Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on February 18, 2025 ("Annual Report") and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q and our Annual Report.
For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 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. 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 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 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.
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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 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.
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.
The accompanying financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
We have elected to be taxed as a real estate investment trust ("REIT") under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from those activities.
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; this seasonality affects the sequential comparison of our results in individual quarters over time. For instance, we have historically experienced higher utility costs in the first and third quarters of the year.
We compete with many property owners and developers. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our assets at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.
Overview
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.
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
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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 (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.
Outlook
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, 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. To that end, we are currently marketing for sale select multifamily and land assets in both Washington, D.C. 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, 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 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
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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 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; and
● 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.
(1) 2221 S. Clark Street - Residential and 900 W Street are excluded from leased and occupied percentages as they are operated as short-term rental properties.
(2) Represents the cash basis weighted average starting rent per square foot at our share, which excludes free rent, fixed escalations and percentage rent .
(3) Represents the weighted average rent per square foot recognized over the term of the respective leases, including the effect of free rent and fixed escalations, but excluding the effect of percentage rent.
(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 six months ended June 30, 2025 included:
● the acquisition of Tysons Dulles Plaza. See Note 3 to the financial statements for additional information;
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● 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. See Note 7 to the financial statements for additional information;
● the net borrowing of $141.0 million under our revolving credit facility;
● the payment of dividends totaling $27.2 million and distributions to redeemable noncontrolling interests of $5.7 million;
● the repurchase and retirement of 23.3 million of our common shares for $372.4 million, a weighted average purchase price per share of $15.96; and
● the investment of $62.4 million in development costs, construction in progress and real estate additions.
Activity subsequent to June 30, 2025 included:
● the sale of The Batley. See Note 3 to the financial statements for additional information; and
● 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 six months ended June 30, 2025.
Recent Accounting Pronouncements
See Note 2 to the financial statements for a description of recent accounting pronouncements.
Results of Operations
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 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.
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Comparison of the Three 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 three months ended June 30, 2025 compared to the same period in 2024:
Three Months Ended June 30,
2025
2024
% Change
(Dollars in thousands)
Property rental revenue
$
106,509
$
112,536
(5.4)
%
Third-party real estate services revenue, including reimbursements
14,805
17,397
(14.9)
%
Depreciation and amortization expense
47,560
51,306
(7.3)
%
Property operating expense
34,875
36,254
(3.8)
%
Real estate taxes expense
12,651
14,399
(12.1)
%
General and administrative expense:
Corporate and other
16,720
17,001
(1.7)
%
Third-party real estate services
13,562
18,650
(27.3)
%
Interest expense
35,571
31,973
11.3
%
Gain on the sale of real estate, net
41,832
89
*
Impairment loss
31,813
1,025
*
* Not meaningful.
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.
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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,
2025
2024
% Change
(Dollars in thousands)
Property rental revenue
$
208,008
$
235,172
(11.6)
%
Third-party real estate services revenue, including reimbursements
29,719
35,265
(15.7)
%
Depreciation and amortization expense
95,147
108,161
(12.0)
%
Property operating expense
68,312
71,533
(4.5)
%
Real estate taxes expense
24,823
28,194
(12.0)
%
General and administrative expense:
Corporate and other
32,277
31,974
0.9
%
Third-party real estate services
29,633
40,977
(27.7)
%
Interest expense
70,771
62,133
13.9
%
Gain on the sale of real estate, net
42,369
286
*
Impairment loss
40,296
18,236
121.0
%
* 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 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.
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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 $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 (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 $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 $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 $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 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 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 $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.
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.
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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. Nareit defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization expense related to real estate, gains (losses) from the sale of certain real estate assets, gains (losses) from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures.
We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions and other non-comparable income and expenses. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP), as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures used by other companies.
The following is the reconciliation of net loss attributable to common shareholders, the most directly comparable GAAP measure, to FFO:
Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
(In thousands)
Net loss attributable to common shareholders
$
(19,241)
$
(24,373)
$
(64,961)
$
(56,649)
Net loss attributable to redeemable noncontrolling interests
(3,940)
(3,454)
(11,918)
(7,988)
Net loss attributable to noncontrolling interests
—
(5,587)
—
(10,967)
Net loss
(23,181)
(33,414)
(76,879)
(75,604)
Gain on the sale of real estate, net of tax
(41,832)
(89)
(42,369)
(1,498)
Pro rata share of gain on the sale of unconsolidated real estate assets
(1,500)
—
(1,500)
(480)
Real estate depreciation and amortization
46,508
49,631
92,469
104,818
Real estate impairment loss
31,813
—
31,813
—
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures
786
799
1,565
2,290
FFO attributable to redeemable noncontrolling interests in consolidated real estate ventures
(270)
—
(270)
—
FFO attributable to common limited partnership units ("OP Units")
12,324
16,927
4,829
29,526
FFO attributable to redeemable noncontrolling interests
(2,371)
(2,592)
(1,106)
(4,513)
FFO attributable to common shareholders
$
9,953
$
14,335
$
3,723
$
25,013
NOI and Same Store NOI
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 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. 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
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of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.
Information provided on a same store basis includes the results of properties that are owned, operated and in-service for the entirety of both periods being compared, which excludes disposed properties or properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. 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. A development property or under-construction property is moved to the same store pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period. Acquisitions are moved into the same store pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.
Same store NOI 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 and six months ended June 30, 2024 to align with our internal reporting.
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Three Months Ended June 30,
Six Months Ended June 30,
2025
2024
2025
2024
(Dollars in thousands)
Net loss attributable to common shareholders
$
(19,241)
$
(24,373)
$
(64,961)
$
(56,649)
Net loss attributable to redeemable noncontrolling interests
(3,940)
(3,454)
(11,918)
(7,988)
Net loss attributable to noncontrolling interests
—
(5,587)
—
(10,967)
Net loss
(23,181)
(33,414)
(76,879)
(75,604)
Add:
Depreciation and amortization expense
47,560
51,306
95,147
108,161
General and administrative expense:
Corporate and other
16,720
17,001
32,277
31,974
Third-party real estate services
13,562
18,650
29,633
40,977
Transaction and other costs
2,846
824
4,757
2,338
Interest expense
35,571
31,973
70,771
62,133
(Gain) loss on the extinguishment of debt, net
(2,234)
—
2,402
—
Impairment loss
31,813
1,025
40,296
18,236
Income tax expense (benefit)
(83)
597
(283)
(871)
Less:
Third-party real estate services, including reimbursements revenue
14,805
17,397
29,719
35,265
Income (loss) from unconsolidated real estate ventures, net
1,091
(226)
499
749
Interest and other income, net
698
3,432
1,223
5,532
Gain on the sale of real estate, net
41,832
89
42,369
286
Adjustments:
NOI attributable to unconsolidated real estate ventures at our share
1,287
1,168
2,277
4,215
Real estate venture partner’s share of NOI attributable to consolidated real estate ventures
(272)
—
(272)
—
Non-cash rent adjustments (1)
71
(2,509)
2,510
(3,939)
Other adjustments (2)
399
3,324
2,092
(2,705)
Total adjustments
1,485
1,983
6,607
(2,429)
NOI at our share
65,633
69,253
130,918
143,083
Less: out-of-service NOI loss (3) (4)
(1,469)
(2,341)
(3,696)
(5,374)
Operating Portfolio NOI (4)
67,102
71,594
134,614
148,457
Non-same store NOI (4) (5)
7,575
10,254
15,399
23,515
Same store NOI (4) (6)
$
59,527
$
61,340
$
119,215
$
124,942
Change in same store NOI
(3.0%)
(4.6%)
Number of properties in same store pool
34
34
(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 assets 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.
(6) Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared.
Reportable Segments
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.
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The following is a summary of NOI at our share for our multifamily and commercial segments:
Three Months Ended June 30, 2025
Three Months Ended June 30, 2024
Multifamily
Commercial
Multifamily
Commercial
(In thousands, at our share)
Property rental revenue
$
53,563
$
51,683
$
52,203
$
58,286
Other property revenue
654
4,568
937
4,533
Total property revenue
54,217
56,251
53,140
62,819
Property expense:
Real estate taxes
6,165
5,803
5,477
7,685
Payroll
3,845
3,102
4,222
3,280
Utilities
3,776
2,768
3,390
3,202
Repairs and maintenance
6,276
5,233
5,468
5,560
Other property operating
3,188
4,384
2,606
4,468
Total property expense
23,250
21,290
21,163
24,195
NOI from reportable segments
$
30,967
$
34,961
$
31,977
$
38,624
Six Months Ended June 30, 2025
Six Months Ended June 30, 2024
Multifamily
Commercial
Multifamily
Commercial
(In thousands, at our share)
Property rental revenue
$
108,165
$
101,440
$
103,934
$
121,632
Other property revenue
1,275
8,304
1,653
8,625
Total property revenue
109,440
109,744
105,587
130,257
Property expense:
Real estate taxes
11,736
11,395
10,879
15,674
Payroll
7,587
6,109
8,404
6,788
Utilities
7,694
6,170
6,936
6,871
Repairs and maintenance
11,713
9,705
9,831
10,808
Other property operating
6,233
8,532
4,973
8,539
Total property expense
44,963
41,911
41,023
48,680
NOI from reportable segments
$
64,477
$
67,833
$
64,564
$
81,577
Comparison of the Three Months Ended June 30, 2025 to 2024
Multifamily: Property revenue increased by $1.1 million, or 2.0%, to $54.2 million in 2025 from $53.1 million in 2024. 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.
Commercial: 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, partially offset by increases from the acquisition of Tysons Dulles Plaza.
Comparison of the Six Months Ended June 30, 2025 to 2024
Multifamily: 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 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.
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Commercial: 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. 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.
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 June 30,
Six Months Ended June 30,
2025
2024
2025
2024
(In thousands, at our share)
Property management fees
$
3,279
$
3,874
$
6,640
$
7,989
Asset management fees
706
1,242
1,286
2,166
Development fees
464
421
987
659
Leasing fees
1,099
1,128
1,753
2,248
Construction management fees
267
177
498
561
Other service revenue
1,035
1,260
2,070
2,261
Third-party real estate services revenue, excluding reimbursements
6,850
8,102
13,234
15,884
Third-party real estate services expenses, excluding reimbursements
5,397
9,126
12,633
21,262
Net third-party real estate services, excluding reimbursements
$
1,453
$
(1,024)
$
601
$
(5,378)
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 $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 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
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 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.
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Mortgage Loans
The following is a summary of mortgage loans:
Weighted Average
Effective
Interest Rate (1)
June 30, 2025
December 31, 2024
(In thousands)
Variable rate (2)
5.57%
$
545,900
$
587,254
Fixed rate (3)
5.22%
1,009,519
1,196,479
Mortgage loans
1,555,419
1,783,733
Unamortized deferred financing costs and premium/discount, net
(14,749)
(16,560)
Mortgage loans, net
$
1,540,670
$
1,767,173
(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 3.15%, 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 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 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 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 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.
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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The following is a summary of amounts outstanding under the revolving credit facility and term loans:
Effective
Interest Rate (1)
June 30, 2025
December 31, 2024
(In thousands)
Revolving credit facility (2) (3)
6.04%
$
226,000
$
85,000
Tranche A-1 Term Loan (4)
5.44%
$
200,000
$
200,000
Tranche A-2 Term Loan (5)
4.30%
400,000
400,000
2023 Term Loan (6)
5.51%
120,000
120,000
Term loans
720,000
720,000
Unamortized deferred financing costs, net
(1,748)
(2,147)
Term loans, net
$
718,252
$
717,853
(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 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.
(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 $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. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice.
Material Cash Requirements
Our material cash requirements for the next 12 months and beyond are to fund:
● normal recurring expenses;
● debt service and principal repayment obligations, including balloon payments on maturing 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;
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● 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; and
● 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 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 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; and
● proceeds from the issuance of securities.
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."
Summary of Cash Flows
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:
Six Months Ended June 30,
2025
2024
(In thousands)
Net cash provided by operating activities
$
31,752
$
60,813
Net cash provided by investing activities
270,724
61,992
Net cash used in financing activities
(394,706)
(117,344)
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 June 30, 2025 and December 31, 2024.
Net cash provided by operating activities of $31.8 million comprised: (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) $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) $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.
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Unconsolidated Real Estate Ventures
We consolidate entities in which we have a controlling interest or are the primary beneficiary in a variable interest entity. From time to time, we may have off-balance-sheet unconsolidated real estate ventures and other unconsolidated arrangements with varying structures.
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. 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 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. At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. 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 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
Insurance
We maintain general liability insurance with limits of $100.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $1.0 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both conventional terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per occurrence. These policies are partially reinsured by third-party insurance providers.
We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material.
Our debt, consisting of mortgage loans secured by our properties, a revolving credit facility and term loans, contains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at a reasonable cost in the future. 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 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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Legal Proceedings
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 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. 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.
Other
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 June 30, 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 or petroleum products on, under or from that real estate. 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 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. To the extent we arrange for contaminated materials to be sent to other locations for treatment or disposal, we may be liable for the
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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. 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 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. In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated appropriate actions. The environmental assessments have not revealed any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. 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.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.