $3.5 million increase related to the commencement of a lease with Amazon at 2100 Crystal Drive and (iv) a $2.7 million increase related to increased occupancy and higher average daily rates at Crystal City Marriott.

The increase in revenue from our multifamily assets was primarily due to (i) a $10.9 million increase related to higher occupancy at several recently developed properties (West Half, The Wren, 900 W Street and 901 W Street), (ii) a $10.5 million increase at RiverHouse, The Bartlett and 2221 S.

Clark Street - Residential due to higher occupancy and rents (iii) a $9.7 million increase related to our acquisition of The Batley and (iv) a $6.6 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont.

Third-party real estate services revenue, including reimbursements, decreased by $25.0 million, or 21.9%, to $89.0 million in 2022 from $114.0 million in 2021.

The decrease was primarily due to (i) a $17.2 million decrease in development fees related to the timing of development projects, (ii) a $5.5 million decrease in reimbursement revenue due to the termination of a management agreement and fewer construction management projects, and (iii) a $2.3 million decrease in asset management fees due to the sale of assets within the JBG Legacy Funds.

Depreciation and amortization expense decreased by $22.5 million, or 9.5%, to $213.8 million in 2022 from $236.3 million in 2021.

The decrease was primarily due to a $33.3 million decrease related to the Disposed Properties and a $4.9 million decrease related to 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 (i) an $8.0 million increase related to our acquisition of The Batley, (ii) a $5.9 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont and (iii) a $1.8 million increase related to 2221 S.

Clark Street – Office due to the amortization and disposal of certain tenant improvements.

Property operating expense decreased by $634,000, or 0.4%, to $150.0 million in 2022 from $150.6 million in 2021.

The decrease was primarily due to a $19.4 million decrease related to the Disposed Properties, partially offset by (i) a $10.9 million increase in property expenses across our portfolio, primarily related to higher repairs and maintenance, utilities, cleaning, insurance, and payroll, primarily due to higher tenant occupancy and rising costs, (ii) a $3.2 million increase related to our acquisition of The Batley, (iii) a $2.7 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and (iv) a $2.0 million increase related to digital infrastructure initiatives in National Landing.

Real estate tax expense decreased by $8.7 million, or 12.2%, to $62.2 million in 2022 from $70.8 million in 2021.

The decrease was primarily due to a $9.0 million decrease related to the Disposed Properties.

General and administrative expense:

corporate and other increased by $4.5 million, or 8.3%, to $58.3 million in 2022 from $53.8 million in 2021.

The increase was primarily due to increases in compensation and information technology expenses.

The increase was primarily due to higher compensation expenses.

General and administrative expense:

third-party real estate services decreased by $12.6 million, or 11.8%, to $94.5 million in 2022 from $107.2 million in 2021.

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

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

General and administrative expense:

share-based compensation related to Formation Transaction and special equity awards decreased by $10.9 million, or 67.0%, to $5.4 million in 2022 from $16.3 million in 2021.

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 $10.4 million in 2021 consisted of $5.8 million of expenses related to completed, potential and pursued transactions, $3.6 million of demolition costs related to 2000/2001 South Bell Street and $1.0 million of integration and severance costs.

Transaction and other costs of $8.7 million in 2020 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 region, $3.7 million of integration and severance costs and $682,000 of demolition costs related to several under development properties.

Loss from unconsolidated real estate ventures decreased by $18.3 million, or 89.8%, to $2.1 million for 2021 from $20.3 million in 2020.

The decrease was primarily due to (i) the recognition of our proportionate share of the gain from the sale of various assets totaling $28.3 million in 2021 as compared to a net $2.2 million loss from the sale of 11333 Woodglen Drive/NoBe II Land/Woodglen and Pickett Industrial Park in 2020, (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 and (iii) a $6.1 million charge recognized in 2020 from the deferral of rent and the write-off of deferred rent receivables for tenants that were placed on the cash basis of accounting and an increase in uncollectible operating lease receivable attributable to COVID-19.

The decrease in the loss from unconsolidated real estate ventures was partially offset by an impairment loss recorded by one of our unconsolidated real estate ventures, of which our proportionate share was $23.9 million.

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, and the recapture of expense from forfeited awards.

Transaction and other costs of $5.5 million in 2022 consisted of (i) $2.7 million of expenses related to completed, potential and pursued transactions, (ii) $2.0 million of integration and severance costs, and (iii) $813,000 of demolition costs primarily related to 223 23 rd Street and 2250/2300 Crystal Drive.

Transaction and other costs of $10.4 million in 2021 consisted of (i) $5.8 million of expenses related to completed, potential and pursued transactions, (ii) $3.6 million of demolition costs related to 2000/2001 South Bell Street and (iii) $1.0 million of integration and severance costs.

Loss from unconsolidated real estate ventures increased by $15.4 million, or 742.0%, to $17.4 million for 2022 from $2.1 million in 2021.

The increase was primarily due to a $21.5 million reduction in gains at our share from the sale of various assets in 2022 compared to 2021, partially offset by a $6.0 million decrease in impairment losses in 2022 compared to 2021.

Interest and other income of $18.6 million in 2022 was primarily related to (i) a net realized gain of $12.3 million primarily from the sale of investments in equity securities, which had been carried at cost, during the first quarter of 2022, (ii) $3.2 million in interest income primarily on cash and cash equivalents and (iii) a $2.1 million unrealized gain related to equity investments carried at fair value.

Interest and other income of $8.8 million in 2021 was primarily related to $4.5 million of business interruption insurance proceeds received for COVID-19 related losses and $3.6 million of net investment income from investment funds entered into in 2021.

Interest expense increased by $8.0 million, or 11.7%, to $75.9 million in 2022 from $68.0 million in 2021.

The increase was primarily due to a $6.5 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 $6.1 million increase

due to new mortgage loans entered into in 2021 and 2020 at 1225 S.

Clark Street, 1221 Van Street, The Bartlett and 220 20 th Street.

The increase in interest expense was partially offset by a $2.5 million decrease related to our revolving credit facility due to a lower weighted average outstanding balance and to a $4.5 million decrease related to the repayment of a mortgage loan at WestEnd25 in 2020.

The increase in interest expense was primarily due to (i) a $7.3 million increase due to new mortgage loans entered into at WestEnd25, 1225 S.

Clark Street and 1215 S.

Clark Street, (ii) a $5.1 million increase related to 4747 Bethesda Avenue and The Bartlett due to rising interest rates, (iii) a $2.6 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, (iv) a $2.0 million increase related to a higher average outstanding balance and higher interest rates on our revolving credit facility and (v) a $1.2 million increase related to additional draws on our term loans.

The increase in interest expense was partially offset by a $6.7 million increase in the fair value of our interest rate caps as a result of rising interest rates and a $4.2 million increase in capitalized interest primarily related to 1900 Crystal Drive.

Gain on the sale of real estate of $161.9 million in 2022 was primarily due to the sale of the Disposed Properties.

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 3 to the consolidated 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.

Impairment loss of $25.1 million in 2021 was related to 7200 Wisconsin Avenue, RTC-West and a future development parcel, which are non-core assets that were written down to their estimated fair value due to shortened anticipated holding periods, based on contracts under negotiation as of December 31, 2021.

Impairment loss of $10.2 million in 2020 was due to a decline in the fair value of One Democracy Plaza, a non-core commercial real estate asset, which was written down to its estimated fair value.

Impairment loss of $25.1 million in 2021 was related to 7200 Wisconsin Avenue, RTC-West and a development parcel, which were written down to their estimated fair value and subsequently sold to an unconsolidated real estate venture in April 2022.

FFO is a non-GAAP financial measure computed in accordance with the definition established by Nareit in the Nareit FFO White Paper - 2018 Restatement.

Nareit defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures.

We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions.

Nareit defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization expense related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures.

We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions, and other non-comparable income and expenses.

FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP), as a performance measure or cash flow as a liquidity measure.

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Net income (loss) attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Net income (loss) attributable to noncontrolling interests

Net income (loss)

Gain on sale of real estate

(Gain) loss on sale of unconsolidated real estate assets

Gain on the sale of real estate, net of tax

Gain on the sale of unconsolidated real estate assets

Real estate depreciation and amortization

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FFO attributable to common shareholders

(1) In connection with the preparation and review of our annual consolidated financial statements, we determined certain assets were impaired and recorded impairment losses for the year ended December 31, 2021 and 2020 totaling $25.1 million ($24.3 million net of tax) and $10.2 million (of which $7.8 million related to real estate).

(2) Includes an impairment on real estate assets taken by an unconsolidated real estate venture and impairments of our investment in unconsolidated real estate ventures related to decreases in the value of the underlying assets.

(1) In connection with the preparation and review of our annual consolidated financial statements, we determined certain assets were impaired and recorded impairment losses for the years ended December 31, 2021 and 2020 totaling $25.1 million ($24.3 million net of tax) and $10.2 million (of which $7.8 million related to real estate).

(2) Related to decreases in the value of the underlying real estate assets.

NOI and Same Store NOI

NOI is a non-GAAP financial measure management uses to assess a segment's performance.

NOI is a non-GAAP financial measure management uses to assess an asset's performance.

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

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In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets.

However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited.

However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited.

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

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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 year ended December 31, 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.

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 disposed properties or properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

During the year ended December 31, 2022, our same store pool decreased to 47 properties from 55 properties due to (i) the exclusion of The Alaire, The Terano, Galvan and The Gale Eckington, which were sold during the period, (ii) the exclusion of 2221 S.

Street – Office, which was taken out of service, (iii) the exclusion of Universal Buildings, 7200 Wisconsin Avenue, 1730 M Street, RTC-West, Courthouse Plaza 1 and 2, which were sold to an unconsolidated real estate venture during the period and for which our investment in the venture was written down to zero and we have discontinued applying the equity method of accounting, (iv) the exclusion of the L’Enfant Plaza assets (L’Enfant Plaza Office – East, L’Enfant Plaza Office – North and L’Enfant Plaza Retail), assets owned through an unconsolidated real estate venture for which our investment in the venture was written down to zero and we have discontinued applying the equity method of accounting, and (v) the inclusion of West Half, 901 W Street, 900 W Street, 1770 Crystal Drive and 4747 Bethesda Avenue as they were in service for the entirety of the comparable periods.

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.

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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 decreased by $2.6 million, or 0.9%, for the year ended December 31, 2021 as compared to the year ended December 31, 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 uncollectable operating lease receivables and rent deferrals.

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

Same store NOI increased by $32.5 million, or 12.1%, to $302.3 million for the year ended December 31, 2022 from $269.7 million for the year ended December 31, 2021.

The increase was substantially attributable to (i) higher occupancy and rents and lower concessions in our multifamily portfolio, (ii) higher occupancy and average daily rates at the Crystal City Marriott, (iii) an increase in parking revenue in our commercial portfolio and (iv) abatement burn-off at certain assets, partially offset by (v) higher utilities and cleaning expenses.

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

Year Ended December 31,

Net loss attributable to common shareholders

(Dollars in thousands)

Net income (loss) attributable to common shareholders

Depreciation and amortization expense

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Interest expense

Loss on extinguishment of debt

Loss on the extinguishment of debt

Impairment loss

Income tax expense (benefit)

Net loss attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Income tax expense

Net income (loss) attributable to redeemable noncontrolling interests

Net income (loss) attributable to noncontrolling interests

Third-party real estate services, including reimbursements revenue

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Loss from unconsolidated real estate ventures, net

Interest and other income (loss), net

Gain on sale of real estate

Interest and other income, net

Gain on the sale of real estate, net

Consolidated NOI

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(2) Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and allocated corporate general and administrative expenses to operating properties.

(3) Includes the results of our under-construction assets, and near-term and future development pipelines.

(4) Includes the results of properties that were not in-service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

(3) Includes the results of our under-construction assets and assets in the development pipeline.

(4) Includes the results of properties that were not in-service for the entirety of both periods being compared, including disposed properties, and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

(5) Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared.

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

We defined our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our 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 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.

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Year Ended December 31,

(In thousands)

Property management fees

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Third-party real estate services revenue less expenses

(1) As of December 31, 2021, we had estimated unrecognized development fee revenue totaling $48.6 million, of which $13.8 million, $12.0 million and $6.3 million is expected to be recognized in 2022, 2023 and 2024, and $16.5 million is expected to be recognized from 2025 to 2027 as unsatisfied performance obligations are completed.

(1) 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.

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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.

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 the other segment to better align with our internal reporting.

Property revenue is calculated as property rental revenue plus parking revenue.

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Year Ended December 31,

(In thousands)

Property revenue:

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Consolidated NOI

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

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

Comparison of the Year Ended December 31, 2022 to 2021

Property rental revenue increased by $19.0 million, or 5.3%, to $378.3 million in 2021 from $359.3 million in 2020.

Consolidated NOI increased by $23.4 million, or 11.3%, to $229.6 million in 2021 from $206.2 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 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 $18.4 million, or 15.1%, to $140.3 million in 2021 from $121.9 million in 2020.

Property revenue decreased by $46.1 million, or 12.7%, to $318.5 million in 2022 from $364.6 million in 2021.

Consolidated NOI decreased by $21.6 million, or 10.0%, to $194.3 million in 2022 from $216.0 million in 2021.

The decreases in property revenue and consolidated NOI were due to the Disposed Properties, which were partially offset by an increase at the Crystal City Marriott due to higher occupancy and higher average daily rates, and an increase in parking revenue driven by an increase in both contract and transient parking.

Property revenue increased by $40.6 million, or 28.9%, to $180.9 million in 2022 from $140.3 million in 2021.

Consolidated NOI increased by $30.7 million, or 45.5%, to $98.3 million in 2022 from $67.6 million in 2021.

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 our acquisition of The Batley in November 2021, the consolidation of Atlantic Plumbing and 8001 Woodmont in 2022, and higher occupancy and rental rates across the portfolio.

The increase in consolidated NOI was partially offset by an increase in operating costs.

Liquidity and Capital Resources

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.

Property rental revenue 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 the WHI, 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 and LTIP Units.

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Financing Activities

The following is a summary of mortgages payable:

The following is a summary of mortgage loans:

Weighted Average

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Fixed rate (3)

Mortgages payable

Mortgage loans

Unamortized deferred financing costs and premium/discount, net (4)

Mortgages payable, net

Mortgage loans, net

(1) Weighted average effective interest rate as of December 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 December 31, 2021, excludes $6.4 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net."

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

Our mortgages payable contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity.

Certain mortgages payable are recourse to us.

(2) Includes variable rate mortgage loans with interest rate cap agreements.

For mortgage loans with interest rate caps, the weighted average interest rate cap strike is 2.64%, and the weighted average maturity date of the interest rate caps is September 27, 2023.

The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans.

As of December 31, 2022, one-month LIBOR was 4.39% and one-month term SOFR was 4.36%, as applicable.

(3) Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements .

(4) As of December 31, 2022 and 2021, excludes $2.2 million and $6.4 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net."

As of December 31, 2022 and 2021, the net carrying value of real estate collateralizing our mortgage loans totaled $2.2 billion and $1.8 billion.

Our mortgage loans 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 mortgage loans are recourse to us.

See Note 20 to the consolidated financial statements for additional information.

We were not in default under any mortgage loan as of December 31, 2021.

In August 2022, we entered into a mortgage loan 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.

During the year ended December 31, 2021, we entered into two separate mortgage loans with an aggregate principal balance of $190.0 million, collateralized by 1225 S.

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Clark Street.

During the year ended December 31, 2020, we entered into four separate mortgage loans with an aggregate principal balance of $560.0 million, collateralized by 4747 Bethesda Avenue, The Bartlett, 1221 Van Street and 220 20th Street, and refinanced the mortgage payable collateralized by RTC-West, increasing the principal balance by $20.2 million.

In December 2020, we repaid the mortgage payable collateralized by WestEnd25 with a principal balance of $94.7 million.

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

In January 2023, we entered into a $187.6 million loan facility, collateralized by The Wren and F1RST Residences.

The loan has a seven-year term and a fixed interest rate of 5.13%.

Proceeds from the loan were used to repay the mortgage loan on 2121 Crystal Drive, which had a fixed interest rate of 5.51%.

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

See Note 18 for additional information.

As of December 31, 2021, our $1.4 billion credit facility consisted of a $1.0 billion revolving credit facility maturing in January 2025, a $200.0 million Tranche A-1 Term Loan maturing in January 2023 and a $200.0 million Tranche A-2 Term Loan maturing in July 2024.

Based on the terms as of December 31, 2021, the interest rate for the credit facility varies based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets, and ranges (i) in the case of the revolving credit facility from LIBOR plus 1.05% to LIBOR plus 1.50%, (ii) in the case of the Tranche A-1 Term Loan, from LIBOR plus 1.20% to LIBOR plus 1.70% and (iii) in the case of the Tranche A-2 Term Loan, from LIBOR plus 1.15% to LIBOR plus 1.70%.

There are various LIBOR options in the credit facility, and we elected the one-month LIBOR option as of December 31, 2021.

We were not in default under our credit facility as of December 31, 2021.

Effective as of January 14, 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 1.05% to SOFR plus 1.65%, in each case including a credit spread adjustment.

In connection with the loan amendment, we amended the related LIBOR-based interest rate swaps, extending the maturity to July 2024 and converting the hedged rate from one-month LIBOR to one-month SOFR.

Credit Facility

As of December 31, 2022, our $1.6 billion credit facility consisted of a $1.0 billion revolving credit facility maturing in January 2025, a $200.0 million Tranche A-1 Term Loan maturing in January 2025, and a $400.0 million 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 with the remaining $50.0 million undrawn as of the date of this filing.

We entered into two interest rate swaps that were effective September 2022 with 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 interest rate swaps that will be effective July 2024 with 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:

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

(2) As of December 31, 2021 and 2020, letters of credit with an aggregate face amount of $911,000 and $1.5 million were outstanding under our revolving credit facility.

(3) As of December 31, 2021 and 2020, excludes net deferred financing costs related to our revolving credit facility of $5.0 million and $6.7 million that were included in "Other assets, net."

The interest rate for the revolving credit facility excludes a 0.15% facility fee.

(2) As of December 31, 2022, one-month term SOFR was 4.36%.

As of December 31, 2022 and 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 December 31, 2022 and 2021, excludes net deferred financing costs related to our revolving credit facility of $3.3 million and $5.0 million that were included in "Other assets, net."

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

As of December 31, 2021, the interest rate swaps mature concurrently with the respective term loan and fix LIBOR at a weighted average interest rate of 1.39% for the Tranche A-1 Term Loan and 1.34% for the Tranche A-2 Term Loan.

As of December 31, 2021, we had floating rate debt with a principal balance totaling $2.0 billion and hedging arrangements with a notional value totaling $1.7 billion that use LIBOR as a reference rate.

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.

As of December 31, 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.

As of December 31, 2022, we had debt with a principal balance totaling $692.7 million and hedging arrangements with a notional value totaling $1.0 billion that use LIBOR as a reference rate.

On November 30, 2020, the United Kingdom regulator announced its intentions 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, the SOFR, exists, significant uncertainties still remain.

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Common Shares Repurchased

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

During the year ended December 31, 2021, we repurchased and retired 5.4 million common shares for $157.7 million, a weighted average purchase price per share of $29.34.

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 year ended December 31, 2022, we repurchased and retired 14.2 million common shares for $361.0 million, a weighted average purchase price per share of $25.49.

During the year ended December 31, 2021, we repurchased and retired 5.4 million common shares for $157.7 million, a weighted

average purchase price per share of $29.34.

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.

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.

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● 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 and LTIP Units;

● common share repurchases;

● possible 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 December 31, 2022, we had $275.1 million on a consolidated basis and $297.2 million at our share of mortgage loans scheduled to mature in 2023;

● capital expenditures, including major renovations, tenant improvements and leasing costs — As of December 31, 2022, we had committed tenant-related obligations totaling $62.3 million ($60.4 million related to our consolidated entities and $1.9 million related to our unconsolidated real estate ventures at our share);

● development expenditures — As of December 31, 2022, we had assets under construction that, based on our current plans and estimates, require an additional $403.5 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 December 15, 2022, our Board of Trustees declared a quarterly dividend of $0.225 per common share, which was paid on January 12, 2023;

● possible common share repurchases and

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

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

● cash and cash equivalent balances;

● cash and cash equivalents — As of December 31, 2022, we had cash and cash equivalents of $241.1 million;

● cash flows from operations;

● distributions from real estate ventures;

● proceeds from financings, recapitalizations and asset sales.

● borrowing capacity under our current credit facility — As of December 31, 2022, we had $1.0 billion of availability under our credit facility, including $50.0 million undrawn under our Tranche A-2 Term Loan;

● proceeds from financings, asset sales and recapitalizations.

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 December 31, 2021, we had $699.1 million of availability under our credit facility (net of outstanding letters of credit totaling $911,000).

As of December 31, 2021, we had mortgages payable totaling $107.5 million on a consolidated basis and $194.2 million at our share scheduled to mature in 2022.

The following is a summary of our material cash requirements as of December 31, 2022:

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Operating leases (3)

Finance leases (3)

Total material cash requirements (4)

(1) Interest was computed giving effect to interest rate hedges.

One-month LIBOR of 0.10% was applied to loans which are variable (no hedge) or variable with an interest rate cap.

One-month LIBOR of 4.39% or one-month term SOFR of 4.36% was applied to loans, as applicable which are variable (no hedge) or variable with an interest rate cap.

Additionally, we assumed no additional borrowings on construction loans.

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See additional information in Unconsolidated Real Estate Ventures section below.

(3) We recognize operating and finance lease right-of-use assets and lease liabilities associated with our corporate office lease and various ground leases for which we are the lessee in our consolidated balance sheet.

(3) We have operating lease right-of-use assets and lease liabilities associated with various ground leases for which we are the lessee in our consolidated balance sheet.

See Note 20 to the consolidated financial statements for additional information.

(4) Excludes obligations related to construction or development contracts totaling $403.5 million since payments are only due upon satisfactory performance under the contracts.

Also excludes committed tenant-related obligations totaling $76.0 million ($70.7

million related to our consolidated entities and $5.3 million related to our unconsolidated real estate ventures at our share) as timing and amounts of payments are uncertain and may only be due upon satisfactory performance of certain conditions.

Also excludes committed tenant-related obligations totaling $62.3 million ($60.4 million related to our consolidated entities and $1.9 million related to our unconsolidated real estate ventures at our share) as timing and amounts of payments are uncertain and may only be due upon satisfactory performance of certain conditions.

See Commitments and Contingencies section below for additional information.

As of December 31, 2021, we have capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.9 million.

In December 2021, our Board of Trustees declared a quarterly dividend of $0.225 per common share, which was paid on January 14, 2022.

Summary of Cash Flows

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Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Cash Flows for the Year Ended December 31, 2022

Cash and cash equivalents, and restricted cash increased $38.8 million to $302.1 million as of December 31, 2021, compared to $263.3 million as of December 31, 2020.

This increase resulted from $217.6 million of net cash provided by operating activities and $189.9 million of net cash provided by financing activities, partially offset by $368.7 million of net cash used in investing activities.

Our outstanding debt was $2.5 billion and $2.0 billion as of December 31, 2021 and 2020.

The $484.4 million increase in outstanding debt was primarily from borrowings under our revolving credit facility totaling $300.0 million and borrowings from two separate mortgage loans with an aggregate principal balance of $190.0 million, collateralized by 1225 S.

Clark Street and 1215 S.

Clark Street.

Cash and cash equivalents, and restricted cash decreased $28.0 million to $274.1 million as of December 31, 2022, compared to $302.1 million as of December 31, 2021.

This decrease resulted from $730.1 million of net cash used in financing activities, partially offset by $524.0 million of net cash provided by investing activities and $178.0 million of net cash provided by operating activities.

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

Net cash provided by operating activities of $178.0 million primarily comprised:

(i) $201.1 million of net income (before $302.1 million of non-cash items and an $11.3 million gain on sale of real estate), (ii) $15.9 million of return on capital from unconsolidated real estate ventures and (iii) $633,000 of net change in operating assets and liabilities.

Non-cash income adjustments of $302.1 million primarily include depreciation and amortization expense, share-based compensation expense, impairment loss, deferred rent and amortization of lease incentives.

Net cash used in investing activities of $368.7 million comprised:

(i) $208.3 million related to the acquisition of The Batley in November 2021, (ii) $173.2 million of development costs, construction in progress and real estate additions and (iii) $41.8 million of investments in unconsolidated real estate ventures, 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.

Net cash provided by financing activities of $189.9 million primarily comprised:

(i) $300.0 million of proceeds from borrowings under our revolving credit facility, (ii) $190.0 million of proceeds from borrowings under mortgages payable, and (iii) $24.1 million of contributions from noncontrolling interests, partially offset by (iv) $157.7 million of common shares repurchased, (v) $118.1 million of dividends paid to common shareholders, (vi) $20.0 million of finance lease payments, (vii) $17.8 million of distributions to redeemable noncontrolling interests, (viii) $6.6 million of debt issuance costs and (ix) $5.6 million of repayments of mortgages payable.

(i) $181.9 million of net income (before $244.8 million of non-cash items and a $161.9 million gain on the sale of real estate), (ii) $11.4 million of return on capital from unconsolidated real estate ventures and (iii) $15.2 million of net change in operating assets and liabilities.

Non-cash income adjustments of $244.8 million primarily include depreciation and amortization expense, share-based compensation expense, deferred rent, loss from unconsolidated real estate ventures, net income from investments, amortization of lease incentives and other non-cash items.

Net cash provided by investing activities of $524.0 million comprised:

(i) $928.9 million of proceeds from the sale of real estate;

(ii) $59.7 million of distributions of capital from unconsolidated real estate ventures and (iii) $19.0 million of proceeds from the sale of investments, partially offset by (iv) $326.7 million of development costs, construction in progress and real estate additions, (v) $91.6 million of investments in unconsolidated real estate ventures and other investments and (vi) $65.3 million for the acquisition of real estate.

Net cash used in financing activities of $730.1 million primarily comprised:

(i) $400.0 million of repayments of our revolving credit facility, (ii) $361.0 million of common shares repurchased, (iii) $270.7 million of repayments of mortgage loans, (iv) $107.7 million of dividends paid to common shareholders, (v) $16.4 million of distributions to redeemable noncontrolling interests and (vi) $9.5 million related to the redemption of our partner’s noncontrolling interest, partially offset by (vii) $179.7 million of borrowings under mortgage loans, (viii) $150.0 million of borrowings under our unsecured term loan, (ix) $100.0 million of proceeds from borrowings under our revolving credit facility and (x) $9.4 million of contributions from noncontrolling interests.

Unconsolidated Real Estate Ventures

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

As of December 31, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.9 million.

As of December 31, 2022, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $62.8 million.

As of December 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 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.

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.

Commitments and Contingencies

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We are responsible for deductibles and losses in excess of the insurance coverage, which could be material.

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

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

If lenders insist on greater coverage than we are able to obtain, it could adversely affect the ability to finance or refinance our properties.

Our debt, consisting of mortgage loans 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

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Environmental Matters

Under various federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such real estate.

These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances.

The costs of remediation or removal of such substances may be substantial and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's ability to sell such real estate or to borrow using such real estate as collateral.

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

These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances.

The costs of remediation or removal of these substances may be substantial, and the presence of these substances, or the failure to promptly remediate these substances, may adversely affect the owner's ability to sell the real estate or to borrow using the real estate as collateral.

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

The release of these hazardous materials and wastes 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 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.

In addition, our assets are exposed to the risk of contamination originating from other sources.

While a property owner may not be responsible for remediating contamination that has migrated onsite from an identifiable and viable offsite source, the contaminant's presence can have adverse effects on operations and the redevelopment of our assets.

To the extent we send contaminated materials to other locations for treatment or disposal, we may be liable for cleanup of those sites if they become contaminated.

Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the assets.

To the extent we send contaminated materials to other locations for treatment or disposal, we may be liable for the cleanup of those sites if they become contaminated.

Most of our assets have been subject to environmental assessments that are intended to evaluate the environmental condition of the assets.

These environmental assessments generally have included a historical review, a public records review, a visual inspection of the site and surrounding assets, visual or historical evidence of underground storage tanks, and the preparation and issuance of a written report.

Soil and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any issues raised by the initial assessment that could reasonably be expected to pose a material concern to the property or result in us incurring material environmental liabilities as a result of redevelopment.

They may not, however, have included extensive sampling or subsurface investigations.

The tests may not, however, have included extensive sampling or subsurface investigations.

In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated appropriate actions.

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

in Note 19 to the consolidated financial statements, environmental liabilities totaled $18.2 million as of December 31, 2021 and 2020, and are included in "Other liabilities, net"

in Note 20 to the consolidated financial statements, environmental liabilities totaled $18.0 million and $18.2 million as of December 31, 2022 and 2021, and are included in "Other liabilities, net"

in our consolidated 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-K

Item 7. Management’s Discussion and Analysis