What changed in this filing

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Item 1. Financial Statements

2023-05-09 compared with 2022-11-01 · 248 added, 388 removed, 496 unchanged (56% of the section changed)

3 unchanged sentences

(In thousands, except par value amounts)

September 30, 2022

March 31, 2023

December 31, 2022

14 unchanged sentences

Other assets, net

Assets held for sale

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

Mortgages payable, net

Mortgage loans, net

Revolving credit facility

8 unchanged sentences

Common shares, $ 0.01 par value - 500,000 shares authorized;

113,764 and 127,378 shares issued and outstanding as of September 30, 2022 and December 31, 2021

113,583 and 114,013 shares issued and outstanding as of March 31, 2023 and December 31, 2022

Additional paid-in capital

Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total shareholders' equity of JBG SMITH Properties

5 unchanged sentences

(In thousands, except per share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Property rental

12 unchanged sentences

OTHER INCOME (EXPENSE)

Income (loss) from unconsolidated real estate ventures, net

Income from unconsolidated real estate ventures, net

Interest and other income, net

Interest expense

Gain on the sale of real estate, net

Gain (loss) on the sale of real estate, net

Loss on the extinguishment of debt

Total other income (expense)

INCOME (LOSS) BEFORE INCOME TAX EXPENSE

Income tax expense

INCOME (LOSS) BEFORE INCOME TAX BENEFIT

Income tax benefit

NET INCOME (LOSS)

Net (income) loss attributable to redeemable noncontrolling interests

Net (income) loss attributable to noncontrolling interests

Net income attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

3 unchanged sentences

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

Condensed Consolidated Statements of Comprehensive Income

(In thousands)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

NET INCOME (LOSS)

OTHER COMPREHENSIVE INCOME:

OTHER COMPREHENSIVE INCOME (LOSS):

Change in fair value of derivative financial instruments

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

Total other comprehensive income

COMPREHENSIVE INCOME (LOSS)

Net (income) loss attributable to redeemable noncontrolling interests

Net (income) loss attributable to noncontrolling interests

Other comprehensive income attributable to redeemable noncontrolling interests

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES

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

Total other comprehensive income (loss)

COMPREHENSIVE INCOME

Net income attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Other comprehensive (income) loss attributable to redeemable noncontrolling interests

Other comprehensive loss attributable to noncontrolling interests

COMPREHENSIVE INCOME ATTRIBUTABLE TO JBG SMITH PROPERTIES

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

5 unchanged sentences

Noncontrolling

BALANCE AS OF JUNE 30, 2022

BALANCE AS OF DECEMBER 31, 2022

Net income (loss) attributable to common shareholders and noncontrolling interests

2 unchanged sentences

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

Dividends declared on common shares

($ 0.225 per common share)

Distributions to noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation

Total other comprehensive income

BALANCE AS OF SEPTEMBER 30, 2022

BALANCE AS OF JUNE 30, 2021

Net income attributable to common shareholders and noncontrolling interests

Conversion of OP Units to common shares

Common shares repurchased

Common shares issued pursuant to employee incentive compensation plan and ESPP

Dividends declared on common shares

($ 0.225 per common share)

Distributions to noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation

Total other comprehensive income

BALANCE AS OF SEPTEMBER 30, 2021

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

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(In thousands)

Comprehensive

Common Shares

Noncontrolling

BALANCE AS OF DECEMBER 31, 2021

Net income attributable to common shareholders and noncontrolling interests

Conversion of OP Units to common shares

Common shares repurchased

Common shares issued pursuant to employee incentive compensation plan and ESPP

Dividends declared on common shares

( $ 0.45 per common share)

Contributions from noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation

Total other comprehensive income

BALANCE AS OF SEPTEMBER 30, 2022

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive loss allocation

Other comprehensive loss

Other comprehensive loss attributable to noncontrolling interest

BALANCE AS OF MARCH 31, 2023

BALANCE AS OF DECEMBER 31, 2021

3 unchanged sentences

Common shares issued pursuant to employee incentive compensation plan and ESPP

Dividends declared on common shares

( $ 0.45 per common share)

Contributions from noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation

Total other comprehensive income

BALANCE AS OF SEPTEMBER 30, 2021

Other comprehensive income

BALANCE AS OF MARCH 31, 2022

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

2 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

OPERATING ACTIVITIES:

2 unchanged sentences

Share-based compensation expense

Depreciation and amortization, including amortization of deferred financing costs

Depreciation and amortization expense, including amortization of deferred financing costs

Deferred rent

(Income) loss from unconsolidated real estate ventures, net

Income from unconsolidated real estate ventures, net

Amortization of market lease intangibles, net

Amortization of lease incentives

Loss on the extinguishment of debt

Gain on the sale of real estate, net

Loss on operating lease and other receivables

(Gain) loss on the sale of real estate, net

(Income) loss on operating lease and other receivables

Income from investments, net

10 unchanged sentences

Acquisition of real estate

Deposits for real estate and other acquisitions

Proceeds from the sale of real estate

2 unchanged sentences

Investments in unconsolidated real estate ventures and other investments

Net cash provided by (used in) investing activities

Net cash used in investing activities

FINANCING ACTIVITIES:

Borrowings under mortgages payable

Borrowings under revolving credit facility

Borrowings under unsecured term loans

Repayments of mortgages payable

Repayments of revolving credit facility

Borrowings under mortgage loans

Repayments of mortgage loans

Debt issuance and modification costs

Proceeds from common shares issued pursuant to ESPP

Redemption of partner's noncontrolling interest

Common shares repurchased

1 unchanged sentence

Distributions to redeemable noncontrolling interests

Distributions to noncontrolling interests

Contributions from noncontrolling interests

Net cash used in financing activities

Net cash provided by (used in) financing activities

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

5 unchanged sentences

(In thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD:

6 unchanged sentences

Write-off of fully depreciated assets

Deconsolidation of real estate asset

Conversion of OP Units to common shares

Recognition of operating lease right-of-use asset

Recognition of liabilities related to operating lease right-of-use asset

Cash paid for amounts included in the measurement of lease liabilities for operating leases

3 unchanged sentences

Organization and Basis of Presentation

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust ("REIT"), owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail.

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust, owns and operates a portfolio of multifamily and commercial assets amenitized with ancillary retail.

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

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

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

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

Amazon.com, Inc.'s ("Amazon") new headquarters;

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 Washington Housing Initiative ("WHI") Impact Pool, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties.

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

As of September 30, 2022, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 88.3 % of its OP Units, after giving effect to the conversion of certain vested long-term incentive partnership units ("LTIP Units") that are convertible into OP Units.

As of March 31, 2023, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 88.5 % of its OP Units, after giving effect to the conversion of certain vested long-term incentive partnership units ("LTIP Units") that are convertible into OP Units.

JBG SMITH is referred to herein as "we,"

3 unchanged sentences

References to "our share"

refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our 10.0 % subordinated interest in one commercial building and our 33.5 % subordinated interest in four commercial buildings, as well as the associated non-recourse mortgages payable, held through unconsolidated real estate ventures;

refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our:

(i) 10.0 % subordinated interest in one commercial building, (ii) 33.5 % subordinated interest in four commercial buildings (the "Fortress Assets") and (iii) 49.0 % interest in three commercial buildings (the "L'Enfant Plaza Assets"), as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures;

these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures, and we have not guaranteed their obligations or otherwise committed to providing financial support.

2 unchanged sentences

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

As of September 30, 2022, our Operating Portfolio consisted of 56 operating assets comprising 35 commercial assets totaling 10.5 million square feet ( 8.9 million square feet at our share), 19 multifamily assets totaling 7,359 units ( 6,608 units at our share) and two wholly owned land assets for which we are the ground lessor.

Additionally, we have:

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

(ii) eight near-term development assets totaling 3.7 million square feet ( 3.5 million square feet at our share) of estimated potential development density;

and (iii) 16 future development assets totaling 8.8 million square feet ( 6.3 million square feet at our share) of estimated potential development density.

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

As of March 31, 2023, our Operating Portfolio consisted of 51 operating assets comprising 31 commercial assets totaling 9.7 million square feet ( 8.2 million square feet at our share), 18 multifamily assets totaling 6,756 units ( 6,756 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 ( 9.8 million square feet at our share) of estimated potential development density.

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

In addition, our third-party asset management and real estate services business provides fee-based real estate services.

5 unchanged sentences

The results of operations

for the three and nine months ended September 30, 2022 and 2021 are not necessarily indicative of the results that may be expected for a full year.

for the three months ended March 31, 2023 and 2022 are not necessarily indicative of the results that may be expected for a full year.

These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 21, 2023 ("Annual Report").

2 unchanged sentences

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

References to our financial statements refer to our unaudited condensed consolidated financial statements as of September 30, 2022 and December 31, 2021, and for the three and nine months ended September 30, 2022 and 2021.

References to our balance sheets refer to our condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021.

References to our statements of operations refer to our condensed consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021.

References to our statements of comprehensive income (loss) refer to our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021.

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

References to our financial statements refer to our unaudited condensed consolidated financial statements as of March 31, 2023 and December 31, 2022, and for the three months ended March 31, 2023 and 2022.

References to our balance sheets refer to our condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

References to our statements of operations refer to our condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022.

References to our statements of comprehensive income refer to our condensed consolidated statements of comprehensive income for the three months ended March 31, 2023 and 2022.

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

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

2 unchanged sentences

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

Reclassification

Intangible assets totaling $ 202.0 million were reclassified from "Other assets, net"

to "Intangible assets, net"

in our balance sheet as of December 31, 2021 to present intangible assets separately from other assets, which is consistent with our current year presentation.

Summary of Significant Accounting Policies

2 unchanged sentences

Use of Estimates

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

The most significant of these estimates include:

(i) the underlying cash flows and holding periods used in assessing impairment of our real estate assets;

(ii) the determination of useful lives for tangible and intangible assets;

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

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

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

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

Actual results could differ from those estimates.

Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update 2020-04, Reference Rate Reform ("Topic 848").

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform ("Topic 848"), which was amended in December 2022 by ASU 2022-06, Reference Rate Reform (Topic 848).

Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts.

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

During the nine months ended September 30, 2022, we elected to apply the hedge accounting expedients that allows us to (i) continue to amortize previously deferred gains and losses in accumulated other comprehensive income (loss) related to terminated hedges into earnings in accordance with the underlying hedged forecasted transactions, (ii) modify loan agreements to replace the reference rate without treating the change as a contract modification and (iii) modify the reference rate of the hedging instruments without it being considered a change in critical terms requiring redesignation.

We have elected to apply the hedge accounting expedients related to (i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future London Interbank Offered Rate ("LIBOR") indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

The guidance in Topic 848 is optional and may be elected through December 31, 2024 as reference rate reform activities occur.

We elected to apply the hedge accounting expedients that allow us to (i) continue to amortize previously deferred gains and losses in accumulated other comprehensive income related to terminated hedges into earnings in accordance with the underlying hedged forecasted transactions, (ii) modify loan agreements to replace the reference rate without treating the change as a contract modification and (iii) modify the reference rate of the hedging instruments without it being considered a change in critical terms requiring redesignation.

We also elected to apply the hedge accounting expedients related to (i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future London Interbank Offered Rate ("LIBOR") indexed cash flows to assume that the

index upon which future hedged transactions will be based matches the index on the corresponding derivatives.

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

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

Acquisition, Dispositions and Assets Held for Sale

On August 1, 2022, we acquired the remaining 36.0 % ownership interest in an unconsolidated real estate venture that owned Atlantic Plumbing, a multifamily asset, which was encumbered by a $ 100.0 million mortgage, for a purchase price of $ 19.7 million and our partner’s share of the working capital.

The mortgage was repaid on August 10, 2022.

Atlantic Plumbing was consolidated as of the date of acquisition.

The following is a summary of activity for the nine months ended September 30, 2022:

The following is a summary of activity for the three months ended March 31, 2023:

Date Disposed

3 unchanged sentences

Arlington, Virginia

April 1, 2022

Universal Buildings (1)

Washington, D.C.

April 13, 2022

7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2 (2)

Bethesda, Maryland, Washington, D.C., Reston, Virginia, Arlington, Virginia

Pen Place (3)

Arlington, Virginia

(1) Cash proceeds from sale excludes a lease termination fee of $ 24.3 million received during the first quarter of 2022.

(2) Assets were sold to an unconsolidated real estate venture.

See Note 4 for additional information.

"RTC-West"

refers to RTC-West, RTC-West Trophy Office and RTC-West Land.

Total square feet include 1.4 million square feet of estimated potential development density.

In April 2022, $ 164.8 million of mortgages payable related to 1730 M Street and RTC-West were repaid.

(3) Total square feet represents estimated or approved potential development density.

During the nine months ended September 30, 2022, our unconsolidated real estate ventures sold several assets.

March 23, 2023

4747 Bethesda Avenue (1)

Bethesda, Maryland

(1) We sold an 80.0 % interest in the asset for a gross sales price of $ 196.0 million, representing a gross valuation of $ 245.0 million.

See Note 4 for additional information.

Assets Held for Sale

There were no assets held for sale as of September 30, 2022.

The following is a summary of assets held for sale as of December 31, 2021:

(In thousands)

Pen Place (1)

Arlington, Virginia

(1) Sold to Amazon in May 2022.

Total square feet represents estimated or approved potential development density.

(2) Represents recognition of contingent consideration related to a prior period disposition.

Investments in Unconsolidated Real Estate Ventures

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

Real Estate Venture Partners

September 30, 2022

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

Real Estate Venture

March 31, 2023

December 31, 2022

1 unchanged sentence

Prudential Global Investment Management

Landmark Partners ("Landmark") (2)

18.0 % - 49.0 %

CBREI Venture (3)

5.0 % - 10.0 %

Canadian Pension Plan Investment Board ("CPPIB") (4)

Morgan Global Alternatives ("J.P.

Morgan") (2)

Berkshire Group (6)

4747 Bethesda Venture (3)

Brandywine Realty Trust

CBREI Venture

9.9 % - 10.0 %

Landmark Partners (4)

Total investments in unconsolidated real estate ventures (5) (6)

(1) Reflects our effective ownership interests in the underlying real estate as of September 30, 2022.

(1) Reflects our effective ownership interests in the underlying real estate as of March 31, 2023.

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

(2) In connection with the preparation and review of the third quarter 2022 financial statements, an impairment loss of $ 15.4 million associated with certain commercial and future development assets located in Washington, D.C.

was included in "Income (loss) from unconsolidated real estate ventures, net"

in our statements of operations for the three and nine months ended September 30, 2022.

(3) On August 1, 2022, we acquired the remaining 36.0 % ownership interest in an unconsolidated real estate venture that owned Atlantic Plumbing, a multifamily asset.

(4) Our effective ownership interest reflects an investment in the real estate venture that owns 1101 17 th Street for which we have a zero investment balance and discontinued applying the equity method of accounting.

Morgan is the advisor for an institutional investor.

(6) On October 5, 2022, we acquired the remaining 50.0 % ownership interest in 8001 Woodmont, a multifamily asset owned by the venture, for a purchase price of $ 115.0 million, including the assumption of the $ 51.9 million mortgage at our share.

The asset is encumbered by a $ 103.8 million mortgage, which is consolidated in our balance sheet as of the date of acquisition.

(7) As of September 30, 2022 and December 31, 2021, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $ 4.4 million and $ 18.6 million, resulting principally from capitalized interest and our zero investment balance in certain real estate ventures .

On April 13, 2022, we formed an unconsolidated real estate venture with affiliates of Fortress Investment Group LLC ("Fortress") to recapitalize a 1.6 million square foot office portfolio and land parcels for a gross sales price of $ 580.0 million comprising four wholly owned commercial assets (7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2).

Additionally, we contributed $ 66.1 million in cash for a 33.5 % interest in the venture, while Fortress contributed $ 131.0 million for a 66.5 % interest in the venture.

In connection with the transaction, the venture obtained mortgage loans totaling $ 458.0 million secured by the properties, of which $ 402.0 million was drawn at closing.

We provide asset management, property management and leasing services to the venture.

Because our interest in the venture is subordinated to a 15 % preferred return to Fortress, we do not anticipate receiving any near-term cash flow distributions

As of the transaction date, our investment in the venture was zero , and we have discontinued applying the equity method as we have not guaranteed its obligations or otherwise committed to providing financial support.

(3) In March 2023, we sold an 80.0 % interest in 4747 Bethesda Avenue for a gross sales price of $ 196.0 million, representing a gross valuation of $ 245.0 million and retained a 20.0 % interest.

We will provide leasing, property management and other real estate services to the venture.

In connection with the transaction, the real estate venture assumed the related $ 175.0 million mortgage loan.

(4) Excludes the L'Enfant Plaza Assets for which we have a zero investment balance and discontinued applying the equity method of accounting after September 30, 2022.

(5) Excludes (i) 10.0 % subordinated interest in one commercial building, (ii) the Fortress Assets and (iii) the L'Enfant Plaza Assets held through unconsolidated real estate ventures.

For more information see Note 1.

Also, excludes our interest in an investment in the real estate venture that owns 1101 17th Street for which we have discontinued applying the equity method of accounting since June 30, 2018 because we received distributions in excess of our contributions and share of earnings, which reduced our investment to zero ;

further, we are not obligated to provide for losses, have not guaranteed its obligations or otherwise committed to provide financial support.

(6) As of March 31, 2023 and December 31, 2022, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $ 6.9 million and $ 8.9 million, resulting principally from capitalized interest and our zero investment balance in certain real estate ventures .

We provide leasing, property management and other real estate services to our unconsolidated real estate ventures.

We recognized revenue, including expense reimbursements, of $ 6.1 million and $ 18.2 million for the three and nine months ended September 30, 2022, and $ 5.9 million and $ 17.8 million for the three and nine months ended September 30, 2021, for such services.

We recognized revenue, including expense reimbursements, of $ 5.3 million and $ 5.5 million for the three months ended March 31, 2023 and 2022 for such services.

We evaluate reconsideration events as we become aware of them.

1 unchanged sentence

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

The following is a summary of disposition activity by our unconsolidated real estate ventures for the nine months ended September 30, 2022:

Proportionate

Date Disposed

(In thousands)

January 27, 2022

The Alaire, The Terano and

12511 Parklawn Drive

1.8 % - 18.0 %

1900 N Street

(1) Included in "Income (loss) from unconsolidated real estate ventures, net"

in our statements of operations.

The following is a summary of the debt of our unconsolidated real estate ventures:

1 unchanged sentence

Interest Rate (1)

September 30, 2022

March 31, 2023

December 31, 2022

2 unchanged sentences

Fixed rate (3)

Mortgages payable (4)

Unamortized deferred financing costs

Mortgages payable, net (4) (5)

(1) Weighted average effective interest rate as of September 30, 2022.

Mortgage loans (4)

Unamortized deferred financing costs and premium / discount, net

Mortgage loans, net (4) (5)

(1) Weighted average effective interest rate as of March 31, 2023.

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

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

(4) Excludes mortgages related to the unconsolidated real estate venture with Fortress.

(4) Excludes mortgage loans related to the Fortress Assets and the L'Enfant Plaza Assets.

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

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

September 30, 2022

March 31, 2023

December 31, 2022

3 unchanged sentences

Other assets, net

Mortgages payable, net

Mortgage loans, net

Other liabilities, net

1 unchanged sentence

Total liabilities and equity

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

1 unchanged sentence

Total revenue

Operating income (loss) (2)

Operating income (2)

Net income (loss) (2)

(1) Excludes amounts related to the unconsolidated real estate venture with Fortress.

(2) Includes the gain on the sale of various assets totaling $ 77.4 million during the nine months ended September 30, 2022, and $ 47.4 million and $ 85.5 million during the three and nine months ended September 30, 2021.

Includes an impairment loss of $ 16.1 million during the three and nine months ended September 30, 2022.

(1) Excludes amounts related to the Fortress Assets.

Excludes combined balance sheet information for both periods presented and combined income statement information for the three months ended March 31, 2023 related to the L'Enfant Plaza Assets as we discontinued applying the equity method of accounting after September 30, 2022.

(2) Includes the gain on the sale of various assets totaling $ 45.1 million during the three months ended March 31, 2022.

Variable Interest Entities

4 unchanged sentences

Unconsolidated VIEs

As of September 30, 2022 and December 31, 2021, we had interests in entities deemed to be VIEs.

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

As of March 31, 2023 and December 31, 2022, we had interests in entities deemed to be VIEs.

Although we may be responsible for managing the day-to-day operations of these investees, we are not the primary beneficiary of these VIEs, as we do not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's economic performance.

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

As of September 30, 2022 and December 31, 2021, the net carrying amounts of our investment in these entities was $ 84.7 million and $ 145.2 million, which were included in "Investments in unconsolidated real estate ventures"

As of March 31, 2023 and December 31, 2022, the net carrying amounts of our investment in these entities were $ 85.3 million and $ 83.2 million, which were included in "Investments in unconsolidated real estate ventures"

in our balance sheets.

Our equity in the income of unconsolidated VIEs is included in "Income (loss) from unconsolidated real estate ventures, net"

Our equity in the income of unconsolidated VIEs is included in "Income from unconsolidated real estate ventures, net"

in our statements of operations.

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

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

In conjunction with the acquisition of The Batley in November 2021, we entered into an agreement with a qualified intermediary to facilitate a like-kind exchange.

As a result, the qualified intermediary was the legal owner of the entity that owned this property as of December 31, 2021.

We determined that the entity that owned the Batley was a VIE, and we were the primary beneficiary of the VIE.

We consolidated the property and its operations as of the acquisition date.

Legal ownership of this entity was transferred to us by the qualified intermediary when the like-kind exchange agreement was completed with the sale of Pen Place in May 2022.

As of September 30, 2022, excluding JBG SMITH LP, we consolidated two VIEs with total assets of $ 199.5 million and liabilities of $ 69.7 million.

As of December 31, 2021, excluding JBG SMITH LP, we consolidated three VIEs with total assets of $ 269.7 million and liabilities of $ 13.9 million.

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

As of March 31, 2023 and December 31, 2022, excluding JBG SMITH LP, we consolidated two VIEs (1900 Crystal Drive and 2000/2001 South Bell Street) with total assets of $ 326.0 million and $ 265.5 million, and liabilities of $ 158.2 million and $ 116.3 million, primarily consisting of construction in process and mortgage loans.

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

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The following is a summary of other assets, net:

September 30, 2022

March 31, 2023

December 31, 2022

4 unchanged sentences

Operating lease right-of-use assets (1)

Finance lease right-of-use assets (1)

Investments in funds (2)

1 unchanged sentence

Total other assets, net

(1) Represents assets related to finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2, which were sold to an unconsolidated real estate venture in April 2022.

(1) Includes our corporate office lease at 4747 Bethesda Avenue as of March 31, 2023.

(2) Consists of investments in real estate-focused technology companies, which are recorded at their fair value based on their reported net asset value.

During the three and nine months ended September 30, 2022, we recorded unrealized gains (losses) totaling ($ 267,000 ) and $ 928,000 related to these investments, which are included in "Interest and other income, net"

During the three months ended March 31, 2023 and 2022, unrealized gains related to these investments were $ 2.0 million and $ 156,000 , which were included in "Interest and other income, net"

in our statements of operations .

During the three months ended March 31, 2023, realized losses related to these investments were $ 129,000 , which were included in "Interest and other income, net"

in our statement of operations.

(3) Primarily consists of equity investments that are carried at cost.

During the three and nine months ended September 30, 2022, we recorded realized gains (losses) of ($ 300,000 ) and $ 13.8 million related to these investments, which is included in "Interest and other income, net"

in our statements of operations .

Mortgages Payable

The following is a summary of mortgages payable:

During the three months ended March 31, 2022, realized gains related to these investments were $ 13.9 million, which were included in "Interest and other income, net"

in our statement of operations .

Mortgage Loans

The following is a summary of mortgages loans:

Weighted Average

Interest Rate (1)

September 30, 2022

March 31, 2023

December 31, 2022

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Fixed rate (3)

Mortgages payable

Mortgage loans

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

Mortgages payable, net

(1) Weighted average effective interest rate as of September 30, 2022.

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

As of September 30, 2022, one-month LIBOR was 3.14 % and one-month term Secured Overnight Financing Rate ("SOFR") was 3.04 % , as applicable.

Mortgage loans, net

(1) Weighted average effective interest rate as of March 31, 2023.

(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 2.35 % , and the weighted average maturity date of the interest rate caps is August 1, 2023.

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

As of March 31, 2023, one-month LIBOR was 4.86 % and one-month term Secured Overnight Financing Rate ("SOFR") was 4.80 % .

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

(4) As of September 30, 2022 and December 31, 2021, excludes $ 2.3 million and $ 6.4 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net."

As of September 30, 2022 and December 31, 2021, the net carrying value of real estate collateralizing our mortgages payable totaled $ 1.9 billion and $ 1.8 billion.

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

Certain mortgages payable are recourse to us.

(4) As of March 31, 2023 and December 31, 2022, excludes $ 2.1 million and $ 2.2 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net"

in our balance sheets.

As of March 31, 2023 and December 31, 2022, the net carrying value of real estate collateralizing our mortgage loans totaled $ 2.2 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 17 for additional information.

In August 2022, we entered into a mortgage with a principal balance of $ 97.5 million collateralized by WestEnd25.

The mortgage loan has a seven-year term and an interest rate of SOFR plus 1.45 %.

We also entered into an interest rate swap with a total notional value of $ 97.5 million, which effectively fixes SOFR at an average interest rate of 2.71 % through the maturity date.

As of September 30, 2022 and December 31, 2021, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $ 1.3 billion.

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 %.

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, and staggered maturities.

Proceeds from the loan were used, in part, to repay the $ 131.5 million mortgage loan on 2121 Crystal Drive, which had a fixed interest rate of 5.51 %.

As of March 31, 2023 and December 31, 2022, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $ 1.2 billion and $ 1.3 billion.

See Note 15 for additional information.

Credit Facility

As of September 30, 2022, our $ 1.6 billion credit facility consisted of a $ 1.0 billion revolving credit facility maturing in January 2025, a $ 200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2025, and a $ 400.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in January 2028, of which $ 50.0 million remains available to be borrowed until July 2023.

In January 2022, the Tranche A-1 Term Loan was amended to extend the maturity date to January 2025 with two one-year extension options, and to amend the interest rate to SOFR plus 1.15 % to SOFR plus 1.75 %, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets.

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

In July 2022, the Tranche A-2 Term Loan was amended to increase its borrowing capacity by $ 200.0 million.

The incremental $ 200.0 million includes a delayed draw feature, of which $ 150.0 million was drawn in September 2022 and the remaining $ 50.0 million was undrawn as of the date of this filing.

The amendment extends the maturity date of the term loan from July 2024 to January 2028 and amends the interest rate to SOFR plus 1.25 % to SOFR plus 1.80 %, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets.

We entered into two interest rate swaps with an effective date of September 30, 2022 and a total notional value of $ 150.0 million, which effectively fix SOFR at a weighted average interest rate of 2.15 % through the maturity date.

We also entered into two forward-starting

interest rate swaps with an effective date of July 2024 and a total notional value of $ 200.0 million, which will effectively fix SOFR at a weighted average interest rate of 2.80 % through the maturity date.

Additionally, we amended the interest rate of the revolving credit facility to SOFR plus 1.15 % to SOFR plus 1.60 %, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets.

As of March 31, 2023 and December 31, 2022, our $ 1.6 billion credit facility consisted of an undrawn $ 1.0 billion revolving credit facility maturing in January 2025, a $ 200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2025, and a $ 350.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in January 2028, which has a $ 50.0 million additional advance available, which we will draw in May 2023.

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

Interest Rate (1)

September 30, 2022

March 31, 2023

December 31, 2022

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Unsecured term loans, net

(1) Effective interest rate as of September 30, 2022.

(1) Effective interest rate as of March 31, 2023.

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

(2) As of September 30, 2022, one-month term SOFR was 3.04 % .

As of September 30, 2022 and December 31, 2021, letters of credit with an aggregate face amount of $ 467,000 and $ 911,000 were outstanding under our revolving credit facility.

In October 2022, we repaid the outstanding balance under our revolving credit facility.

(3) As of September 30, 2022 and December 31, 2021, excludes $ 3.8 million and $ 5.0 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net."

(4) As of September 30, 2022 and December 31, 2021, the outstanding balance was fixed by interest rate swap agreements.

As of September 30, 2022, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46 % for the Tranche A-1 Term Loan and 2.15 % for the Tranche A-2 Term Loan .

(2) As of March 31, 2023, one-month term SOFR was 4.80 % .

As of March 31, 2023 and December 31, 2022, letters of credit with an aggregate face amount of $ 467,000 were outstanding under our revolving credit facility.

(3) As of March 31, 2023 and December 31, 2022, excludes $ 2.9 million and $ 3.3 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net"

in our balance sheets.

(4) As of March 31, 2023 and December 31, 2022, the outstanding balance was fixed by interest rate swap agreements, which fix SOFR at a weighted average interest rate of 1.46 % for the Tranche A-1 Term Loan and 2.14 % for the Tranche A-2 Term Loan .

Interest rate swaps for the Tranche A-1 Term Loan with a total notional value of $ 200.0 million mature in July 2024.

Interest rate swaps for the Tranche A-2 Term Loan with a total notional value of $ 200.0 million mature in July 2024 and with a total notional value of $ 150.0 million mature in January 2028.

We have 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 2.61 % through the maturity date.

The interest rate for our Tranche A-2 Term Loan excludes a 0.15 % per annum commitment fee on the undrawn $ 50.0 million of commitments.

Other Liabilities, Net

The following is a summary of other liabilities, net:

September 30, 2022

March 31, 2023

December 31, 2022

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Liabilities related to operating lease right-of-use assets (1)

Liabilities related to finance lease right -of-use assets (1)

Security deposits

3 unchanged sentences

Derivative agreements, at fair value

Deferred purchase price related to the acquisition of a future development parcel

Deferred purchase price related to the acquisition of a development parcel

Total other liabilities, net

(1) Represents liabilities related to finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2, which were sold to an unconsolidated real estate venture in April 2022.

(1) Includes our corporate office lease at 4747 Bethesda Avenue as of March 31, 2023.

Redeemable Noncontrolling Interests

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

Vested LTIP Units are convertible into OP Units.

During the nine months ended September 30, 2022 and 2021, unitholders redeemed 493,596 and 829,107 OP Units, which we elected to redeem for an equivalent number of our common shares.

As of September 30, 2022, outstanding OP Units and redeemable LTIP Units totaled 15.1 million, representing an 11.7 % ownership interest in JBG SMITH LP.

Vested LTIP Units are redeemable into OP Units.

During the three months ended March 31, 2023 and 2022, unitholders redeemed 756,356 and 207,882 OP Units, which we elected to redeem for an equivalent number of our common shares.

As of March 31, 2023, outstanding OP Units and redeemable LTIP Units totaled 14.8 million, representing an 11.5 % ownership interest in JBG SMITH LP.

Our OP Units and certain vested LTIP Units are presented at the higher of their redemption value or their carrying value, with adjustments to the redemption value recognized in "Additional paid-in capital"

in our balance sheets.

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

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

In April 2023, unitholders redeemed 685,132 OP Units and LTIP Units, which we elected to redeem for an equivalent number of our common shares.

Consolidated Real Estate Venture

We are a partner in a consolidated real estate venture that owns a multifamily asset, The Wren, located in Washington, D.C.

Our partners can redeem their interest for cash under certain conditions.

As of September 30, 2022, we held a 96.0 % ownership interest in the real estate venture.

On October 4, 2022, one of our partners redeemed their interest for $ 9.5 million, increasing our ownership interest to 99.7 %.

We were a partner in a consolidated real estate venture that owned a multifamily asset, The Wren, located in Washington, D.C.

As of March 31, 2022, we held a 96.0 % ownership interest in the real estate venture.

In October 2022, one partner redeemed its 3.7 % interest, and in February 2023, another partner redeemed its 0.3 % interest, increasing our ownership interest to 100.0 % as of March 31, 2023.

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

Three Months Ended September 30,

(In thousands)

Balance, beginning of period

OP Unit redemptions

Net income (loss)

Other comprehensive income

Distributions

Share-based compensation expense

Adjustment to redemption value

Balance, end of period

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Balance, beginning of period

OP Unit redemptions

LTIP Units issued in lieu of cash bonuses (1)

Net income (loss)

Other comprehensive income

Other comprehensive income (loss)

Distributions

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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LTIP Units and Time-Based LTIP Units

In January 2022, we granted to certain employees 660,785 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant-date fair value of $ 27.41 per unit that vest ratably over four years subject to continued employment.

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

During the three months ended March 31, 2023, we granted to certain employees 922,459 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant-date fair value of $ 17.73 per unit that primarily vest ratably over four years subject to continued employment.

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

In February 2023, we granted 280,342 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonuses related to 2022 service as LTIP Units.

The LTIP units had a weighted average grant-date fair value of $ 22.19 per unit.

The LTIP units had a grant-date fair value of $ 15.90 per unit.

Compensation expense totaling $ 4.5 million for these LTIP Units was recognized in 2022.

In April 2022, as part of their annual compensation, we granted to non-employee trustees a total of 95,084 fully vested LTIP Units with a grant-date fair value of $ 20.90 per unit, which includes LTIP Units elected in lieu of cash retainers.

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

The aggregate grant-date fair value of the Time-Based LTIP Units and the LTIP Units granted during the nine months ended September 30, 2022 was $ 25.7 million.

The aggregate grant-date fair value of the Time-Based LTIP Units and the LTIP Units granted during the three months ended March 31, 2023 was $ 20.8 million.

The Time-Based LTIP Units and the LTIP Units were valued based on the closing common share price on the grant date, less a discount for post-grant restrictions.

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Expected volatility

30.0 % to 41.0 %

Risk-free interest rate

1 unchanged sentence

Post-grant restriction periods

In May 2023, as part of their annual compensation, we granted to non-employee trustees a total of 155,523 fully vested LTIP Units with a grant-date fair value of $ 11.30 per unit, which includes LTIP Units elected in lieu of cash retainers.

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

Appreciation-Only LTIP Units ("AO LTIP Units")

In January 2022, we granted to certain employees 1.5 million performance-based AO LTIP Units with a weighted average grant-date fair value of $ 4.44 per unit.

In January 2023, we granted to certain employees 1.7 million performance-based AO LTIP Units with a grant-date fair value of $ 3.73 per unit.

The AO LTIP Units are structured in the form of profits interests that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the participation threshold of $ 20.83 .

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The AO LTIP Units expire on the ten th anniversary of their grant date.

The aggregate grant-date fair value of the AO LTIP Units granted during the nine months ended September 30, 2022 was $ 6.6 million, valued using Monte Carlo simulations based on the following significant assumptions:

Expected volatility

Dividend yield

Risk-free interest rate

Performance-Based LTIP Units

In January 2022, 469,624 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units"), which were unvested as of December 31, 2021, were forfeited as the performance measures were not met.

Pursuant to the ESPP, employees purchased 39,851 common shares for $ 801,000 during the nine months ended September 30, 2022.

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

The aggregate grant-date fair value of the AO LTIP Units granted during the three months ended March 31, 2023 was $ 6.4 million, valued using Monte Carlo simulations based on the following significant assumptions:

Expected volatility

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Risk-free interest rate

Expected life

LTIP Units with Performance-Based Vesting Requirements ("Performance-Based LTIP Units")

In January 2023, 470,773 Performance-Based LTIP Units, which were unvested as of December 31, 2022, were forfeited because the performance measures were not met.

Restricted Share Units ("RSUs")

In January 2023, we granted to certain non-executive employees 78,681 time-based RSUs ("Time-Based RSUs") with a grant-date fair value of $ 18.94 per unit.

Vesting requirements and compensation expense recognition for the Time-Based RSUs are primarily consistent to those of the Time-Based LTIP Units granted in 2023.

The aggregate grant-date fair value of the RSUs granted during the three months ended March 31, 2023 was $ 1.5 million.

The Time-Based RSUs were valued based on the closing common share price on the date of grant.

Share-Based Compensation Expense

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Share-based compensation expense - other

Formation Awards

OP Units and LTIP Units (2)

Formation awards, OP Units and LTIP Units (2)

Special Time-Based LTIP Units and Special Performance-Based LTIP Units (3)

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(1) Primarily comprising compensation expense for:

(i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonuses earned, (ii) restricted share units ("RSUs") and (iii) shares issued under our ESPP.

(2) Includes share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which fully vested in July 2022.

(i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonuses earned, (ii) RSUs and (iii) shares issued under our ESPP.

(2) Includes share-based compensation expense for formation awards, LTIP Units and OP Units issued in the Formation Transaction, which fully vested in July 2022.

(3) Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in National Landing.

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

in the accompanying statements of operations .

As of September 30, 2022, we had $ 50.5 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 3.2 years.

in our statements of operations.

As of March 31, 2023, we had $ 53.2 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 2.8 years.

Transaction and Other Costs

The following is a summary of transaction and other costs:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Demolition costs

Integration and severance costs

Completed, potential and pursued transaction expenses (1)

Severance and other costs

Demolition costs

Transaction and other costs

(1) Primarily consists of legal and dead deal costs related to pursued transactions.

(1) Primarily consists of legal costs related to pursued transactions.

Interest Expense

The following is a summary of interest expense:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

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

Net unrealized (gain) loss on derivative financial instruments designated as ineffective hedges

Net (gain) loss on derivative financial instruments designated as ineffective hedges:

Net unrealized (gain) loss

Net realized loss

Capitalized interest

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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, which it increased to an aggregate of $ 1.0 billion in June 2022.

During the three and nine months ended September 30, 2022, we repurchased and retired 2.3 million and 14.2 million common shares for $ 54.0 million and $ 361.0 million, a weighted average purchase price per share of $ 23.35 and $ 25.49 .

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

Since we began the share repurchase program, we have repurchased and retired 23.3 million common shares for $ 623.5 million, a weighted average purchase price per share of $ 26.74 .

Our Board of Trustees previously authorized the repurchase of up to $ 1.0 billion of our outstanding common shares, and in May 2023, increased the common share repurchase authorization to $ 1.5 billion.

During the three months ended March 31, 2023, we repurchased and retired 1.2 million common shares for $ 20.1 million, a weighted average purchase price per share of $ 16.66 .

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

Since we began the share repurchase program, as of March 31, 2023, we have repurchased and retired 24.5 million common shares for $ 643.6 million, a weighted average purchase price per share of $ 26.25 .

During the second quarter of 2023, through the date of this filing, we repurchased and retired 2.8 million common shares for $ 40.1 million, a weighted average purchase price per share of $ 14.16 , pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Earnings (Loss) Per Common Share

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

Three Months Ended September 30,

Nine Months Ended September 30,

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

Three Months Ended March 31,

(In thousands, except per share amounts)

Net income (loss)

Net (income) loss attributable to redeemable noncontrolling interests

Net (income) loss attributable to noncontrolling interests

Net income attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Net income (loss) attributable to common shareholders

Distributions to participating securities

Net income (loss) available to common shareholders - basic and diluted

Weighted average number of common shares outstanding - basic and diluted

Earnings (loss) per common share - basic and diluted

The effect of the redemption of OP Units, Time-Based LTIP Units, fully vested LTIP Units and Special Time-Based LTIP Units that were outstanding as of September 30, 2022 and 2021 is excluded in the computation of diluted earnings (loss) per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings (loss) per share).

The effect of the redemption of OP Units, Time-Based LTIP Units, fully vested LTIP Units and Special Time-Based LTIP Units that were outstanding as of March 31, 2023 and 2022 is excluded in the computation of diluted earnings (loss) per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings (loss) per share).

Since OP Units, Time-Based LTIP Units, LTIP Units and Special Time-Based LTIP Units, which are held by noncontrolling interests, are attributed gains at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average impact are excluded from net income (loss) available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings (loss) per common share.

AO LTIP Units, Performance-Based LTIP Units, Formation Awards and RSUs, which totaled 5.9 million for the three and nine months ended September 30, 2022, and 5.2 million and 4.9 million for the three and nine months ended September 30, 2021, were excluded from the calculation of diluted earnings (loss) per common share as they were antidilutive, but potentially could be dilutive in the future.

Dividends Declared in October 2022

On October 25, 2022, our Board of Trustees declared a quarterly dividend of $ 0.225 per common share, payable on November 22, 2022 to shareholders of record as of November 8, 2022.

AO LTIP Units, Performance-Based LTIP Units, formation awards and RSUs, which totaled 5.5 million and 6.0 million for the three months ended March 31, 2023 and 2022, were excluded from the calculation of diluted earnings (loss) per common share as they were antidilutive, but potentially could be dilutive in the future.

Dividends Declared in May 2023

On May 4, 2023, our Board of Trustees declared a quarterly dividend of $ 0.225 per common share, payable on June 30, 2023 to shareholders of record as of June 23, 2023.

Fair Value Measurements

1 unchanged sentence

To manage or hedge our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments.

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

As of September 30, 2022 and December 31, 2021, we had various derivative financial instruments consisting of interest rate swap and cap agreements that are measured at fair value on a recurring basis.

The net unrealized gain (loss) on our derivative financial instruments designated as effective hedges was $ 54.2 million and ($ 17.2 ) million as of September 30, 2022 and December 31, 2021 and was recorded in "Accumulated other comprehensive income (loss)"

As of March 31, 2023 and December 31, 2022, we had various derivative financial instruments consisting of interest rate swap and cap agreements that are measured at fair value on a recurring basis.

The net unrealized gain on our derivative financial instruments designated as effective hedges was $ 37.1 million and $ 55.0 million as of March 31, 2023 and December 31, 2022 and was recorded in "Accumulated other comprehensive income"

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

1 unchanged sentence

Accounting Standards Codification 820 ("Topic 820"), Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value.

The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).

The objective of fair value is to determine the price that would be received

upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).

Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

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(In thousands)

September 30, 2022

March 31, 2023

Derivative financial instruments designated as effective hedges:

Classified as assets in "Other assets, net"

Classified as liabilities in "Other liabilities, net"

Derivative financial instruments designated as ineffective hedges:

3 unchanged sentences

Classified as assets in "Other assets, net"

Classified as liabilities in "Other liabilities, net"

Derivative financial instruments designated as ineffective hedges:

3 unchanged sentences

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

However, as of September 30, 2022 and December 31, 2021, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments.

However, as of March 31, 2023 and December 31, 2022, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments.

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

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

in our statements of comprehensive income (loss) for the three and nine months ended September 30, 2022 and 2021 were attributable to the net change in unrealized gains or losses related to effective interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

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

in our statements of comprehensive income for the three months ended March 31, 2023 and 2022 were attributable to the net change in unrealized gains or losses related to effective interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

Financial Assets and Liabilities Not Measured at Fair Value

As of September 30, 2022 and December 31, 2021, all financial assets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:

September 30, 2022

As of March 31, 2023 and December 31, 2022, all financial assets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:

March 31, 2023

December 31, 2022

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Financial liabilities:

Mortgages payable

Revolving credit facility

Mortgage loans

Unsecured term loans

(1) The carrying amount consists of principal only.

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

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

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

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

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

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

Segment Information

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

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

To conform to the current period presentation, we have reclassified the prior period segment financial data for 1700 M Street, for which we are the ground lessor, that had been classified as part of the commercial segment to other to better align with our internal reporting.

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

The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the net operating income ("NOI") of properties within each segment.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Third-party real estate services revenue less expenses

(1) As of September 30, 2022, we had estimated unrecognized development fee revenue totaling $ 41.1 million, of which $ 3.6 million, $ 12.4 million and $ 6.8 million is expected to be recognized during the remainder of 2022 , 2023 and 2024 , and $ 18.3 million is expected to be recognized thereafter through 2027 as unsatisfied performance obligations are completed.

Changes in the timing and costs of planned development projects may impact these amounts.

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

Management company assets primarily consist of management and leasing contracts with a net book value of $ 15.2 million and $ 19.6 million as of September 30, 2022 and December 31, 2021, which are classified in "Intangible assets, net"

Management company assets primarily consist of management and leasing contracts with a net book value of $ 12.2 million and $ 13.7 million as of March 31, 2023 and December 31, 2022, which were included in "Intangible assets, net"

in our balance sheets.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Loss on the extinguishment of debt

Income tax expense

Net income (loss) attributable to redeemable noncontrolling interests

Net income (loss) attributable to noncontrolling interests

Income tax benefit

Net income attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Third-party real estate services, including reimbursements revenue

Other revenue

Income (loss) from unconsolidated real estate ventures, net

Income from unconsolidated real estate ventures, net

Interest and other income, net

Gain on the sale of real estate, net

Gain (loss) on the sale of real estate, net

Consolidated NOI

The following is a summary of NOI by segment.

Items classified in the Other column include future development assets, assets ground leased to third parties, corporate entities and the elimination of inter-segment activity.

Three Months Ended September 30, 2022

(In thousands)

Property rental revenue

Parking revenue

Total property revenue

Property expense:

Property operating

Real estate taxes

Total property expense

Consolidated NOI

Three Months Ended September 30, 2021

(In thousands)

Property rental revenue

Parking revenue

Total property revenue

Property expense:

Property operating

Real estate taxes

Total property expense

Consolidated NOI

Nine Months Ended September 30, 2022

Items classified in the Other column include development assets, corporate entities, land assets for which we are the ground lessor and the elimination of inter-segment activity.

Three Months Ended March 31, 2023

(In thousands)

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Consolidated NOI

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

(In thousands)

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(In thousands)

September 30, 2022

March 31, 2023

Real estate, at cost

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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.

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.

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Construction Commitments

As of September 30, 2022, we had assets under construction that, based on our current plans and estimates, require an additional $ 468.1 million to complete, which we anticipate will be primarily expended over the next two to three years .

As of March 31, 2023, we had assets under construction that, based on our current plans and estimates, require an additional $ 346.5 million to complete, which we anticipate will be primarily expended over the next three years .

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

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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.

Environmental liabilities totaled $ 18.0 million and $ 18.2 million as of September 30, 2022 and December 31, 2021 and are included in "Other liabilities, net"

Environmental liabilities totaled $ 18.0 million as of March 31, 2023 and December 31, 2022 and are included in "Other liabilities, net"

in our balance sheets.

As of September 30, 2022, we had committed tenant-related obligations totaling $ 67.3 million ($ 64.9 million related to our consolidated entities and $ 2.4 million related to our unconsolidated real estate ventures at our share).

As of March 31, 2023, we had committed tenant-related obligations totaling $ 60.6 million ($ 58.6 million related to our consolidated entities and $ 2.0 million related to our unconsolidated real estate ventures at our share).

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

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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 September 30, 2022, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $ 64.0 million.

As of September 30, 2022, we had no principal payment guarantees related to our unconsolidated real estate ventures.

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

lenders, tenants and other third parties for the completion of development projects.

As of September 30, 2022, the aggregate amount of principal payment guarantees was $ 8.3 million for our consolidated entities.

As of March 31, 2023, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $ 62.6 million.

As of March 31, 2023, we had no principal payment guarantees related to our unconsolidated real estate ventures.

As of March 31, 2023, the aggregate amount of principal payment guarantees was $ 8.3 million for our consolidated entities.

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

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

As of September 30, 2022, the WHI Impact Pool had completed closings of capital commitments totaling $ 114.4 million, which included a commitment from us of $ 11.2 million.

As of September 30, 2022, our remaining unfunded commitment was $ 6.2 million.

The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool and its affiliates was $ 4.9 million and $ 15.1 million for the three and nine months ended September 30, 2022, and $ 5.6 million and $ 17.2 million for the three and nine months ended September 30, 2021.

As of September 30, 2022 and December 31, 2021, we had receivables from the JBG Legacy Funds and the WHI Impact Pool and its affiliates totaling $ 4.1 million and $ 3.2 million for such services.

We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 214,000 and $ 922,000 for the three and nine months ended September 30, 2022, and $ 246,000 and $ 1.0 million for the three and nine months ended September 30, 2021.

As of March 31, 2023, the WHI Impact Pool had completed closings of capital commitments totaling $ 114.4 million, which included a commitment from us of $ 11.2 million.

As of March 31, 2023, our remaining unfunded commitment was $ 4.3 million.

The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool and its affiliates was $ 5.0 million and $ 5.5 million for the three months ended March 31, 2023 and 2022.

As of March 31, 2023 and December 31, 2022, we had receivables from the JBG Legacy Funds and the WHI Impact Pool and its affiliates totaling $ 5.2 million and $ 4.5 million for such services.

Commencing in March 2023, in connection with the sale of an 80.0 % interest in 4747 Bethesda Avenue, we leased our corporate offices from an unconsolidated real estate venture and incurred $ 158,000 of rent expense for the three months ended March 31, 2023, which is included in "General and administrative expense"

in our statement of operations.

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

We paid BMS $ 2.7 million and $ 7.8 million during the three and nine months ended September 30, 2022, and $ 4.9 million and $ 13.4 million for the three and nine months ended September 30, 2021, which is included in "Property operating expenses"

We paid BMS $ 2.4 million and $ 3.1 million during the three months ended March 31, 2023 and 2022, which is included in "Property operating expenses"

in our statements of operations.

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

What changed 10-Q

Item 1. Financial Statements