What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-07-30 compared with 2024-04-30 · 195 added, 127 removed, 315 unchanged (51% of the section changed)

16 unchanged sentences

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;

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 5G digital infrastructure.

and our retail and digital placemaking initiatives and public infrastructure improvements.

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") and other third parties.

2 unchanged sentences

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;

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

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

2 unchanged sentences

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

References to our financial statements refer to our unaudited condensed consolidated financial statements as of March 31, 2024 and December 31, 2023, and for the three months ended March 31, 2024 and 2023.

References to our balance sheets refer to our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.

to our statements of operations refer to our condensed consolidated statements of operations for the three months ended March 31, 2024 and 2023.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the three months ended March 31, 2024 and 2023.

References to our financial statements refer to our unaudited condensed consolidated financial statements as of June 30, 2024 and December 31, 2023, and for the three and six months ended June 30, 2024 and 2023.

References to our balance sheets refer to our condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023.

References to our statements of operations refer to our condensed consolidated statements of operations for the three and six months ended June 30, 2024 and 2023.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the six months ended June 30, 2024 and 2023.

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

12 unchanged sentences

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

As of March 31, 2024, our Operating Portfolio consisted of 41 operating assets comprising 15 multifamily assets totaling 6,318 units (6,318 units at our share), 24 commercial assets totaling 7.5 million square feet (7.2 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 with 1,583 units (1,583 units at our share) and 18 assets in the development pipeline totaling 11.3 million square feet (9.3 million square feet at our share) of estimated potential development density.

As of June 30, 2024, our Operating Portfolio consisted of 40 operating assets comprising 15 multifamily assets totaling 6,318 units (6,318 units at our share), 23 commercial assets totaling 7.2 million square feet (6.9 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 18 assets in the development pipeline totaling 11.4 million square feet (9.3 million square feet at our share) of estimated potential development density.

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

2 unchanged sentences

To that end, we saw the delivery of two placemaking projects, Water Park and Surreal in 2023.

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

In the second quarter of 2024, we delivered 1900 Crystal Drive (The Grace and Reva) with 808 units and approximately 39,000 square feet of retail space.

Additionally, the digital infrastructure investments we are making are advancing our efforts to make National Landing among the first 5G-operable submarkets in the nation.

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

We evaluate development, acquisition, disposition, share repurchases and other investment decisions based on

how they may impact long-term NAV per share.

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

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

4 unchanged sentences

Current market conditions have significantly slowed down the pace of asset sales, and we expect this reduced activity to continue in 2024.

Our multifamily portfolio occupancy as of March 31, 2024 of 94.3% decreased by 40 basis points compared to December 31, 2023.

First quarter lease expirations increased effective rents, which represent the average change in rental rates versus expiring rental rates net of concessions, by 9.4% upon renewal while achieving a 52.4% renewal rate across our portfolio.

We continue to advance our two under-construction multifamily assets in National Landing, 1900 Crystal Drive (The Grace and Reva) and 2000/2001 South Bell Street, totaling 1,583 units.

1900 Crystal Drive began leasing in January 2024 with move-ins commencing in February 2024 and expected delivery of all remaining units in the second quarter of 2024.

Our multifamily portfolio occupancy as of June 30, 2024 of 94.3% was consistent compared to March 31, 2024.

During the second quarter of 2024, we increased effective rents, which represent the average change in rental rates versus expiring rental rates net of concessions, by 4.6% blended across new and renewal leases and 8.6% upon renewal while achieving a 50.9% renewal rate across our portfolio.

We continue to advance our two under-construction multifamily assets in National Landing, 1900 Crystal Drive (The Grace and Reva) and 2000/2001 South Bell Street (Valen and The Zoe), totaling 1,583 units.

1900 Crystal Drive began leasing in January 2024 with move-ins commencing in February 2024 and delivery of all remaining units in the second quarter of 2024, with 38.5% leased as of June 30, 2024.

2000/2001 South Bell Street is expected to deliver in the third quarter of 2025.

We expect that interest expense will increase as we deliver our under-construction assets and cease capitalization of interest on those assets.

Our office portfolio occupancy as of March 31, 2024 of 83.1% decreased by 180 basis points as compared to December 31, 2023.

Our office portfolio occupancy as of June 30, 2024 of 80.6% decreased by 250 basis points as compared to March 31, 2024.

As the office market continues to experience headwinds due to hybrid work trends and tenants seeking to repurpose space for flexibility, we anticipate continued weakness in the commercial office sector.

2 unchanged sentences

Accordingly, our efforts to re-lease certain spaces will be targeted toward buildings with long-term viability where we can concentrate occupancy, and we intend to take some of our other buildings out of service.

In addition to 1800 South Bell Street, which we took out of service in the first quarter of 2024, we plan to take 2100 Crystal Drive out of service when Amazon vacates in the second quarter of 2024.

In addition to 1800 South Bell Street, which we took out of service in the first quarter of 2024, we took 2100 Crystal Drive out of service when Amazon vacated in the second quarter of 2024.

We are also phasing 2200 Crystal Drive out of service as leases expire.

With the objective of ultimately reducing our competitive office inventory in National Landing, we expect to repurpose these older, obsolete and under-leased buildings for redevelopment, conversion to multifamily, hospitality or another specialty use.

We continue to advance the design and entitlement of our 11.3 million square feet (9.3 million square feet at our share) of estimated potential development density in our development pipeline and will look to source joint venture capital as a means of funding these developments as market conditions permit.

multifamily, hospitality or another specialty use.

We anticipate approximately 485,000 square feet (approximately $22 million of annualized rent) in National Landing will be vacated in the second half of 2024 and in 2025, but that number could change as those expirations grow nearer.

We continue to advance the design and entitlement of our 11.4 million square feet (9.3 million square feet at our share) of estimated potential development density in our development pipeline and intend to look to source joint venture capital as a means of funding these developments as market conditions permit.

Operating Results

Key highlights for the three months ended March 31, 2024 included:

● net loss attributable to common shareholders of $32.3 million, or $0.36 per diluted common share, for the three months ended March 31, 2024 compared to net income attributable to common shareholders of $21.2 million, or $0.19 per diluted common share, for the three months ended March 31, 2023;

● third-party real estate services revenue, including reimbursements, of $17.9 million and $22.8 million for the three months ended March 31, 2024 and 2023;

● operating multifamily portfolio leased and occupied percentages (1) at our share of 95.9% and 94.3% as of March 31, 2024 compared to 96.0% and 94.7% as of December 31, 2023, and 95.0% and 92.9% as of March 31, 2023;

● operating commercial portfolio leased and occupied percentages at our share of 84.6% and 83.1% as of March 31, 2024 compared to 86.3% and 84.9% as of December 31, 2023, and 87.6% and 85.2% as of March 31, 2023;

● the leasing of 99,000 square feet at our share, at an initial rent (2) of $45.68 per square foot and a GAAP-basis weighted average rent per square foot (3) of $45.38 for the three months ended March 31, 2024;

● an increase in same store (4) NOI of 6.5% to $75.7 million for the three months ended March 31, 2024 compared to $71.1 million for the three months ended March 31, 2023.

Key highlights for the three and six months ended June 30, 2024 included:

● net loss attributable to common shareholders of $24.4 million, or $0.27 per diluted common share, for the three months ended June 30, 2024 compared to $10.5 million, or $0.10 per diluted common share, for the three months ended June 30, 2023.

Net loss attributable to common shareholders of $56.6 million, or $0.63 per diluted common share, for the six months ended June 30, 2024 compared to net income attributable to common shareholders of $10.6 million, or $0.09 per diluted common share, for the six months ended June 30, 2023;

● third-party real estate services revenue, including reimbursements, of $17.4 million and $35.3 million for the three and six months ended June 30, 2024, and $22.9 million and $45.6 million for the three and six months ended June 30, 2023;

● operating multifamily portfolio leased and occupied percentages (1) at our share of 96.9% and 94.3% as of June 30, 2024 compared to 95.9% and 94.3% as of March 31, 2024, and 96.8% and 93.7% as of June 30, 2023;

● operating commercial portfolio leased and occupied percentages at our share of 82.3% and 80.6% as of June 30, 2024 compared to 84.6% and 83.1% as of March 31, 2024, and 86.3% and 84.0% as of June 30, 2023;

● the leasing of 248,000 square feet at our share, at an initial rent (2) of $46.61 per square foot and a GAAP-basis weighted average rent per square foot (3) of $47.34 for the three months ended June 30, 2024, and the leasing of 347,000 square feet at our share, at an initial rent (2) of $46.34 per square foot and a GAAP-basis weighted average rent per square foot (3) of $46.78 for the six months ended June 30, 2024;

● an increase in same store (4) NOI of 3.2% to $71.4 million for the three months ended June 30, 2024 compared to $69.1 million for the three months ended June 30, 2023, and an increase in same store (4) NOI of 5.2% to $145.1 million for the six months ended June 30, 2024 compared to $137.9 million for the six months ended June 30, 2023.

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

2 unchanged sentences

(4) Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.

Additionally, investing and financing activity during the three months ended March 31, 2024 included:

Additionally, investing and financing activity during the six months ended June 30, 2024 included:

● the sale of North End Retail.

6 unchanged sentences

● the investment of $113.4 million in development costs, construction in progress and real estate additions.

Activity subsequent to March 31, 2024 included:

● the declaration of a quarterly dividend of $0.175 per common share, payable on May 24, 2024 to shareholders of record as of May 10, 2024.

Activity subsequent to June 30, 2024 included:

● the declaration of a quarterly dividend of $0.175 per common share, payable on August 21, 2024 to shareholders of record as of August 7, 2024;

● the repurchase and retirement of 897,531 common shares for $14.0 million, a weighted average purchase price per share of $15.55, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended;

● a contract to sell a multifamily asset located in Washington D.C.

for $86.8 million that went firm on July 29, 2024.

Subject to customary closing conditions, we anticipate that this transaction will close in 2024;

however, we can make no assurances as to when or if the transaction will close.

Critical Accounting Estimates

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

There have been no significant changes to our policies during the three months ended March 31, 2024.

There have been no significant changes to our policies during the six months ended June 30, 2024.

Recent Accounting Pronouncements

1 unchanged sentence

Results of Operations

During the three months ended March 31, 2024, we sold North End Retail.

During the six months ended June 30, 2024, we sold North End Retail.

In 2023, we sold an 80.0% interest in 4747 Bethesda Avenue to an unconsolidated real estate venture, and we sold Falkland Chase-South & West/North, 5 M Street Southwest, Crystal City Marriott and Capital Point-North-75 New York Avenue.

We collectively refer to these assets as the "Disposed Properties" in the discussion below.

Comparison of the Three Months Ended March 31, 2024 to 2023

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended March 31, 2024 compared to the same period in 2023:

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2024 to 2023

Three Months Ended June 30,

(Dollars in thousands)

7 unchanged sentences

Third-party real estate services

Income (loss) from unconsolidated real estate ventures, net

Interest expense

Property rental revenue decreased by approximately $8.1 million, or 6.7%, to $112.5 million in 2024 from $120.6 million in 2023.

The decrease was primarily due to an $8.7 million decrease in revenue from our commercial assets and a $910,000 decrease in other revenue, partially offset by a $781,000 increase in revenue from our multifamily assets and $738,000 in lease termination revenue.

The decrease in revenue from our commercial assets was primarily due to a $3.8 million decrease related to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, a $2.3 million decrease related to the Disposed Properties, and lower occupancy and rents across the portfolio.

The increase in revenue from our multifamily assets was primarily due to a $1.2 million increase related to 1900 Crystal Drive, which we began

leasing during the first quarter of 2024, and higher occupancy and rents across the portfolio, partially offset by a $2.8 million decrease related to the Disposed Properties.

Third-party real estate services revenue, including reimbursements, decreased by approximately $5.5 million, or 23.9%, to $17.4 million in 2024 from $22.9 million in 2023.

The decrease was primarily due to a $2.3 million decrease in development fees related to the timing of development projects, a $1.8 million decrease in reimbursement revenue and a $1.0 million decrease in property management fees.

Depreciation and amortization expense increased by approximately $2.1 million, or 4.2%, to $51.3 million in 2024 from $49.2 million in 2023.

The increase was primarily due to (i) a $4.2 million increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, (ii) a $1.5 million increase related to 2100 Crystal Drive due to the acceleration of depreciation of certain assets as the building was taken out of service in the second quarter of 2024 and (iii) a $514,000 increase related to Crystal City Shops at 2100 due to the acceleration of depreciation.

The increase in depreciation and amortization expense was partially offset by (iv) a $2.2 million decrease related to 1800 South Bell Street, which was taken out of service during the first quarter of 2024, (v) a $1.5 million decrease related to the Disposed Properties and (vi) a $1.1 million decrease related to 2451 Crystal Drive due to the disposal of certain tenant-related assets in 2023.

Property operating expense increased by approximately $342,000, or 1.0%, to $36.3 million in 2024 from $35.9 million in 2023.

The increase was primarily due to a $519,000 increase in property operating expense from our multifamily assets and a $522,000 increase in other property operating expense, partially offset by a $699,000 decrease in property operating expense from our commercial assets.

The increase in property operating expense from our multifamily assets was primarily due to a $1.0 million increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, and higher operating expenses due to higher occupancy across the portfolio, partially offset by a $914,000 decrease related to the Disposed Properties.

The increase in other property operating expense was primarily due to a $646,000 increase in insurance claims covered by our captive insurance subsidiary.

The decrease in property operating expense from our commercial assets was primarily due to an $836,000 decrease related to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, a $525,000 decrease related to the Disposed Properties and lower operating expenses due to lower occupancy across the portfolio, partially offset by a $557,000 increase in expenses incurred in connection with construction management services provided to tenants.

Real estate taxes expense decreased by approximately $25,000, or 0.2%, to $14.4 million in 2024.

The decrease was primarily due to a $546,000 decrease related to the Disposed Properties and lower assessments across the portfolio, partially offset by an $841,000 increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024.

General and administrative expense:

corporate and other increased by approximately $1.9 million, or 12.6%, to $17.0 million in 2024 from $15.1 million in 2023.

The increase was primarily due to higher compensation expenses and a decrease in capitalized payroll.

General and administrative expense:

third-party real estate services decreased by approximately $3.5 million, or 15.6%, to $18.7 million in 2024 from $22.1 million in 2023.

The decrease was primarily due to lower third-party reimbursable expenses.

Loss from unconsolidated real estate ventures increased by approximately $736,000, or 144.3%, to $226,000 in 2024 from income of $510,000 in 2023 due to a decrease in income at our share primarily related to disposition activity.

Interest expense increased by approximately $6.1 million, or 23.8%, to $32.0 million in 2024 from $25.8 million in 2023.

The increase in interest expense was primarily due to (i) a $5.5 million increase due to higher outstanding debt, (ii) a $2.9 million increase related to rising interest rates on variable rate mortgage loans and (iii) a $2.9 million decrease in capitalized interest as we placed 1900 Crystal Drive into service.

The increase in interest expense was partially offset by (iv) a $2.9 million decrease related to the increase in mark-to-market associated with our non-designated derivatives and a decrease resulting from the expiration of certain derivatives and (v) a $2.1 million decrease related to mortgage loans collateralized by 800 North Glebe Road and Falkland Chase-South & West, which were repaid during 2023.

Comparison of the Six Months Ended June 30, 2024 to 2023

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the six months ended June 30, 2024 compared to the same period in 2023:

Six Months Ended June 30,

(Dollars in thousands)

Property rental revenue

Third-party real estate services revenue, including reimbursements

Depreciation and amortization expense

Property operating expense

Real estate taxes expense

General and administrative expense:

Corporate and other

Third-party real estate services

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

3 unchanged sentences

Impairment loss

_____________

* Not meaningful.

Property rental revenue decreased by approximately $9.5 million, or 3.9%, to $235.2 million in 2024 from $244.6 million in 2023.

The decrease was primarily due to a $14.3 million decrease in revenue from our commercial assets, partially offset by $10.3 million in lease termination revenue, a $1.5 million increase in revenue from our multifamily assets and a $1.1 million increase in other revenue.

The decrease in revenue from our commercial assets was primarily due to a $3.8 million decrease related to the Disposed Properties, a $2.1 million decrease related to 1800 South Bell Street, which was taken out of service during the first quarter of 2024, and lower occupancy and rents across the portfolio.

The increase in revenue from our multifamily assets was primarily due to higher occupancy and rents across the portfolio and continued lease up of 8001 Woodmont, partially offset by a $2.6 million decrease related to the Disposed Properties.

The decrease was primarily due to a $23.0 million decrease in revenue from our commercial assets, partially offset by $11.1 million in lease termination revenue, a $2.3 million increase in revenue from our multifamily assets and a $163,000 increase in other revenue.

The decrease in revenue from our commercial assets was primarily due to a $6.6 million decrease related to the Disposed Properties, a $6.2 million decrease related to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, and lower occupancy and rents across the portfolio.

The increase in revenue from our multifamily assets was primarily due to a $1.3 million increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, and higher occupancy and rents across the portfolio, partially offset by a $5.4 million decrease related to the Disposed Properties.

Third-party real estate services revenue, including reimbursements, decreased by approximately $10.4 million, or 22.7%, to $35.3 million in 2024 from $45.6 million in 2023.

The decrease was primarily due to a $2.0 million decrease in reimbursement revenue, a $1.7 million decrease in development fees related to the timing of development projects and a $681,000 decrease in property management fees.

The decrease was primarily due to a $4.1 million decrease in development fees related to the timing of development projects, a $3.7 million decrease in reimbursement revenue and a $1.7 million decrease in property management fees.

Depreciation and amortization expense increased by approximately $5.5 million, or 5.4%, to $108.2 million in 2024 from $102.6 million in 2023.

The increase was primarily due to (i) a $7.7 million increase related to 2100 Crystal Drive due to the acceleration of depreciation of certain assets as the building will be taken out of service in the second quarter of 2024, (ii) a $2.3 million increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, and (iii) a $1.7 million increase related to various National Landing assets primarily due to placing Water Park and Surreal into service and the acceleration of depreciation of certain assets.

The increase in depreciation and amortization expense was partially offset by (iv) a $3.3 million decrease related to 8001 Woodmont due to the amortization of acquired in-place lease intangibles in 2023, (v) a $3.0 million decrease related to the Disposed Properties and (vi) a $2.2 million decrease related to 1800 South Bell Street, which was taken out of service during the first quarter of 2024.

Property operating expense decreased by approximately $333,000, or 0.9%, to $35.3 million in 2024 from $35.6 million in 2023.

The decrease was primarily due to a $2.3 million decrease in property operating expense from our commercial assets and a $49,000 decrease in property operating expense from our multifamily assets, partially offset by a $2.0 million increase in other property operating expense.

The decrease in property operating expense from our commercial assets was primarily due to a $1.3 million decrease related to the Disposed Properties, a $699,000 decrease in construction management services provided to tenants and a $329,000 decrease related to 1800 South Bell Street, which was taken out of service during the

first quarter of 2024.

The increase in other property operating expense was primarily due to a $1.3 million increase in insurance claims covered by our captive insurance subsidiary.

The increase was primarily due to (i) a $7.5 million increase related to 2100 Crystal Drive due to the acceleration of depreciation of certain assets as the building was taken out of service in the second quarter of 2024, (ii) a $6.5 million increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, (iii) a $2.2 million increase related to Crystal City Shops at 2100 due to the acceleration of depreciation and (iv) a $2.0 million increase related to various National Landing assets primarily due to placing Water Park and Surreal into service.

The increase in depreciation and amortization expense was partially offset by (v) a $4.9 million decrease related to the Disposed Properties, (vi) a $4.3 million decrease related to 1800 South Bell Street, which was taken out of service during the first quarter of 2024, (vii) a $3.4 million decrease related to 8001 Woodmont due to the amortization of acquired in-place lease intangibles in 2023 and (viii) a $1.0 million decrease related to 2451 Crystal Drive due to the disposal of certain tenant-related assets in 2023.

Property operating expense increased by approximately $9,000 to $71.5 million in 2024.

The increase was primarily due to a $2.5 million increase in other property operating expense and a $470,000 increase in property operating expense from our multifamily assets, partially offset by a $3.0 million decrease in property operating expense from our commercial assets.

The increase in other property operating expense was primarily due to a $1.8 million increase in insurance claims covered

by our captive insurance subsidiary.

The increase in property operating expense from our multifamily assets was primarily due to a $2.0 million increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, and higher operating expenses due to higher occupancy across the portfolio, partially offset by a $1.6 million decrease related to the Disposed Properties.

The decrease in property operating expense from our commercial assets was primarily due to a $1.9 million decrease related to the Disposed Properties, a $1.2 million decrease related to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, and lower operating expenses due to lower occupancy across the portfolio.

Real estate taxes expense decreased by approximately $1.5 million, or 4.9%, to $28.2 million in 2024 from $29.6 million in 2023.

The decrease was primarily due to a $1.1 million decrease related to the Disposed Properties.

The decrease was primarily due to a $1.6 million decrease related to the Disposed Properties and lower assessments across the portfolio, partially offset by a $1.4 million increase related to 1900 Crystal Drive, which we began leasing during the first quarter of 2024.

General and administrative expense:

corporate and other decreased by approximately $1.2 million, or 7.1%, to $15.0 million in 2024 from $16.1 million in 2023.

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

corporate and other increased by approximately $758,000, or 2.4%, to $32.0 million in 2024 from $31.2 million in 2023.

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

General and administrative expense:

third-party real estate services decreased by approximately $5.0 million, or 10.8%, to $41.0 million in 2024 from $45.9 million in 2023.

The decrease was primarily due to lower third-party reimbursable expenses.

The decrease was primarily due to lower third-party reimbursable expenses and lower compensation expenses.

General and administrative expense:

1 unchanged sentence

The decrease was due to certain awards fully vesting in 2023.

Income from unconsolidated real estate ventures increased by approximately $542,000, or 125.2%, to $975,000 in 2024 from $433,000 in 2023.

The increase was primarily due to a $480,000 gain at our share from the sale of Central Place Tower in 2024.

Income from unconsolidated real estate ventures decreased by approximately $194,000, or 20.6%, to $749,000 in 2024 from $943,000 in 2023.

The decrease was due to a decrease in income at our share primarily related to disposition activity, partially offset by a $480,000 gain at our share from the sale of Central Place Tower in 2024.

Interest expense increased by approximately $9.5 million, or 18.0%, to $62.1 million in 2024 from $52.7 million in 2023.

The increase in interest expense was primarily due to (i) a $6.8 million increase due to higher outstanding debt, (ii) a $3.1 million increase related to rising interest rates on variable rate mortgage loans and (iii) a $550,000 decrease in capitalized interest as we began placing 1900 Crystal Drive into service during the first quarter of 2024.

The increase in interest expense was partially offset by (iv) a $2.7 million decrease related to the increase in mark-to-market associated with our non-designated derivatives, (v) a $2.7 million decrease related to mortgage loans collateralized by 800 North Glebe Road, 2121 Crystal Drive and Falkland Chase-South & West, which were repaid during 2023 and (vi) a $2.1 million decrease related to the Disposed Properties, excluding Falkland Chase-South & West.

The increase in interest expense was primarily due to (i) a $11.9 million increase due to higher outstanding debt, (ii) a $5.9 million increase related to rising interest rates on variable rate mortgage loans and (iii) a $3.4 million decrease in capitalized interest as we placed 1900 Crystal Drive into service.

The increase in interest expense was partially offset by (iv) a $5.6 million decrease resulting from the expiration of certain non-designated derivatives, (v) a $4.8 million decrease related to mortgage loans collateralized by 800 North Glebe Road, 2121 Crystal Drive and Falkland Chase-South & West, which were repaid during 2023, and (vi) a $2.1 million decrease related to the Disposed Properties, excluding Falkland Chase-South & West.

Gain on the sale of real estate of $286,000 in 2024 was primarily due to the recognition of previously recorded contingent liabilities, which were relieved in connection with the sale of Central Place Tower by one of our unconsolidated real estate ventures, partially offset by the loss on the sale of North End Retail.

Gain on the sale of real estate of $40.7 million in 2023 was due to the sale of the Disposed Properties.

Impairment loss of $17.2 million in 2024 is related to a development parcel, which was written down to its estimated fair value.

Impairment loss of $18.2 million in 2024 was related to two development parcels, which were written down to their estimated fair value.

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

1 unchanged sentence

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

FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should

not be considered as an alternative to net income (loss) (computed in accordance with GAAP), as a performance measure or cash flow as a liquidity measure.

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

FFO may not be comparable to similarly titled measures used by other companies.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

23 unchanged sentences

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

During the three months ended March 31, 2024, our same store pool decreased to 41 properties from 42 properties due to (i) the sale of North End Retail and Central Place Tower, (ii) the exclusion of 1800 South Bell Street, which was taken out of service, and (iii) the inclusion of 8001 Woodmont and 1831/1861 Wiehle Avenue as they were in service for the entirety of the comparable periods.

During the three months ended June 30, 2024, our same store pool decreased to 40 properties from 41 properties due to the exclusion of 2100 Crystal Drive, which was taken out of service.

During the six months ended June 30, 2024, our same store pool decreased to 40

properties from 42 properties due to (i) the sale of North End Retail and Central Place Tower, (ii) the exclusion of 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service, and (iii) the inclusion of 8001 Woodmont and 1831/1861 Wiehle Avenue as they were in service for the entirety of the comparable periods.

While there is judgment surrounding changes in designations, a property is removed from the same store pool when the property is considered to be under-construction because it is undergoing significant redevelopment or renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property NOI.

A development property or under-construction property is moved to the same store

pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period.

A development property or under-construction property is moved to the same store pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period.

Acquisitions are moved into the same store pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.

Same store NOI increased $4.6 million, or 6.5%, to $75.7 million for the three months ended March 31, 2024 from $71.1 million for the same period in 2023.

The increase was substantially attributable to (i) higher rents and occupancy, partially offset by higher operating expenses in our multifamily portfolio and (ii) burn off of rent abatements and lower bad debt, real estate taxes and operating expenses, partially offset by lower occupancy in our commercial portfolio.

Same store NOI increased $2.2 million, or 3.2%, to $71.4 million for the three months ended June 30, 2024 from $69.1 million for the same period in 2023.

The increase for the three months ended June 30, 2024 was substantially attributable to (i) higher rents and occupancy and lower concessions, partially offset by higher operating expenses in our multifamily portfolio, and (ii) lower real estate taxes and operating expenses, partially offset by lower occupancy in our commercial portfolio.

Same store NOI increased $7.2 million, or 5.2%, to $145.1 million for the six months ended June 30, 2024 from $137.9 million for the same period in 2023.

The increase for the six months ended June 30, 2024 was substantially attributable to (i) higher rents and occupancy and lower concessions, partially offset by higher operating expenses in our multifamily portfolio, and (ii) burn off of rent abatements, lower real estate taxes and non-reimbursable operating expenses, partially offset by lower occupancy in our commercial portfolio.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

Net income (loss) attributable to common shareholders

Net income (loss) attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Net income (loss)

Depreciation and amortization expense

5 unchanged sentences

Interest expense

Loss on the extinguishment of debt

Impairment loss

Income tax benefit

Net income (loss) attributable to redeemable noncontrolling interests

Net loss attributable to noncontrolling interests

Income tax expense (benefit)

Third-party real estate services, including reimbursements revenue

Other revenue

Income from unconsolidated real estate ventures, net

Income (loss) from unconsolidated real estate ventures, net

Interest and other income, net

25 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

10 unchanged sentences

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

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three months ended March 31, 2024 in the preceding pages under "Results of Operations."

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three and six months ended June 30, 2024 in the preceding pages under "Results of Operations."

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

2 unchanged sentences

Consolidated NOI is calculated as property revenue less property expense.

See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three months ended March 31, 2024 and 2023.

See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three and six months ended June 30, 2024 and 2023.

The following is a summary of NOI by segment:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

8 unchanged sentences

(3) Includes property operating expenses and real estate taxes.

Comparison of the Three Months Ended March 31, 2024 to 2023

Comparison of the Three Months Ended June 30, 2024 to 2023

Property revenue increased by $684,000, or 1.3%, to $53.4 million in 2024 from $52.7 million in 2023.

Consolidated NOI decreased by $506,000, or 1.8%, to $28.2 million in 2024 from $28.7 million in 2023.

The increase in property revenue was primarily due to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, and higher occupancy and rents across the portfolio, partially offset by a decrease related to the Disposed Properties.

The decrease in consolidated NOI was due to an increase in property operating expenses primarily related to 1900 Crystal Drive, partially offset by a decrease in property operating expenses related to the Disposed Properties and an increase in property revenue.

Property revenue decreased by $9.3 million, or 13.5%, to $59.5 million in 2024 from $68.7 million in 2023.

Consolidated NOI decreased by $7.7 million, or 18.3%, to $34.6 million in 2024 from $42.3 million in 2023.

The decreases in property revenue and consolidated NOI were primarily due to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, the Disposed Properties, and lower occupancy and rents across the portfolio.

Comparison of the Six Months Ended June 30, 2024 to 2023

Property revenue increased by $2.2 million, or 2.1%, to $105.0 million in 2024 from $102.9 million in 2023.

Consolidated NOI increased by $1.2 million, or 4.4%, to $28.3 million in 2024 from $27.1 million in 2023.

The increases in property revenue and consolidated NOI were primarily due to higher occupancy and rents across the portfolio, partially offset by the Disposed Properties.

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

Consolidated NOI increased by $687,000, or 1.2%, to $56.5 million in 2024 from $55.8 million in 2023.

The increases in property revenue and consolidated NOI were primarily due to 1900 Crystal Drive, which we began leasing during the first quarter of 2024, and higher occupancy and rents across the portfolio, partially offset by a decrease related to the Disposed Properties.

Property revenue decreased by $24.1 million, or 16.7%, to $120.7 million in 2024 from $144.8 million in 2023.

Consolidated NOI decreased by $18.7 million, or 20.8%, to $71.3 million in 2024 from $90.0 million in 2023.

The decreases in property revenue and consolidated NOI were primarily due to the Disposed Properties, 1800 South Bell Street being taken out of service during the first quarter of 2024, and lower occupancy and rents across the portfolio.

The decreases in property revenue and consolidated NOI were primarily due to the Disposed Properties, 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, and lower occupancy and rents across the portfolio.

Liquidity and Capital Resources

8 unchanged sentences

Interest Rate (1)

March 31, 2024

June 30, 2024

December 31, 2023

5 unchanged sentences

Mortgage loans, net

(1) Weighted average effective interest rate as of March 31, 2024.

(1) Weighted average effective interest rate as of June 30, 2024.

(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 was 3.41%, and the weighted average maturity date of the interest rate caps was April 2025.

For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.52%, and the weighted average maturity date of the interest rate caps was June 2025.

In July 2024, a new interest rate cap was executed that extended the weighted average maturity date of the interest rate caps to October 2025.

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

As of March 31, 2024, one-month term Secured Overnight Financing Rate ("SOFR") was 5.33%.

As of June 30, 2024, one-month term Secured Overnight Financing Rate ("SOFR") was 5.34%.

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

As of March 31, 2024 and December 31, 2023, the net carrying value of real estate collateralizing our mortgage loans totaled $2.2 billion.

As of June 30, 2024 and December 31, 2023, 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.

1 unchanged sentence

See Note 17 to the financial statements for additional information.

As of March 31, 2024 and December 31, 2023, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $1.6 billion and $1.7 billion.

As of June 30, 2024 and December 31, 2023, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $1.6 billion and $1.7 billion.

See Note 15 to the financial statements for additional information.

Revolving Credit Facility and Term Loans

As of March 31, 2024 and 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.

As of June 30, 2024 and 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.

The revolving credit facility has two six-month extension options, and the Tranche A-1 Term Loan has two one-year extension options.

1 unchanged sentence

Interest Rate (1)

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

Term loans, net

(1) Effective interest rate as of March 31, 2024.

(1) Effective interest rate as of June 30, 2024.

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

(2) As of March 31, 2024, daily SOFR was 5.34%.

As of March 31, 2024 and December 31, 2023, letters of credit with an aggregate face amount of $467,000 were outstanding under our revolving credit facility.

(3) As of March 31, 2024 and December 31, 2023, excludes $9.5 million and $10.2 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net" in our balance sheets.

(4) As of March 31, 2024 and 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 March 31, 2024 and 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 March 31, 2024 and 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.

(2) As of June 30, 2024, daily SOFR was 5.33%.

As of June 30, 2024 and December 31, 2023, letters of credit with an aggregate face amount of $15.7 million and $467,000 were outstanding under our revolving credit facility.

(3) As of June 30, 2024 and December 31, 2023, excludes $8.7 million and $10.2 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net" in our balance sheets.

(4) As of June 30, 2024 and 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 matured in July 2024.

We have two forward-starting interest rate swaps that became effective in July 2024 with a total notional value of $200.0 million, which effectively fix SOFR at a weighted average interest rate of 4.00% through January 2027.

(5) As of June 30, 2024 and 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 matured in July 2024 and with a total notional value of $200.0 million will mature in January 2028.

(6) As of June 30, 2024 and 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.

Common Shares Repurchased

Our Board of Trustees has authorized the repurchase of up to $1.5 billion of our outstanding common shares.

During the three months ended March 31, 2024, we repurchased and retired 3.0 million common shares for $49.4 million, a weighted average purchase price per share of $16.50.

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

Since we began the share repurchase program through March 31, 2024, we have repurchased and retired 48.9 million common shares for $1.0 billion, a weighted average purchase price per share of $20.61.

During the three and six months ended June 30, 2024, we repurchased and retired 4.7 million and 7.7 million common shares for $68.7 million and $118.1 million, a weighted average purchase price per share of $14.62 and $15.35.

During the three and six months ended June 30, 2023, we repurchased and retired 9.3 million and 10.5 million common shares for $135.7 million and $155.8 million, a weighted average purchase price per share of $14.54 and $14.79.

Since we began the share repurchase program through June 30, 2024, we have repurchased and retired 53.6 million common shares for $1.1 billion, a weighted average purchase price per share of $20.09.

During July 2024, through the date of this filing, we repurchased and retired 897,531 common shares for $14.0 million, a weighted average purchase price per share of $15.55, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements.

4 unchanged sentences

● normal recurring expenses;

● debt service and principal repayment obligations, including balloon payments on maturing mortgage loans — As of March 31, 2024, we had $120.9 million on a consolidated basis and at our share related to a mortgage loan scheduled to mature in 2024;

● capital expenditures, including major renovations, tenant improvements and leasing costs — As of March 31, 2024, we had committed tenant-related obligations totaling $33.4 million ($33.3 million related to our consolidated entities and $113,000 related to our unconsolidated real estate ventures at our share);

● development expenditures — As of March 31, 2024, we had assets under construction that, based on our current plans and estimates, require an additional $134.4 million to complete, which we anticipate will be primarily expended over the next two years;

● dividends to shareholders and distributions to holders of OP Units and LTIP Units — On April 25, 2024, our Board of Trustees declared a quarterly dividend of $0.175 per common share;

● possible common share repurchases;

● debt service and principal repayment obligations, including balloon payments on maturing mortgage loans — As of June 30, 2024, we had a $120.9 million mortgage loan scheduled to mature in August 2024.

In 2025, we have maturities

totaling $424.0 million ($391.0 million related to our consolidated entities and $33.0 million related to an unconsolidated real estate venture at our share), after adjusting for by-right extension options;

● capital expenditures, including major renovations, tenant improvements and leasing costs — As of June 30, 2024, we had committed tenant-related obligations totaling $44.4 million ($44.3 million related to our consolidated entities and $144,000 related to our unconsolidated real estate ventures at our share);

● development expenditures — As of June 30, 2024, we had assets under construction that, based on our current plans and estimates, require an additional $98.5 million to complete, which we anticipate will be primarily expended over the next two years;

● dividends to shareholders and distributions to holders of OP Units and LTIP Units — On July 24, 2024, our Board of Trustees declared a quarterly dividend of $0.175 per common share;

● possible common share repurchases — during July 2024, through the date of this filing, we repurchased and retired 897,531 common shares for $14.0 million;

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

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

● cash and cash equivalents — As of March 31, 2024, we had cash and cash equivalents of $220.5 million ;

● cash and cash equivalents — As of June 30, 2024, we had cash and cash equivalents of $163.5 million ;

● cash flows from operations;

● distributions from real estate ventures;

● borrowing capacity under our revolving credit facility — As of March 31, 2024, we had $749.5 million of availability under our revolving credit facility;

● borrowing capacity under our revolving credit facility — As of June 30, 2024, we had $694.3 million of availability under our revolving credit facility;

● proceeds from financings, asset sales and recapitalizations;

● proceeds from the issuance of securities.

During the three months ended March 31, 2024, there were no significant changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report.

During the six months ended June 30, 2024, there were no significant changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report.

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

1 unchanged sentence

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

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

1 unchanged sentence

Net cash provided by (used in) investing activities

Net cash (used in) provided by financing activities

Cash Flows for the Three Months Ended March 31, 2024

Cash and cash equivalents, and restricted cash increased $59.8 million to $260.3 million as of March 31, 2024, compared to $200.4 million as of December 31, 2023.

Net cash used in financing activities

Cash Flows for the Six Months Ended June 30, 2024

Cash and cash equivalents, and restricted cash increased $5.5 million to $205.9 million as of June 30, 2024, compared to $200.4 million as of December 31, 2023.

This increase resulted from $62.0 million of net cash provided by investing activities and $60.8 million of net cash provided by operating activities, partially offset by $117.3 million of net cash used in financing activities.

Our outstanding debt was $2.6 billion as of March 31, 2024 and December 31, 2023.

Our outstanding debt was $2.6 billion as of June 30, 2024 and December 31, 2023.

Net cash provided by operating activities of $60.8 million comprised:

(i) $70.8 million of net income (before $146.7 million of non-cash items and a $286,000 gain on the sale of real estate), (ii) $1.7 million of return on capital from unconsolidated real estate ventures and (iii) $11.7 million of net change in operating assets and liabilities.

Non-cash income adjustments of $80.6 million primarily include depreciation and amortization expense, impairment loss, share-based compensation expense, deferred rent and amortization of lease incentives.

Non-cash income adjustments of $146.7 million primarily include depreciation and amortization expense, share-based compensation expense, impairment loss, deferred rent and amortization of lease incentives.

Net cash provided by investing activities of $62.0 million primarily comprised:

1 unchanged sentence

Net cash used in financing activities of $117.3 million primarily comprised:

(i) $92.0 million of repayments on the revolving credit facility, (ii) $49.4 million of common shares repurchased, (iii) $16.1 million of dividends paid to common shareholders and (iv) $2.9 million of distributions to our redeemable noncontrolling interests, partially offset by (v) $31.6 million of borrowings under mortgage loans and (vi) $30.0 million of borrowings under the revolving credit facility.

(i) $195.0 million of repayments on the revolving credit facility, (ii) $116.4 million of common shares repurchased, (iii) $32.2 million of dividends paid to common shareholders, (iv) $26.6 million paid for the acquisition of noncontrolling interests and (v) $5.8 million of distributions to our redeemable noncontrolling interests, partially offset by (vi) $173.0 million of borrowings under the revolving credit facility and (vii) $89.6 million of borrowings under mortgage loans.

Unconsolidated Real Estate Ventures

1 unchanged sentence

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

As of March 31, 2024, we had investments in unconsolidated real estate ventures totaling $104.8 million.

As of June 30, 2024, we had investments in unconsolidated real estate ventures totaling $101.0 million.

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

For a more complete description of our real estate ventures, see Note 4 to the financial statements.

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.

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

We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees.

2 unchanged sentences

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

As of March 31, 2024, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $58.7 million.

As of March 31, 2024, we had no debt principal payment guarantees related to our unconsolidated real estate ventures.

As of June 30, 2024, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $58.0 million.

As of June 30, 2024, we had no debt principal payment guarantees related to our unconsolidated real estate ventures.

Commitments and Contingencies

9 unchanged sentences

Construction Commitments

As of March 31, 2024, we had assets under construction that, based on our current plans and estimates, require an additional $134.4 million to complete, which we anticipate will be primarily expended over the next two years.

As of June 30, 2024, we had assets under construction that, based on our current plans and estimates, require an additional $98.5 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.

As of March 31, 2024, we had committed tenant-related obligations totaling $33.4 million ($33.3 million related to our consolidated entities and $113,000 related to our unconsolidated real estate ventures at our share).

As of June 30, 2024, we had committed tenant-related obligations totaling $44.4 million ($44.3 million related to our consolidated entities and $144,000 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.

1 unchanged sentence

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.

nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion of development projects.

As of March 31, 2024, the aggregate amount of debt principal payment guarantees was $8.3 million for our consolidated entities.

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

As of June 30, 2024, the aggregate amount of debt 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.

9 unchanged sentences

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

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

While a property owner may not be responsible for remediating contamination that has migrated onsite from an identifiable and viable offsite source, the contaminant's presence can have

adverse effects on operations and the redevelopment of our assets.

To the extent we arrange for contaminated materials to be sent to other locations for treatment or disposal, we may be liable for the cleanup of those sites if they become contaminated, without regard to whether we complied with environmental laws in doing so.

6 unchanged sentences

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

As disclosed in Note 17 to the financial statements, environmental liabilities totaled $17.6 million as of March 31, 2024 and December 31, 2023, and are included in "Other liabilities, net" in our balance sheets.

As disclosed in Note 17 to the financial statements, environmental liabilities totaled $17.5 million and $17.6 million as of June 30, 2024 and December 31, 2023, and are included in "Other liabilities, net" in our balance sheets.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis