urf

rterly Investor Package

​

JBGS Divider

​

​

​

Management Letter

​

August 8, 2023

​

To Our Fellow Shareholders:

​

This quarter saw the official opening of Amazon’s HQ2 in National Landing. Having hired over 8,000 new employees in this location, Amazon has single-handedly expanded the neighborhood employee base by over 15% since their decision brought them to this region just five years ago. In addition to the significant and expanding ripple effects we expect Amazon to have in National Landing, JBG SMITH continues to transform the neighborhood into a vibrant, 18-hour amenity-rich environment. This fall we will bring online over a dozen exciting new retailers on Crystal Drive followed by 1,583 new multifamily units expected to start delivering in early 2024. Not to be outdone, Virginia Tech’s Innovation Campus will open its doors with a new, state-of-the-art graduate campus facility in 2024, right on the heels of a newly minted eponymous Metro station serving that section of National Landing. Suffice to say that National Landing is rapidly realizing the promise of years of planning and investment.

​

While growth in National Landing is rapidly accelerating, the office market continues to struggle. New leasing transaction volume remains well below pre-pandemic levels and the equity and debt markets remain nearly completely frozen for office assets. Both because and in spite of these realities, we have continued to execute on our strategy of reducing our non-core office exposure, growing our multifamily portfolio, and advancing the value and readiness of our Development Pipeline. Thanks to our success in recasting our revolving credit facility, our balance sheet remains very strong, and we have ample liquidity to navigate the current environment.

​

Highlights from the most recent quarter:

​

Amazon officially opened Phase One of its HQ2, Metropolitan Park. The 2.1 million square foot office complex had its grand opening in June and is currently phasing in 8,000+ employees. We are already seeing demand associated with HQ2’s opening translate to absorption within our multifamily portfolio in National Landing. We anticipate this trend to continue as Amazon’s hiring progresses. As a reminder, Amazon is incentivized to hire up to 37,850 full-time jobs in National Landing as per its agreement with the Commonwealth of Virginia.

​

We recast our revolving credit facility to $750 million, with a fully extended maturity date of June 2028. The amendment revised the current interest rate to SOFR plus 140 basis points, an increased spread of 25 basis points. Given the current state of the debt capital markets, we were very pleased with lender demand to participate in the recast credit facility, which solidified our strong balance sheet and provided us financial flexibility to execute on accretive investment opportunities.

​

Capital Allocation

When our shares trade at a material discount to NAV, we believe share repurchases are the most accretive use of capital available to us. Our strong balance sheet and ample liquidity afford us the ability to capitalize on this disconnect. Year-to-date we have repurchased 12.5 million shares at a weighted average price of $14.98 per share, totaling $187.3 million; and since the inception of our share repurchase program in 2020, we have repurchased 35.8 million shares, or 24% of shares and OP units outstanding as of December 31, 2019, at a

​

weighted average price per share of $22.64, totaling $810.8 million.
​

As we mentioned last quarter, we expect new investments, including development projects, acquisitions, and share repurchases, to be largely funded, whether up front or after the fact, by asset recycling. We have earmarked certain non-core assets for sale and are actively pursuing marketing several of them.

​

Financial and Operating Metrics

For the three months ended June 30, 2023, we reported Core FFO attributable to common shareholders of $39.8 million, or $0.36 per diluted share. Annualized NOI increased 0.3% quarter-over-quarter when excluding assets that were sold or recapitalized in the first quarter of 2023. Our multifamily portfolio ended the quarter at 96.8% leased and 93.7% occupied. Our office portfolio ended the quarter at 86.3% leased and 84.0% occupied. For second generation leases, the rental rate mark-to-market increased 2.7%.

​

As of June 30, 2023, our Net Debt/Total Enterprise Value was 57.0% and our Net Debt/Annualized Adjusted

EBITDA was 8.3x. Our floating rate exposure remains limited, with 91.4% of our debt fixed or hedged as of the end of the second quarter, after accounting for in-place interest rate swaps and caps. The remaining floating rate exposure is tied to our non-core assets, or assets where the business plan warrants preserving flexibility.

​

We continue to be well-positioned with respect to our near-term debt maturities: (i) we have only $13.7 million of debt maturing by year end 2023, all of which is non-recourse asset-level financing related to unconsolidated joint ventures; (ii) our weighted average debt maturity stands at 4.2 years, after adjusting for by-right extension options; and (iii) we have zero debt maturities tied to office assets in National Landing until 2025. Our primarily non-recourse asset-level financing strategy is most valuable in an environment like today, providing a floor on our downside risk.

​

Operating Portfolio

Multifamily Trends

Our multifamily portfolio ended the quarter at 93.7% occupied, up 80 basis points quarter-over-quarter, and 96.8% leased, up 180 basis points quarter-over-quarter. Leasing during the quarter was strong as we capitalized on seasonality typical to the summer months. Across our portfolio, we increased gross rents by 7.5% upon renewal for second quarter lease expirations, while achieving a 49.3% renewal rate. We continue to see concessions vary by submarket, with some burn-down seen in select markets in recent months.

​

Market-Wide (DC Metro) Multifamily Trends (based on CoStar, UrbanTurf, and Apartment List data)

Market-wide occupancy decreased in the second quarter to 93.3% from 94.7% in the same period last year. This market occupancy rate is nearly exactly in line with our portfolio. Despite declining occupancy, the market saw steady year-over-year (Q2 2022 to Q2 2023) growth in asking rents (1.4%) which was similar to what was observed in other gateway markets (1.2%). Asking rents ended the second quarter 10.7% above pre-COVID levels which speaks to the continued resilience of the demand for multifamily. Despite face rate growth, concessions have remained persistent in our submarkets with one to two months being typical, which somewhat reflects the softening occupancy picture.

​

The supply environment continues to present a positive outlook, with no new starts during the second quarter – fully recognizing the impact of interest rates and construction costs. Year-to-date we have seen only 760 units in three buildings get underway in the submarkets we track. We did see just over 1,000 units in three buildings in our submarkets deliver during the second quarter and more than 2,000 units in six buildings deliver year-to-date. This does put some pressure on overall occupancy but is also muted relative to historic norms. We believe this supply environment should help keep occupancies and rate growth relatively strong.

​

​

Office Trends

Our office portfolio ended the second quarter at 86.3% leased and 84.0% occupied. We executed 210,000 square feet of leases, with a weighted average lease term of 5.9 years. 62% of the leases executed in National Landing were with Department of Defense and government contractor tenants, which isn’t surprising given the submarket’s proximity to the Pentagon, deep tech talent pool, and the digital ecosystem we are creating.

​

In National Landing we have 1.8 million square feet of office leases rolling by the end of 2024 across 72 leases (27% of annualized rent). Based on tenant discussions to date, we anticipate 1.2 million square feet will vacate, implying an approximately 33% retention rate. Over half of the anticipated vacates are leases with Amazon (678,000 square feet), 300,000 square feet of which expires in 2023, and 378,000 square feet in 2024. 444,000 square feet of the Amazon vacates represent the entirety of 1800 South Bell Street and 2100 Crystal Drive, two assets that we plan to take off-line and entitle for alternate uses.

​

Excluding Amazon, our implied retention rate between now and the end of 2024 is approximately 50% (versus our long-term retention rate of approximately 70%). While market-wide leasing remains challenging, fundamentals in National Landing benefit from the demand drivers at play in this submarket: Amazon’s HQ2 hiring, Virginia Tech’s new Innovation Campus, 1,583 multifamily units under-construction, a retail transformation, and proximity to the Pentagon. Nonetheless, our efforts to re-lease certain spaces will be targeted toward buildings with long-term viability. We expect to repurpose older, obsolete, and vacant buildings for redevelopment, conversion to multifamily, or another specialty use, ultimately reducing our competitive inventory in National Landing.

​

Finally, mid-week physical occupancy across our National Landing office portfolio continues to remain stable, in the 70%+ range, as compared to pre-pandemic levels.

​

Market-Wide (DC Metro) Office Trends (based on JLL, CBRE, and Kastle Systems data)

The office market ended the first half of the year in a similar position to the end of last year, but with some notable trends emerging that could define the go-forward environment.

​

The first of those trends is the continued vast disparity between high-quality offerings and everything else. CBRE calls this a “flight to experience” with amenitization representing a significant factor in tenant decision-making. We believe that this shift in tenant preference is here to stay, and that amenity-rich markets and surgical improvements to even older buildings in those markets will create the most appealing offering to tenants.

​

The second trend is the continued decline in renewal rates from post-pandemic highs. JLL notes that renewal rates declined to 52% market-wide in the second quarter, essentially normalizing as tenants increasingly relocate, and new requirements gradually emerge. This is consistent with what we’ve seen in our own portfolio and with the “flight to experience” that CBRE describes.

​

The third trend – a potential moderation of right-sizing – is strongly related to the decrease in renewal rates. CBRE reported leasing activity in Northern Virginia was up 14% in the second quarter compared to post-pandemic levels, but still down nearly 30% from pre-pandemic levels on a quarterly average basis. However, within the top 10 leases in the second quarter, only two were contractions, with the rest either remaining flat or growing. Of the four tenants who signed new leases only one contracted according to CBRE. This leasing activity suggests that tenants are finally making moves to optimize their spaces after years of “status quo” stagnancy. While rightsizing is still a factor, it doesn’t appear to be the dominant factor.

​

​

This right-sizing trend doesn’t translate into big losses in net demand, but it also doesn’t translate into significant growth from today’s demand picture, with both CBRE and JLL noting that the quarter was slightly negative in Northern Virginia, continuing a trend of overall flatness. This leaves the market with protracted vacancy above 20% with limited reductions of inventory. Sublease availability has flattened, according to JLL, which is a positive sign, but CBRE notes that most sublease terms now sit at less than four years, suggesting that absent a change in space utilization by those tenants, this space is likely to convert to direct vacancy at its expiration. All told, it appears as though a reduced demand environment is the near-term norm, with tenants moving in search of the right locations, but not driving any real growth in demand. We believe this may create winner and loser submarkets – likely based on amenities and environment.

​

Taken together, these trends have resulted in a continued elevated concession environment in Northern Virginia, with CBRE reporting concessions still 22% above pre-pandemic levels but moderated slightly from year-end 2022. Face rents are close to flat according to both JLL and CBRE data, with most landlords continuing to leverage large concession packages to lure tenants where they have the balance sheet or lender support to do so.

​

The picture is largely the same in DC proper, with both JLL and CBRE reporting essentially flat absorption and activity dominated by a flight-to-quality; although contractions also seem to be moderating in that market, with CBRE reporting 74% of leases are either flat or positive for the market during the second quarter. Both firms note that trophy inventory is dwindling, and there are few on-the-books sites remaining in the city despite strong demand from tenants looking to upgrade space (largely law firms). This fact suggests a continued game of musical chairs which could relieve some pressure on the beleaguered Class B/C market through potential removals of inventory for eventual redevelopment.

​

* * *

​

Amidst economic uncertainty and capital markets constraints, we continue to prioritize prudent capital allocation, balance sheet strength, and value creation. Our transformation of National Landing is happening in real time, highlighted by the opening of Amazon’s HQ2, and further emphasized by the upcoming deliveries of over 1,500 multifamily units to the neighborhood and a total revitalization of the streetscape. Our portfolio transformation toward majority multifamily is well underway, with meaningful progress being made on additional non-core asset sales. Finally, our judicious balance sheet management positions us well for the current environment.

​

We are grateful to our banking partners who participated in our recast revolving credit facility syndication. While this sentiment is not new, tough times are the truest test of relationship strength, and we are deeply appreciative of your strong support of JBG SMITH.

​

Thank you for your continued trust and confidence.

​

Sincerely,

​

W. Matthew Kelly

Chief Executive Officer

​

​

Section Two – Earnings Release

​

​

​

​

​

Earnings Release

​

CONTACT

Barbat Rodgers

Senior Vice President, Investor Relations

(240) 333-3805

brodgers@jbgsmith.com

JBG SMITH ANNOUNCES SECOND QUARTER 2023 RESULTS

Bethesda, MD (August 8, 2023) - JBG SMITH (NYSE: JBGS), a leading owner and developer of high-quality, mixed-use properties in the Washington, DC market, today filed its Form 10-Q for the quarter ended June 30, 2023 and reported its financial results.

Additional information regarding our results of operations, properties, and tenants can be found in our Second Quarter 2023 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com. We encourage investors to consider the information presented here with the information in that document.

Second Quarter 2023 Highlights

​

Operating Portfolio

Development Portfolio

Under-Construction

Development Pipeline

Third-Party Asset Management and Real Estate Services Business

​

Balance Sheet

Investing and Financing Activities

​

Subsequent to June 30, 2023:

Dividends

About JBG SMITH

JBG SMITH owns, operates, invests in, and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, DC. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, DC metropolitan area. Approximately two-thirds of JBG SMITH's holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon's new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and JBG SMITH’s deployment of next-generation public and private 5G digital infrastructure. JBG SMITH's dynamic portfolio currently comprises 15.0 million square feet of high-

​

growth office, multifamily, and retail assets at share, 98% of which are Metro-served. It also maintains a development pipeline encompassing 9.8 million square feet of mixed-use, primarily multifamily, development opportunities. JBG SMITH is committed to the operation and development of green, smart, and healthy buildings and plans to maintain carbon neutral operations annually. For more information on JBG SMITH please visit www.jbgsmith.com.

Forward-Looking Statements

Certain statements contained herein may 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 performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results, financial condition and business of JBG SMITH Properties ("JBG SMITH", the "Company", "we", "us", "our" or similar terms) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximate", "hypothetical", "potential", "believes", "expects", "anticipates", "estimates", "intends", "plans", "would", "may" or similar expressions in this earnings release. We also note the following forward-looking statements: changes to the amount and manner in which tenants use space; our annual dividend per share and dividend yield; whether in the case of our under-construction assets and assets in the development pipeline, estimated square feet, estimated number of units and estimated potential development density are accurate; expected timing, completion, modifications and delivery dates for the projects we are developing for Amazon; the ability of any or all of our demand drivers to materialize and their effect on economic impact, job growth, expansion of public transportation and related demand in the National Landing submarket; planned infrastructure and educational improvements related to Amazon's additional headquarters and the Virginia Tech Innovation Campus; our development plans related to National Landing; whether we will be able to successfully shift the majority of our portfolio to multifamily; and whether the allocation of capital to our share repurchase plan has any impact on our share price.

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. These factors include, among others: adverse economic conditions in the Washington, DC metropolitan area, the timing of and costs associated with development and property improvements, financing commitments, and general competitive factors. For further discussion of factors that could materially affect the outcome of our forward-looking statements and other risks and uncertainties, see "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Cautionary Statement Concerning Forward-Looking Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 and other periodic reports the Company files with the Securities and Exchange Commission. For these 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. 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 hereof.

​

Pro Rata Information

We present certain financial information and metrics in this release "at JBG SMITH Share," which refers to our ownership percentage of consolidated and unconsolidated assets in real estate ventures (collectively, "real estate ventures") as applied to these financial measures and metrics. Financial information "at JBG SMITH Share" is calculated on an asset-by-asset basis by applying our percentage economic interest to each applicable line item of that asset's financial information. "At JBG SMITH Share" information, which we also refer to as being "at share," "our pro rata share" or "our share," is not, and is not intended to be, a presentation in accordance with GAAP. Given that a substantial portion of our assets are held through real estate ventures, we believe this form of presentation, which presents our economic interests in the partially owned entities, provides investors valuable information regarding a significant component of our portfolio, its composition, performance and capitalization.

We do not control the unconsolidated real estate ventures and do not have a legal claim to our co-venturers' share of assets, liabilities, revenue and expenses. The operating agreements of the unconsolidated real estate ventures generally allow each co-venturer to receive cash distributions to the extent there is available cash from operations. The amount of cash each investor receives is based upon specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions.

With respect to any such third-party arrangement, we would not be in a position to exercise sole decision-making authority regarding the property, real estate venture or other entity, and may, under certain circumstances, be exposed to economic risks not present were a third-party not involved. We and our respective co-venturers may each have the right to trigger a buy-sell or forced sale arrangement, which could cause us to sell our interest, or acquire our co-venturers' interests, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. Our real estate ventures may be subject to debt, and the repayment or refinancing of such debt may require equity capital calls. To the extent our co-venturers do not meet their obligations to us or our real estate ventures or they act inconsistent with the interests of the real estate venture, we may be adversely affected. Because of these limitations, the non-GAAP "at JBG SMITH Share" financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.

Occupancy, non-GAAP financial measures, leverage metrics, operating assets and operating metrics presented in our investor package exclude our 10.0% subordinated interest in one commercial building, our 33.5% subordinated interest in four commercial buildings, and our 49.0% interest in three commercial buildings, as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures, as 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.

Non-GAAP Financial Measures

This release includes non-GAAP financial measures. For these measures, we have provided an explanation of how these non-GAAP measures are calculated and why JBG SMITH's management believes that the presentation of these measures provides useful information to investors regarding JBG SMITH's financial condition and results of operations. Reconciliations of certain non-GAAP measures to the most directly comparable GAAP financial measure are included in this earnings release. Our presentation of non-GAAP financial measures may not be

​

comparable to similar non-GAAP measures used by other companies. In addition to "at share" financial information, the following non-GAAP measures are included in this release:

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), EBITDA for Real Estate ("EBITDAre") and "Adjusted EBITDA" are non-GAAP financial measures. EBITDA and EBITDAre are used by management as supplemental operating performance measures, which we believe help investors and lenders meaningfully evaluate and compare our operating performance from period-to-period by removing from our operating results the impact of our capital structure (primarily interest charges from our outstanding debt and the impact of our interest rate swaps) and certain non-cash expenses (primarily depreciation and amortization expense on our assets). EBITDAre is computed in accordance with the definition established by the National Association of Real Estate Investment Trusts ("Nareit"). Nareit defines EBITDAre as GAAP net income (loss) adjusted to exclude interest expense, income taxes, depreciation and amortization expense, gains and losses on sales of real estate 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 of unconsolidated real estate ventures. These supplemental measures may help investors and lenders understand our ability to incur and service debt and to make capital expenditures. EBITDA and EBITDAre are not substitutes for net income (loss) (computed in accordance with GAAP) and may not be comparable to similarly titled measures used by other companies.

Adjusted EBITDA represents EBITDAre adjusted for items we believe are not representative of ongoing operating results, such as Transaction and Other Costs, impairment write-downs of right-of-use assets associated with leases in which we are a lessee, gain (loss) on the extinguishment of debt, earnings (losses) and distributions in excess of our investment in unconsolidated real estate ventures, lease liability adjustments, income from investments, business interruption insurance proceeds and share-based compensation expense related to the Formation Transaction and special equity awards. We believe that adjusting such items not considered part of our comparable operations, provides a meaningful measure to evaluate and compare our performance from period-to-period.

Because EBITDA, EBITDAre and Adjusted EBITDA have limitations as analytical tools, we use EBITDA, EBITDAre and Adjusted EBITDA to supplement GAAP financial measures. Additionally, we believe that users of these measures should consider EBITDA, EBITDAre and Adjusted EBITDA in conjunction with net income (loss) and other GAAP measures in understanding our operating results.

Funds from Operations ("FFO"), "Core FFO" and Funds Available for Distribution ("FAD") are non-GAAP financial measures. FFO is computed in accordance with the definition established by 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 and losses from the sale of certain real estate assets, gains and 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.

Core FFO represents FFO adjusted to exclude items which we believe are not representative of ongoing operating results, such as Transaction and Other Costs, impairment write-downs of right-of-use assets associated with leases in which we are a lessee, gain (loss) on the extinguishment of debt, earnings (losses) and distributions in excess of our investment in unconsolidated real estate ventures, share-based compensation expense related to the Formation

​

Transaction and special equity awards, lease liability adjustments, income from investments, business interruption insurance proceeds, amortization of the management contracts intangible and the mark-to-market of derivative instruments, including our share of such adjustments for unconsolidated real estate ventures.

FAD represents Core FFO less recurring tenant improvements, leasing commissions and other capital expenditures, net deferred rent activity, third-party lease liability assumption (payments) refunds, recurring share-based compensation expense, accretion of acquired below-market leases, net of amortization of acquired above-market leases, amortization of debt issuance costs and other non-cash income and charges, including our share of such adjustments for unconsolidated real estate ventures. FAD is presented solely as a supplemental disclosure that management believes provides useful information as it relates to our ability to fund dividends.

We believe FFO, Core FFO and FAD are meaningful non-GAAP financial measures useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because these non-GAAP measures exclude 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, Core FFO and FAD do not represent cash generated from operating activities and are 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, Core FFO and FAD may not be comparable to similarly titled measures used by other companies.

"Net Debt" is a non-GAAP financial measurement. Net Debt represents our total consolidated and unconsolidated indebtedness less cash and cash equivalents at our share. Net Debt is an important component in the calculations of Net Debt to Annualized Adjusted EBITDA and Net Debt / total enterprise value. We believe that Net Debt is a meaningful non-GAAP financial measure useful to investors because we review Net Debt as part of the management of our overall financial flexibility, capital structure and leverage. We may utilize a considerable portion of our cash and cash equivalents at any given time for purposes other than debt reduction. In addition, cash and cash equivalents at our share may not be solely controlled by us. The deduction of cash and cash equivalents at our share from consolidated and unconsolidated indebtedness in the calculation of Net Debt, therefore, should not be understood to mean that it is available exclusively for debt reduction at any given time.

Net Operating Income ("NOI") and "Annualized NOI" are non-GAAP financial measures management uses to assess an asset's performance. The most directly comparable GAAP measure is net income (loss) attributable to common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of Free Rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable. NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure of our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. 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. 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. Annualized NOI, for all assets except Crystal City Marriott, represents NOI for the three months ended June 30, 2023 multiplied by four. Due to seasonality in the hospitality business, Annualized NOI for Crystal City Marriott represents the trailing 12-month NOI as of June 30, 2023. Management believes Annualized NOI provides useful information in understanding our financial performance over a 12-month period, however, investors and other users are cautioned against attributing undue certainty to our calculation of Annualized NOI. Actual NOI for any 12-month period will depend on a number of factors beyond our ability to control or predict, including general capital markets and economic conditions, any bankruptcy, insolvency, default or other failure to pay rent by one or more of our tenants and the destruction of one or more of our assets due to terrorist attack, natural disaster or other casualty, among others. We do not undertake any obligation to update our calculation to reflect events or circumstances occurring after the date of this earnings release. There can be no assurance that the Annualized NOI shown will reflect our actual results of operations over any 12-month period.

Definitions

"Development Pipeline" refers to assets that have the potential to commence construction subject to receipt of full entitlements, completion of design and market conditions where we (i) own land or control the land through a ground lease or (ii) are under a long-term conditional contract to purchase, or enter into, a leasehold interest with respect to land.

"Estimated Potential Development Density" reflects management's estimate of developable gross square feet based on our current business plans with respect to real estate owned or controlled as of June 30, 2023. Our current business plans may contemplate development of less than the maximum potential development density for individual assets. As market conditions change, our business plans, and therefore, the Estimated Potential Development Density, could change accordingly. Given timing, zoning requirements and other factors, we make no assurance that Estimated Potential Development Density amounts will become actual density to the extent we complete development of assets for which we have made such estimates.

"First-generation" is a lease on space that had been vacant for at least nine months or a lease on newly delivered space.

"Formation Transaction" refers collectively to the spin-off on July 17, 2017 of substantially all of the assets and liabilities of Vornado Realty Trust's Washington, DC segment, which operated as Vornado / Charles E. Smith, and the acquisition of the management business and certain assets and liabilities of The JBG Companies.

"Free Rent" means the amount of base rent and tenant reimbursements that are abated according to the applicable lease agreement(s).

​

"GAAP" means accounting principles generally accepted in the United States of America.

"In-Service" refers to commercial or multifamily 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, 2023.

"Non-Same Store" refers to all operating assets excluded from the same store pool.

"Same Store" refers to the pool of assets that were in-service for the entirety of both periods being compared, except for assets for which significant redevelopment, renovation, or repositioning occurred during either of the periods being compared.

"Second-generation" is a lease on space that had been vacant for less than nine months.

"Transaction and Other Costs" include pursuit costs related to completed, potential and pursued transactions, demolition costs, severance and other costs.

"Under-Construction" refers to assets that were under construction during the three months ended June 30, 2023.

​

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

​

Note: For complete financial statements, please refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

​

​

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

​

Note: For complete financial statements, please refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

​

​

EBITDA, EBITDAre AND ADJUSTED EBITDA RECONCILIATIONS (NON-GAAP)

(Unaudited)

Note: All EBITDA measures as shown above are attributable to common limited partnership units ("OP Units") and certain fully-vested incentive equity awards that are convertible into OP Units.

​

​

FFO, CORE FFO AND FAD RECONCILIATIONS (NON-GAAP)

(Unaudited)

​

​

​

​

​

See footnotes on page 15.

​

​

FFO, CORE FFO AND FAD RECONCILIATIONS (NON-GAAP)

(Unaudited)

​

​

NOI RECONCILIATIONS (NON-GAAP)

(Unaudited)