What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-04-29 · 219 added, 125 removed, 303 unchanged (53% of the section changed)

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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") headquarters;

Amazon.com, Inc.'s headquarters;

Virginia Tech's $1 billion Innovation Campus;

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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.

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.

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 June 30, 2025 and December 31, 2024, and for the three and six months ended June 30, 2025 and 2024.

References to our balance sheets refer to our condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024.

References to our statements of operations refer to our condensed consolidated statements of operations for the three and six months ended June 30, 2025 and 2024.

References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024.

Actual results could differ from these estimates.

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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 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.

As of June 30, 2025, our Operating Portfolio consisted of 38 operating assets comprising 15 multifamily assets totaling 6,596 units (6,410 units at our share), 21 commercial assets totaling 7.0 million square feet (6.6 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 355 units (355 units at our share) and 19 assets in the development pipeline totaling 10.7 million square feet (8.7 million square feet at our share) of estimated potential development density.

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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 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.

In the first quarter of 2025, we completed construction on The Zoe (formerly 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 (formerly 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 to National Landing 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.

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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.

These new investments may include share repurchases, distressed office investments 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.

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and Northern Virginia.

During the six months ended June 30, 2025, we sold two multifamily assets and one development parcel for total gross sales proceeds of $391.0 million and sold a 40.0% interest in a real estate venture that owns West Half, a multifamily asset, for $100.0 million.

Additionally, in July 2025, we sold The Batley, a multifamily asset, for a gross sales price of $155.0 million.

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.

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 74.6% leased as of March 31, 2025.

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.

As long as we believe our share price does not reflect the underlying, intrinsic value of our business, we expect to continue repurchasing shares through our share repurchase plan (which had a capacity of $499.2 million as of June 30, 2025) and to fund such repurchases through such asset sales or recapitalizations.

Our in-service operating 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 June 30, 2025, was 92.9% occupied as of June 30, 2025, a decrease of 140 basis points as compared to March 31, 2025.

During the second quarter of 2025, we increased effective rents, which represent the average change in rental rates versus expiring rental rates net of concessions, by 1.0% for new leases and 8.9% upon renewal while achieving a 49.0% renewal rate across our portfolio.

Our recently delivered assets, The Grace and Reva (placed into service the second quarter of 2024) and The Zoe (placed into service the second quarter of 2025) were a weighted average of 63.7% leased as of June 30, 2025.

As a result of these deliveries, interest expense has increased as we have ceased capitalizing the related interest, and we expect additional interest expense when we deliver Valen later this year.

Our office portfolio occupancy was 74.8% as of June 30, 2025, a decrease of 160 basis points as compared to March 31, 2025.

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.

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

Our leasing efforts continue to focus on buildings with long-term potential, concentrating occupancy in areas of National Landing that we have enhanced through our placemaking initiatives and that are accessible via multi-modal transportation.

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.

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 10.7 million square feet (8.7 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.

New Tax Legislation

Effective July 4, 2025, certain changes to U.S.

tax law were approved that impact us and our shareholders.

Among other changes, this legislation (i) permanently extended the 20% deduction for "qualified REIT dividends" for individuals and other non-corporate taxpayers under Section 199A of the Code, (ii) increased the percentage limit under the REIT asset test applicable to taxable REIT subsidiaries from 20% to 25% for taxable years beginning after December 31, 2025 and (iii) increased the base on which the 30% interest deduction limit under Section 163(j) of the Code applies by excluding depreciation, amortization and depletion from the definition of "adjusted taxable income" for taxable years beginning after December 31, 2024.

Operating Results

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.

Key highlights for the three and six months ended June 30, 2025 included:

● net loss attributable to common shareholders of $19.2 million, or $0.29 per diluted common share, for the three months ended June 30, 2025 compared to $24.4 million, or $0.27 per diluted common share, for the three months ended June 30, 2024.

Net loss attributable to common shareholders of $65.0 million, or $0.87 per diluted common share, for the six months ended June 30, 2025 compared to $56.6 million, or $0.63 per diluted common share, for the six months ended June 30, 2024;

● third-party real estate services revenue, including reimbursements, of $14.8 million and $29.7 million for the three and six months ended June 30, 2025, and $17.4 million and $35.3 million for the three and six months ended June 30, 2024;

● in-service operating multifamily portfolio leased and occupied percentages (1) at our share of 94.8% and 92.9% as of June 30, 2025 as compared to 95.7% and 94.3% as of March 31, 2025, and 96.9% and 94.3% as of June 30, 2024;

● operating commercial portfolio leased and occupied percentages at our share of 76.5% and 74.8% as of June 30, 2025 compared to 78.3% and 76.4% as of March 31, 2025, and 82.3% and 80.6% as of June 30, 2024;

● the leasing of 208,000 square feet at our share, at an initial rent (2) of $49.07 per square foot and a GAAP-basis weighted average rent per square foot (3) of $47.16 for the three months ended June 30, 2025, and the leasing of 279,000 square feet at our share, at an initial rent (2) of $49.92 per square foot and a GAAP-basis weighted average rent per square foot (3) of $48.46 for the six months ended June 30, 2025;

● a decrease in same store (4) net operating income ("NOI") of 3.0% to $59.5 million for the three months ended June 30, 2025 compared to $61.3 million for the three months ended June 30, 2024, and a decrease in same store (4) NOI of 4.6% to $119.2 million for the six months ended June 30, 2025 compared to $124.9 million for the six months ended June 30, 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 three months ended March 31, 2025 included:

● the sale of 8001 Woodmont.

Additionally, investing and financing activity during the six months ended June 30, 2025 included:

● the acquisition of Tysons Dulles Plaza.

See Note 3 to the financial statements for additional information;

● the sale of WestEnd25, a development parcel and 8001 Woodmont.

See Note 3 to the financial statements for additional information;

● the sale of a 40.0% noncontrolling interest in a real estate venture that owns West Half.

See Note 9 to the financial statements for additional information;

● the refinancing of the RiverHouse Apartments mortgage loan.

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● the investment of $62.4 million in development costs, construction in progress and real estate additions.

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 .

Activity subsequent to June 30, 2025 included:

● the sale of The Batley.

See Note 3 to the financial statements for additional information;

● the declaration of a quarterly dividend of $0.175 per common share, payable on August 21, 2025 to shareholders of record as of August 7, 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 three months ended March 31, 2025.

There have been no significant changes to our policies during the six months ended June 30, 2025.

Recent Accounting Pronouncements

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Results of Operations

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.

During the six months ended June 30, 2025, we sold WestEnd25 and 8001 Woodmont, and 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.

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,

In May 2025, we acquired Tysons Dulles Plaza.

In 2024, we began leasing The Grace and Reva, and we began leasing The Zoe during the first quarter of 2025.

Comparison of the Three Months Ended June 30, 2025 to 2024

Three Months Ended June 30,

(Dollars in thousands)

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Interest expense

Loss on the extinguishment of debt

Gain on the sale of real estate, net

Impairment loss

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Property rental revenue decreased by approximately $6.0 million, or 5.4%, to $106.5 million in 2025 from $112.5 million in 2024.

The decrease was primarily due to a $7.6 million decrease in revenue from our commercial assets, partially offset by a $435,000 increase in revenue from our multifamily assets.

The decrease in revenue from our commercial assets was primarily due to a $4.2 million decrease related to the commercial Disposed Properties, a $2.1 million decrease related to taking 2100 Crystal Drive and 2200 Crystal Drive out of service, and lower occupancy across the portfolio, partially offset by a $2.3 million increase related to the acquisition of Tysons Dulles Plaza and a $1.9 million increase in lease termination revenue.

The increase in revenue from our multifamily assets was primarily due to a $5.7 million increase related to the continued lease up of The Grace, Reva and The Zoe, and higher rents across the portfolio, partially offset by a $6.2 million decrease related to the multifamily Disposed Properties.

Third-party real estate services revenue, including reimbursements, decreased by approximately $2.6 million, or 14.9%, to $14.8 million in 2025 from $17.4 million in 2024.

The decrease was primarily due to a $1.2 million decrease in reimbursement revenue, a $634,000 decrease in property management fees and a $536,000 decrease in asset management fees.

Depreciation and amortization expense decreased by approximately $3.7 million, or 7.3%, to $47.6 million in 2025 from $51.3 million in 2024.

The decrease was primarily due to (i) a $4.0 million decrease related to Disposed Properties, (ii) a $2.7 million decrease related to 2100 Crystal Drive and Crystal Drive Retail due to the acceleration of depreciation of certain assets in 2024 and (iii) a $799,000 decrease related to West Half due to certain assets being fully depreciated.

The decrease in depreciation and amortization expense was partially offset by (iv) a $1.9 million increase related to The Zoe, which we began leasing during the first quarter of 2025, (v) a $1.6 million increase related to 2011 Crystal Drive due to the acceleration of depreciation for certain assets in 2025 and (vi) a $796,000 increase related to the acquisition of Tysons Dulles Plaza.

Property operating expense decreased by approximately $1.4 million, or 3.8%, to $34.9 million in 2025 from $36.3 million in 2024.

The decrease was primarily due to a $1.3 million decrease in property operating expense from our commercial assets, partially offset by a $79,000 increase in property operating expense from our multifamily assets.

The decrease in property operating expense from our commercial assets was primarily due to a $1.1 million decrease related to the commercial Disposed Properties and lower operating expenses primarily related to utilities, partially offset by a $630,000 increase related to the acquisition of Tysons Dulles Plaza.

The increase in property operating expense from our multifamily assets was primarily due to a $1.4 million increase related to the continued lease up of The Grace, Reva and The Zoe, and higher operating expenses primarily related to repairs and maintenance and utilities, partially offset by a $2.0 million decrease related to the multifamily Disposed Properties.

Real estate taxes expense decreased by approximately $1.7 million, or 12.1%, to $12.7 million in 2025 from $14.4 million in 2024.

The decrease was primarily due to a $1.6 million decrease related to the Disposed Properties.

General and administrative expense:

corporate and other decreased by approximately $281,000, or 1.7%, to $16.7 million in 2025 from $17.0 million in 2024.

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

General and administrative expense:

third-party real estate services decreased by approximately $5.1 million, or 27.3%, to $13.6 million in 2025 from $18.7 million in 2024.

The decrease was primarily due to lower compensation expenses and lower third-party reimbursable expenses related to a decline in the number of third-party management contracts.

Interest expense increased by approximately $3.6 million, or 11.3%, to $35.6 million in 2025 from $32.0 million in 2024.

The increase was primarily due to (i) a $6.5 million increase due to higher interest expense on our term loans and a higher outstanding balance on our revolving credit facility, (ii) a $1.1 million decrease in capitalized interest as we placed The Grace, Reva and The Zoe into service, and (iii) an $879,000 increase due to draws on the mortgage loan related to The Zoe and Valen.

The increase in interest expense was partially offset by (iv) a $2.5 million decrease related to the Disposed Properties and (v) 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.

Gain on the sale of real estate of $41.8 million in 2025 was primarily due to the sale of WestEnd25.

Impairment loss of $31.8 million in 2025 was related to The Batley, which was written down to its estimated fair value.

Comparison of the Six Months Ended June 30, 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 six months ended June 30, 2025 compared to the same period in 2024:

Six Months Ended June 30,

(Dollars in thousands)

Property rental revenue

Third-party real estate services revenue, including reimbursements

Depreciation and amortization expense

Property operating expense

Real estate taxes expense

General and administrative expense:

Corporate and other

Third-party real estate services

Interest expense

Gain on the sale of real estate, net

Impairment loss

* Not meaningful.

Property rental revenue decreased by approximately $27.2 million, or 11.6%, to $208.0 million in 2025 from $235.2 million in 2024.

The decrease was primarily due to a $32.4 million decrease in revenue from our commercial assets, partially offset by a $3.1 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.

The decrease in revenue from our commercial assets was primarily due to an $8.6 million decrease related to the commercial Disposed Properties, a $7.5 million decrease in lease termination revenue, a $7.0 million decrease related to taking 2100 Crystal Drive, 2200 Crystal Drive and 1901 South Bell Street out of service, and lower occupancy across the portfolio, partially offset by a $2.3 million increase related to the acquisition of Tysons Dulles Plaza.

The increase in revenue from our multifamily assets was primarily due to an $11.5 million increase related to the continued lease up of The Grace, Reva and The Zoe, and higher rents across the portfolio, partially offset by a $10.1 million decrease related to the multifamily Disposed Properties.

Third-party real estate services revenue, including reimbursements, decreased by approximately $5.5 million, or 15.7%, to $29.7 million in 2025 from $35.3 million in 2024.

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.

The decrease was primarily due to a $2.7 million decrease in reimbursement revenue, a $1.5 million decrease in property management fees, an $880,000 decrease in asset management fees and a $573,000 decrease in leasing fees.

Depreciation and amortization expense decreased by approximately $13.0 million, or 12.0%, to $95.1 million in 2025 from $108.2 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.

The decrease was primarily due to (i) an $11.1 million decrease related to 2100 Crystal Drive and Crystal Drive Retail due to the acceleration of depreciation of certain assets in 2024, (ii) an $8.4 million decrease related to Disposed Properties, (iii) a $1.6 million decrease related to West Half due to certain assets being fully depreciated and (iv) a $1.1 million decrease related to 800 North Glebe Road due to the disposal of certain assets in 2024.

The decrease in depreciation and amortization expense was partially offset by (v) a $6.5 million increase as we placed The Grace, Reva and The Zoe into service, (vi) a $2.5 million increase related to 2011 Crystal Drive due the acceleration of depreciation for certain assets in 2025 and (vii) a $796,000 increase related to the acquisition of Tysons Dulles Plaza.

Property operating expense decreased by approximately $3.2 million, or 4.5%, to $68.3 million in 2025 from $71.5 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 was primarily due to a $2.7 million decrease in property operating expense from our commercial assets and a $1.0 million decrease in other property operating expense, partially offset by a $462,000 increase in property operating expense from our multifamily assets.

The decrease in property operating expense from our commercial assets was primarily due to a $2.3 million decrease related to the commercial Disposed Properties and lower operating expenses primarily related to marketing expenses across the portfolio, partially offset by a $630,000 increase related to the acquisition of Tysons Dulles Plaza.

The decrease in other property operating expense was primarily due to a $1.5 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.

The increase in property operating expense from our multifamily assets was primarily due to a $2.6 million increase related to the continued lease up The Grace, Reva and The Zoe, and higher operating expenses primarily related to repairs and maintenance and utilities, partially offset by a $3.5 million decrease related to the multifamily Disposed Properties.

Real estate taxes expense decreased by approximately $3.4 million, or 12.0%, to $24.8 million in 2025 from $28.2 million in 2024.

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

The decrease was primarily due to a $3.1 million decrease related to the Disposed Properties and various decreases in property value assessments, partially offset by a $1.2 million increase related to The Grace, Reva and The Zoe.

General and administrative expense:

corporate and other increased by approximately $303,000, or 0.9%, to $32.3 million in 2025 from $32.0 million in 2024.

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

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

General and administrative expense:

third-party real estate services decreased by approximately $11.3 million, or 27.7%, to $29.6 million in 2025 from $41.0 million in 2024.

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

The decrease was primarily due to lower compensation expenses and lower third-party reimbursable expenses related to a decline in the number of third-party management contracts.

Interest expense increased by approximately $8.6 million, or 13.9%, to $70.8 million in 2025 from $62.1 million in 2024.

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 was primarily due to (i) a $10.0 million increase due to higher interest expense on our term loans and a higher outstanding balance on our revolving credit facility, (ii) a $3.3 million decrease in capitalized interest as we placed The Grace, Reva and The Zoe into service, (iii) a $2.5 million increase due to draws on the mortgage loan related to The Zoe and Valen and (iv) a $2.3 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.

The increase in interest expense was partially offset by (v) a $4.3 million decrease related to the Disposed Properties, (vi) a $3.2 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 $1.2 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.

Gain on the sale of real estate of $42.4 million in 2025 was primarily due to the sale of WestEnd25.

Impairment loss of $40.3 million in 2025 was related to The Batley and a development parcel, which were written down to their estimated fair value.

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

Funds from Operations ("FFO")

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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 March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

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Gain on the sale of real estate, net of tax

Gain on the sale of unconsolidated real estate assets

Pro rata share of gain on the sale of unconsolidated real estate assets

Real estate depreciation and amortization

Real estate impairment loss

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

FFO attributable to redeemable noncontrolling interests in consolidated real estate ventures

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

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

However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited.

of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited.

NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently.

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

During the three months ended June 30, 2025, our same store pool decreased to 34 properties from 35 properties due to the sale of WestEnd25.

During the six months ended June 30, 2025, our same store pool decreased to 34 properties from 36 properties due to the sale of 8001 Woodmont and WestEnd25.

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 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.

Same store NOI decreased $1.8 million, or 3.0%, to $59.5 million for the three months ended June 30, 2025 from $61.3 million for the same period in 2024.

Same store NOI decreased $5.7 million, or 4.6%, to $119.2 million for the six months ended June 30, 2025 from $124.9 million for the same period in 2024.

The decrease was substantially attributable to (i) lower occupancy and higher operating expenses, partially offset by higher rents in our multifamily portfolio and (ii) lower occupancy and recovery revenue, partially offset by lower real estate taxes in our commercial 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,

To conform to the current period presentation, we have included certain other property revenue in the calculation of NOI for the three and six months ended June 30, 2024 to align with our internal reporting.

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands)

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Interest expense

Loss on the extinguishment of debt

(Gain) loss on the extinguishment of debt, net

Impairment loss

Income tax benefit

Income tax expense (benefit)

Third-party real estate services, including reimbursements revenue

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NOI attributable to unconsolidated real estate ventures at our share

Real estate venture partner’s share of NOI attributable to consolidated real estate ventures

Non-cash rent adjustments (1)

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(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.

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

(4) Represents amounts at our share.

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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.

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

Three Months Ended June 30, 2025

Three Months Ended June 30, 2024

(In thousands, at our share)

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NOI from reportable segments

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

Six Months Ended June 30, 2025

Six Months Ended June 30, 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 June 30, 2025 to 2024

Property revenue increased by $1.1 million, or 2.0%, to $54.2 million in 2025 from $53.1 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.

NOI decreased by $1.0 million, or 3.2%, to $31.0 million in 2025 from $32.0 million in 2024.

The increase in property revenue at our share was primarily due to the continued lease up of The Grace, Reva and The Zoe, and higher rents across the portfolio, partially offset by a decrease related to the multifamily Disposed Properties.

The decrease in NOI at our share was primarily due to higher property operating expenses, partially offset by the increase in property revenue.

Property revenue decreased by $6.6 million, or 10.5%, to $56.3 million in 2025 from $62.8 million in 2024.

NOI decreased by $3.7 million, or 9.5%, to $35.0 million in 2025 from $38.6 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.

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, partially offset by increases from the acquisition of Tysons Dulles Plaza.

Comparison of the Six Months Ended June 30, 2025 to 2024

Property revenue increased by $3.9 million, or 3.6%, to $109.4 million in 2025 from $105.6 million in 2024.

NOI decreased by $87,000, or 0.1%, to $64.5 million in 2025 from $64.6 million in 2024.

The decrease in NOI at our share was primarily due to higher property operating expenses, partially offset by the increase in property revenue.

Property revenue decreased by $20.5 million, or 15.7%, to $109.7 million in 2025 from $130.3 million in 2024.

NOI decreased by $13.7 million, or 16.8%, to $67.8 million in 2025 from $81.6 million in 2024.

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,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, at our share)

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Net third-party real estate services, excluding reimbursements

Comparison of the Three Months Ended June 30, 2025 to 2024

Third-party real estate services revenue, excluding reimbursements, decreased by $1.3 million, or 15.5%, to $6.9 million in 2025 from $8.1 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.

The decrease was primarily due to a $595,000 decrease in property management fees and a $536,000 decrease in asset management fees.

Third-party real estate services expenses, excluding reimbursements, decreased by $3.7 million, or 40.9%, to $5.4 million in 2025 from $9.1 million in 2024.

The decrease was primarily due to lower compensation expenses.

The decrease was primarily due to lower compensation expenses related to a decline in the number of third-party management contracts.

Comparison of the Six Months Ended June 30, 2025 to 2024

Third-party real estate services revenue, excluding reimbursements, decreased by $2.7 million, or 16.7%, to $13.2 million in 2025 from $15.9 million in 2024.

The decrease was primarily due to a $1.3 million decrease in property management fees, an $880,000 decrease in asset management fees and a $495,000 decrease in leasing fees.

Third-party real estate services expenses, excluding reimbursements, decreased by $8.6 million, or 40.6%, to $12.6 million in 2025 from $21.3 million in 2024.

The decrease was primarily due to lower compensation expenses related to a decline in the number of third-party management contracts.

Liquidity and Capital Resources

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Interest Rate (1)

March 31, 2025

June 30, 2025

December 31, 2024

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Mortgage loans, net

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

(1) Weighted average effective interest rate as of June 30, 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 3.11%, and the weighted average maturity date of the interest rate caps is in the first quarter of 2026.

For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.15%, and the weighted average maturity date of the interest rate caps is in the second quarter of 2026.

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

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

As of June 30, 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 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.

As of June 30, 2025 and December 31, 2024, the net carrying value of real estate collateralizing our mortgage loans totaled $1.7 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 June 2025, in connection with the sale of WestEnd25, we repaid the related $97.5 million mortgage loan.

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.

As of June 30, 2025 and December 31, 2024, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $799.1 million and $1.4 billion.

See Note 15 to the financial statements for additional information.

Revolving Credit Facility and Term Loans

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.

As of June 30, 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.

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

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.

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Interest Rate (1)

March 31, 2025

June 30, 2025

December 31, 2024

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Term loans, net

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

(1) Effective interest rate as of June 30, 2025.

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

(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.

(2) As of June 30, 2025, daily SOFR was 4.45%.

As of December 31, 2024, a $15.2 million letter of credit was outstanding under our revolving credit facility, which was cancelled on April 1, 2025.

(3) As of June 30, 2025 and December 31, 2024, excludes $5.8 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.

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Common Shares Repurchased

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.

Our Board of Trustees has authorized the repurchase of up to $2.0 billion of our outstanding common shares.

During the three and six months ended June 30, 2025, we repurchased and retired 11.2 million and 23.3 million common shares for $184.9 million and $372.4 million, a weighted average purchase price per share of $16.54 and $15.96.

During the three and six months ended June 30, 2024, we repurchased and retired 4.7 million and 7.7 million common shares for $68.6 million and $118.0 million, a weighted average purchase price per share of $14.62 and $15.35.

Since we began the share repurchase program through June 30, 2025, we have repurchased and retired 80.1 million common shares for $1.5 billion, a weighted average purchase price per share of $18.73.

During the third quarter of 2025, through July 25, 2025, we repurchased and retired 264,209 common shares for $4.6 million, a weighted average purchase price per share of $17.26, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

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

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● normal recurring expenses;

● 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;

● debt service and principal repayment obligations, including balloon payments on maturing mortgage loans — As of June 30, 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 June 30, 2025, we had committed tenant-related obligations totaling $34.1 million ($33.9 million related to our consolidated entities and $173,000 related to our unconsolidated real estate ventures at our share);

● development expenditures — As of June 30, 2025, we had one asset under construction, Valen, and are building a new amenity hub at 2011 Crystal Drive that together, based on our current plans and estimates, require an additional $35.2 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 July 24, 2025, our Board of Trustees declared a quarterly dividend of $0.175 per common share;

● possible common share repurchases — During the third quarter of 2025, through July 25, 2025, we repurchased and retired 264,209 common shares for $4.6 million;

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

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

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

● cash and cash equivalents — As of June 30, 2025, we had cash and cash equivalents of $61.4 million ;

● cash flows from operations;

● distributions from real estate ventures;

● 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;

● borrowing capacity under our revolving credit facility — As of June 30, 2025, we had $524.0 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 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.

During the six months ended June 30, 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:

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

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Net cash used in financing activities

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.

Cash Flows for the Six Months Ended June 30, 2025

Cash and cash equivalents, and restricted cash decreased $92.2 million to $91.0 million as of June 30, 2025, compared to $183.2 million as of December 31, 2024.

This decrease resulted from $394.7 million of net cash used in financing activities, partially offset by $270.7 million of net cash provided by investing activities and $31.8 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.

Our outstanding debt was $2.5 billion and $2.6 billion as of June 30, 2025 and December 31, 2024.

Net cash provided by operating activities of $31.8 million comprised:

(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.

(i) $44.1 million of net income (before $163.3 million of non-cash items and a $42.4 million gain on the sale of real estate) and (ii) $864,000 of return on capital from unconsolidated real estate ventures, partially offset by (iii) $13.2 million of net change in operating assets and liabilities.

Non-cash income adjustments of $163.3 million primarily include depreciation and amortization expense, impairment loss, share-based compensation expense, amortization of lease incentives and deferred rent.

Net cash provided by investing activities of $270.7 million primarily comprised:

(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.

(i) $381.6 million of proceeds from the sale of real estate, partially offset by (ii) $62.4 million of development costs, construction in progress and real estate additions and (iii) $42.7 million related to the acquisition of Tysons Dulles Plaza in May 2025.

Net cash used in financing activities of $394.7 million primarily comprised:

(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.

(i) $505.9 million of repayments of mortgage loans, (ii) $490.0 million of repayments on the revolving credit facility, (iii) $372.8 million of common shares repurchased, and (iv) $27.2 million of dividends paid to common shareholders, partially offset by (v) $631.0 million of borrowings under the revolving credit facility, (vi) $275.0 million of borrowings under mortgage loans and (vii) $100.0 million of proceeds from the sale of a 40.0% noncontrolling interest in a real estate venture that owns West Half in May 2025.

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

As of June 30, 2025, we had investments in unconsolidated real estate ventures totaling $93.9 million.

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

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

As of March 31, 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.

As of June 30, 2025, we had no principal payment guarantees related to our unconsolidated real estate ventures.

As of June 30, 2025, we had additional capital commitments totaling $7.2 million related to our investments in real estate-focused technology companies.

Commitments and Contingencies

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Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at a reasonable cost in the future.

If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

If lenders insist on greater coverage than we can obtain, it could adversely affect our ability to finance or refinance our properties.

Construction Commitments

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.

As of June 30, 2025, we had one asset under construction, Valen, and are building a new amenity hub at 2011 Crystal Drive that together, based on our current plans and estimates, require an additional $35.2 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.

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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).

Our accrual for loss contingencies relating to unresolved legal matters was included in "Other liabilities, net" in the consolidated balance sheets.

Actual losses may differ materially from amounts recorded and the ultimate outcome of these legal proceedings is generally not yet determinable.

As of June 30, 2025, we had committed tenant-related obligations totaling $34.1 million ($33.9 million related to our consolidated entities and $173,000 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 and stabilization of development projects.

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

As of June 30, 2025, we had no debt principal payment guarantees related to our consolidated real estate assets.

Environmental Matters

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

While a property

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

To the extent we 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.

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.

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

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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 as of March 31, 2025 and December 31, 2024, 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 June 30, 2025 and December 31, 2024, and are included in "Other liabilities, net" in our balance sheets.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis