What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-09 compared with 2022-11-01 · 200 added, 286 removed, 272 unchanged (64% of the section changed)

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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.

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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 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.

Occupancy, non-GAAP financial measures, leverage metrics, operating assets and operating metrics also exclude these subordinated interests.

We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C.

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

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

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

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

The accompanying financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and 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 these estimates.

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

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.

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

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.

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.

Our revenues and expenses are, to some extent, subject to seasonality during the year, which impacts quarterly net earnings, cash flows and funds from operations;

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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 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.

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

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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.

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.

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

We are currently constructing two new office buildings for Amazon on Metropolitan Park, totaling 2.1 million square feet, inclusive of over

50,000 square feet of street-level retail with new shops and restaurants.

We expect Amazon to occupy its new headquarters at Metropolitan Park in National Landing in June 2023.

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.

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

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

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

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 and intend to continue disposing of assets where the disparity in public and private market valuations is greatest.

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.

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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.

Our office portfolio occupancy as of September 30, 2022 declined by 20 basis points as compared to June 30, 2022.

Although new leasing has been slow to recover from the pandemic 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 207,000 square feet at our share of office leases during the quarter, over 50% of which comprised new leases in National Landing.

We expect this lag to continue to impact our occupancy levels for the foreseeable future.

We have seen an increase in the number of employees returning to the office and higher transient parking, with parking revenue in our commercial portfolio at approximately 79% of pre-pandemic levels of approximately $25 million annually, at our share.

Our multifamily portfolio occupancy as of September 30, 2022 improved by 140 basis points as compared to June 30, 2022.

Average in-place rents ended the quarter 8.4% below asking rents.

For third quarter lease expirations, we increased rents by 6.7% upon renewal while achieving a 57.1% renewal rate across our portfolio.

Curbed lending activity, however, has significantly slowed down the pace of asset sales and we expect this reduced activity to continue for the rest of 2023.

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 March 31, 2023 increased by 10 basis points compared to December 31, 2022.

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 114,000 square feet of office leases during the first quarter, over 90% of which comprised leases in National Landing.

We have 619,000 square feet of office leases expiring in 2023 with another 40,500 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 March 31, 2023 decreased by 70 basis points compared to December 31, 2022 as lower leasing volume is typical for the first quarter.

For first quarter lease expirations, we increased rents by 9.3% upon renewal while achieving a 54.7% renewal rate across our portfolio.

Operating Results

Key highlights for the three and nine months ended September 30, 2022 included:

● a net loss attributable to common shareholders of $19.3 million, or $0.17 per diluted common share, for the three months ended September 30, 2022 compared to net income attributable to common shareholders of $893,000, or $0.00 per diluted common share, for the three months ended September 30, 2021.

Net income attributable to common shareholders of $104.0 million, or $0.86 per diluted common share, for the nine months ended September 30, 2022 compared to a net loss attributable to common shareholders of $22.8 million, or $0.18 per diluted common share, for the nine months ended September 30, 2021;

● third-party real estate services revenue, including reimbursements, of $21.8 million and $68.0 million for the three and nine months ended September 30, 2022 compared to $25.8 million and $90.7 million for the three and nine months ended September 30, 2021;

● operating commercial portfolio leased and occupied percentages at our share of 88.3% and 85.9% as of September 30, 2022 compared to 87.3% and 86.1% as of June 30, 2022, and 84.9% and 82.6% as of September 30, 2021;

● operating multifamily portfolio leased and occupied percentages (1) at our share of 95.5% and 93.7% as of September 30, 2022 compared to 95.7% and 92.3% as of June 30, 2022, and 94.0% and 92.4% as of September 30, 2021;

● the leasing of 207,000 square feet at our share, at an initial rent (2) of $45.87 per square foot and a GAAP-basis weighted average rent per square foot (3) of $46.81 for the three months ended September 30, 2022, and the leasing of 743,000 square feet at our share, at an initial rent (2) of $45.69 per square foot and a GAAP-basis weighted average rent per square foot (3) of $45.03 for the nine months ended September 30, 2022;

● an increase in same store (4) NOI of 11.5% to $78.1 million for the three months ended September 30, 2022 compared to $70.0 million for the three months ended September 30, 2021, and an increase in same store (4) NOI of 13.0% to $231.5 million for the nine months ended September 30, 2022 compared to $204.9 million for the nine months ended September 30, 2021.

Key highlights for the three months ended March 31, 2023 included:

● net income attributable to common shareholders of $21.2 million, or $0.19 per diluted common share, compared to a net loss attributable to common shareholders of $32,000, or $0.00 per diluted common share, for the three months ended March 31, 2022;

● third-party real estate services revenue, including reimbursements, of $22.8 million compared to $24.0 million for the three months ended March 31, 2022;

● operating commercial portfolio leased and occupied percentages at our share of 87.6% and 85.2% as of March 31, 2023 compared to 88.5% and 85.1% as of December 31, 2022, and 85.2% and 83.3% as of March 31, 2022;

● operating multifamily portfolio leased and occupied percentages (1) at our share of 95.0% and 92.9% as of March 31, 2023 compared to 94.5% and 93.6% as of December 31, 2022, and 94.1% and 91.6% as of March 31, 2022;

● the leasing of 114,000 square feet at our share, at an initial rent (2) of $50.92 per square foot and a GAAP-basis weighted average rent per square foot (3) of $51.03;

● a decrease in same store (4) NOI of 0.7% to $76.1 million compared to $76.6 million for the three months ended March 31, 2022.

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

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(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 nine months ended September 30, 2022 included:

● the acquisition of 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.

See Note 3 to the financial statements for additional information;

● the sale of the Universal Buildings, Pen Place and a development parcel for an aggregate gross sales price of $429.3 million.

See Note 3 to the financial statements for additional information;

● 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 4 to the financial statements for additional information;

● recognition of an aggregate gain of $6.2 million from the sale of various assets by our unconsolidated real estate ventures.

See Note 4 to the financial statements for additional information;

● 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 a $200.0 million unsecured term loan ("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 Secured Overnight Financing Rate ("SOFR") plus 1.15% to SOFR plus 1.75%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets;

● the amendment of a $200.0 million unsecured term loan ("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 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.

Additionally, investing and financing activity during the three months ended March 31, 2023 included:

● 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%;

● the sale of a development parcel for a gross sales price of $5.5 million;

● the sale of an 80.0% interest in 4747 Bethesda Avenue.

See Note 4 to the financial statements for additional information;

● the net repayment of the outstanding balance on our revolving credit facility totaling $200.0 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 $25.7 million and distributions to redeemable noncontrolling interests of $4.0 million;

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● the investment of $78.3 million in development, construction in progress and real estate additions.

Activity subsequent to September 30, 2022 included:

● 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 acquisition of the remaining 50.0% ownership interest in 8001 Woodmont, a multifamily asset owned by an unconsolidated real estate 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;

● the repayment of the outstanding balance on our revolving credit facility of $100.0 million;

● the declaration of a quarterly dividend of $0.225 per common share, payable on November 22, 2022 to shareholders of record as of November 8, 2022.

Activity subsequent to March 31, 2023 included:

● the increase by our Board of Trustees of our common share repurchase authorization to $1.5 billion;

● the repurchase and retirement of 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;

● the declaration of a quarterly dividend of $0.225 per common share, payable on June 30, 2023 to shareholders of record as of June 23, 2023.

Critical Accounting Estimates

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

There have been no significant changes to our policies during the nine months ended September 30, 2022.

There have been no significant changes to our policies during the three months ended March 31, 2023.

Recent Accounting Pronouncements

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Results of Operations

During the nine months ended September 30, 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.

During the three months ended March 31, 2023, we sold an 80.0% interest in 4747 Bethesda Avenue 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 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 November 2021, we acquired The Batley, and in August 2022, we acquired the remaining 36.0% ownership interest in an unconsolidated real estate venture that owned Atlantic Plumbing, which was consolidated upon acquisition.

Comparison of the Three Months Ended September 30, 2022 to 2021

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended September 30, 2022 compared to the same period in 2021:

Three Months Ended September 30,

(Dollars in thousands)

Property rental revenue

Third-party real estate services revenue, including reimbursements

Depreciation and amortization expense

Property operating expense

Real estate taxes expense

General and administrative expense:

Corporate and other

Third-party real estate services

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

Transaction and other costs

Income (loss) from unconsolidated real estate ventures, net

Interest expense

Property rental revenue decreased by approximately $6.1 million, or 4.8%, to $119.8 million in 2022 from $125.9 million in 2021.

The decrease was primarily due to a $17.8 million decrease in revenue from our commercial assets, partially offset by a $10.6 million increase in revenue from our multifamily assets.

The decrease in revenue from our commercial assets

was primarily due to an $18.2 million decrease related to the Disposed Properties.

The increase in revenue from our multifamily assets was primarily due to (i) a $2.6 million increase related to The Batley, (ii) a $2.6 million increase at RiverHouse and The Bartlett due to higher occupancy and rents, (iii) a $2.1 million increase related to higher occupancy at several recently developed properties (West Half, The Wren, 900 W Street and 901 W Street) and (iv) a $1.7 million increase related to Atlantic Plumbing.

Third-party real estate services revenue, including reimbursements, decreased by approximately $4.0 million, or 15.5%, to $21.8 million in 2022 from $25.8 million in 2021.

The decrease was primarily due to a $2.6 million decrease in development fees related to the timing of development projects and a $1.4 million decrease in reimbursement revenue.

Depreciation and amortization expense decreased by approximately $6.7 million, or 11.8%, to $50.1 million in 2022 from $56.7 million in 2021.

The decrease was primarily due to a $7.7 million decrease related to the Disposed Properties, which was partially offset by a $1.4 million increase related to The Batley.

Property operating expense decreased by approximately $3.8 million, or 9.5%, to $36.4 million in 2022 from $40.2 million in 2021.

The decrease was primarily due to a $6.5 million decrease related to the Disposed Properties.

The decrease in property operating expense was partially offset by (i) a $940,000 increase related to The Batley, (ii) a $756,000 increase in cleaning, and repairs and maintenance expenses across our same store portfolio and (iii) a $531,000 increase related to Atlantic Plumbing.

Real estate tax expense decreased by approximately $3.5 million, or 19.3%, to $14.7 million in 2022 from $18.3 million in 2021.

The decrease was primarily due to a $3.7 million decrease related to the Disposed Properties.

General and administrative expense:

corporate and other remained relatively unchanged at $12.1 million in 2022 and 2021 as a decrease in employee compensation costs was offset by an increase in travel and costs associated with employees working in the office.

General and administrative expense:

third-party real estate services decreased by approximately $4.3 million, or 16.9%, to $21.2 million in 2022 from $25.5 million in 2021.

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

General and administrative expense:

share-based compensation related to Formation Transaction and special equity awards decreased by approximately $2.9 million, or 84.3%, to $548,000 in 2022 from $3.5 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 $1.7 million in 2022 primarily included $1.0 million of severance costs and $600,000 of expenses related to completed, potential and pursued transactions.

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

Income (loss) from unconsolidated real estate ventures decreased by approximately $34.4 million, or 167.6%, to a loss of $13.9 million for 2022 from income of $20.5 million in 2021.

The decrease was primarily due to a $23.1 million gain at our share from the sale of 500 L'Enfant Plaza in 2021 and a $14.0 million increase in impairment losses in 2022 compared to 2021.

Interest expense increased by approximately $689,000, or 4.0%, to $17.9 million in 2022 from $17.2 million in 2021.

The increase in interest expense was primarily due to (i) a $2.2 million increase due to new mortgage loans entered into during 2022 and 2021 at WestEnd25, 1225 S.

Clark Street and 1215 S.

Clark Street, (ii) a $954,000 increase at 4747 Bethesda due to rising interest rates and (iii) a $789,000 increase related to a higher average outstanding balance on our revolving credit facility.

The increase in interest expense was partially offset by a $3.1 million increase in the fair value of our interest rate caps due to rising interest rates .

Comparison of the Nine Months Ended September 30, 2022 to 2021

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the nine months ended September 30, 2022 compared to the same period in 2021:

Nine Months Ended September 30,

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.

Comparison of the Three Months Ended March 31, 2023 to 2022

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended March 31, 2023 compared to the same period in 2022:

Three Months Ended March 31,

(Dollars in thousands)

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

Transaction and other costs

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

* Not meaningful .

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The decrease was primarily due to a $15.7 million decrease in revenue from our commercial assets, partially offset by a $7.8 million increase in revenue from our multifamily assets.

The decrease in revenue from our commercial assets was primarily due to (i) a $36.8 million decrease related to the Disposed Properties and (ii) a $2.0 million decrease related to 2451 Crystal Drive due to construction management services provided to tenants in 2021, partially offset by (iii) a $3.4 million increase related to the commencement of a lease with Amazon at 2100 Crystal Drive.

The increase in revenue from our multifamily assets was primarily due to (i) a $10.6 million increase related to higher occupancy at several recently developed properties (West Half, The Wren, 900 W Street and 901 W Street), (ii) an $8.0 million increase related to The Batley, (iii) a $7.8 million increase at RiverHouse, The Bartlett and 2221 S.

Clark Street - Residential due to higher occupancy and rents and (iv) a $1.7 million increase related to Atlantic Plumbing.

The decrease in revenue from our commercial assets was primarily due to an $18.5 million decrease related to the Disposed Properties, partially offset by a $1.2 million decrease in bad debt reserves.

The increase in revenue from our multifamily assets was primarily due to a $5.4 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and a $1.6 million increase due to higher occupancies and rents at RiverHouse, The Bartlett and 2221 S.

Clark Street - Residential.

Third-party real estate services revenue, including reimbursements, decreased by approximately $1.2 million, or 4.9%, to $22.8 million in 2023 from $24.0 million in 2022.

The decrease was primarily due to (i) a $15.6 million decrease in development fees related to the timing of development projects, (ii) a $5.2 million decrease in reimbursement revenue due to the termination of a management agreement and (iii) a $1.8 million decrease in asset management fees due to the sale of assets within the JBG Legacy Funds.

The decrease was primarily due to a $1.6 million decrease in development fees related to the timing of development projects and a $668,000 decrease in asset management fees due to the sale of assets within the JBG Legacy Funds.

The decrease in third-party real estate services revenue was partially offset by a $776,000 increase in reimbursement revenue.

Depreciation and amortization expense decreased by approximately $4.6 million, or 8.0%, to $53.4 million in 2023 from $58.1 million in 2022.

The decrease was primarily due to a $26.4 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 an $8.6 million increase related to The Batley and a $1.2 million increase related to 1770 Crystal Drive due to Amazon taking occupancy.

Property operating expense increased by approximately $2.5 million, or 2.3%, to $112.5 million in 2022 from $109.9 million in 2021.

The increase was primarily due to (i) a $5.6 million increase in utility, cleaning, repairs and maintenance, and other property expenses across our same store portfolio, (ii) a $2.7 million increase related to The Batley, (iii) a $2.5 million increase related to technology initiatives in National Landing, (iv) a $1.8 million increase related to higher occupancy at several recently developed properties (4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street), and (v) a $912,000 increase related to 2221 S.

Clark Street – Residential due to higher property management and other operating expenses resulting from higher occupancy.

The increase in property operating expense was partially offset by a $12.2 million decrease related to the Disposed Properties.

The decrease was primarily due to a $7.3 million decrease related to the Disposed Properties and a $2.9 million decrease due to the amortization of the acquired in-place lease intangible in 2022 at The Batley.

The decrease in depreciation and amortization expense was partially offset by a $6.2 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont.

Property operating expense decreased by approximately $5.0 million, or 12.4%, to $35.6 million in 2023 from $40.6 million in 2022.

The decrease was primarily due to a $6.7 million decrease related to the Disposed Properties, and a $1.5 million decrease in costs incurred related to digital infrastructure initiatives in National Landing.

The decrease in property operating expense was partially offset by a $2.7 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and an $876,000 increase in property expenses across our multifamily portfolio, primarily related to higher compensation expenses, cleaning expenses and rising costs.

Real estate tax expense decreased by approximately $3.0 million, or 16.3%, to $15.2 million in 2023 from $18.2 million in 2022.

The decrease was primarily due to a $7.4 million decrease related to the Disposed Properties.

The decrease was primarily due to a $3.3 million decrease related to the Disposed Properties, partially offset by a $727,000 increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont.

General and administrative expense:

corporate and other increased by approximately $4.2 million, or 10.9%, to $42.7 million in 2022 from $38.5 million in 2021.

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

corporate and other increased by approximately $308,000, or 1.9%, to $16.1 million in 2023 from $15.8 million in 2022.

The increase was primarily due to a decrease in capitalized payroll, partially offset by lower compensation expenses.

General and administrative expense:

third-party real estate services decreased by approximately $3.2 million, or 11.9%, to $23.8 million in 2023 from $27.0 million in 2022.

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

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

General and administrative expense:

share-based compensation related to Formation Transaction and special equity awards decreased by approximately $8.5 million, or 66.0%, to $4.4 million in 2022 from $12.9 million in 2021.

share-based compensation related to Formation Transaction and special equity awards decreased by approximately $1.9 million, or 84.4%, to $351,000 in 2023 from $2.2 million in 2022.

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 $4.6 million in 2022 included (i) $2.2 million of expenses related to completed, potential and pursued transactions, (ii) $2.0 million of integration and severance costs and (iii) $428,000 of demolition costs primarily related to 223 23 rd Street and 2250/2300 Crystal Drive.

Transaction and other costs of $8.9 million in 2021 included (i) $5.4 million of expenses related to completed, potential and pursued transactions, (ii) $2.9 million of demolition costs related to 2000/2001 South Bell Street and (iii) $616,000 of integration and severance costs.

Income (loss) from unconsolidated real estate ventures decreased by approximately $36.3 million, or 154.6%, to a loss of $12.8 million for 2022 from income of $23.5 million in 2021.

The decrease was primarily due to a $22.1 million reduction in gains at our share from the sale of various assets in 2022 as compared to 2021 and a $14.0 million increase in impairment losses in 2022 compared to 2021.

Interest and other income of $16.9 million in 2022 was primarily related to a realized gain of $13.9 million from the sale of investments in equity securities, which had been carried at cost, during the first quarter of 2022 and a $928,000 unrealized gain in 2022 related to equity investments carried at fair value.

Interest expense remained relatively unchanged at $50.3 million in 2022 and 2021.

Interest expense decreased by $8.4 million due to an increase in the fair value of our interest rate caps as a result of rising interest rates and a $2.0 million increase in capitalized interest primarily related to 1900 Crystal Drive.

The decrease in interest expense was offset by (i) a $4.1 million increase due to new mortgage loans entered into in 2022 and 2021 at WestEnd25, 1225 S.

Clark Street and 1215 S.

Clark Street, (ii) a $2.1 million increase related to a higher average outstanding balance on our revolving credit facility, (iii) a $1.6 million increase related to Courthouse Plaza 1 and 2 as its associated ground lease was reclassified to a finance lease in December 2021, (iv) a $1.3 million increase related to 4747 Bethesda Avenue due to rising interest rates, (v) a $947,000 increase related to additional draws on our term loans and (vi) a $565,000 increase related to Atlantic Plumbing.

Gain on the sale of real estate of $158.6 million in 2022 was primarily due to the sale of the Disposed Properties.

See Note 3 to the financial statements for additional information.

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.

Income from unconsolidated real estate ventures decreased by approximately $2.7 million, or 86.2%, to $433,000 in 2023 from $3.1 million in 2022.

The decrease was primarily due to a $5.2 million gain at our share from the sale of various assets in 2022.

The decrease in income from unconsolidated real estate ventures was partially offset by a $1.8 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont as these assets are not yet stabilized, and an $883,000 increase related to our suspension of the equity method of accounting for the L’Enfant Plaza Assets.

Interest and other income decreased by approximately $10.2 million, or 71.4%, to $4.1 million in 2023 from $14.2 million in 2022 primarily due to a realized gain of $13.9 million in 2022 from the sale of investments in equity securities, partially offset by a $2.1 million increase in interest income on our outstanding cash balances and a $1.8 million increase in unrealized gains from investments in real estate-focused technology companies.

Interest expense increased by approximately $10.6 million, or 64.9%, to $26.8 million in 2023 from $16.3 million in 2022.

The increase in interest expense was primarily due to (i) a $6.1 million change in the fair value of our ineffective interest rate caps due to a decline in the forward interest rate curve, (ii) a $4.7 million increase related to 1225 S.

Clark Street, The Bartlett, 1221 Van Street, 220 20 th Street, 4747 Bethesda Avenue and 800 North Glebe Road, due to rising interest rates, (iii) a $2.8 million increase due to new mortgage loans entered into at WestEnd25, The Wren and F1RST Residences, (iv) a $2.1 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and (v) a $1.6 million increase related to additional draws on our term loans.

The increase in interest expense was partially offset by (i) a $3.4 million increase in capitalized interest primarily related to 1900 Crystal Drive, (ii) a $2.9 million decrease related to the Disposed Properties and (iii) an $870,000 decrease related to a lower average outstanding balance on our revolving credit facility.

Gain on the sale of real estate of $40.7 million in 2023 was primarily due to the sale of an 80.0% interest in 4747 Bethesda Avenue.

Loss on the sale of real estate of $136,000 in 2022 was due to the sale of a development parcel.

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

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.

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 as 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.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Three Months Ended March 31,

Net income (loss) attributable to common shareholders

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)

Gain on the sale of real estate, net of tax

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

Gain on the sale of unconsolidated real estate assets

Real estate depreciation and amortization

Impairment related to unconsolidated real estate ventures (1)

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

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FFO attributable to common shareholders

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

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

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

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

During the three months ended September 30, 2022, our same store pool increased to 53 properties from 52 properties due to the inclusion of The Wren.

During the nine months ended September 30, 2022, our same store pool decreased to 52 properties from 55 properties due to the inclusion of West Half, 901 W Street, 900 W Street, 1770 Crystal Drive, and 4747 Bethesda Avenue, and the exclusion of The Alaire, The Terano, the Universal Buildings, 7200 Wisconsin Avenue, 1730 M Street, RTC-West, Courthouse Plaza 1 and 2, and Galvan, which were 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 disposed properties or properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

During the three months ended March 31, 2023, our same store pool increased to 49 properties from 47 properties due to the inclusion of The Wren and The Batley 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 increased $8.1 million, or 11.5%, to $78.1 million for the three months ended September 30, 2022 from $70.0 million for the same period in 2021.

Same store NOI increased $26.6 million, or 13.0%, to $231.5 million for the nine months ended September 30, 2022 from $204.9 million for the same period in 2021.

The increase was substantially attributable to (i) higher occupancy and rents and lower concessions in our multifamily portfolio, (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.

Same store NOI decreased $528,000, or 0.7%, to $76.1 million for the three months ended March 31, 2023 from $76.6 million for the same period in 2022.

The decrease was substantially attributable to (i) increased abatement and higher utilities, partially offset by an increase in parking revenue in our commercial portfolio and (ii) higher occupancy and rents in our multifamily portfolio.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(Dollars 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

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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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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.

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

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three and nine months ended September 30, 2022 in the preceding pages under "Results of Operations."

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three months ended March 31, 2023 in the preceding pages under "Results of Operations."

Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.

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.

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

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Consolidated NOI is calculated as property revenue less property expense.

See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three and nine months ended September 30, 2022 and 2021.

See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three months ended March 31, 2023 and 2022.

The following is a summary of NOI by segment:

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Consolidated NOI

(1) Includes activity related to future development assets, ground leases in which we are the lessor, corporate entities and the elimination of inter-segment activity.

Comparison of the Three Months Ended September 30, 2022 to 2021

Property revenue decreased by $17.5 million, or 18.9%, to $75.1 million in 2022 from $92.6 million in 2021.

Consolidated NOI decreased by $7.1 million, or 13.3%, to $46.4 million in 2022 from $53.5 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 an increase in parking revenue driven by an increase in both contract and transient parking.

Property revenue increased by $10.8 million, or 30.6%, to $45.9 million in 2022 from $35.1 million in 2021.

Consolidated NOI increased by $8.5 million, or 53.0%, to $24.5 million in 2022 from $16.0 million in 2021.

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

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

Comparison of the Nine Months Ended September 30, 2022 to 2021

(1) Includes activity related to development assets, corporate entities, land assets for which we are the ground lessor and the elimination of inter-segment activity.

Comparison of the Three Months Ended March 31, 2023 to 2022

Property revenue decreased by $15.6 million, or 17.0%, to $76.1 million in 2023 from $91.6 million in 2022.

Consolidated NOI decreased by $6.0 million, or 11.1%, to $47.7 million in 2023 from $53.7 million in 2022.

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, an increase in parking revenue driven by an increase in both contract and transient parking, and an increase at 2100 Crystal Drive due to the commencement of a lease with Amazon.

The decreases in property revenue and consolidated NOI were due to the Disposed Properties, partially offset by increased occupancy at 1550 Crystal Drive and 241 18 th Street, and the recovery of previously reserved balances.

Property revenue increased by $7.9 million, or 18.7%, to $50.1 million in 2023 from $42.2 million in 2022.

Consolidated NOI increased by $3.8 million, or 16.4%, to $27.1 million in 2023 from $23.3 million in 2022.

The increases in property revenue and consolidated NOI were due to the acquisition of The Batley in November 2021, and

higher occupancy and rental rates across the portfolio.

The increases in property revenue and consolidated NOI were due to 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.

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

Financing Activities

The following is a summary of mortgages payable:

Mortgage Loans

The following is a summary of mortgage 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 London Interbank Offered Rate ("LIBOR") was 3.14% and one-month term 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 London Interbank Offered Rate ("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 to the financial statements 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 $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, 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 to the financial statements 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 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 and the remaining $50.0 million was undrawn as of the date of this filing.

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.

As of September 30, 2022, we had floating rate debt with a principal balance totaling $882.7 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, subject to confirmation following an early December consultation, to cease the publication of the one-week and two-month USD-LIBOR immediately following the December 31, 2021 publications, and the remaining USD-LIBOR tenors immediately following the June 30, 2023 publications.

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

(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.

As of March 31, 2023, 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.

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

metric, including LIBOR, could, among other things, result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions.

The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things, result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions.

In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations.

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.

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.

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Material Cash Requirements

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

Our material cash requirements for the next 12 months and beyond are to fund:

● normal recurring expenses;

● debt service and principal repayment obligations, including balloon payments on maturing debt — As of September 30, 2022, we had no mortgages payable on a consolidated basis and $22.5 million at our share scheduled to mature in 2022.

In October 2022, we repaid the outstanding balance on our revolving credit facility of $100.0 million;

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

● development expenditures — 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;

● dividends to shareholders and distributions to holders of OP Units and LTIP Units — On October 25, 2022, our Board of Trustees declared a quarterly dividend of $0.225 per common share;

● possible common share repurchases;

● possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests – On October 5, 2022, we acquired the remaining 50.0% ownership interest in 8001 Woodmont, a multifamily asset owned by an unconsolidated real estate 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.

On October 4, 2022, we acquired an additional 3.7% ownership 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%.

● debt service and principal repayment obligations, including balloon payments on maturing mortgage loans — as of March 31, 2023, we had $143.0 million on a consolidated basis and $165.0 million at our share scheduled to mature in 2023;

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

● development expenditures — 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;

● dividends to shareholders and distributions to holders of OP Units and LTIP Units — on May 4, 2023, our Board of Trustees declared a quarterly dividend of $0.225 per common share;

● possible common share repurchases — 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;

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

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

● cash and cash equivalents — As of September 30, 2022, we had cash and cash equivalents of $258.9 million and had restricted cash of $188.0 million held by a qualified intermediary all of which was released in October 2022;

● cash and cash equivalents — as of March 31, 2023, we had cash and cash equivalents of $279.6 million ;

● cash flows from operations;

● distributions from real estate ventures;

● borrowing capacity under our current credit facility — As of September 30, 2022, we had $949.5 million of availability under our credit facility, including $50.0 million undrawn under our Tranche A-2 Term Loan;

● borrowing capacity under our current credit facility — as of March 31, 2023, we had $1.0 billion of availability under our credit facility, including $50.0 million undrawn under our Tranche A-2 Term Loan which we will draw in May 2023;

● 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.

During the nine months ended September 30, 2022, there were no significant changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report, except for a $1.4 billion decrease in future finance lease payments related to the Disposed Properties, a $200.0 million net decrease in the principal amount due on our revolving credit facility, a $164.8 million decrease in the principal amount due on mortgages payable related to the Disposed Properties, a $150.0 million draw under our unsecured term loan and a new mortgage loan with a principal balance of $97.5 million collateralized by WestEnd25.

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

During the three months ended March 31, 2023, there were no significant changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report.

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

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

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash used in financing activities

Cash Flows for the Nine Months Ended September 30, 2022

Cash and cash equivalents, and restricted cash increased $169.8 million to $471.9 million as of September 30, 2022, compared to $302.1 million as of December 31, 2021.

This increase resulted from $674.4 million of net cash provided by investing activities and $130.4 million of net cash provided by operating activities, partially offset by $635.0 million of net cash used in financing activities.

Our outstanding debt was $2.4 billion and $2.5 billion as of September 30, 2022 and December 31, 2021.

Net cash provided by operating activities of $130.4 million primarily comprised:

Net cash used in investing activities

Net cash provided by (used in) financing activities

Cash Flows for the Three Months Ended March 31, 2023

Cash and cash equivalents, and restricted cash increased $47.8 million to $321.9 million as of March 31, 2023, compared to $274.1 million as of December 31, 2022.

This increase resulted from $42.6 million of net cash provided by operating activities and $31.9 million of net cash provided by financing activities, partially offset by $26.7 million of net cash used in investing activities.

Our outstanding debt was $2.4 billion and $2.5 billion as of March 31, 2023 and December 31, 2022.

Net cash provided by operating activities of $42.6 million comprised:

(i) $40.0 million of net income (before $56.4 million of non-cash items and a $40.7 million gain on the sale of real estate), (ii) $3.9 million of return on capital from unconsolidated real estate ventures and (iii) $1.2 million of net change in operating assets and liabilities.

Non-cash income adjustments of $178.9 million primarily include depreciation and amortization expense, share-based compensation expense, deferred rent, net income from investments, amortization of lease incentives and other non-cash items.

Net cash provided by investing activities of $674.4 million comprised:

(i) $923.1 million of proceeds from the sale of real estate, (ii) $54.8 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) $218.8 million of development costs, construction in progress and real estate additions, (v) $86.7 million of investments in unconsolidated real estate ventures and other investments and (vi) $15.2 million for the acquisition of real estate.

Net cash used in financing activities of $635.0 million primarily comprised:

(i) $361.0 million of common shares repurchased, (ii) $300.0 million of repayments of our revolving credit facility, (iii) $268.6 million of repayments of mortgages payable, (iv) $82.1 million of dividends paid to common shareholders and (v) $12.4 million of distributions to our redeemable noncontrolling interests, partially offset by (vi) $150.0 million of borrowings under our unsecured term loan, (vii) $134.3 million of borrowings under mortgages payable, (viii) $100.0 million of borrowings under our revolving credit facility and (ix) $9.4 million of contributions from noncontrolling interests.

Non-cash income adjustments of $56.4 million primarily include depreciation and amortization expense, share-based compensation expense, deferred rent and other non-cash items.

Net cash used in investing activities of $26.7 million primarily comprised:

(i) $78.3 million of development costs, construction in progress and real estate additions and (ii) $16.9 million of investments in unconsolidated real estate ventures and other investments, partially offset by (iii) $69.0 million of proceeds from the sale of real estate.

Net cash provided by financing activities of $31.9 million primarily comprised:

(i) $223.3 million of borrowings under mortgage loans, partially offset by (ii) $133.9 million of repayments of mortgage loans, (iii) $25.7 million of dividends paid to common shareholders, (iv) $20.1 million of common shares repurchased, (v) $7.2 million of debt issuance and modification costs, and (vi) $4.0 million of distributions to our redeemable noncontrolling interests.

Unconsolidated Real Estate Ventures

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

As of September 30, 2022, we had investments in unconsolidated real estate ventures totaling $360.8 million.

As of March 31, 2023, we had investments in unconsolidated real estate ventures totaling $312.7 million.

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

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At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees.

Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt.

Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified

circumstances or repayment of the underlying debt.

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

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

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

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.

We evaluate reconsideration events as we become aware of them.

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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.

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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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, 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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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.

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

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

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

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 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.

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.

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.

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.

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.

As disclosed in Note 17 to the financial statements, 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"

As disclosed in Note 17 to the financial statements, 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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis