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Item 8. Financial Statements and Supplementary Data

2024-02-20 compared with 2023-02-21 · 393 added, 458 removed, 944 unchanged (47% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of JBG SMITH Properties and subsidiaries (the "Company") as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2022, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of JBG SMITH Properties and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Real Estate – Impairment Indicators - Refer to Note 2 to the consolidated financial statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Real Estate – Impairment Indicators and Impairment- Refer to Notes 2 and 19 to the consolidated financial statements

Critical Audit Matter Description

The Company has real estate which is required to be evaluated for impairment.

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

The Company evaluates real estate assets for impairment whenever there are changes in circumstances or indicators that the carrying amount of the asset may not be recoverable.

These indicators may include declining operating

performance, below average occupancy, shortened anticipated holding periods, and other adverse changes.

At December 31, 2022, the carrying value of the Company's real estate assets, net, was approximately $4.82 billion .

Given the Company's evaluation of possible indications of impairment of real estate assets requires management to make significant judgments, including anticipated holding periods, performing audit procedures to evaluate whether management appropriately identified events or changes in circumstances indicating that the carrying amounts of real estate assets may not be recoverable required an increased extent of effort and high degree of auditor judgment.

These indicators may include declining operating performance, below average occupancy, shortened anticipated holding periods, and other adverse changes.

An impairment exists when

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

For those real estate assets where an indicator of impairment has been identified, estimates of future cash flows are based on the Company’s current plans, anticipated holding periods and available market information.

Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements.

An impairment loss is recognized if the carrying amount of the asset is not recoverable and is measured based on the excess of a property's carrying amount over its estimated fair value.

Estimated fair values are calculated based on the following information in order of preference, dependent upon availability:

(i) pending or executed agreements, (ii) market prices for comparable properties or (iii) the sum of discounted cash flows.

The Company’s estimates of fair value are determined using either a discounted cash flow model which requires judgements related to the anticipated holding periods, current market conditions and unobservable quantitative inputs, including appropriate capitalization and discount rates, or a market approach.

Given (1) the Company's evaluation of possible indicators of impairment of real estate assets requires management to make significant judgments, including anticipated holding periods, when determining whether events or changes in circumstances indicate that the carrying amounts of real estate assets may not be recoverable and (2) for those real estate assets where indicators of impairment have been identified, the Company’s evaluation of the recoverability and fair value of such assets requires management to make significant estimates and assumptions, our audit procedures to evaluate (a) whether management appropriately identified impairment indicators (b) the reasonableness of management’s undiscounted future cash flows analysis and (c) when required, the reasonableness of the estimated fair values of real estate assets required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the evaluation of real estate assets for possible indications of impairment included the following, among others:

● We tested the effectiveness of controls over management's review of impairment indicators, which include assessing possible circumstances that could indicate that the carrying amounts of real estate assets are not recoverable.

● We evaluated the reasonableness of management's judgments by:

– Testing real estate assets for possible indications of impairment, including searching for adverse asset-specific and/or market conditions.

Our audit procedures related to the assessment of real estate assets for possible indicators of impairment, the estimate of future operating cash flows, and the determination of fair value for those assets where impairment has been identified included the following, among others:

● We tested the effectiveness of controls over management’s identification of possible circumstances that may indicate that the carryi ng amounts of real estate assets may not be recoverable .

We tested the effectiveness of controls over management’s cash flow recoverability and fair value analyses , including controls over management’s estimates of future occupancy, rental rates, capital requirements and, as applicable, capitalization and discount rates and management’s selection of comparable properties used in the market approach, when applicable .

● We evaluated the Company’s assessment of impairment indicators by:

– Testing real estate assets for possible indicators of impairment, including searching for adverse asset-specific and/or market conditions.

– Inquiring of management and reading business performance reports and board minutes to identify properties that should be evaluated for shortened anticipated holding periods.

– Developing an expectation of assets for which impairment indicators are identified in management's analysis.

Investments in Unconsolidated Real Estate Ventures - Refer to Notes 2 and 5 to the consolidated financial statements

Critical Audit Matter Description

The Company has investments in real estate ventures which are required to be evaluated for consolidation, including determining whether each entity is a variable interest entity ("VIE").

If it is determined that an entity is a VIE in which it has a variable interest, the Company assesses whether it is the primary beneficiary of the VIE to determine whether it should be consolidated.

If it is determined that a real estate venture is not a VIE, then the determination as to whether the Company consolidates the entity is based on whether it has a controlling financial interest in the real estate venture, which is based on voting interests and the degree of influence the Company has over the real estate venture.

In April 2022, the Company entered into an agreement to form a real estate venture (the "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 million comprising four commercial assets.

The Company acquired a 33.5% equity interest in the Venture.

The Venture was determined not to be a VIE and, therefore, was evaluated under the voting interest model, under which the Company determined it does not have a controlling financial interest and therefore does not consolidate the Venture.

Given the complexities associated with accounting for the Company’s interest in the Venture, and the related management judgments to determine whether the Venture is a VIE or whether the Company has a controlling financial interest, performing audit procedures to evaluate these conclusions required an increased extent of audit effort, including the involvement of professionals in our firm having expertise in consolidation accounting.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s judgments to determine whether the Venture is a VIE and, if not, whether the Company has a controlling financial interest included the following, among others:

● We tested the effectiveness of the controls over management’s judgments to determine whether the Venture is a VIE and, if not, whether the Company’s has a controlling financial interest under the voting interest model.

● We evaluated the appropriateness of the Company’s accounting conclusions upon formation of the Venture by:

– With the assistance of professionals in our firm having expertise in consolidation accounting, reading the operating agreements and other related documents, including operating budgets and mortgage loan agreements, to evaluate the risks that the Venture was designed to pass onto its members and management’s conclusion that the Venture was not a VIE.

– Performing corroborating management inquiries and inspecting relevant agreements, to understand the Venture’s voting interests and participating rights of the members, in order to evaluate the Company’s conclusion as to whether it has a controlling financial interest that should be consolidated.

● We evaluated the Company’s future cash flows prepared when an indicator of impairment has been identified by performing the following:

– Discussing with management the assumptions used in the Company’s undiscounted cash flow models and evaluating the consistency of the assumptions used with evidence obtained in other areas of the audit.

– Testing the recoverability as sessments by developing independent estimates, based in part on applicable third-party market data, and compared our estimates to those used by management .

● We evaluated the Company’s determination of fair value for those assets where impairment had been identified by performing the following:

– With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the market prices for comparable properties, and we developed a range of independent estimates of fair value and compared our estimates to those used by management.

/s/ Deloitte & Touche LLP

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Investments in unconsolidated real estate ventures

Deferred leasing costs, net

Intangible assets, net

Other assets, net

Assets held for sale

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

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Revolving credit facility

Unsecured term loans, net

Term loans, net

Accounts payable and accrued expenses

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Accumulated deficit

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

Total shareholders' equity of JBG SMITH Properties

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Loss from unconsolidated real estate ventures, net

Interest and other income (loss), net

Interest and other income, net

Interest expense

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Change in fair value of derivative financial instruments

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

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

Total other comprehensive income (loss)

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Other comprehensive (income) loss attributable to redeemable noncontrolling interests

Other comprehensive income attributable to noncontrolling interests

Other comprehensive (income) loss attributable to noncontrolling interests

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES

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Net loss attributable to common shareholders and noncontrolling interests

Conversion of common limited partnership units ("OP Units") to common shares

Redemption of common limited partnership units ("OP Units") for common shares

Common shares repurchased

Common shares issued pursuant to Employee Share Purchase Plan ("ESPP")

Common shares issued pursuant to employee incentive compensation plan and employee share purchase plan ("ESPP")

Dividends declared on common shares ($ 0.90 per common share)

Distributions to noncontrolling interests

Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation

Other comprehensive loss

Contributions from noncontrolling interests, net

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

Total other comprehensive income

BALANCE AS OF DECEMBER 31, 2021

Net loss attributable to common shareholders and noncontrolling interests

Conversion of OP Units to common shares

Net income attributable to common shareholders and noncontrolling interests

Redemption of OP Units for common shares

Common shares repurchased

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Contributions from noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation

Other comprehensive income

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

Total other comprehensive income

Other comprehensive income attributable to noncontrolling interests

BALANCE AS OF DECEMBER 31, 2022

Net income attributable to common shareholders and noncontrolling interests

Conversion of OP Units to common shares

Net loss attributable to common shareholders and noncontrolling interests

Redemption of OP Units for common shares

Common shares repurchased

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Dividends declared on common shares ($ 0.675 per common share)

Contributions from noncontrolling interests, net

Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation

Other comprehensive income

Other comprehensive income attributable to noncontrolling interests

Distributions to noncontrolling interests, net

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

Total other comprehensive loss

Other comprehensive loss attributable to noncontrolling interests

BALANCE AS OF DECEMBER 31, 2023

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Acquisition of real estate

Deposits for real estate and other acquisitions

Proceeds from the sale of real estate

Proceeds from the sale of investments

Distributions of capital from unconsolidated real estate ventures

Proceeds from derivative financial instruments

Payments on derivative financial instruments

Distributions of capital from unconsolidated real estate ventures and other investments

Investments in unconsolidated real estate ventures and other investments

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

FINANCING ACTIVITIES:

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Borrowings under revolving credit facility

Borrowings under unsecured term loans

Borrowings under term loans

Repayments of mortgage loans

Repayments of revolving credit facility

Proceeds from derivative financial instruments

Payments on derivative financial instruments

Debt issuance and modification costs

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Contributions from noncontrolling interests

Net cash provided by (used in) financing activities

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

Cash and cash equivalents, and restricted cash, beginning of period

Cash and cash equivalents, and restricted cash, end of period

See accompanying notes to the consolidated financial statements.

Net cash (used in) provided by financing activities

JBG SMITH PROPERTIES

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Year Ended December 31,

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

Cash and cash equivalents, and restricted cash, beginning of period

Cash and cash equivalents, and restricted cash, end of period

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

Cash and cash equivalents

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Write-off of fully depreciated assets

Cash paid (received) for income taxes

Cash paid for income taxes

Deconsolidation of real estate asset

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Accrued distributions to redeemable noncontrolling interests

Conversion of OP Units to common shares

Derecognition of operating lease right-of-use assets

Derecognition of liabilities related to operating lease right-of-use assets

Redemption of OP Units for common shares

Recognition (derecognition) of operating lease right-of-use asset

Recognition (derecognition) of liabilities related to operating lease right-of-use asset

(Derecognition) recognition of finance lease right-of-use assets

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

Deferred purchase price related to acquisition

See accompanying notes to the consolidated financial statements .

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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'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, which is anchored by four key demand drivers:

Amazon.com, Inc.'s ("Amazon") new headquarters, which is being developed by us;

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust ("REIT"), owns, operates, invests in and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, D.C., most notably National Landing.

Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, D.C.

metropolitan area.

Approximately 75.0 % of our holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers:

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

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

the submarket’s proximity to the Pentagon;

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

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

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

As of December 31, 2022, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 88.3 % of its OP Units, after giving effect to the conversion of certain vested long-term incentive partnership units ("LTIP Units") that are convertible into OP Units.

JBG SMITH is referred to herein as "we,"

"us,"

"our"

or other similar terms.

References to "our share"

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

(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, as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures;

and our deployment of 5G digital infrastructure.

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

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

As of December 31, 2023, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 87.8 % of its OP Units, after giving effect to the conversion of certain vested long-term incentive partnership units ("LTIP Units") that are convertible into OP Units.

JBG SMITH is referred to herein as "we," "us," "our" or other similar terms.

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

(i) 10.0 % subordinated interest in one commercial building, (ii) 33.5 % subordinated interest in four commercial buildings (the "Fortress Assets"), (iii) 49.0 % interest in three commercial buildings (the "L'Enfant Plaza Assets") and (iv) 9.9 % interest in The Foundry, 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.

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.

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

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

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

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

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

As of December 31, 2023, our Operating Portfolio consisted of 44 operating assets comprising 16 multifamily assets totaling 6,318 units ( 6,318 units at our share), 26 commercial assets totaling 8.3 million square feet ( 7.7 million square feet at our share) and two wholly owned land assets for which we are the ground lessor.

Additionally, we have two under-construction multifamily assets totaling 1,583 units ( 1,583 units at our share) and 17 assets in the development pipeline totaling 10.8 million square feet ( 8.8 million square feet at our share) of estimated potential development density.

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

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

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

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Basis of Presentation

The accompanying consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

All intercompany transactions and balances have been eliminated.

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH LP.

See Note 6 for additional information on our VIEs.

The accompanying consolidated financial statements include our accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH LP.

See Note 6 for additional information.

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

Reclassification

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

to "Intangible assets, net"

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

Deferred leasing costs totaling $ 94.1 million were reclassified from "Intangible assets, net" to "Deferred leasing costs, net" in our balance sheet as of December 31, 2022 to present deferred leasing costs separately from intangible assets, which is consistent with our current year presentation.

Summary of Significant Accounting Policies

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The results of operations of acquisitions are prospectively included in our consolidated financial statements beginning with the date of the acquisition.

The fair values of buildings are determined using the "as-if vacant"

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

The fair values of buildings are determined using the "as-if vacant" approach whereby we use discounted cash flow models with inputs and assumptions that we believe are consistent with current market conditions for similar assets.

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

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

The fair values of identified intangible assets are determined based on the following:

The fair values of identified intangible assets and liabilities are determined based on the following:

● The value allocable to the above- or below-market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired lease) of the difference between:

(i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using market rates over the remaining term of the lease.

Amounts allocated to above- market leases are recorded as lease intangible assets in "Intangible assets, net"

in our consolidated balance sheets, and amounts allocated to below-market leases are recorded as lease intangible liabilities in "Other liabilities, net"

in our consolidated balance sheets.

These intangibles are amortized

to "Property rental revenue"

in our consolidated statements of operations over the remaining terms of the respective leases;

Amounts allocated to above- market leases are recorded as lease intangible assets in "Intangible assets, net" in our consolidated balance sheets, and amounts allocated to below-market leases are recorded as lease intangible liabilities in "Other liabilities, net" in our consolidated balance sheets.

These intangibles are amortized to "Property rental revenue" in our consolidated statements of operations over the remaining terms of the respective leases.

● Factors considered in determining the value allocable to in-place leases during hypothetical lease-up periods related to space that is leased at the time of acquisition include:

(i) lost rent and operating cost recoveries during the hypothetical lease-up period and (ii) theoretical leasing commissions required to execute similar leases.

These intangible assets are recorded as lease intangible assets in "Intangible assets, net"

in our consolidated balance sheets and are amortized to "Depreciation and amortization expense"

in our consolidated statements of operations over the remaining term of the existing lease.

These intangible assets are recorded as lease intangible assets in "Intangible assets, net" in our consolidated balance sheets and are amortized to "Depreciation and amortization expense" in our consolidated statements of operations over the remaining term of the existing lease.

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

Maintenance and repairs are expensed as incurred and are included in "Property operating expenses"

in our consolidated statements of operations.

As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest expense, are capitalized to the extent that we believe such costs are recoverable through the value of the property.

The capitalization period ends when the asset is ready for its intended use, but no later than one year from substantial completion of major construction activities, at which point the costs associated with a property are allocated to its various components.

Depreciation and amortization expense require an estimate of the useful life of each property and improvement.

Depreciation and amortization expense are recognized on a straight-line basis over estimated useful lives, which range from three to 40 years .

Tenant improvements are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the tenant improvements.

When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains or losses reflected in net income (loss) for the period.

Maintenance and repairs are expensed as incurred and are included in "Property operating expenses" in our consolidated statements of operations.

Construction in progress, including land, is carried at cost, and no depreciation is recorded.

Real estate undergoing significant renovations and improvements is considered to be under development.

All direct and indirect costs related to development activities are capitalized into "Construction in progress, including land"

in our consolidated balance sheets, except for certain demolition costs, which are expensed as incurred.

All direct and indirect costs related to development activities, including redevelopment activities, are capitalized to the extent that we believe such costs are recoverable through the value of the property into "Construction in progress, including land" in our consolidated balance sheets, except for certain demolition costs, which are expensed as incurred.

Direct development costs incurred include:

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If the property is encumbered by specific debt, we will capitalize both the interest incurred applicable to that debt and additional interest expense using our weighted average borrowing rate for any accumulated expenditures in excess of the principal balance of the debt encumbering the property.

The capitalization of such expenses ceases when the real estate is ready for its intended use, but no later than one-year from substantial completion of major construction activities.

The capitalization of such expenses ceases when the real estate is ready for its intended use, but no later than one-year from substantial completion of major construction activities at which point the costs associated with a property are allocated to its various components.

Depreciation and amortization expense require an estimate of the useful life of each property and improvement.

Depreciation and amortization expense are recognized on a straight-line basis over estimated useful lives, which range from three to 40 years .

Tenant improvements are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the tenant improvements.

When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains (losses) reflected in net income (loss) for the period.

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

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An impairment loss is recognized if the carrying amount of the asset is not recoverable and is measured based on the excess of the property's carrying amount over its estimated fair value.

Estimated fair values are calculated based on the following information in order of preference, dependent upon availability:

Estimated fair values are

calculated based on the following information in order of preference, dependent upon availability:

(i) pending or executed agreements, (ii) market prices for comparable properties or (iii) the sum of discounted cash flows.

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Significant influence is typically indicated through ownership of 20% or more of the voting interests.

Under the equity method, we record our investments in these entities in "Investments in unconsolidated real estate ventures"

in our consolidated balance sheets, and our proportionate share of earnings or losses earned by the real estate venture is recognized in "Loss from unconsolidated real estate ventures, net"

in the accompanying consolidated statements of operations.

Under the equity method, we record our investments in these entities in "Investments in unconsolidated real estate ventures" in our consolidated balance sheets, and our proportionate share of earnings (losses) earned by the real estate venture is recognized in "Loss from unconsolidated real estate ventures, net" in the accompanying consolidated statements of operations.

We earn revenue from the management services we provide to unconsolidated real estate ventures.

These fees are determined in accordance with the terms specific to each arrangement and may include property and asset management fees, or transactional fees for leasing, acquisition, development and construction, financing and legal services provided.

We account for this revenue gross of our ownership interest in each respective real estate venture and recognize such revenue in "Third-party real estate services, including reimbursements"

in our consolidated statements of operations when earned.

Our proportionate share of related expenses is recognized in "Loss from unconsolidated real estate ventures, net"

in our consolidated statements of operations.

We account for this revenue gross of our ownership interest in each respective real estate venture and recognize such revenue in "Third-party real estate services, including reimbursements" in our consolidated statements of operations when earned.

Our proportionate share of related expenses is recognized in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations.

We may also earn incremental promote distributions if certain financial return benchmarks are achieved upon ultimate disposition of the underlying properties.

Promote revenue is recognized when certain earnings events have occurred, and the amount of revenue is determinable and collectible.

Any promote revenue is reflected in "Loss from unconsolidated real estate ventures, net"

in our consolidated statements of operations.

Any promote revenue is reflected in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations.

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

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

We evaluate reconsideration events as we become aware of them.

Reconsideration events include, among other criteria, amendments to real estate venture agreements or changes in the capital requirements of the real estate venture.

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

Intangible assets primarily consist of:

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Investments in equity securities without readily determinable fair values are carried at cost.

Investments in investment funds without readily determinable fair values that qualify for the net asset value ("NAV") practical expedient are carried at fair value based on their reported NAV.

Investments in equity securities and investment funds are included in "Other assets, net"

in our consolidated balance sheets.

Realized and unrealized gains and losses are included in "Interest and other income (loss), net"

in our consolidated statements of operations.

Investments in investment funds without readily determinable fair values that qualify for the net asset value ("NAV") practical expedient are carried at fair value based on their reported NAV.

Investments in equity securities and investment funds are included in "Other assets, net" in our consolidated balance sheets.

Realized and unrealized gains (losses) are included in "Interest and other income, net" in our consolidated statements of operations.

Assets Held for Sale

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Deferred financing costs consist of loan issuance costs directly related to financing transactions that are deferred and amortized over the term of the related loan as a component of interest expense.

Unamortized deferred financing costs related to our mortgage loans and unsecured term loans are presented as a direct deduction from the carrying amounts of the related debt instruments, while such costs related to our revolving credit facility are included in other assets.

Unamortized deferred financing costs related to our mortgage loans and term loans are presented as a direct deduction from the carrying amounts of the related debt instruments, while such costs related to our revolving credit facility are included in other assets.

Noncontrolling Interests

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Redeemable noncontrolling interests are generally redeemable at the option of the holder for our common shares, or cash at our election, subject to certain limitations, and are presented in the mezzanine section between total liabilities and shareholders' equity in our consolidated balance sheets.

The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in "Additional paid-in capital."

See Note 12 for additional information.

Noncontrolling Interests - Noncontrolling interests represents the portion of equity that we do not own in entities we consolidate, including interests in consolidated real estate ventures.

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The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation.

Cash flows and related gains (losses) associated with derivative financial instruments are classified as operating cash flows in our consolidated statements of cash flows, unless the derivative financial instrument contains an other-than-insignificant financing element at inception, in which case the related cash flows are reported as either cash flows from investing or financing activities depending on the derivative's off-market nature at inception.

Derivative Financial Instruments Designated as Effective Hedges - Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are cash flow hedges that are designated as effective hedges, and are carried at their estimated fair value on a recurring basis.

We assess the effectiveness of our hedges both at inception and on an ongoing basis.

If the hedges are deemed to be effective, the fair value is recorded in "Accumulated other comprehensive income (loss)"

in our consolidated balance sheets and is subsequently reclassified into "Interest expense"

in our consolidated statements of operations in the period that the hedged forecasted transactions affect earnings.

Our hedges become less than perfectly effective if the critical terms of the hedging instrument and the forecasted transactions do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and interest rates.

If the hedges are deemed to be effective, the fair value is recorded in "Accumulated other comprehensive income" in our consolidated balance sheets and is subsequently reclassified into "Interest expense" in our consolidated statements of operations in the period that the hedged forecasted transactions affect earnings.

Our hedges become less than perfectly effective if the critical terms of the hedging instrument and the forecasted transactions do not perfectly match such as

notional amounts, settlement dates, reset dates, calculation period and interest rates.

In addition, we evaluate the default risk of the counterparty by monitoring the creditworthiness of the counterparty.

Derivative instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges.

Derivative financial instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges.

These judgments determine if the changes in fair value of the derivative instruments are reported in our consolidated statements of operations, or in our consolidated statements of comprehensive income (loss).

Derivative Financial Instruments Designated as Ineffective Hedges - Certain derivative financial instruments, consisting of interest rate cap agreements, are cash flow hedges that are designated as ineffective hedges, and are carried at their estimated fair value on a recurring basis.

Realized and unrealized gains are recorded in "Interest expense"

in our consolidated statements of operations.

Non-Designated Derivatives - Certain derivative financial instruments, consisting of interest rate cap agreements, are used to manage our exposure to interest rate movements, but do not meet the accounting requirements to be classified as hedging instruments.

These derivatives are carried at their estimated fair value on a recurring basis with realized and unrealized gains (losses) recorded in "Interest expense" in our consolidated statements of operations.

Fair Value of Assets and Liabilities

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

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

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We have elected the practical expedient that allows us to combine certain lease and non-lease components of our operating leases.

Non-lease components are recognized together with fixed base rent in "Property rental revenue,"

as variable lease income in the same periods as the related expenses are incurred.

Non-lease components are recognized together with fixed base rent in "Property rental revenue," as variable lease income in the same periods as the related expenses are incurred.

Certain commercial leases may also provide for the payment by the lessee of additional rents based on a percentage of sales, which are recorded as variable lease income in the period the additional rents are earned.

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In circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of property rental revenue on a straight-line basis over the term of the lease commencing when the tenant takes possession of the space.

Differences between rental revenue recognized and amounts due under the respective lease agreements are recorded as an increase or decrease to "Deferred rent receivable"

in our consolidated balance sheets.

Differences between rental revenue recognized and amounts due under the respective lease agreements are recorded as an increase or decrease to "Deferred rent receivable" in our consolidated balance sheets.

Property rental revenue also includes the amortization or accretion of acquired above-and below-market leases.

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

Any changes to the provision for lease revenue determined to be not probable of collection are included in "Property rental revenue"

in our consolidated statements of operations.

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

Any changes to the provision for lease revenue determined to be not probable of collection are included in "Property rental revenue" in our consolidated statements of operations.

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

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Lessee Accounting

We are obligated under non-cancellable operating and finance leases, including ground leases on certain of our properties with terms extending through the year 2027.

We have, or have entered in the past, operating and finance leases, including ground leases on certain of our properties.

When a renewal option is included within a lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term.

Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the corresponding lease liability and right-of-use asset.

Amortization of the right-of-use asset associated with a finance lease is recognized on a straight-line basis over the expected lease term and is included in our consolidated statements of operations in "Depreciation and amortization expense"

with the related interest on our outstanding lease liability included in "Interest expense."

Lease expense for our operating leases is recognized on a straight-line basis over the expected lease term and is included in our consolidated statements of operations in "Property operating expenses." Amortization of the right-of-use asset associated with a finance lease is recognized on a straight-line basis over the expected lease term and is included in our consolidated statements of operations in "Depreciation and amortization expense" with the related interest on our outstanding lease liability included in "Interest expense."

Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, market rates or our share of expenditures of the leased premises.

Such variable payments are recognized in lease expense in the period in which the variability is determined.

Certain lease agreements may also include various non-lease components that primarily relate to property operating expenses associated with our office leases, which also vary each period.

Certain lease agreements may also include various non-lease

components that primarily relate to property operating expenses associated with our office leases, which also vary each period.

We have elected the practical expedient which allows us to combine lease and non-lease components for our ground and office leases and recognize variable non-lease components in lease expense when incurred.

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We made a policy election to forgo recording right-of-use assets and the related lease liabilities for leases with initial terms of 12 months or less.

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

Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its

shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders.

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

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

Prior to the Separation, Vornado operated as a REIT and distributed 100% of its REIT taxable income to its shareholders;

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Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Code and such other factors as our Board of Trustees deems relevant.

We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries ("TRS") under the Code.

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

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Any increase or decrease in the valuation allowance that results from a change in circumstances that causes a change in the estimated ability to realize the related deferred tax asset is included in deferred tax benefit (expense).

ASC 740 ("Topic 740"), Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in our consolidated financial statements.

Topic 740 requires the evaluation of tax positions taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not"

of being sustained by the applicable tax authority.

ASC 740 ("Topic 740"), Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in our consolidated financial statements.

Topic 740 requires the evaluation of tax positions taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority.

Tax benefits of positions not deemed to meet the more-likely-than-not threshold are recorded as a tax expense in the current year.

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During periods of net loss, losses are allocated only to the extent the participating securities are required to absorb their share of such losses.

Distributions to participating securities in excess of their allocated income or loss are shown as a reduction to net income (loss) attributable to common shareholders.

Distributions to participating securities in excess of their allocated income (loss) are shown as a reduction to net income (loss) attributable to common shareholders.

Diluted earnings (loss) per common share reflects the potential dilution of the assumed exchange of various unit and share-based compensation awards into common shares to the extent they are dilutive.

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We account for forfeitures as they occur.

Distributions paid on

unvested OP Units and LTIP Units are recorded to "Redeemable noncontrolling interests"

in our consolidated balance sheets.

Distributions paid on unvested Restricted Share Units ("RSUs") are recorded to "Additional paid-in capital"

in our consolidated balance sheets.

Distributions paid on unvested OP Units and LTIP Units are recorded to "Redeemable noncontrolling interests" in our consolidated balance sheets.

Distributions paid on unvested Restricted Share Units ("RSUs") are recorded to "Additional paid-in capital" in our consolidated balance sheets.

Recent Accounting Pronouncements

Standard Adopted

Reference Rate Reform

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

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

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

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

During the year ended December 31, 2022, we elected to apply the hedge accounting expedients that allows us to (i) continue to amortize previously deferred gains and losses in accumulated other comprehensive income (loss) related to terminated hedges into earnings in accordance with the underlying hedged forecasted transactions, (ii) modify loan agreements to replace the reference rate without treating the change as a contract modification and (iii) modify the reference rate of the hedging instruments without it being considered a change in critical terms requiring redesignation.

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

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

Acquisitions, Dispositions and Assets Held for Sale

As of December 31, 2023, we have converted all our London Interbank Offered Rate-indexed debt and derivative financial instruments to Secured Overnight Financing Rate ("SOFR")-based indexes.

For all derivative financial instruments designated as effective hedges, we utilized the elective relief in Topic 848 that allows for the continuation of hedge accounting through the transition process.

Standards Not Yet Adopted

In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740):

Improvements to Income Tax Disclosures" ("Topic 740").

Topic 740 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income (loss) from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign).

Topic 740 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes.

The guidance is effective for annual periods beginning after December 15, 2024.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

This guidance should be applied on a prospective basis, but retrospective application is permitted.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Segment Reporting

In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280):

Improvements to Reportable Segments Disclosures" ("Topic 280").

Topic 280 enhances disclosures of significant segment expenses and other segment items regularly provided to the chief operating decision maker ("CODM"), extends certain annual disclosures to interim periods and permits more than one measure of segment profit (loss) to be reported under certain conditions.

The amendments are effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 .

Retrospective adoption to all periods presented is required, and early adoption of the

amendments is permitted.

We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures.

Acquisitions and Dispositions

During 2023, we paid the deferred purchase price of $ 19.6 million related to the 2020 acquisition of a development parcel, formerly the Americana hotel.

In October 2022, we acquired the remaining 50.0 % ownership interest in 8001 Woodmont, a 322 -unit multifamily asset in Bethesda, Maryland previously owned by an unconsolidated real estate venture, for a purchase price of $ 115.0 million, including the assumption of the $ 51.9 million mortgage loan at our share.

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We used The Batley as a replacement property in a like-kind exchange for the sale of Pen Place, which closed during the second quarter of 2022.

See Note 6 for additional information.

In December 2020, we acquired a 1.4 -acre development parcel in National Landing formerly occupied by the Americana Hotel and three other parcels for an aggregate total of $ 65.0 million, exclusive of $ 688,000 of transaction costs that were capitalized as part of the acquisition.

Of the total purchase price, $ 47.3 million was allocated to the former Americana Hotel site, of which $ 20.0 million was deferred and $ 17.7 million was allocated to the other three parcels.

The former Americana Hotel site has the potential to accommodate up to approximately 550,000 square feet of new development density and is located directly across the street from Amazon's future headquarters.

The following is a summary of activity for the year ended December 31, 2022:

The following is a summary of disposition activity:

Date Disposed

(In thousands)

Year Ended December 31, 2023

March 17, 2023

Development Parcel

Arlington, Virginia

March 23, 2023

4747 Bethesda Avenue (1)

September 20, 2023

Falkland Chase-South & West and Falkland Chase-North

October 4, 2023

5 M Street Southwest

November 30, 2023

Crystal City Marriott

December 5, 2023

Capitol Point-North-75 New York Avenue

Year Ended December 31, 2022

March 28, 2022

Development Parcel

April 1, 2022

Universal Buildings (3)

Washington, D.C.

April 13, 2022

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

Bethesda, Maryland,

Washington, D.C.,

Reston, Virginia,

Arlington, Virginia

Pen Place (3)

Arlington, Virginia

7200 Wisconsin Avenue,

1730 M Street,

Courthouse Plaza 1 and 2 (4)

December 23, 2022

Land Option (3)

Washington, D.C.

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

See Note 5 for additional information.

(2) Related to prior period dispositions.

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

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See Note 5 for additional information.

"RTC-West"

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

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

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

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

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

In April 2021, we invested cash in and contributed land to two real estate ventures and recognized an $ 11.3 million gain on the disposition of land, which is included in "Gain on sale of real estate, net"

in our consolidated statement of operations for the year ended December 31, 2021.

In April 2021, we invested cash in and contributed land to two real estate ventures and recognized an $ 11.3 million gain on the disposition of land, which was included in "Gain on sale of real estate, net" in our consolidated statement of operations for the year ended December 31, 2021.

See Note 5 for additional information.

In January 2020, we sold Metropolitan Park for $ 155.0 million and recognized a $ 59.5 million gain, which is included in "Gain on sale of real estate, net"

in our consolidated statement of operations for the year ended December 31, 2020.

See Note 5 for additional information related to the sale of assets by our unconsolidated real estate ventures.

Assets Held for Sale

There were no assets held for sale as of December 31, 2022.

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

(In thousands)

Pen Place (1)

Arlington, Virginia

(1) Sold to Amazon in May 2022.

Total square feet represents estimated or approved potential development density.

In January 2024, we sold North End Retail, a multifamily asset, for a gross sales price of $ 14.3 million.

Tenant and Other Receivables

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

Real Estate Venture Partners

Real Estate Venture

(In thousands)

Prudential Global Investment Management (2)

Morgan Global Alternatives ("J.P.

Morgan") (2)

Landmark Partners ("Landmark")

18.0 % - 49.0 %

CBREI Venture (3)

9.9 % - 10.0 %

Canadian Pension Plan Investment Board ("CPPIB") (4) (5)

Berkshire Group (6)

Morgan Global Alternatives ("J.P.

4747 Bethesda Venture

Brandywine Realty Trust

CBREI Venture (4)

Landmark Partners (5)

Total investments in unconsolidated real estate ventures (6) (7)

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

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

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

(2) An impairment loss of $ 25.3 million related to Central Place Tower was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statement of operations for the year ended December 31, 2023.

In February 2024, the venture sold its interest in Central Place Tower for a gross sales price of $ 325.0 million.

Morgan is the advisor for an institutional investor.

(4) In August 2023, the venture sold its interest in Stonebridge at Potomac Town Center.

An impairment loss of $ 3.3 million related to The Foundry was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statement of operations for the year ended December 31, 2023.

Excludes The Foundry for which we have a zero -investment balance and discontinued applying the equity method of accounting after September 30, 2023.

In August 2022, we acquired the remaining 36.0 % ownership interest in Atlantic Plumbing, an asset previously owned by the venture.

See Note 3 for additional information.

(4) Our effective ownership interest reflects an investment in the real estate venture that owns 1101 17 th Street for which we have a zero investment balance and discontinued applying the equity method of accounting since June 30, 2018.

We will recognize as income any future distributions from the venture until our share of unrecorded earnings and contributions exceeds the cumulative excess distributions previously recognized in income.

(5) In June 2022, the venture sold its interest in 1900 N Street.

(6) In October 2022, we acquired the remaining 50.0 % ownership interest in 8001 Woodmont, an asset previously owned by the venture.

See Note 3 for additional information.

(7) As of December 31, 2022 and 2021, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $ 8.9 million and $ 18.6 million, resulting principally from capitalized interest and our zero investment balance in certain real estate ventures.

(5) In November 2023, the venture sold its interest in Rosslyn Gateway-North, Rosslyn Gateway-South, Rosslyn Gateway-South Land and Rosslyn Gateway-North Land ("Rosslyn Gateway").

Impairment losses totaling $ 19.3 million related to the L'Enfant Plaza Assets and the Rosslyn Gateway assets, and $ 23.9 million on the L'Enfant Plaza Assets were included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations for the years ended December 31, 2022 and 2021.

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

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

See Note 1 for more information.

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

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

(7) As of December 31, 2023 and 2022, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $ 8.7 million and $ 8.9 million, resulting principally from our zero -investment balance in certain real estate ventures and capitalized interest.

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

We recognized revenue, including expense reimbursements, of $ 21.7 million, $ 24.0 million and $ 23.7 million for each of the three years in the period ended December 31, 2023, for such services.

We evaluate reconsideration events as we become aware of them.

Reconsideration events include, among other criteria, amendments to real estate venture agreements or changes in the capital requirements of the real estate venture.

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

The following is a summary of disposition activity by our unconsolidated real estate ventures:

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Year Ended December 31, 2023

August 24, 2023

CBREI Venture

Stonebridge at Potomac Town Center

November 14, 2023

Rosslyn Gateway

Year Ended December 31, 2022

January 27, 2022

The Alaire, The Terano and

12511 Parklawn Drive

The Alaire, The Terano and 12511 Parklawn Drive

1.8 % - 18.0 %

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500 L'Enfant Plaza

Year Ended December 31, 2020

11333 Woodglen Drive/NoBe II Land/Woodglen

October 28, 2020

CBREI Venture

Pickett Industrial Park

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

in our consolidated statements of operations.

Fortress Investment Group LLC ("Fortress")

(1) Included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations.

4747 Bethesda Venture

In March 2023, we sold an 80.0 % interest in 4747 Bethesda Avenue to 4747 Bethesda Venture for a gross sales price of $ 196.0 million, representing a gross valuation of $ 245.0 million.

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

Fortress Investment Group LLC ("Fortress")

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

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

In connection with the preparation and review of the third quarter 2022 financial statements and 2021 annual financial statements, impairment losses of $ 15.4 million and $ 23.9 million on the L'Enfant Plaza assets were included in "Loss from unconsolidated real estate ventures, net"

in our consolidated statements of operations for the years ended December 31, 2022 and 2021.

As of December 31, 2022, our investment in the L'Enfant Plaza assets was zero , and we have discontinued applying the equity method of accounting on these assets after September 30, 2022 as we have not guaranteed their obligations or otherwise committed to providing financial support.

In connection with the preparation and review of the 2022 annual financial statements, an impairment loss of $ 3.9 million on the Rosslyn Gateway assets was included in "Loss from unconsolidated real estate ventures, net"

in our consolidated statement of operations for the year ended December 31, 2022.

In April 2021, we entered into two real estate ventures with an institutional investor advised by J.P.

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We have determined the ventures are VIEs, but we are not the primary beneficiary of the VIEs and, accordingly, we have not consolidated either venture.

We recognized an $ 11.3 million gain on the land contributed to one of the real estate ventures based on the cash received and the remeasurement of our retained interest in the asset, which was included in "Gain on sale of real estate, net"

in our consolidated statement of operations for the year ended December 31, 2021.

As part of the transaction, our venture partner elected to accelerate the monetization of a 2013 promote interest in the land contributed by it to the ventures.

During the second quarter of 2021, the total amount of the promote paid was $ 17.5 million, of which $ 4.2 million was paid to certain of our non-employee trustees and certain of our executives.

Pacific Life Insurance Company ("PacLife")

During the second quarter of 2020, we determined that our investment in the venture that owned The Marriott Wardman Park hotel was impaired due to a decline in the fair value of the underlying asset and recorded an impairment loss of $ 6.5 million, which reduced the net book value of our investment to zero , and we suspended equity loss recognition for the venture after June 30, 2020.

On October 1, 2020, we transferred our interest in this venture to PacLife.

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

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Mortgage loans (4)

Unamortized deferred financing costs

Unamortized deferred financing costs and premium / discount, net

Mortgage loans, net (4) (5)

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

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

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

(4) Excludes mortgage loans related to the L'Enfant Plaza assets and the unconsolidated real estate venture with Fortress.

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

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

(4) Excludes mortgages related to the Fortress Assets, the L'Enfant Plaza Assets and The Foundry.

(5) See Note 21 for additional information on guarantees related to our unconsolidated real estate ventures.

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Net income (loss) (2)

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

Excludes information related to the L'Enfant Plaza assets as of December 31, 2022 and for the fourth quarter of 2022.

Also, excludes information related to the venture that owned The Marriott Wardman Park hotel for the second half of 2020 as we discontinued applying the equity method of accounting .

On October 1, 2020, we transferred our interest in this venture to our venture partner.

(2) Includes the gain (loss) from the sale of various assets totaling $ 114.9 million, $ 85.5 million and ( $ 8.4 million) for each of the three years in the period ended December 31, 2022.

Includes impairment losses of $ 37.7 million and $ 48.7 million for the years ended December 31, 2022 and 2021.

(1) Excludes amounts related to the Fortress Assets.

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

Excludes combined balance sheet information as of December 31, 2023 and combined income statement information for the fourth quarter of 2023 related to The Foundry as we discontinued applying the equity method of accounting after September 30, 2023.

(2) Includes the gain from the sale of various assets totaling $ 3.0 million, $ 114.9 million and $ 85.5 million for each of the three years in the period ended December 31, 2023.

Includes impairment losses of $ 80.7 million, $ 37.7 million and $ 48.7 million for each of the three years in the period ended December 31, 2023.

Variable Interest Entities

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

As of December 31, 2022 and 2021, the net carrying amounts of our investment in these entities were $ 83.2 million and $ 145.2 million, which were included in "Investments in unconsolidated real estate ventures"

in our consolidated balance sheets.

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

in our consolidated statements of operations.

As of December 31, 2023 and 2022, the net carrying amounts of our investment in these entities were $ 87.3 million and $ 83.2 million, which were included in "Investments in unconsolidated real estate ventures" in our consolidated balance sheets.

Our equity in the income of unconsolidated VIEs was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations.

Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees.

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The noncontrolling interests of JBG SMITH LP do not have substantive liquidation rights, substantive kick-out rights without cause or substantive participating rights that could be exercised by a simple majority of noncontrolling interest limited partners (including by such a limited partner unilaterally).

Because the noncontrolling interest holders do

not have these rights, JBG SMITH LP is a VIE.

Because the noncontrolling interest holders do not have these rights, JBG SMITH LP is a VIE.

As general partner, we have the power to direct the activities of JBG SMITH LP that most significantly affect its economic performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP.

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

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

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

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

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

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

In March 2021, we leased the land underlying 1900 Crystal Drive located in National Landing to a lessee, which is constructing an 808 -unit multifamily asset comprising two towers with ground floor retail.

The ground lessee has engaged us to be the development manager for the construction of 1900 Crystal Drive, and separately, we are the lessee in a master lease of the asset.

We have an option to acquire the asset until a specified period after completion.

The ground lessee invested $ 17.5 million of equity funding, and we are obligated to provide additional project funding through a mezzanine loan to the ground lessee estimated at $ 104.8 million, of which $ 96.7 million has been funded as of December 31, 2022.

In December 2021, we leased the land underlying 2000 South Bell Street and 2001 South Bell Street ("2000/2001 South Bell Street") located in National Landing to a lessee, which is constructing a 775 -unit multifamily asset comprising two towers with ground floor retail.

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

We have an option to acquire the asset until a specified period after completion.

The ground lessee invested $ 16.0 million of equity funding, and we are obligated to provide additional project funding through a mezzanine loan to the ground lessee, estimated at $ 96.2 million, of which $ 31.6 million has been funded as of December 31, 2022.

We determined that 1900 Crystal Drive and 2000/2001 South Bell Street are VIEs and that we are the primary beneficiary of the VIEs.

Accordingly, we consolidate the VIEs with the lessee's ownership interest shown as "Noncontrolling interests"

in our consolidated balance sheets.

The aforementioned ground leases, mezzanine loans and master leases are eliminated in consolidation.

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

As of December 31, 2021, excluding JBG SMITH LP, we consolidated three VIEs (1900 Crystal Drive, 2000/2001 South Bell Street and The Batley) with total assets of $ 269.7 million and liabilities of $ 13.9 million.

As of December 31, 2023 and 2022, we also consolidated two VIEs (1900 Crystal Drive and 2000/2001 South Bell Street) with total assets of $ 503.2 million and $ 265.5 million, and liabilities of $ 293.3 million and $ 116.3 million, primarily consisting of construction in process and mortgage loans.

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

Deferred Leasing Costs, Net

The following is a summary of the deferred leasing costs, net:

(In thousands)

Deferred leasing costs

Accumulated amortization

Deferred leasing costs, net

Intangible Assets, Net

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(In thousands)

Deferred leasing costs

Lease intangible assets:

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Management and leasing contract amortization (1)

Other amortization

Total amortization expense related to lease and other identified intangible assets

(1) Amounts are included in "Depreciation and amortization expense"

in our consolidated statements of operations.

(2) Amounts are included in "Property rental revenue"

in our consolidated statements of operations.

(1) Amounts are included in "Depreciation and amortization expense" in our consolidated statements of operations.

(2) Amounts are included in "Property rental revenue" in our consolidated statements of operations.

The following is a summary of the estimated amortization related to lease and other identified intangible assets for the next five years and thereafter as of December 31, 2023:

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Prepaid expenses

Derivative agreements, at fair value

Derivative financial instruments, at fair value

Deferred financing costs, net

Operating lease right-of-use assets (1)

Finance lease right-of-use assets (1)

Investments in funds (2)

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Total other assets, net

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

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

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

During the years ended December 31, 2022 and 2021, unrealized gains totaled $ 2.1 million and $ 4.6 million related to these investments, which are included in "Interest and other income (loss), net"

in our consolidated statements of operations.

During the year ended December 31, 2022, realized losses related to these investments were $ 1.2 million.

For each of the three years in the period ended December 31, 2023, unrealized gains totaled $ 1.3 million, $ 2.1 million and $ 4.6 million related to these investments.

During the years ended December 31, 2023 and 2022, realized losses related to these investments totaled $ 758,000 and $ 1.2 million.

Unrealized and realized gains (losses) were included in "Interest and other income, net" in our consolidated statements of operations.

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

During the years ended December 31, 2022 and 2021, realized gains (losses) totaled $ 13.5 million and ($ 1.0 ) million related to these investments, which are included in "Interest and other income (loss), net"

in our consolidated statements of operations.

For each of the three years in the period ended December 31, 2023, realized gains (losses) totaled $ 436,000 , $ 13.5 million and ($ 1.0 ) million related to these investments, which were included in "Interest and other income, net" in our consolidated statements of operations.

Mortgage Loans

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

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

For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.33 % , and the weighted average maturity date of the interest rate caps is March 2025.

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

As of December 31, 2022, one-month LIBOR was 4.39 % and one-month term Secured Overnight Financing Rate ("SOFR") was 4.36 % , as applicable.

As of December 31, 2023, one-month term SOFR was 5.35 % .

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

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

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

Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on

these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity.

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

As of December 31, 2023 and 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 21 for additional information.

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

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

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

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

In June 2023, we repaid $ 142.4 million in mortgage loans collateralized by Falkland Chase-South & West and 800 North Glebe Road.

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

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Clark Street.

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

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

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

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

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

As of December 31, 2023 and 2022, we had various interest rate swap and cap agreements on certain of our mortgage loans with an aggregate notional value of $ 1.7 billion and $ 1.3 billion.

See Note 19 for additional information.

Credit Facility

As of December 31, 2022, our $ 1.6 billion credit facility consisted of a $ 1.0 billion revolving credit facility maturing in January 2025, a $ 200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2025, and a $ 400.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in January 2028, of which $ 50.0 million remains available to be borrowed until July 2023.

Revolving Credit Facility and Term Loans

As of December 31, 2023, our unsecured revolving credit facility and term loans totaling $ 1.5 billion consisted of a $ 750.0 million revolving credit facility maturing in June 2027, a $ 200.0 million term loan ("Tranche A-1 Term Loan") maturing in January 2025, a $ 400.0 million term loan ("Tranche A-2 Term Loan") maturing in January 2028 and a $ 120.0 million term loan ("2023 Term Loan") maturing in June 2028.

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

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

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

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

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

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

We also entered into two forward-starting interest rate swaps that will be effective July 2024 with a total notional value of $ 200.0 million, which will effectively fix SOFR at a weighted average interest rate of 2.80 % through the maturity date.

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

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

The incremental $ 200.0 million included a delayed draw feature, of which $ 150.0 million was drawn in September 2022 and the remaining $ 50.0 million was drawn in May 2023.

The amendment extended the maturity date of the term loan to January 2028 and amended 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.

Effective as of June 29, 2023, the revolving credit facility was amended to:

(i) reduce the borrowing capacity from $ 1.0 billion to $ 750.0 million, (ii) extend the maturity date from January 2025 to June 2027 and (iii) amend the interest rate to daily SOFR plus 1.40 % to daily SOFR plus 1.85 %, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets.

We have the option to increase the $ 750.0 million revolving credit facility or add term loans up to $ 500.0 million, and we also have the right to extend the maturity date beyond June 2027 via two six-month extension options.

In addition, on June 29, 2023, we entered into a $ 120.0 million term loan maturing in June 2028 with an interest rate of one-month term SOFR plus 1.25 % to one-month term SOFR plus 1.80 %, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets.

In July 2023, we amended the covenants related to the Tranche A-1 Term Loan and the Tranche A-2 Term Loan to be consistent with the revolving credit facility and 2023 Term Loan covenants.

The following is a summary of amounts outstanding under the revolving credit facility and term loans:

Interest Rate (1)

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Tranche A-2 Term Loan (5)

Unsecured term loans

2023 Term Loan (6)

Unamortized deferred financing costs, net

Unsecured term loans, net

Term loans, net

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

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

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

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

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

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

As of December 31, 2022, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46 % for the Tranche A-1 Term Loan and 2.15 % for the Tranche A-2 Term Loan.

(2) As of December 31, 2023, daily SOFR was 5.38 % .

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

In February 2024, we repaid all amounts outstanding under our revolving credit facility.

(3) As of December 31, 2023 and 2022, excludes net deferred financing costs related to our revolving credit facility of $ 10.2 million and $ 3.3 million that were included in "Other assets, net" in our consolidated balance sheets.

(4) As of December 31, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46 % .

Interest rate swaps with a total notional value of $ 200.0 million mature in July 2024.

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 4.00 % through January 2027.

(5) As of December 31, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 2.29 % .

Interest rate swaps with a total notional value of $ 200.0 million mature in July 2024 and with a total notional value of $ 200.0 million mature in January 2028.

(6) As of December 31, 2023, the outstanding balance was fixed by an interest rate swap agreement, which fixes SOFR at an interest rate of 4.01 % through the maturity date .

Principal Maturities

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

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

Security deposits

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Dividends payable

Derivative agreements, at fair value

Derivative financial instruments, at fair value

Deferred purchase price related to the acquisition of a development parcel

Total other liabilities, net

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

Amortization expense included in "Property rental revenue"

in our consolidated statements of operations related to lease intangible liabilities for each of the three years in the period ended December 31, 2022 was $ 1.9 million, $ 2.2 million and $ 2.0 million.

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

Amortization expense included in "Property rental revenue" in our consolidated statements of operations related to lease intangible liabilities for each of the three years in the period ended December 31, 2023 was $ 1.7 million, $ 1.9 million and $ 2.2 million.

The following is a summary of the estimated amortization of lease intangible liabilities for the next five years and thereafter as of December 31, 2023:

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As a REIT, we may also be subject to federal excise taxes if we engage in certain types of transactions.

Continued qualification as a REIT depends on our ability to satisfy the REIT distribution tests, stock

ownership requirements and various other qualification tests.

Our TRSs had an estimated federal net operating loss ("NOL") carry forward of $ 4.8 million that was utilized in 2022.

As of December 31, 2022, the state NOL carryforward was $ 159,000 , tax-effected.

Continued qualification as a REIT depends on our ability to satisfy the REIT distribution tests, stock ownership requirements and various other qualification tests.

The net basis of our assets and liabilities for tax reporting purposes is approximately $ 422.1 million higher than the amounts reported in our consolidated balance sheet as of December 31, 2023.

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(In thousands)

Current tax (expense) benefit

Current tax expense

Deferred tax (expense) benefit

Income tax (expense) benefit

As of December 31, 2022 and 2021, we have a net deferred tax liability of $ 4.9 million and $ 5.3 million primarily related to investments in real estate, and management and leasing contracts, partially offset by deferred tax assets associated with tax versus book differences and related general and administrative expenses.

As of December 31, 2023 and 2022, we have a net deferred tax liability of $ 3.3 million and $ 4.9 million primarily related to basis differences in management, leasing and other investment, partially offset by deferred tax assets associated with tax versus book differences and related general and administrative expenses.

We are subject to federal, state and local income tax examinations by taxing authorities for the tax years ending in 2019 through 2022.

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Net deferred tax liability

During the year ended December 31, 2022, our Board of Trustees declared cash dividends totaling $ 0.90 of which $ 0.775 were capital gain distributions for federal income tax purposes and the remaining $ 0.125 will be determined in 2023.

During the year ended December 31, 2023, our Board of Trustees declared cash dividends totaling $ 0.675 of which $ 0.135 was taxable as ordinary income for federal income tax purposes and $ 0.540 were capital gain distributions.

During the year ended December 31, 2022, our Board of Trustees declared cash dividends totaling $ 0.90 of which $ 0.025 was taxable as ordinary income for federal income tax purposes and $ 0.875 were capital gain distributions.

During the year ended December 31, 2021, our Board of Trustees declared cash dividends totaling $ 0.90 of which $ 0.252 was taxable as ordinary income for federal income tax purposes and $ 0.648 were capital gain distributions.

Redeemable Noncontrolling Interests

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Vested LTIP Units are redeemable into OP Units.

During the years ended December 31, 2022 and 2021, unitholders redeemed 701,222 and 906,126 OP Units, which we elected to redeem for an equivalent number of our common shares.

As of December 31, 2022, outstanding OP Units and redeemable LTIP Units totaled 15.0 million, representing an 11.7 % ownership interest in JBG SMITH LP.

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

in our consolidated balance sheets.

During the years ended December 31, 2023 and 2022, unitholders redeemed 2.8 million and 701,222 OP Units, which we elected to redeem for an equivalent number of our common shares.

As of December 31, 2023, outstanding OP Units and redeemable LTIP Units totaled 13.1 million, representing a 12.2 % ownership interest in JBG SMITH LP.

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

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Consolidated Real Estate Venture

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

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

As of December 31, 2022, we held a 99.7 % ownership interest in the real estate venture, which reflects the redemption of a 3.7 % interest in October 2022 for $ 9.5 million.

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

As of December 31, 2022, we held a 99.7 % ownership interest in the real estate venture, which reflects the redemption of a 3.7 % interest in October 2022, and in February 2023, another partner redeemed its 0.3 % interest, increasing our ownership interest to 100.0 %.

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

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Balance, beginning of period

LTIP Units issued in lieu of cash bonuses (1)

LTIP Units issued in lieu of cash

compensation (1)

Net income (loss)

Other comprehensive income

Other comprehensive income (loss)

Distributions

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Certain OP Units issued in the Combination to the former owners of JBG/Operating Partners, L.P.

were subject to post-combination vesting over a period of 60 months based on continued employment.

were subject to post-combination that vested over a period of 60 months based on continued employment.

Compensation expense for these OP Units was recognized over the graded vesting period through July 2022.

The following is a summary of the OP Units activity:

Average Grant-

Date Fair Value

Unvested as of December 31, 2021

Unvested as of December 31, 2022

The total-grant date fair value of the OP Units that vested for each of the three years in the period ended December 31, 2022 was $ 14.7 million, $ 36.0 million and $ 45.1 million.

The total-grant date fair value of the OP Units that vested for the years ended December 31, 2022 and 2021 was $ 14.7 million and $ 36.0 million.

JBG SMITH 2017 Omnibus Share Plan

On June 23, 2017, our Board of Trustees adopted the JBG SMITH 2017 Omnibus Share Plan (the "Plan"), effective as of July 17, 2017, and authorized the reservation of 10.3 million of our common shares pursuant to the Plan.

In April 2021, our shareholders approved an amendment to the Plan to increase the common shares reserved under the Plan by 8.0 million.

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Formation Awards

The formation awards issued in the Combination ("Formation Awards") were structured in the form of profits interests in JBG SMITH LP that provided for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the volume-weighted average price of a common share at the time the formation unit was granted.

The Formation Awards, subject to certain conditions, generally vested 25 % on each of the third and fourth anniversaries and 50 % on the fifth anniversary of the date granted, subject to continued employment.

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The conversion ratio between Formation Awards and LTIP Units, which starts at zero, is the quotient of:

(i) the excess of the value of a common share on the conversion date above the per share value at the time the Formation

Award was granted over (ii) the value of a common share as of the date of conversion.

(i) the excess of the value of a common share on the conversion date above the per share value at the time the Formation Award was granted over (ii) the value of a common share as of the date of conversion.

Formation Awards have a finite 10-year term over which their value is allowed to increase and during which they may be converted into LTIP Units (and in turn, OP Units).

Holders of Formation Awards will not receive distributions or allocations of net income (net loss) prior to conversion to LTIP Units.

The following is a summary of the Formation Awards activity:

Average Grant-

Date Fair Value

Unvested as of December 31, 2021

( 1,005,426 )

Unvested as of December 31, 2022

The total-grant date fair value of the Formation Awards that vested for each of the three years in the period ended December 31, 2022 was $ 8.9 million, $ 6.0 million and $ 6.9 million.

The total-grant date fair value of the Formation Awards that vested for the years ended December 31, 2022 and 2021 was $ 8.9 million and $ 6.0 million.

Time-Based LTIP Units, LTIP Units and Special Time-Based LTIP Units

During each of the three years in the period ended December 31, 2022, we granted to certain employees 644,995 , 498,955 and 381,504 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant-date fair value of $ 27.39 , $ 29.21 and $ 38.52 per unit that primarily vest ratably over four years subject to continued employment.

During each of the three years in the period ended December 31, 2023, we granted to certain employees 979,138 , 644,995 and 498,955 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant-date fair value of $ 17.56 , $ 27.39 and $ 29.21 per unit that primarily vest ratably over four years subject to continued employment.

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

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

During each of the three years in the period ended December 31, 2022, we granted 252,206 , 163,065 and 90,094 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonus, related to prior service, as LTIP Units.

During each of the three years in the period ended December 31, 2023, we granted 280,342 , 252,206 and 163,065 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonuses related to prior service as LTIP Units.

The LTIP Units had a grant-date fair value of $ 15.90 , $ 22.19 and $ 29.54 per unit.

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

The aggregate grant-date fair value of the Time-Based LTIP Units and LTIP Units granted (collectively "Granted LTIPs") for each of the three years in the period ended December 31, 2022 was $ 25.7 million, $ 40.6 million and $ 19.9 million.

Holders of the Granted LTIPs and the Time-Based LTIP Units issued in 2018 related to our successful pursuit of Amazon's new headquarters ("Special Time-Based LTIP Units") have the right to convert vested units into OP Units, which are then subsequently exchangeable for our common shares.

The aggregate grant-date fair value of the Time-Based LTIP Units and LTIP Units granted (collectively "Granted LTIPs") for each of the three years in the period ended December 31, 2023 was $ 23.4 million, $ 25.7 million and $ 40.6 million.

subsequently exchangeable for our common shares.

Granted LTIPs and Special Time-Based LTIP Units do not have redemption rights, but any OP Units into which units are converted are entitled to redemption rights.

Granted LTIPs and Special Time-Based LTIP Units, generally, vote with the OP Units and do not have any separate voting rights except in connection with actions that would materially and adversely affect the rights of the Granted LTIPs and Special Time-Based LTIP Units.

The Granted LTIPs were valued based on the closing common share price on the date of grant, less a

discount for post-grant restrictions.

The Granted LTIPs were valued based on the closing common share price on the date of grant, less a discount for post-grant restrictions.

The discount was determined using Monte Carlo simulations based on the following significant assumptions:

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Unvested as of December 31, 2022

( 1,131,006 )

Unvested as of December 31, 2023

The total-grant date fair value of the Granted LTIPs and Special Time-Based LTIP Units that vested for each of the three years in the period ended December 31, 2023 was $ 28.0 million, $ 27.2 million and $ 19.1 million.

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

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

The AO LTIP Units are structured in the form of profits interests that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the participation threshold of $ 32.30 .

The AO LTIP Units are subject to a total shareholder return ("TSR") modifier whereby the number of AO LTIP Units that will ultimately be earned will be increased or reduced by as much as 25 %.

The AO LTIP Units have a three-year performance period with 50 % of the AO LTIP Units that are earned vesting at the end of the three-year performance period and the remaining 50 % vesting on the fourth anniversary of the grant date, subject to continued employment.

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

During the years ended December 31, 2023 and 2022, we granted to certain employees 1.7 million and 1.5 million performance-based AO LTIP Units with a weighted average grant-date fair value of $ 3.73 and $ 4.44 per unit.

The AO LTIP Units are subject to a total shareholder return ("TSR") modifier whereby the number of AO LTIP Units that will ultimately be earned will be increased or reduced by as much as 25 %.

The AO LTIP Units have a three-year performance period with 50 % of the AO LTIP Units earned vesting at the end of the three-year performance period and the remaining 50 % vesting on the fourth anniversary of the grant date, subject to continued employment.

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

The aggregate grant-date fair value of the AO LTIP Units granted during the year ended December 31, 2022 was $ 6.6 million, valued using Monte Carlo simulations based on the following significant assumptions:

The aggregate grant-date fair value of the AO LTIP Units granted for the years ended December 31, 2023 and 2022 was $ 6.4 million and $ 6.6 million, valued using Monte Carlo simulations based on the following significant assumptions:

Year Ended December 31,

Expected volatility

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Unvested as of December 31, 2022

Forfeited / cancelled

Unvested as of December 31, 2023

Performance-Based LTIP Units

During the years ended December 31, 2021 and 2020, we granted to certain employees 627,874 and 593,100 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") and a weighted average grant-date fair value of $ 15.14 and $ 18.67 per unit.

During the year ended December 31, 2021, we granted to certain employees 627,874 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") and a weighted average grant-date fair value of $ 15.14 per unit.

Performance-Based LTIP Units are performance-based equity compensation pursuant to which participants have the opportunity to earn LTIP Units based on the relative performance of the TSR of our common shares compared to the companies in the FTSE Nareit Equity Office Index, over the defined performance period beginning on the grant date, inclusive of dividends and stock price appreciation.

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

The aggregate grant-date fair value of the Performance-Based LTIP Units granted for each of the three years in the period ended December 31, 2022 was $ 384,000 , $ 29.0 million and $ 11.1 million, valued using Monte Carlo simulations based on the following significant assumptions:

The aggregate grant-date fair value of the Performance-Based LTIP Units for the years ended December 31, 2022 and 2021 was $ 384,000 and $ 29.0 million, valued using Monte Carlo simulations based on the following significant assumptions:

Year Ended December 31,

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0.2 % to 1.0 %

The following is a summary of the Performance-Based LTIP activity:

The following is a summary of the Performance-Based LTIP Units activity:

Average Grant-

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Unvested as of December 31, 2022

Forfeited / cancelled

Forfeited (1)

( 1,191,918 )

Unvested as of December 31, 2023

(1) In January 2023, 470,655 Performance-Based LTIP Units, which were unvested as of December 31, 2022, were forfeited as the performance measures were not met .

The total-grant date fair value of the Performance-Based LTIP that vested for each of the three years in the period ended December 31, 2022 was $ 4.2 million, $ 5.1 million and $ 4.6 million.

During the years ended December 31, 2022 and 2021, we granted to certain non-executive employees 39,536 and 22,194 RSUs with time-based vesting requirements ("Time-Based RSUs") and a weighted average grant-date fair value of $ 29.36 and $ 31.52 per unit.

During the year ended December 31, 2021, we granted to certain non-executive employees 13,516 RSUs with performance-based vesting requirements ("Performance-Based RSUs") and a weighted average grant-date fair value of $ 15.16 per unit.

Vesting requirements and compensation expense recognition for the Time-Based RSUs and the Performance-Based RSUs are primarily consistent to those of the Time-Based LTIP Units and Performance-Based LTIP Units granted in 2022 and 2021.

The aggregate grant-date fair value of the RSUs granted during the years ended December 31, 2022 and 2021 was $ 1.2 million and $ 905,000 .

(1) Includes 554,093 Performance-Based LTIP Units, which were forfeited in December 2023 as the performance measures were not met .

The total-grant date fair value of the Performance-Based LTIP Units that vested for the years ended December 31, 2022 and 2021 was $ 4.2 million and $ 5.1 million.

During each of the three years in the period ended December 31, 2023, we granted to certain non-executive employees 78,681 , 39,536 and 22,194 RSUs with time-based vesting requirements ("Time-Based RSUs") and a weighted average grant-date fair value of $ 18.94 , $ 29.36 and $ 31.52 per unit.

The aggregate grant-date fair value of the RSUs granted during each of the three years in the period ended December 31, 2023 was $ 1.5 million, $ 1.2 million and $ 905,000 .

The Time-Based RSUs were valued based on the closing common share price on the date of grant and the Performance-Based RSUs were valued using Monte Carlo simulations with the same significant assumptions used to value the Performance-Based LTIP Units above.

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Unvested as of December 31, 2023

The aggregate total-grant date fair value of the RSUs that vested for the year ended December 31, 2022 was $ 271,000 .

The aggregate total-grant date fair value of the RSUs that vested for the years ended December 31, 2023 and 2022 was $ 1.1 million and $ 271,000 .

The ESPP authorized the issuance of up to 2.1 million common shares.

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As of December 31, 2023, there were 1.7 million common shares available for issuance under the ESPP.

Pursuant to the ESPP, employees purchased 79,040 , 64,321 and 68,047 common shares for $ 1.5 million, $ 1.6 million and $ 1.7 million during each of the three years in the period ended December 31, 2022, valued using Black Scholes model based on the following significant assumptions:

Pursuant to the ESPP, employees purchased 84,673 , 79,040 and 64,321 common shares for $ 1.1 million, $ 1.5 million and $ 1.6 million during each of the three years in the period ended December 31, 2023, valued using the Black Scholes model based on the following significant assumptions:

Year Ended December 31,

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Share-based compensation expense - other

Formation Awards

OP Units and LTIP Units (2)

Formation Awards, OP Units and LTIP Units (2)

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

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

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

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

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

(4) Included in "General and administrative expense:

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

in the accompanying consolidated statements of operations.

(4) Included in "General and administrative expense:

Share-based compensation related to Formation Transaction and special equity awards" in the accompanying consolidated statements of operations.

As of December 31, 2023, we had $ 27.3 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 2.9 years.

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In 2024, we granted 1.9 million AO LTIP Units, 974,140 Time-Based LTIP Units and 74,842 Time-Based RSUs to certain employees with an estimated total grant-date fair value of $ 23.9 million.

Additionally, we granted 280,342 fully vested LTIP Units, with a total grant-date fair value of $ 4.5 million, to certain employees who elected to receive all or a portion of their cash bonus earned, related to 2022 service, as LTIP Units.

Additionally, we granted 209,047 fully vested

LTIP Units, with a total grant-date fair value of $ 3.0 million, to certain employees who elected to receive all or a portion of their cash bonus earned, related to 2023 service, as LTIP Units.

Transaction and Other Costs

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(In thousands)

Demolition costs

Integration and severance costs

Completed, potential and pursued transaction expenses (1)

Severance and other costs

Demolition costs

Transaction and other costs

(1) Includes primarily legal and dead deal costs.

(2) Related to charitable commitments to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington D.C.

metropolitan area .

(1) Includes legal and other costs related to pursued transactions and dead deal costs.

Interest Expense

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

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

Net unrealized

Net (gain) loss on non-designated derivatives:

Net unrealized (gain) loss

Net realized loss

Capitalized interest

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Common Shares Repurchased

In March 2020, our Board of Trustees authorized the repurchase of up to $ 500.0 million of our outstanding common shares, which it increased to an aggregate of $ 1.0 billion in June 2022.

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 year ended December 31, 2023, we repurchased and retired 22.6 million common shares for $ 335.3 million, a weighted average purchase price per share of $ 14.83 .

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

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 .

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

Since we began the share repurchase program through December 31, 2023, we have repurchased and retired 45.9 million common shares for $ 958.8 million, a weighted average purchase price per share of $ 20.88 .

During the first quarter of 2024, through the date of this filing, we repurchased and retired 2.7 million common shares for $ 45.4 million, a weighted average purchase price per share of $ 16.52 , pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Earnings (Loss) Per Common Share

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Earnings (loss) per common share - basic and diluted

The effect of the redemption of OP Units, Time-Based LTIP Units, fully vested LTIP Units and Special Time-Based LTIP Units that were outstanding as of December 31, 2022 and 2021 is excluded in the computation of diluted earnings (loss) per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings (loss) per share).

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

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

AO LTIP Units, Performance-Based LTIP Units, Formation Awards and RSUs, which totaled 6.8 million, 5.9 million and 4.5 million for each of the three years in the period ended December 31, 2023, were excluded from the calculation of diluted earnings (loss) per common share as they were antidilutive, but potentially could be dilutive in the future.

Dividends Declared in February 2024

On February 14, 2024, our Board of Trustees declared a quarterly dividend of $ 0.175 per common share, payable on March 15, 2024 to shareholders of record as of March 1, 2024.

Fair Value Measurements

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

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

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

The net unrealized gain (loss) on our derivative financial instruments designated as effective hedges was $ 55.0 million and ($ 17.2 ) million as of December 31, 2022 and 2021 and was recorded in "Accumulated other comprehensive income (loss)"

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

Within the next 12 months, we expect to reclassify $ 29.2 million of the net unrealized gain as a decrease to interest expense.

The net unrealized gain on our derivative financial instruments designated as effective hedges was $ 22.7 million and $ 55.0 million as of December 31, 2023 and 2022 and was recorded in "Accumulated other comprehensive income" in our consolidated balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $ 24.2 million of the net unrealized gain as a decrease to interest expense.

The fair values of the derivative financial instruments are based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and observable inputs.

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Derivative financial instruments designated as effective hedges:

Classified as assets in "Other assets, net"

Derivative financial instruments designated as ineffective hedges:

Classified as assets in "Other assets, net"

Classified as liabilities in "Other liabilities, net"

Non-designated derivatives:

Classified as assets in "Other assets, net"

Classified as liabilities in "Other liabilities, net"

December 31, 2022

Derivative financial instruments designated as effective hedges:

Classified as assets in "Other assets, net"

Classified as liabilities in "Other liabilities, net"

Derivative financial instruments designated as ineffective hedges:

Classified as assets in "Other assets, net"

Non-designated derivatives:

Classified as assets in "Other assets, net"

The fair values of our derivative financial instruments were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument.

This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates.

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

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

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

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

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

in our consolidated statements of comprehensive income (loss) for each of the three years in the period ended December 31, 2022 were attributable to the net change in unrealized gains or losses related to the interest rate swaps and caps that were outstanding during those periods, none of which were reported in our consolidated statements of operations as the interest rate swaps and caps were documented and qualified as hedging instruments.

The net unrealized gains (losses) included in "Other comprehensive income (loss)" in our consolidated statements of comprehensive income (loss) for each of the three years in the period ended December 31, 2023 were attributable to the net change in unrealized gains (losses) related to effective interest rate swaps that were outstanding during those periods, none of which were reported in our consolidated statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

Realized and unrealized gains related to non-designated derivatives are included in "Interest expense" in our consolidated statements of operations.

Fair Value Measurements on a Nonrecurring Basis

We evaluate the carrying amount of our assets for impairment.

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

In connection with the preparation and review of our 2021 annual consolidated financial statements, we assessed the recoverability of the carrying amount of our real estate and related intangible assets.

This assessment resulted in the remeasurement of 7200 Wisconsin Avenue, RTC-West and a development parcel, which were written down to their estimated aggregate fair value of $ 309.0 million and were classified as Level 2 in the fair value hierarchy.

Our estimates of the fair values were based on expected sales prices as determined by contracts that were under negotiation as of December 31, 2021, after adjusting for estimated selling costs.

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

During the year ended December 31, 2023, this assessment resulted in the impairment of three commercial assets and one development parcel.

Our estimate of the fair value of 2101 L Street of $ 121.3 million was determined using a discounted cash flow model and was classified as Level 3 in the fair value hierarchy, which considers, among other things, the anticipated holding period, current market conditions and utilizes unobservable quantitative inputs, including capitalization and discount rates.

Our estimate of the fair value of 2100 Crystal Drive, 2200 Crystal Drive and a development parcel totaling $ 56.4 million was based on a market approach and classified as Level 2 in the fair value hierarchy.

The development parcel was sold in December 2023.

The impairment loss totaled $ 90.2 million, which was included in "Impairment loss" in our consolidated statement of operations for the year ended December 31, 2023.

There were no assets measured at fair value on a nonrecurring basis as of December 31, 2022.

During the year ended December 31, 2021, this assessment resulted in the impairment of 7200 Wisconsin Avenue, RTC-West and a development parcel, which were written down to their estimated aggregate fair value of $ 309.0 million and were classified as Level 2 in the fair value hierarchy.

Our estimates of the fair values were based on expected sales prices

as determined by contracts that were under negotiation as of December 31, 2021, after adjusting for estimated selling costs.

The assets were sold to an unconsolidated real estate venture in April 2022.

The remeasurement results in impairment losses totaling $ 25.1 million, which are included in "Impairment loss"

in our consolidated statement of operations for the year ended December 31, 2021.

There were no other assets measured at fair value on a nonrecurring basis as of December 31, 2022 and 2021.

The impairment loss totaled $ 25.1 million, which was included in "Impairment loss" in our consolidated statement of operations for the year ended December 31, 2021.

Financial Assets and Liabilities Not Measured at Fair Value

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Revolving credit facility

Unsecured term loans

(1) The carrying amount consists of principal only.

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

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

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

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

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

Segment Information

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

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

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

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

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

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

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

NOI includes property rental revenue and parking revenue, and deducts property operating expenses and real estate taxes.

With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative:

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

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

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

Management company assets primarily consist of management and leasing contracts with a net book value of $ 13.7 million and $ 19.6 million as of December 31, 2022 and 2021, which are classified in "Intangible assets, net"

in our consolidated balance sheets.

Management company assets primarily consist of management and leasing contracts with a net book value of $ 8.1 million and $ 13.7 million as of December 31, 2023 and 2022, which are classified in "Intangible assets, net" in our consolidated balance sheets.

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

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Loss from unconsolidated real estate ventures, net

Interest and other income (loss), net

Interest and other income, net

Gain on the sale of real estate, net

Consolidated NOI

The following is a summary of NOI by segment.

Items classified in the Other column include development assets, corporate entities and the elimination of intersegment activity.

The following is a summary of NOI and certain balance sheet data by segment.

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

Year Ended December 31, 2023

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Consolidated NOI

The following is a summary of certain balance sheet data by segment:

(In thousands)

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We maintain general liability insurance with limits of $ 150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $ 1.0 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties.

We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $ 2.0 billion per occurrence.

We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both conventional terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $ 2.0 billion per occurrence.

These policies are partially reinsured by third-party insurance providers.

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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 mortgage loans 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 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 December 31, 2022, we had assets under construction that, based on our current plans and estimates, require an additional $ 403.5 million to complete, which we anticipate will be primarily expended over the next two to three years .

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

As of December 31, 2023, we had assets under construction that, based on our current plans and estimates, require an additional $ 177.1 million to complete, which we anticipate will be primarily expended over the next two years .

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

Environmental Matters

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

The environmental assessments did not reveal any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law.

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

The environmental assessments have not revealed any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law.

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

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

in our consolidated balance sheets.

Environmental liabilities totaled $ 17.6 million and $ 18.0 million as of December 31, 2023 and 2022, and are included in "Other liabilities, net" in our consolidated balance sheets.

Operating and Finance Leases

As of December 31, 2023, we are obligated under non-cancellable operating leases, including ground leases on certain of our properties with terms extending through the year 2037.

As of December 31, 2023, our operating lease liabilities were calculated based on the weighted average discount rates of 5.6 % and had a weighted average remaining lease term of 13.5 years.

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Total liabilities related to lease right-of-use assets

During the year ended December 31, 2023, we incurred $ 5.4 million of fixed operating lease expenses, and $ 180,000 of variable operating lease expenses.

In April 2022, we sold the finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2 to an unconsolidated real estate venture.

During the year ended December 31, 2022, we incurred $ 601,000 and $ 2.6 million of fixed operating and finance lease expenses, and $ 97,000 of variable operating lease expenses.

During the year ended December 31, 2021, we incurred $ 731,000 and $ 2.8 million of fixed operating and finance lease costs, and $ 2.6 million of variable operating lease costs.

As of December 31, 2022, we had committed tenant-related obligations totaling $ 62.3 million ($ 60.4 million related to our consolidated entities and $ 1.9 million related to our unconsolidated real estate ventures at our share).

During the year ended December 31, 2021, we incurred $ 731,000 and $ 2.8 million of fixed operating and finance lease expenses, and $ 2.6 million of variable operating lease expenses.

As of December 31, 2023, we had committed tenant-related obligations totaling $ 46.8 million ($ 46.0 million related to our consolidated entities and $ 828,000 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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In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

During the year ended December 31, 2023, we recognized a $ 6.0 million gain from the settlement of litigation, which was included in "Interest and other income, net" in our consolidated statement of operations.

From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings, or (iii) provide guarantees to lenders and other third parties for the completion of development projects.

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As of December 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.

Under the Tax Matters Agreement, we may be required to indemnify Vornado against any taxes and related amounts and costs resulting from a violation by us of the Tax Matters Agreement.

Transactions with Related Parties

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

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

In connection with the contribution to us of certain assets formerly owned by the JBG Legacy Funds as part of the Formation Transaction, the general partner and managing member interests in the JBG Legacy Funds that were held by certain former JBG executives (and who became members of our management team and/or Board of Trustees) were not transferred to us and remain under the control of these individuals.

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

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

As of December 31, 2022, the WHI Impact Pool had completed closings of capital commitments totaling $ 114.4 million, which included a commitment from us of $ 11.2 million.

As of December 31, 2023, the WHI Impact Pool completed fundraising in 2020 with capital commitments totaling $ 114.4 million, which included a commitment from us of $ 11.2 million.

As of December 31, 2023, our remaining commitment was $ 3.5 million.

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As of December 31, 2023 and 2022, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $ 3.5 million and $ 4.5 million for such services.

We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 922,000 , $ 1.3 million and $ 4.6 million for each of the three years in the period ended December 31, 2022.

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

We paid BMS $ 10.7 million, $ 18.6 million and $ 16.9 million for each of the three years in the period ended December 31, 2022, which is included in "Property operating expenses"

in our consolidated statements of operations.

Commencing in March 2023, in connection with the sale of an 80.0 % interest in 4747 Bethesda Avenue, we leased our corporate offices from an unconsolidated real estate venture and incurred $ 5.0 million of rent expense for the year ended December 31, 2023, which was included in "General and administrative expense" in our consolidated statement of operations.

We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $ 922,000 and $ 1.3 million for the years ended December 31, 2022 and 2021.

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

We paid BMS $ 9.3 million, $ 10.7 million and $ 18.6 million for each of the three years in the period ended December 31, 2023, which was included in "Property operating expenses" in our consolidated statements of operations.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data