What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-29 compared with 2024-10-29 · 216 added, 287 removed, 212 unchanged (70% of the section changed)

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You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q.

All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by

the cautionary statements contained or referred to in this section.

All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.

Organization and Basis of Presentation

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust, 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.

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust, owns, operates and develops mixed-use properties concentrated in amenity-rich, Metro-served submarkets in and around Washington, D.C., most notably National Landing, that we believe have long-term growth potential and appeal to residential, office and retail tenants.

Through an intense focus on placemaking, JBG SMITH cultivates vibrant, highly amenitized, 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 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.

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

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

Virginia Tech's $1 billion Innovation Campus;

proximity to the Pentagon;

and our placemaking initiatives and public infrastructure improvements.

In addition, our third-party real estate services business provides fee-based real estate services to third parties, including the legacy funds formerly organized by The JBG Companies.

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

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") 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;

References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our 10.0% subordinated interest in one commercial building and our 33.5% subordinated interest in four commercial buildings (the "Fortress 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.

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."

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

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

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

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the nine months ended September 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.

References to our financial statements refer to our unaudited condensed consolidated financial statements as of March 31, 2025 and December 31, 2024, and for the three months ended March 31, 2025 and 2024.

References to our balance sheets refer to our condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024.

References to our statements of operations refer to our condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024.

statements and the reported amounts of revenue and expenses during the reporting periods.

Actual results could differ from these estimates.

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

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

Our three operating and reportable segments are multifamily, commercial and third-party real estate services.

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

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

As of September 30, 2024, our Operating Portfolio consisted of 41 operating assets comprising 16 multifamily assets totaling 6,781 units (6,781 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.

As of March 31, 2025, our Operating Portfolio consisted of 37 operating assets comprising 15 multifamily assets totaling 6,459 units (6,459 units at our share), 20 commercial assets totaling 6.5 million square feet (6.1 million square feet at our share) and two wholly owned land assets for which we are the ground lessor.

Additionally, we have one under-construction multifamily asset with 775 units (775 units at our share) and 19 assets in the development pipeline totaling 11.0 million square feet (8.9 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.

Our placemaking includes the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces.

In keeping with our dedication to placemaking, each new project is intended to contribute to authentic and distinct neighborhoods by creating a vibrant street environment with robust retail offerings and other amenities, including improved public spaces.

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

In the second quarter of 2024, we delivered The Grace and Reva, formerly known collectively as 1900 Crystal Drive, with 808 units and approximately 38,000 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 intend to continue to opportunistically sell or recapitalize assets as well as land sites where a ground lease or joint venture execution may represent the most attractive path to maximizing value.

Successful execution of our capital allocation strategy enables us to source capital at NAV from the disposition of assets generating low cash yields and invest those proceeds in new acquisitions with higher cash yields and growth, development projects with significant yield spreads and profit potential, and share repurchases.

Consequently, at any given time, we expect to be in various stages of discussions and negotiations with potential buyers, real estate venture partners, ground lessors and other counterparties with respect to sales, joint ventures and/or ground leases for certain of our assets, including portfolios thereof.

These discussions and negotiations may or may not lead to definitive documentation or closed transactions.

While current market conditions have significantly slowed down the pace of asset sales, we anticipate redeploying the proceeds from any sales will not only help fund our planned growth but will also further advance the strategic shift of our portfolio to majority multifamily.

Our in-service multifamily portfolio, which refers to operating assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of September 30, 2024, was 95.7% occupied as of September 30, 2024, an increase of 140 basis points as compared to June 30, 2024.

During the third quarter of 2024, we increased effective rents, which represent the average change in rental rates versus expiring rental rates net of concessions, by 4.5% for new leases and 6.1% upon renewal while achieving a 60.0% renewal rate across our portfolio.

Our recently delivered assets, The Grace and Reva, 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 64.7% and 56.8% leased as of September 30, 2024.

We continue to advance our under-construction multifamily asset in National Landing, 2000/2001 South Bell Street (Valen and The Zoe), with 775 units

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 capitalizing interest on those assets.

Our office portfolio occupancy as of September 30, 2024 of 79.1% decreased by 150 basis points as compared to June 30, 2024.

Although the office market continues to experience headwinds with companies continuing to challenge their space needs, we have seen some favorable trends in leasing activity and companies asking employees to return to the office.

We anticipate approximately 475,000 square feet (approximately $21.5 million of annualized rent) will be vacated in National Landing, of which approximately two thirds will occur in the fourth quarter of 2024 and the remainder in the first half of 2025.

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 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 implement our comprehensive plan to reposition our holdings in National Landing by executing a broad array of placemaking strategies.

Our placemaking includes the delivery of new multifamily assets, the delivery of redeveloped and new office assets subject to demand therefor, amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces.

In keeping with our dedication to placemaking, each new project is intended to contribute to an authentic and distinct neighborhood by creating a vibrant street environment with robust retail offerings and other amenities, including improved public spaces.

In 2024, we delivered The Grace and Reva with 808 multifamily units and approximately 38,000 square feet of retail space.

In the first quarter of 2025, we completed construction on The Zoe (2001 South Bell Street), a 420-unit multifamily tower, and we have fully leased the approximately 8,000 square feet of ground floor retail.

We expect to deliver Valen (2000 South Bell Street), a 355-unit multifamily tower adjacent to The Zoe, later this year.

Additionally, in 2024, we started construction on a new office amenity hub at 2011 Crystal Drive that, along with a repositioning of the asset itself, brings a large-scale externally managed meeting and conference facility, two elevated food and beverage offerings, and an activated public lobby.

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

While there is continued uncertainty as to how the current political environment will impact us and the Washington, D.C.

metropolitan area, we remain focused on our long-term strategy and intend to continue seeking new investments that offer the most accretive returns and that align with our strategy and competitive advantages.

We anticipate that new investments will primarily be financed through asset recycling, either in advance or retrospectively.

These new investments may include share repurchases and other opportunistic investments in partnership with third-party capital.

The latter may allow us to capitalize on distressed pricing in the office market, to monetize our land bank, and to generate additional fee and carried interest revenue.

We intend to continue to opportunistically sell or recapitalize assets (which may be multifamily, commercial and/or retail assets) as well as land sites where a ground lease or joint venture execution may

represent the most attractive path to maximizing value.

In a climate where office valuations are near cyclical lows with limited liquidity, the most efficiently priced source of capital will likely come from our multifamily assets.

To that end, we are currently marketing for sale select multifamily and land assets in both Washington, D.C.

and Northern Virginia.

Recycling these assets will also further advance our strategy to concentrate our portfolio in National Landing.

As long as we believe our share price does not reflect the underlying, intrinsic value of our business, as we do now, we expect to continue repurchasing shares through our share repurchase plan (which had a capacity of $684.1 million as of March 31, 2025) and to fund such repurchases through such asset sales or recapitalizations.

Our in-service multifamily portfolio, which refers to operating assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of March 31, 2025, was 94.3% occupied as of March 31, 2025, a decrease of 50 basis points as compared to December 31, 2024.

During the first quarter of 2025, we increased effective rents, which represent the average change in rental rates versus expiring rental rates net of concessions, by 1.5% for new leases and 5.6% upon renewal while achieving a 55.5% renewal rate across our portfolio.

We expect that interest expense will increase as we deliver The Zoe and Valen and cease capitalizing the related interest.

Our office portfolio occupancy was 76.4% as of March 31, 2025, a decrease of 10 basis points as compared to December 31, 2024.

The office market continues to experience headwinds, including an increased focus on the reduction of government spending, which could impact U.S.

federal government leasing practices and companies dependent on the federal government with many deals paused as tenants wait for more certainty regarding federal government staffing and spending changes.

Our efforts to re-lease certain spaces will be targeted toward buildings with long-term viability where we can concentrate occupancy.

We took approximately 618,000 office square feet out of service in 2024 at 1800 South Bell Street, 2100 Crystal Drive and 2200 Crystal Drive.

Additionally, during the first quarter of 2025, we took 197,124 square feet out of service at 1901 South Bell Street, a commercial asset, and expect to take the remainder of the asset out of service as tenants vacate.

With the objective of ultimately reducing our competitive office inventory in National Landing, we expect to help foster a healthier long-term office market while repurposing older, underutilized buildings for redevelopment or conversion to multifamily housing, hospitality or other complimentary uses that will support a vibrant mixed-use environment.

We continue to advance the design and entitlement of our 11.0 million square feet (8.9 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 and nine months ended September 30, 2024 included:

● net loss attributable to common shareholders of $27.0 million, or $0.32 per diluted common share, for the three months ended September 30, 2024 compared to $58.0 million, or $0.58 per diluted common share, for the three months ended September 30, 2023.

Net loss attributable to common shareholders of $83.6 million, or $0.95 per diluted common share, for the nine months ended September 30, 2024 compared to $47.4 million, or $0.45 per diluted common share, for the nine months ended September 30, 2023;

● third-party real estate services revenue, including reimbursements, of $17.1 million and $52.3 million for the three and nine months ended September 30, 2024, and $23.9 million and $69.6 million for the three and nine months ended September 30, 2023;

● in-service operating multifamily portfolio leased and occupied percentages (1) at our share of 97.0% and 95.7% as of September 30, 2024 as compared to 96.9% and 94.3% as of June 30, 2024, and 96.9% and 95.6% as of September 30, 2023 ;

● operating commercial portfolio leased and occupied percentages at our share of 80.7% and 79.1% as of September 30, 2024 compared to 82.3% and 80.6% as of June 30, 2024, and 85.6% and 84.4% as of September 30, 2023;

● the leasing of 150,000 square feet at our share, at an initial rent (2) of $47.12 per square foot and a GAAP-basis weighted average rent per square foot (3) of $47.50 for the three months ended September 30, 2024, and the leasing of 496,000 square feet at our share, at an initial rent (2) of $46.53 per square foot and a GAAP-basis weighted average rent per square foot (3) of $46.95 for the nine months ended September 30, 2024;

● an increase in same store (4) NOI of 0.5% to $68.6 million for the three months ended September 30, 2024 compared to $68.3 million for the three months ended September 30, 2023, and an increase in same store (4) NOI of 4.2% to $211.6 million for the nine months ended September 30, 2024 compared to $203.1 million for the nine months ended September 30, 2023.

Key highlights for the three months ended March 31, 2025 included:

● net loss attributable to common shareholders of $45.7 million, or $0.56 per diluted common share, for the three months ended March 31, 2025 compared to $32.3 million, or $0.36 per diluted common share, for the three months ended March 31, 2024;

● third-party real estate services revenue, including reimbursements, of $14.9 million and $17.9 million for the three months ended March 31, 2025 and 2024;

● in-service operating multifamily portfolio leased and occupied percentages (1) at our share of 95.7% and 94.3% as of March 31, 2025 as compared to 96.2% and 94.8% as of December 31, 2024, and 95.9% and 94.3% as of March 31, 2024;

● operating commercial portfolio leased and occupied percentages at our share of 78.3% and 76.4% as of March 31, 2025 compared to 78.6% and 76.5% as of December 31, 2024, and 84.6% and 83.1% as of March 31, 2024;

● the leasing of 71,000 square feet at our share, at an initial rent (2) of $52.43 per square foot and a GAAP-basis weighted average rent per square foot (3) of $52.27 for the three months ended March 31, 2025;

● a decrease in same store (4) net operating income ("NOI") of 5.5% to $63.1 million for the three months ended March 31, 2025 compared to $66.8 million for the three months ended March 31, 2024.

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

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

Additionally, investing and financing activity during the nine months ended September 30, 2024 included:

● the sale of North End Retail and Fort Totten Square.

Additionally, investing and financing activity during the three months ended March 31, 2025 included:

● the sale of 8001 Woodmont.

See Note 3 to the financial statements for additional information;

● the sale of Central Place Tower by one of our unconsolidated real estate ventures.

● the refinancing of the RiverHouse Apartments mortgage loan.

See Note 7 to the financial statements for additional information;

● the net borrowing of $77.0 million under our revolving credit facility;

● the repayment of the $83.3 million mortgage loan collateralized by 201 12th Street S., 200 12th Street S., and 251 18th Street S.;

● the one-year extension of the maturity date of the Tranche A-1 Term Loan to January 2026;

● the payment of dividends totaling $14.8 million and distributions to redeemable noncontrolling interests of $2.8 million;

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● the investment of $29.1 million in development costs, construction in progress and real estate additions.

Activity subsequent to September 30, 2024 included:

● the declaration of a quarterly dividend of $0.175 per common share, payable on November 22, 2024 to shareholders of record as of November 7, 2024.

Activity subsequent to March 31, 2025 included:

● the declaration of a quarterly dividend of $0.175 per common share, payable on May 22, 2025 to shareholders of record as of May 8, 2025 .

Critical Accounting Estimates

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

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

There have been no significant changes to our policies during the three months ended March 31, 2025.

Recent Accounting Pronouncements

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Results of Operations

During the nine months ended September 30, 2024, we sold North End Retail and Fort Totten Square.

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 and Falkland Chase-North ("Falkland Chase"), 5 M Street Southwest, Crystal City Marriott and Capital Point-North-75 New York Avenue.

During the three months ended March 31, 2025, we sold 8001 Woodmont.

In 2024, we sold North End Retail, Fort Totten Square and 2101 L Street.

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

Additionally, during the first quarter of 2024, we began leasing The Grace and Reva.

Comparison of the Three Months Ended September 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 three months ended September 30, 2024 compared to the same period in 2023:

Three Months Ended September 30,

In 2024, we took 1800 South Bell Street, 2100 Crystal Drive and 2200 Crystal Drive out of service, and during the first quarter of 2025, we took 197,124 square feet out of service at 1901 South Bell Street.

In 2024, we began leasing The Grace and Reva, and we began leasing The Zoe, one of the two multifamily towers at 2000/2001 South Bell Street, during the first quarter of 2025.

Comparison of the Three Months Ended March 31, 2025 to 2024

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, 2025 compared to the same period in 2024:

Three Months Ended March 31,

(Dollars in thousands)

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Interest expense

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

Loss on the extinguishment of debt

Impairment loss

* Not meaningful.

Property rental revenue decreased by approximately $21.1 million, or 17.2%, to $101.5 million in 2025 from $122.6 million in 2024.

The decrease was primarily due to a $9.8 million decrease in revenue from our commercial assets, partially offset by a $2.2 million increase in revenue from our multifamily assets and a $697,000 increase in other revenue.

The decrease in revenue from our commercial assets was primarily due to a $4.6 million decrease related to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, a $1.8 million decrease related to the Disposed Properties and lower occupancy across the portfolio.

The increase in revenue from our multifamily assets was primarily due to a $3.6 million increase related to The Grace and Reva, and higher rents and lower concessions across the portfolio, partially offset by a $2.7 million decrease related to the Disposed Properties.

The decrease was primarily due to a $25.0 million decrease in revenue from our commercial assets, partially offset by a $3.0 million increase in revenue from our multifamily assets.

The decrease in revenue from our commercial assets was primarily due to a $9.4 million decrease in lease termination revenue, a $4.4 million decrease related to the commercial Disposed Properties, a $4.0 million decrease related to 2100 Crystal Drive and 2200 Crystal Drive, which were taken out of service in 2024, and lower occupancy across the portfolio.

The increase in revenue from our multifamily assets was primarily due to a $5.6 million increase related to the continued lease up of The Grace and Reva, and higher rents across the portfolio, partially offset by a $4.2 million decrease related to the multifamily Disposed Properties.

Third-party real estate services revenue, including reimbursements, decreased by approximately $3.0 million, or 16.5%, to $14.9 million in 2025 from $17.9 million in 2024.

The decrease was primarily due to a $4.0 million decrease in development fees related to the timing of development projects, a $2.3 million decrease in reimbursement revenue and an $845,000 decrease in property management fees.

Depreciation and amortization expense decreased by approximately $215,000, or 0.4%, to $50.1 million in 2024 from $50.3 million in 2023.

The decrease was primarily due to (i) a $2.2 million decrease related to 1800 South Bell Street, which was taken out of service during the first quarter of 2024, (ii) a $1.6 million decrease related to the Disposed Properties and (iii) a $1.6 million decrease related to 800 North Glebe Road and 2011 Crystal Drive due to the disposal of assets for tenant terminations in the first quarter of 2024.

The decrease in depreciation and amortization expense was partially offset by (iv) a $4.6 million increase related to The Grace and Reva.

Property operating expense increased by approximately $1.7 million, or 4.4%, to $39.3 million in 2024 from $37.6 million in 2023.

The increase was primarily due to a $1.1 million increase in property operating expense from our multifamily assets and a $907,000 increase in other property operating expense, partially offset by a $308,000 decrease in property operating expense from our commercial assets.

The increase in property operating expense from our multifamily assets was primarily due to a $1.8 million increase related to The Grace and Reva and higher operating expenses due to higher compensation expenses across the portfolio, partially offset by a $966,000 decrease related to the Disposed Properties.

The increase in other property operating expense was primarily due to a $1.2 million increase in insurance claims covered by our captive insurance subsidiary.

The decrease in property operating expense from our commercial assets was primarily due to a $711,000 decrease related to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, a $642,000 decrease related to the Disposed Properties and lower operating expenses due to lower occupancy across the portfolio, partially offset by a $1.1 million increase in expenses related to 1550 Crystal Drive due to the phasing in of Water Park.

The decrease was primarily due to a $1.4 million decrease in reimbursement revenue, an $824,000 decrease in property management fees and a $481,000 decrease in leasing fees.

Depreciation and amortization expense decreased by approximately $9.3 million, or 16.3%, to $47.6 million in 2025 from $56.9 million in 2024.

The decrease was primarily due to an $8.4 million decrease related to 2100 Crystal Drive and Crystal Drive Retail due to the acceleration of depreciation of certain assets in 2024 and a $4.5 million decrease related to Disposed Properties.

The decrease in depreciation and amortization expense was partially offset by a $4.0 million increase related to The Grace and Reva, which we began leasing during the first quarter of 2024, and 2000/2001 South Bell Street, which we began leasing during the first quarter of 2025.

Property operating expense decreased by approximately $1.8 million, or 5.2%, to $33.4 million in 2025 from $35.3 million in 2024.

The decrease was primarily due to a $1.5 million decrease in property operating expense from our commercial assets and a $1.3 million decrease in other property operating expense, partially offset by a $1.0 million increase in property operating expense from our multifamily assets.

The decrease in property operating expense from our commercial assets was primarily due to a $1.3 million decrease related to the commercial Disposed Properties.

The decrease in other property operating expense was primarily due to a $1.6 million decrease in insurance claims covered by our captive insurance subsidiary.

The increase in property operating expense from our multifamily assets was primarily due to a $1.1 million increase related to The Grace and Reva and 2000/2001 South Bell, and higher operating expenses primarily related to onsite personnel and utilities, partially offset by a $1.4 million decrease related to the multifamily Disposed Properties.

Real estate taxes expense decreased by approximately $1.6 million, or 11.8%, to $12.2 million in 2025 from $13.8 million in 2024.

The decrease was primarily due to (i) a $1.6 million real estate tax refund as a result of successful appeals related to 2101 L Street, (ii) a $570,000 decrease related to the Disposed Properties and (iii) lower assessments across the portfolio, partially offset by (iv) an $836,000 increase related to The Grace and Reva.

The decrease was primarily due to a $1.5 million decrease related to the Disposed Properties.

General and administrative expense:

corporate and other increased by approximately $584,000, or 3.9%, to $15.6 million in 2025 from $15.0 million in 2024.

The increase was primarily due to higher compensation expenses, partially offset by an increase in capitalized payroll.

The increase was primarily due to an increase in professional fees and other overhead expenses, partially offset by lower compensation expenses.

General and administrative expense:

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Interest expense increased by approximately $5.0 million, or 16.7%, to $35.2 million in 2025 from $30.2 million in 2024.

The increase in interest expense was primarily due to (i) a $5.1 million net increase due to higher outstanding debt, (ii) a $3.3 million decrease in capitalized interest as we placed The Grace and Reva into service and (iii) an $823,000 increase related to rising interest rates on variable rate mortgage loans.

The increase in interest expense was partially offset by (iv) a $1.7 million decrease related to the mark-to-market associated with our non-designated derivatives primarily due to their maturity.

Loss on the sale of real estate of $5.4 million in 2024 was due to the sale of Fort Totten Square.

Gain on the sale of real estate of $906,000 in 2023 was primarily due to the sale of Falkland Chase.

Impairment loss of $59.3 million in 2023 was related to 2101 L Street, 2100 Crystal Drive and a development parcel, which were written down to their estimated fair value.

Comparison of the Nine Months Ended September 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 nine months ended September 30, 2024 compared to the same period in 2023:

Nine Months Ended September 30,

(Dollars in thousands)

Property rental revenue

Third-party real estate services revenue, including reimbursements

Depreciation and amortization expense

Property operating expense

Real estate taxes expense

General and administrative expense:

Corporate and other

Third-party real estate services

Interest expense

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

Impairment loss

Property rental revenue decreased by approximately $16.4 million, or 4.5%, to $348.5 million in 2024 from $364.9 million in 2023.

The decrease was primarily due to a $32.8 million decrease in revenue from our commercial assets, partially offset by an $11.9 million increase in other revenue and a $4.5 million increase in revenue from our multifamily assets.

The decrease in revenue from our commercial assets was primarily due to a $10.7 million decrease related to 1800 South Bell Street and 2100 Crystal Drive, which were taken out of service during 2024, an $8.4 million decrease related to the Disposed Properties and lower occupancy across the portfolio.

The increase in other revenue was primarily due to $10.4 million in lease termination revenue.

The increase in revenue from our multifamily assets was primarily due to a $4.9 million increase related to The Grace and Reva, and higher rents and lower concessions across the portfolio, partially offset by an $8.1 million decrease related to the Disposed Properties.

Third-party real estate services revenue, including reimbursements, decreased by approximately $17.3 million, or 24.8%, to $52.3 million in 2024 from $69.6 million in 2023.

The decrease was primarily due to an $8.1 million decrease in development fees related to the timing of development projects, a $6.0 million decrease in reimbursement revenue and a $2.6 million decrease in property management fees.

Depreciation and amortization expense increased by approximately $5.3 million, or 3.5%, to $158.2 million in 2024 from $152.9 million in 2023.

The increase was primarily due to (i) an $11.1 million increase related to The Grace and Reva, (ii) a $6.9 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, (iii) a $2.7 million increase related to various National Landing assets primarily due to placing Water Park and Surreal into service and (iv) a $2.1 million 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 (v) a $6.5 million decrease related to the Disposed Properties, (vi) a $6.5 million decrease related to 1800 South Bell Street, which was taken out of service during the first quarter of 2024 and (vii) a $3.3 million decrease related to 8001 Woodmont due to the amortization of acquired in-place lease intangibles in 2023.

Property operating expense increased by approximately $1.7 million, or 1.5%, to $110.8 million in 2024 to $109.1 million in 2023.

The increase was primarily due to a $3.4 million increase in other property operating expense and a $1.5 million increase in property operating expense from our multifamily assets, partially offset by a $3.3 million decrease in property operating expense from our commercial assets.

The increase in other property operating expense was primarily due to a $3.0 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 $3.8 million increase related to The Grace and Reva, and higher operating expenses due to higher compensation expenses across the portfolio, partially offset by a $2.3 million decrease related to the Disposed Properties.

The decrease in property operating expense from our commercial assets was primarily due to a $2.5 million decrease related to the Disposed Properties, a $1.9 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 repair and maintenance expenses and marketing expenses across the portfolio, partially offset by a $2.4 million increase in expenses related to 1550 Crystal Drive due to the phasing in of Water Park.

Real estate taxes expense decreased by approximately $4.1 million, or 9.2%, to $40.0 million in 2024 from $44.1 million in 2023.

The decrease was primarily due to (i) a $2.3 million decrease related to the Disposed Properties, (ii) a $1.6 million real estate tax refund as a result of successful appeals related to 2101 L Street and (iii) lower assessments across the portfolio, partially offset by (iv) a $2.2 million increase related to The Grace and Reva.

General and administrative expense:

corporate and other increased by approximately $1.4 million, or 3.3%, to $43.9 million in 2024 from $42.5 million in 2023.

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

General and administrative expense:

third-party real estate services decreased by approximately $10.3 million, or 15.2%, to $57.1 million in 2024 from $67.3 million in 2023.

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

Interest expense increased by approximately $16.8 million, or 20.9%, to $97.4 million in 2024 from $80.6 million in 2023.

The increase in interest expense was primarily due to (i) a $17.0 million net increase due to higher outstanding debt, (ii) a $6.8 million increase related to rising interest rates on variable rate mortgage loans and (iii) a $6.7 million decrease in capitalized interest as we placed The Grace and Reva into service.

The increase in interest expense was partially offset by (iv) a $7.3 million decrease related to the mark-to-market associated with our non-designated derivatives primarily due to their maturity, (v) a $4.9 million decrease related to mortgage loans collateralized by 800 North Glebe Road, 2121 Crystal Drive, Falkland Chase, 201 12 th Street S., 200 12 th Street S.

and 251 18 th Street S., which were repaid during 2023 and 2024, and (vi) a $2.1 million decrease related to the Disposed Properties, excluding Falkland Chase.

Loss on the sale of real estate of $5.1 million in 2024 was primarily due to the sale of North End Retail and Fort Totten Square, partially offset by 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.

Gain on the sale of real estate of $41.6 million in 2023 was primarily due to the sale of 4747 Bethesda Avenue and Falkland Chase.

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

Impairment loss of $59.3 million in 2023 was related to 2101 L Street, 2100 Crystal Drive and a development parcel, which were written down to their estimated fair value.

The increase was primarily due to (i) a $3.5 million increase due to higher interest expense on our term loans and a higher outstanding balance on our revolving credit facility, (ii) a $2.5 million increase due to the expiration of interest rate swaps related to the RiverHouse Apartments mortgage loan, which was refinanced in March 2025 with a fixed interest rate mortgage loan, (iii) a $2.2 million decrease in capitalized interest as we placed The Grace and Reva into service and began placing 2000/2001 South Bell Street into service, and (iv) a $1.7 million increase in outstanding debt related to draws on the mortgage loan related to 2000/2001 South Bell Street.

The increase in interest expense was partially offset by (v) a $1.8 million decrease related to the Disposed Properties, (vi) a $1.6 million decrease related to mortgage loans collateralized by 201 12th Street S., 200 12th Street S.

and 251 18th Street S., which were repaid during 2024, and (vii) a $1.6 million decrease related to lower rates on variable rate mortgage loans.

Loss on the extinguishment of debt of $4.6 million in 2025 was due to the refinancing of the RiverHouse Apartments mortgage loan.

Impairment loss of $8.5 million and $17.2 million in 2025 and 2024 were related to a development parcel, which was written down to its estimated fair value.

Funds from Operations ("FFO")

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.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

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Net loss attributable to redeemable noncontrolling interests

Net income (loss) attributable to noncontrolling interests

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

Net loss attributable to noncontrolling interests

Gain on the sale of real estate, net of tax

Gain on the sale of unconsolidated real estate assets

Real estate depreciation and amortization

Real estate impairment loss

Impairment related to unconsolidated real estate ventures (1)

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

FFO attributable to noncontrolling interests

FFO attributable to common limited partnership units ("OP Units")

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FFO attributable to common shareholders

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

NOI and Same Store NOI

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

NOI and same store NOI are non-GAAP financial measures management uses to assess an asset's performance.

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

We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable.

NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles.

Management uses NOI as a supplemental performance measure of our assets and believes it provides useful information to investors because it reflects only those revenue and expense

items that are incurred at the asset level, excluding non-cash items.

We use NOI internally as a performance measure and believe NOI and same store NOI provide useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable.

NOI and same store NOI exclude deferred rent, commercial lease termination revenue, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles.

Management uses NOI, which includes our proportionate share of revenue and expenses attributable to real estate ventures, as a supplemental performance measure and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items.

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

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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 September 30, 2024, our same store pool decreased to 39 properties from 40 properties due to the sale of Fort Totten Square.

During the nine months ended September 30, 2024, our same store pool decreased to 39 properties from 42 properties due to (i) the sale of North End Retail, Fort Totten Square 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.

During the three months ended March 31, 2025, our same store pool decreased to 35 properties from 36 properties due to the sale of 8001 Woodmont.

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

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

Same store NOI increased $331,000, or 0.5%, to $68.6 million for the three months ended September 30, 2024 from $68.3 million for the same period in 2023.

The increase for the three months ended September 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 occupancy and recovery revenue in our commercial portfolio, partially offset by lower real estate taxes.

Same store NOI increased $8.5 million, or 4.2%, to $211.6 million for the nine months ended September 30, 2024 from $203.1 million for the same period in 2023.

The increase for the nine months ended September 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 non-reimbursable operating expenses, partially offset by lower occupancy in our commercial portfolio.

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

Three Months Ended September 30,

Nine Months Ended September 30,

Same store NOI decreased $3.7 million, or 5.5%, to $63.1 million for the three months ended March 31, 2025 from $66.8 million for the same period in 2024.The decrease was substantially attributable to (i) lower occupancy and higher utilities expense, partially offset by lower real estate taxes in our commercial portfolio and (ii) higher operating expenses, offset by higher rents in our multifamily portfolio.

The following is the reconciliation of net loss attributable to common shareholders to NOI at our share and same store NOI at our share.

To conform to the current period presentation, we have included certain other property revenue in the calculation of NOI for the three months ended March 31, 2024 to align with our internal reporting.

Three Months Ended March 31,

(Dollars in thousands)

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Net loss attributable to redeemable noncontrolling interests

Net income (loss) attributable to noncontrolling interests

Net loss attributable to noncontrolling interests

Depreciation and amortization expense

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Third-party real estate services

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

Transaction and other costs

Interest expense

(Gain) loss on the extinguishment of debt

Loss on the extinguishment of debt

Impairment loss

Income tax expense (benefit)

Income tax benefit

Third-party real estate services, including reimbursements revenue

Other revenue

Income (loss) from unconsolidated real estate ventures, net

Interest and other income, net

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

Consolidated NOI

Gain on the sale of real estate, net

NOI attributable to unconsolidated real estate ventures at our share

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Total adjustments

NOI at our share

out-of-service NOI loss (3) (4)

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Number of properties in same store pool

(1) Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization.

(2) Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and related party management fees.

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

(1) Adjustment to exclude deferred rent, above/below market lease amortization and lease incentive amortization.

(2) Adjustment to exclude commercial lease termination revenue, related party management fees, corporate entity activity and inter-segment activity.

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

(4) Represents amounts at our share.

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

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Reportable Segments

We review operating and financial data for each property on an individual basis;

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 (multifamily, commercial, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.

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

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 statements of operations.

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

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Our three operating and reportable segments are multifamily, commercial, and third-party real estate services.

We measure and evaluate the performance of our operating segments, with the exception of the third-party real estate services business,

based on NOI at our share, which includes our proportionate share of revenue and expenses attributable to real estate ventures.

The following is a summary of NOI at our share for our multifamily and commercial segments:

Three Months Ended March 31, 2025

Three Months Ended March 31, 2024

(In thousands, at our share)

Property rental revenue

Other property revenue

Total property revenue

Property expense:

Real estate taxes

Repairs and maintenance

Other property operating

Total property expense

NOI from reportable segments

Comparison of the Three Months Ended March 31, 2025 to 2024

Property revenue increased by $2.8 million, or 5.3%, to $55.2 million in 2025 from $52.4 million in 2024.

NOI increased by $923,000, or 2.8%, to $33.5 million in 2025 from $32.6 million in 2024.

The increases in property revenue at our share and NOI at our share were primarily due to The Grace and Reva, which we began leasing during the first quarter of 2024, and higher rents across the portfolio, partially offset by a decrease related to the multifamily Disposed Properties.

Property revenue decreased by $13.9 million, or 20.7%, to $53.5 million in 2025 from $67.4 million in 2024.

NOI decreased by $10.1 million, or 23.5%, to $32.9 million in 2025 from $43.0 million in 2024.

The decreases in property revenue at our share and NOI at our share were primarily due to the commercial Disposed Properties, properties taken out of service and lower occupancy across the portfolio.

With respect to the third-party real estate services business, we review revenue streams generated by this segment, excluding reimbursement revenue, as well as the expenses attributable to this segment at our proportionate share, calculated by excluding real estate services revenue from our interests in real estate ventures.

The following is a summary of our third-party real estate services business at our share:

Three Months Ended March 31,

(In thousands, at our share)

Property management fees

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Third-party real estate services revenue, excluding reimbursements

Reimbursement revenue (1)

Third-party real estate services revenue, including reimbursements

Third-party real estate services expenses

Third-party real estate services revenue less expenses

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

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three and nine months ended September 30, 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.

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

Property expense is calculated as property operating expenses plus real estate taxes.

Consolidated NOI is calculated as property revenue less property expense.

See Note 16 to the financial statements for the reconciliation of net loss attributable to common shareholders to consolidated NOI for the three and nine months ended September 30, 2024 and 2023.

The following is a summary of NOI by segment:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

Property revenue:

Total property revenue

Property expense:

Total property expense

Consolidated NOI:

Consolidated NOI

(1) Includes property rental revenue and parking revenue.

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

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

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

Property revenue increased by $2.2 million, or 4.1%, to $54.9 million in 2024 from $52.7 million in 2023.

Consolidated NOI increased by $835,000, or 3.0%, to $28.6 million in 2024 from $27.7 million in 2023.

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

Property revenue decreased by $10.4 million, or 15.3%, to $57.8 million in 2024 from $68.3 million in 2023.

Consolidated NOI decreased by $6.6 million, or 16.1%, to $34.5 million in 2024 from $41.2 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 across the portfolio.

Comparison of the Nine Months Ended September 30, 2024 to 2023

Property revenue increased by $4.4 million, or 2.8%, to $159.9 million in 2024 from $155.6 million in 2023.

Consolidated NOI increased by $1.5 million, or 1.8%, to $85.0 million in 2024 from $83.5 million in 2023.

Property revenue decreased by $34.5 million, or 16.2%, to $178.5 million in 2024 from $213.1 million in 2023.

Consolidated NOI decreased by $25.4 million, or 19.3%, to $105.8 million in 2024 from $131.2 million in 2023.

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 across the portfolio.

Third-party real estate services expenses, excluding reimbursements

Net third-party real estate services, excluding reimbursements

Third-party real estate services revenue, excluding reimbursements, decreased by $1.4 million, or 18.0%, to $6.4 million in 2025 from $7.8 million in 2024.

The decrease was primarily due to a $754,000 decrease in property management fees, a $466,000 decrease in leasing fees and a $344,000 decrease in asset management fees.

Third-party real estate services expenses, excluding reimbursements, decreased by $4.9 million, or 40.4%, to $7.2 million in 2025 from $12.1 million in 2024.

The decrease was primarily due to lower compensation expenses.

Liquidity and Capital Resources

Property rental income is our primary source of operating cash flow and depends on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent.

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

Our assets provide a relatively consistent level of cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders, and distributions to holders of OP Units and long-term incentive partnership units ("LTIP Units").

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

Our assets provide cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders, and distributions to holders of OP Units and long-term incentive partnership units ("LTIP Units").

Other sources of liquidity to fund cash requirements include proceeds from financings, recapitalizations, asset sales, and the issuance and sale of securities.

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

Mortgage Loans

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Interest Rate (1)

September 30, 2024

March 31, 2025

December 31, 2024

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Mortgage loans, net

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

(1) Weighted average effective interest rate as of March 31, 2025.

(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 3.56%, and the weighted average maturity date of the interest rate caps is in the fourth quarter of 2025.

For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.11%, and the weighted average maturity date of the interest rate caps is in the first quarter of 2026.

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

As of September 30, 2024, one-month term Secured Overnight Financing Rate ("SOFR") was 4.85%.

As of March 31, 2025, one-month term Secured Overnight Financing Rate ("SOFR") was 4.32%.

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

As of September 30, 2024 and December 31, 2023, the net carrying value of real estate collateralizing our mortgage loans totaled $2.1 billion and $2.2 billion.

As of March 31, 2025 and December 31, 2024, the net carrying value of real estate collateralizing our mortgage loans totaled $1.8 billion and $2.1 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.

In September 2024, we repaid the $83.3 million mortgage loan collateralized by 201 12th Street S., 200 12th Street S., and 251 18th Street S.

As of September 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 $1.7 billion.

In February 2025, in connection with the sale of 8001 Woodmont, we repaid the related $99.7 million mortgage loan.

In March 2025, we entered into a five-year interest-only $258.9 million mortgage loan with a fixed interest rate of 5.03% collateralized by the Ashley and Potomac buildings at RiverHouse Apartments and repaid the outstanding $307.7 million mortgage loan that was collateralized by the Ashley, Potomac and James buildings.

As of March 31, 2025 and December 31, 2024, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $886.7 million and $1.4 billion.

See Note 15 to the financial statements for additional information.

Revolving Credit Facility and Term Loans

As of September 30, 2024, 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 2026, as extended in September 2024, 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 March 31, 2025 and December 31, 2024, 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 2026, 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 one remaining one-year extension option.

The agreements for our unsecured revolving credit facility and term loans include customary restrictive covenants, that, among other things, restrict our ability to incur additional indebtedness, to engage in material asset sales, mergers,

consolidations and acquisitions, and to make capital expenditures, and also include requirements to maintain financial ratios.

Our ability to borrow is subject to compliance with these covenants, and failure to comply with our covenants could cause a default, and we may then be required to repay such debt.

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

Interest Rate (1)

September 30, 2024

March 31, 2025

December 31, 2024

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Term loans, net

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

(1) Effective interest rate as of March 31, 2025.

The interest rate for our revolving credit facility excludes a 0.20% facility fee.

(2) As of September 30, 2024, daily SOFR was 4.96%.

As of September 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 September 30, 2024 and December 31, 2023, excludes $8.0 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 September 30, 2024, the interest rate swaps fixed SOFR at a weighted average interest rate of 4.00% through the extended maturity date of January 2027.

(5) As of September 30, 2024, the interest rate swaps fixed SOFR at a weighted average interest rate of 2.81% through the maturity date.

(6) As of September 30, 2024, the interest rate swap fixed SOFR at an interest rate of 4.01% through the maturity date.

(2) As of March 31, 2025, daily SOFR was 4.41%.

As of March 31, 2025 and December 31, 2024, letters of credit with an aggregate face amount of $15.2 million were outstanding under our revolving credit facility.

On April 1, 2025, the $15.2 million letter of credit was cancelled.

(3) As of March 31, 2025 and December 31, 2024, excludes $6.6 million and $7.3 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net" in our balance sheets.

(4) The interest rate swaps fix SOFR at a weighted average interest rate of 4.00% through the extended maturity date of January 2027.

(5) The interest rate swaps fix SOFR at a weighted average interest rate of 2.81% through the maturity date.

(6) The interest rate swap 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 and nine months ended September 30, 2024, we repurchased and retired 3.1 million and 10.8 million common shares for $50.2 million and $168.3 million, a weighted average purchase price per share of $16.23 and $15.61.

During the three and nine months ended September 30, 2023, we repurchased and retired 7.9 million and 18.4 million common shares for $120.8 million and $276.7 million, a weighted average purchase price per share of $15.24 and $14.98.

Since we began the share repurchase program through September 30, 2024, we have repurchased and retired 56.6 million common shares for $1.1 billion, a weighted average purchase price per share of $19.88.

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

In February 2025, our Board of Trustees increased our common share repurchase authorization to $2.0 billion.

During the three months ended March 31, 2025, we repurchased and retired 12.2 million common shares for $187.5 million, a weighted average purchase price per share of $15.43.

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.

Since we began the share repurchase program through March 31, 2025, we have repurchased and retired 69.0 million common shares for $1.3 billion, a weighted average purchase price per share of $19.08.

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

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● normal recurring expenses;

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

In 2025, we have maturities totaling $340.7 million ($307.7 million related to our consolidated entities and $33.0 million related to an unconsolidated real estate venture at our share);

● capital expenditures, including major renovations, tenant improvements and leasing costs — As of September 30, 2024, we had committed tenant-related obligations totaling $43.3 million ($43.2 million related to our consolidated entities and $126,000 related to our unconsolidated real estate ventures at our share);

● development expenditures — As of September 30, 2024, we had an asset under construction that, based on our current plans and estimates, requires an additional $51.1 million to complete, which we anticipate will be primarily expended over the next year;

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

● debt service and principal repayment obligations, including balloon payments on maturing mortgage loans — As of March 31, 2025, we had maturities totaling $338.0 million ($305.0 million related to our consolidated entities and $33.0 million related to an unconsolidated real estate venture at our share) scheduled to mature in 2025 and 2026;

● capital expenditures, including major renovations, tenant improvements and leasing costs — As of March 31, 2025, we had committed tenant-related obligations totaling $32.3 million ($32.2 million related to our consolidated entities and $78,000 related to our unconsolidated real estate ventures at our share);

● development expenditures — As of March 31, 2025, we had one asset under construction, 2000/2001 South Bell Street, and are building a new amenity hub at 2011 Crystal Drive that, based on our current plans and estimates, require an additional $61.2 million to complete, which we anticipate will be primarily expended over the next year;

● dividends to shareholders and distributions to holders of OP Units and LTIP Units — On April 24, 2025, our Board of Trustees declared a quarterly dividend of $0.175 per common share;

● possible common share repurchases;

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

● cash and cash equivalents — As of September 30, 2024, we had cash and cash equivalents of $137.0 million ;

● cash and cash equivalents — As of March 31, 2025, we had cash and cash equivalents of $81.3 million ;

● cash flows from operations;

● distributions from real estate ventures;

● borrowing capacity under our revolving credit facility — As of September 30, 2024, we had $644.3 million of availability under our revolving credit facility;

● proceeds from financings, asset sales and recapitalizations;

● borrowing capacity under our revolving credit facility — As of March 31, 2025, we had $572.8 million of undrawn capacity under our revolving credit facility;

● proceeds from financings, joint venture capital, asset sales and recapitalizations;

● proceeds from the issuance of securities.

During the nine months ended September 30, 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 three months ended March 31, 2025, there were no significant changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report.

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

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

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Net cash provided by operating activities

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Net cash used in financing activities

Cash Flows for the Nine Months Ended September 30, 2024

Cash and cash equivalents, and restricted cash decreased $30.3 million to $170.1 million as of September 30, 2024, compared to $200.4 million as of December 31, 2023.

This decrease resulted from $199.9 million of net cash used in financing activities, partially offset by $87.2 million of net cash provided by operating activities and $82.4 million of net cash provided by investing activities.

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

Cash Flows for the Three Months Ended March 31, 2025

Cash and cash equivalents, and restricted cash decreased $62.9 million to $120.3 million as of March 31, 2025, compared to $183.2 million as of December 31, 2024.

This decrease resulted from $237.1 million of net cash used in financing activities, partially offset by $161.3 million of net cash provided by investing activities and $12.9 million of net cash provided by operating activities.

Our outstanding debt was $2.5 billion and $2.6 billion as of March 31, 2025 and December 31, 2024.

Net cash provided by operating activities of $12.9 million comprised:

(i) $99.3 million of net income (before $201.2 million of non-cash items and a $5.1 million loss on the sale of real estate), (ii) $1.7 million of return on capital from unconsolidated real estate ventures and (iii) $13.8 million of net change in operating assets and liabilities.

Non-cash income adjustments of $201.2 million primarily include depreciation and amortization expense, share-based compensation expense, impairment loss, deferred rent and amortization of lease incentives.

(i) $21.5 million of net income (before $75.7 million of non-cash items and a $537,000 gain on the sale of real estate) and (ii) $390,000 of return on capital from unconsolidated real estate ventures, partially offset by (iii) $9.0 million of net change in operating assets and liabilities.

Non-cash income adjustments of $75.7 million primarily include depreciation and amortization expense, impairment loss, share-based compensation expense, loss on the extinguishment of debt and amortization of lease incentives.

Net cash provided by investing activities of $161.3 million primarily comprised:

(i) $163.9 million of distributions of capital from unconsolidated real estate ventures and other investments primarily related to the sale of Central Place Tower by one of our unconsolidated real estate ventures, and (ii) $97.0 million of proceeds from the sale of real estate, partially offset by (iii) $172.1 million of development costs, construction in progress and real estate additions.

(i) $188.8 million of proceeds from the sale of real estate, partially offset by (ii) $29.1 million of development costs, construction in progress and real estate additions.

Net cash used in financing activities of $237.1 million primarily comprised:

(i) $195.0 million of repayments on the revolving credit facility, (ii) $168.4 million of common shares repurchased, (iii) $85.7 million of repayments of mortgage loans, (iv) $47.2 million of dividends paid to common shareholders, (v) $26.6 million paid for the acquisition of

noncontrolling interests and (vi) $8.7 million of distributions to our redeemable noncontrolling interests, partially offset by (vii) $223.0 million of borrowings under the revolving credit facility and (viii) $112.6 million of borrowings under mortgage loans.

(i) $408.0 million of repayments of mortgage loans, (ii) $147.6 million of common shares repurchased, (iii) $120.0 million of repayments on the revolving credit facility, and (iv) $14.8 million of dividends paid to common shareholders, partially offset by (v) $265.2 million of borrowings under mortgage loans and (vi) $197.0 million of borrowings under the revolving credit facility.

Unconsolidated Real Estate Ventures

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

As of September 30, 2024, we had investments in unconsolidated real estate ventures totaling $100.7 million.

As of March 31, 2025, we had investments in unconsolidated real estate ventures totaling $92.8 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.

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.

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 and stabilization 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.

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

As of September 30, 2024, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $57.4 million.

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

As of March 31, 2025, we had no principal payment guarantees related to our unconsolidated real estate ventures.

As of March 31, 2025, we had additional capital commitments totaling $8.0 million related to our investments in real estate-focused technology companies.

Commitments and Contingencies

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Construction Commitments

As of September 30, 2024, we had an asset under construction that, based on our current plans and estimates, requires an additional $51.1 million to complete, which we anticipate will be primarily expended over the next year.

These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds.

As of March 31, 2025, we had one asset under construction, 2000/2001 South Bell Street, and are building a new amenity hub at 2011 Crystal Drive that, based on our current plans and estimates, require an additional $61.2 million to complete, which we anticipate will be primarily expended over the next year.

These capital expenditures are generally due as the work is performed, and we expect to finance them primarily with debt proceeds.

Legal Proceedings

In November 2023, the District of Columbia filed a lawsuit in the Superior Court of the District of Columbia alleging violations of its antitrust laws by RealPage, Inc., a seller of revenue management software products, and a number of large apartment community owners and operators, including JBG Associates, L.L.C., one of our subsidiaries.

The lawsuit alleges collusion among the defendants to illegally fix and inflate the pricing of multifamily rents and seeks monetary damages, attorneys’ fees and costs, and injunctive relief.

We believe there are defenses, both factual and legal, to the allegations in this proceeding, and we plan to vigorously defend the litigation.

At this stage in the proceeding, it is not possible to predict any outcome or estimate the amount of loss, if any, which could be associated with any adverse decision.

In November 2023, the District of Columbia filed a lawsuit in the Superior Court of the District of Columbia against RealPage, Inc., a provider of revenue management systems, numerous multifamily rental companies, and 14 owners and/or operators of multifamily housing in the District of Columbia, including JBG Associates, L.L.C., one of our subsidiaries, alleging that the defendants violated the District of Columbia Antitrust Act by unlawfully agreeing to use RealPage, Inc.

revenue management systems and sharing sensitive data.

While we intend to vigorously defend against this lawsuit, given the current stage of the District of Columbia’s lawsuit, we are unable to predict the outcome or estimate the amount of loss, if any, that may result from the lawsuit.

While we do not believe that these proceedings will have a material adverse effect on our financial condition, we cannot give assurance that the proceedings will not have a material effect on our results of operations or cash flows in the event of a negative outcome.

There are various other legal actions against us in the ordinary course of business.

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.

As of September 30, 2024, we had committed tenant-related obligations totaling $43.3 million ($43.2 million related to our consolidated entities and $126,000 related to our unconsolidated real estate ventures at our share).

There are various other legal actions arising in the ordinary course of business.

In our opinion, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

As of March 31, 2025, we had committed tenant-related obligations totaling $32.3 million ($32.2 million related to our consolidated entities and $78,000 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.

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

As of September 30, 2024, we had no debt principal payment guarantees related to our consolidated real estate assets.

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.

As of March 31, 2025, we had no debt principal payment guarantees related to our consolidated real estate assets.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, a current or former owner or operator of real estate may be liable for conducting or paying for the costs of the investigation, removal or remediation of certain hazardous or toxic substances on that real estate.

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

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

These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence or release of hazardous or toxic substances or petroleum products, and the liability may be joint and several.

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

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

The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous substances or generated hazardous wastes, and indemnities in our lease agreements may not fully protect us from liability, if, for example, a tenant responsible for environmental noncompliance or contamination becomes insolvent.

The release of these hazardous substances and wastes could result in us incurring liabilities to remediate any resulting contamination.

damages and costs the government incurs in connection with the contamination, (iii) impose restrictions on the manner in which a property may be used or businesses may be operated, or (iv) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral.

The operations of current and former tenants at our assets have involved, or may have involved, the presence or use of hazardous substances or petroleum products or the generation of hazardous wastes, and indemnities in our lease agreements may not fully protect us from liability, if, for example, a tenant responsible for environmental noncompliance or contamination becomes insolvent.

The release of these hazardous substances and wastes and petroleum products could result in us incurring liabilities to investigate or remediate any resulting contamination.

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

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

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

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.

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

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

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

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

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

As disclosed in Note 17 to the financial statements, environmental liabilities totaled $17.5 million and $17.6 million as of September 30, 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 as of March 31, 2025 and December 31, 2024, and are included in "Other liabilities, net" in our balance sheets.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis