UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 001-37994

JBG SMITH PROPERTIES

________________________________________________________________________________

(Exact name of Registrant as specified in its charter)

Maryland	81-4307010
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4747 Bethesda Avenue Suite 200 Bethesda MD	20814
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code: (240) 333-3600

_______________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $0.01 per share	JBGS	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of October 29, 2021, JBG SMITH Properties had 129,725,289 common shares outstanding.

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JBG SMITH PROPERTIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2021

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	Page
	Condensed Consolidated Balance Sheets (unaudited) as of September 30, 2021 and December 31, 2020	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2021 and 2020	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and nine months ended September 30, 2021 and 2020	5
	Condensed Consolidated Statements of Equity (unaudited) for the three and nine months ended September 30, 2021 and 2020	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2021 and 2020	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	50

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	51
Item 6.	Exhibits	52
	Signatures	53

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PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

JBG SMITH PROPERTIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except par value amounts)


	September 30, 2021		December 31, 2020
ASSETS
Real estate, at cost:
Land and improvements	$	1,358,299	$	1,391,472
Buildings and improvements		4,368,477		4,341,103
Construction in progress, including land		299,359		268,056
		6,026,135		6,000,631
Less: accumulated depreciation		(1,346,107)		(1,232,690)
Real estate, net		4,680,028		4,767,941
Cash and cash equivalents		194,277		225,600
Restricted cash		34,900		37,736
Tenant and other receivables		51,128		55,903
Deferred rent receivable		187,882		170,547
Investments in unconsolidated real estate ventures		486,052		461,369
Other assets, net		300,537		286,575
Assets held for sale		74,174		73,876
TOTAL ASSETS	$	6,008,978	$	6,079,547

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgages payable, net	$	1,674,285	$	1,593,738
Revolving credit facility		—		—
Unsecured term loans, net		398,493		397,979
Accounts payable and accrued expenses		105,307		103,102
Other liabilities, net		200,204		247,774
Total liabilities		2,378,289		2,342,593
Commitments and contingencies
Redeemable noncontrolling interests		526,913		530,748
Shareholders' equity:
Preferred shares, $0.01 par value - 200,000 shares authorized; none issued		—		—
Common shares, $0.01 par value - 500,000 shares authorized; 129,704 and 131,778 shares issued and outstanding as of September 30, 2021 and December 31, 2020		1,298		1,319
Additional paid-in capital		3,606,462		3,657,643
Accumulated deficit		(495,033)		(412,944)
Accumulated other comprehensive loss		(25,446)		(39,979)
Total shareholders' equity of JBG SMITH Properties		3,087,281		3,206,039
Noncontrolling interests		16,495		167
Total equity		3,103,776		3,206,206
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	6,008,978	$	6,079,547

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
REVENUE
Property rental	$	125,900	$	118,680	$	370,960	$	354,519
Third-party real estate services, including reimbursements		25,842		26,987		90,694		83,870
Other revenue		5,280		5,368		15,301		15,705
Total revenue		157,022		151,035		476,955		454,094
EXPENSES
Depreciation and amortization		56,726		56,481		178,130		157,586
Property operating		40,198		37,572		109,929		105,867
Real estate taxes		18,259		17,354		55,127		53,422
General and administrative:
Corporate and other		12,105		11,086		38,475		37,478
Third-party real estate services		25,542		28,207		80,035		86,260
Share-based compensation related to Formation Transaction and special equity awards		3,480		7,133		12,866		25,432
Transaction and other costs		2,951		845		8,911		7,526
Total expenses		159,261		158,678		483,473		473,571
OTHER INCOME (EXPENSE)
Income (loss) from unconsolidated real estate ventures, net		20,503		(965)		23,513		(17,142)
Interest and other income, net		192		—		163		1,021
Interest expense		(17,243)		(16,885)		(50,312)		(44,660)
Gain on sale of real estate		—		—		11,290		59,477
Loss on extinguishment of debt		—		—		—		(33)
Total other income (expense)		3,452		(17,850)		(15,346)		(1,337)
INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT		1,213		(25,493)		(21,864)		(20,814)
Income tax (expense) benefit		(217)		488		(4,527)		3,721
NET INCOME (LOSS)		996		(25,005)		(26,391)		(17,093)
Net (income) loss attributable to redeemable noncontrolling interests		(103)		2,212		2,472		445
Net loss attributable to noncontrolling interests		—		—		1,108		—
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	893	$	(22,793)	$	(22,811)	$	(16,648)
EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED	$	0.00	$	(0.18)	$	(0.18)	$	(0.14)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED		131,351		133,620		131,456		133,924

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
NET INCOME (LOSS)	$	996	$	(25,005)	$	(26,391)	$	(17,093)
OTHER COMPREHENSIVE INCOME (LOSS):
Change in fair value of derivative financial instruments		(329)		(278)		4,678		(39,489)
Reclassification of net loss on derivative financial instruments from accumulated other comprehensive loss into interest expense		3,901		3,823		11,476		8,137
Other comprehensive income (loss)		3,572		3,545		16,154		(31,352)
COMPREHENSIVE INCOME (LOSS)		4,568		(21,460)		(10,237)		(48,445)
Net (income) loss attributable to redeemable noncontrolling interests		(103)		2,212		2,472		445
Net loss attributable to noncontrolling interests		—		—		1,108		—
Other comprehensive (income) loss attributable to redeemable noncontrolling interests		(413)		(309)		(1,621)		3,446
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES	$	4,052	$	(19,557)	$	(8,278)	$	(44,554)

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)


								Accumulated
				Additional				Other
	Common Shares			Paid-In		Accumulated		Comprehensive		Noncontrolling		Total
	Shares	Amount		Capital		Deficit		Loss		Interests		Equity
BALANCE AS OF JUNE 30, 2021	131,841	$	1,319	$	3,650,217	$	(466,230)	$	(28,605)	$	16,540	$	3,173,241
Net income attributable to common shareholders and noncontrolling interests	—		—		—		893		—		—		893
Conversion of common limited partnership units to common shares	180		2		5,668		—		—		—		5,670
Common shares repurchased	(2,317)		(23)		(68,907)		—		—		—		(68,930)
Common shares issued pursuant to employee incentive compensation plan and Employee Share Purchase Plan ("ESPP")	—		—		210		—		—		—		210
Dividends declared on common shares ($0.225 per common share)	—		—		—		(29,696)		—		—		(29,696)
Distributions to noncontrolling interests	—		—		—		—		—		(45)		(45)
Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation	—		—		19,274		—		(413)		—		18,861
Other comprehensive income	—		—		—		—		3,572		—		3,572
BALANCE AS OF SEPTEMBER 30, 2021	129,704	$	1,298	$	3,606,462	$	(495,033)	$	(25,446)	$	16,495	$	3,103,776

BALANCE AS OF JUNE 30, 2020	133,708	$	1,338	$	3,742,205	$	(255,162)	$	(47,886)	$	191	$	3,440,686
Net loss attributable to common shareholders and noncontrolling interests	—		—		—		(22,793)		—		—		(22,793)
Conversion of common limited partnership units to common shares	169		2		4,794		—		—		—		4,796
Common shares repurchased	(1,439)		(15)		(38,362)		—		—		—		(38,377)
Common shares issued pursuant to ESPP	—		—		186		—		—		—		186
Dividends declared on common shares ($0.225 per common share)	—		—		—		(30,020)		—		—		(30,020)
Distributions to noncontrolling interests	—		—		—		—		—		(12)		(12)
Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation	—		—		12,236		—		(309)		—		11,927
Other comprehensive income	—		—		—		—		3,545		—		3,545
BALANCE AS OF SEPTEMBER 30, 2020	132,438	$	1,325	$	3,721,059	$	(307,975)	$	(44,650)	$	179	$	3,369,938

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)



								Accumulated
				Additional				Other
	Common Shares			Paid-In		Accumulated		Comprehensive		Noncontrolling		Total
	Shares	Amount		Capital		Deficit		Loss		Interests		Equity
BALANCE AS OF DECEMBER 31, 2020	131,778	$	1,319	$	3,657,643	$	(412,944)	$	(39,979)	$	167	$	3,206,206
Net loss attributable to common shareholders and noncontrolling interests	—		—		—		(22,811)		—		(1,108)		(23,919)
Conversion of common limited partnership units to common shares	829		8		27,342		—		—		—		27,350
Common shares repurchased	(2,937)		(29)		(88,104)		—		—		—		(88,133)
Common shares issued pursuant to employee incentive compensation plan and ESPP	34		—		1,549		—		—		—		1,549
Dividends declared on common shares ($0.45 per common share)	—		—		—		(59,278)		—		—		(59,278)
Contributions from noncontrolling interests, net	—		—		—		—		—		17,436		17,436
Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation	—		—		8,032		—		(1,621)		—		6,411
Other comprehensive income	—		—		—		—		16,154		—		16,154
BALANCE AS OF SEPTEMBER 30, 2021	129,704	$	1,298	$	3,606,462	$	(495,033)	$	(25,446)	$	16,495	$	3,103,776

BALANCE AS OF DECEMBER 31, 2019	134,148	$	1,342	$	3,633,042	$	(231,164)	$	(16,744)	$	201	$	3,386,677
Net loss attributable to common shareholders and noncontrolling interests	—		—		—		(16,648)		—		—		(16,648)
Conversion of common limited partnership units to common shares	1,112		12		40,662		—		—		—		40,674
Common shares repurchased	(2,857)		(29)		(79,540)		—		—		—		(79,569)
Common shares issued pursuant to ESPP	35		—		1,320		—		—		—		1,320
Dividends declared on common shares ($0.45 per common share)	—		—		—		(60,163)		—		—		(60,163)
Distributions to noncontrolling interests	—		—		—		—		—		(22)		(22)
Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation	—		—		125,575		—		3,446		—		129,021
Other comprehensive loss	—		—		—		—		(31,352)		—		(31,352)
BALANCE AS OF SEPTEMBER 30, 2020	132,438	$	1,325	$	3,721,059	$	(307,975)	$	(44,650)	$	179	$	3,369,938

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2021		2020
OPERATING ACTIVITIES:
Net loss	$	(26,391)	$	(17,093)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Share-based compensation expense		38,320		53,183
Depreciation and amortization, including amortization of deferred financing costs		181,217		160,395
Deferred rent		(17,463)		(19,124)
(Income) loss from unconsolidated real estate ventures, net		(23,513)		17,142
Amortization of market lease intangibles, net		(896)		(356)
Amortization of lease incentives		6,083		5,144
Loss on extinguishment of debt		—		33
Gain on sale of real estate		(11,290)		(59,477)
Loss on operating lease and other receivables		1,071		14,750
Return on capital from unconsolidated real estate ventures		13,212		3,697
Other non-cash items		583		265
Changes in operating assets and liabilities:
Tenant and other receivables		3,704		(4,757)
Other assets, net		(12,059)		(11,566)
Accounts payable and accrued expenses		5,954		1,366
Other liabilities, net		(4,120)		(15,747)
Net cash provided by operating activities		154,412		127,855
INVESTING ACTIVITIES:
Development costs, construction in progress and real estate additions		(108,361)		(245,456)
Deposits for real estate and other acquisitions		(10,263)		(25,274)
Proceeds from sale of real estate		14,370		154,493
Distributions of capital from unconsolidated real estate ventures		40,188		70,818
Investments in unconsolidated real estate ventures and other		(32,685)		(12,277)
Net cash used in investing activities		(96,751)		(57,696)
FINANCING ACTIVITIES:
Borrowings under mortgages payable		85,000		580,105
Borrowings under revolving credit facility		—		500,000
Borrowings under unsecured term loans		—		100,000
Repayments of mortgages payable		(4,462)		(6,680)
Repayments of revolving credit facility		—		(700,000)
Debt issuance costs		(5,747)		(14,856)
Finance lease payments		—		(3,281)
Proceeds from common shares issued pursuant to ESPP		880		887
Common shares repurchased		(82,300)		(74,434)
Dividends paid to common shareholders		(88,928)		(90,347)
Distributions to redeemable noncontrolling interests		(13,705)		(11,333)
Distributions to noncontrolling interests		(22)		(23)
Contributions from noncontrolling interests		17,464		—
Net cash (used in) provided by financing activities		(91,820)		280,038
Net (decrease) increase in cash and cash equivalents and restricted cash		(34,159)		350,197
Cash and cash equivalents and restricted cash, beginning of period		263,336		142,516
Cash and cash equivalents and restricted cash, end of period	$	229,177	$	492,713
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD:
Cash and cash equivalents	$	194,277	$	455,111
Restricted cash		34,900		37,602
Cash and cash equivalents and restricted cash	$	229,177	$	492,713

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Nine Months Ended September 30,
	2021		2020
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:
Cash paid for interest (net of capitalized interest of $4,854 and $11,545 in 2021 and 2020)	$	46,010	$	40,744
Accrued capital expenditures included in accounts payable and accrued expenses		41,660		51,092
Write-off of fully depreciated assets		46,278		29,393
Deconsolidation of real estate asset		26,476		—
Conversion of common limited partnership units to common shares		27,350		40,674
Derecognition of operating lease right-of-use assets		—		(13,151)
Derecognition of liabilities related to operating lease right-of-use assets		—		(13,151)
Recognition of finance lease right-of-use assets		—		42,354
Recognition of liabilities related to finance lease right-of-use assets		—		40,684
Cash paid for amounts included in the measurement of lease liabilities for operating leases		1,761		4,603

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.Organization and Basis of Presentation

Organization

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust ("REIT"), owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail. JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in the Washington, D.C. metropolitan area that have high barriers to entry and vibrant urban amenities. Over half of our portfolio is in National Landing in Northern Virginia, where we serve as the exclusive developer for Amazon.com, Inc.'s ("Amazon") new headquarters and where Virginia Tech's under-construction $1 billion Innovation Campus is located. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, Amazon, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership. As of September 30, 2021, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 90.8% of its common limited partnership units ("OP Units"). JBG SMITH is hereinafter referred to 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.

We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C. segment. On July 18, 2017, we acquired the management business and certain assets and liabilities of JBG (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction."

As of September 30, 2021, our Operating Portfolio consisted of 63 operating assets comprising 42 commercial assets totaling 13.1 million square feet (11.3 million square feet at our share) and 21 multifamily assets totaling 7,776 units (6,125 units at our share). Additionally, we have: (i) one under-construction multifamily asset with 808 units (808 units at our share); (ii) 11 near-term development assets totaling 5.3 million square feet (5.0 million square feet at our share) of estimated potential development density; and (iii) 25 future development assets totaling 14.3 million square feet (11.6 million square feet at our share) of estimated potential development density.

We derive our revenue primarily from leases with commercial and multifamily tenants, which include fixed and percentage rents, and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance. In addition, our third-party asset management and real estate services business provides fee-based real estate services.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not contain certain information required in annual financial statements and notes as required under GAAP. In our opinion, all adjustments considered necessary for a fair presentation have been included, and all such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated. The results of operations for the three and nine months ended September 30, 2021 and 2020 are not necessarily indicative of the results that may be expected for a full year. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission.

The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH LP. See Note 5 for additional

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information on our VIEs. The portions of the equity and net income (loss) of consolidated entities that are not attributable to us are presented separately as amounts attributable to noncontrolling interests in our condensed consolidated financial statements.

References to our financial statements refer to our condensed consolidated financial statements as of September 30, 2021 and December 31, 2020, and for the three and nine months ended September 30, 2021 and 2020. References to our balance sheets refer to our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020. References to our statements of operations refer to our condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020. References to our statements of comprehensive income (loss) refer to our condensed consolidated statements of comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020.

Income Taxes

We have elected to be taxed as a 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 these activities.

2.Summary of Significant Accounting Policies

Significant Accounting Policies

There were no material changes to our significant accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and 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. The most significant of these estimates include: (i) the underlying cash flows and holding periods used in assessing impairment of long-lived assets; (ii) the determination of useful lives for tangible and intangible assets; and (iii) the assessment of the collectability of receivables, including deferred rent receivables. Longer estimated holding periods for real estate assets directly reduce the likelihood of recording an impairment loss. If there is a change in the strategy for an asset or if market conditions dictate an earlier sale date, an impairment loss may be recognized, and such loss could be material.

In March 2020, the World Health Organization declared a global pandemic related to the novel coronavirus ("COVID-19"). The significance, extent and duration of the impact of COVID-19 on us and our tenants remains largely uncertain and dependent on near-term and future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19, the distribution, effectiveness and willingness of people to take COVID-19 vaccines, the extent and effectiveness of the containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in the area in which we operate. The ultimate adverse impact of COVID-19 is highly uncertain; however, the effects of COVID-19 on us and our tenants have affected estimates used in the preparation of the underlying cash flows used in assessing our long-lived assets for impairment and the assessment of the collectability of receivables from tenants, including deferred rent receivables. We have made what we believe to be appropriate accounting estimates based on the facts and circumstances available as of the reporting date. To the extent these estimates differ from actual results, our consolidated financial statements may be materially affected.

Due to the business disruptions and challenges caused by COVID-19, we have provided rent deferrals and other lease concessions to certain tenants. We have entered into agreements with certain tenants, many of which have been placed on the cash basis of accounting, resulting in the deferral to future periods or abatement of $492,000 of rent that had been contractually due in the third quarter of 2021. We are negotiating additional rent deferrals and other lease concessions with

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some of our tenants, which have been considered when establishing credit losses against billed and deferred rent receivables. During 2020, we began recognizing revenue from substantially all co-working tenants and retailers except for grocers, pharmacies, essential businesses and certain national credit tenants on the cash basis of accounting.

Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2020-04, Reference Rate Reform ("Topic 848"). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period of March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the nine months ended September 30, 2021, we did not make any elections. During the year ended December 31, 2020, we elected to apply the hedge accounting expedients related to (i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future London Interbank Offered Rate ("LIBOR") indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves our past presentation of our derivatives. We will continue to evaluate the impact of the guidance and may apply other elections, as applicable.

3.Acquisition, Dispositions and Assets Held for Sale

Acquisition

We have agreed, subject to customary closing conditions, to acquire The Batley, a 432-unit multifamily asset in the Union Market submarket of Washington, D.C., for a purchase price of approximately $205 million. The building was 90.7% occupied as of September 30, 2021. We expect the acquisition to close in 2021. We intend to use The Batley as a replacement property in a like-kind exchange for the proceeds from the sale of Pen Place to Amazon, which is expected to close during the second quarter of 2022.

Dispositions

In April 2021, we invested cash in and contributed land to two real estate ventures and recognized an $11.3 million gain, which is included in "Gain on sale of real estate" in our statements of operations for the nine months ended September 30, 2021. See Note 4 for additional information.

During the three and nine months ended September 30, 2021, we recognized our proportionate share of the gain from the sale of various assets by our unconsolidated real estate ventures, which is included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. See Note 4 for additional information.

Assets Held for Sale

The amounts included in "Assets held for sale" in our balance sheets primarily represent the carrying value of real estate. The following is a summary of assets held for sale:



			Total	Assets Held
Assets	Segment	Location	Square Feet ⁽¹⁾	for Sale

			(In thousands)
September 30, 2021
Pen Place ⁽²⁾	Other	Arlington, Virginia	2,082	$	74,174
December 31, 2020
Pen Place ⁽²⁾	Other	Arlington, Virginia	2,082	$	73,876

(1)	Represents estimated or approved potential development density.

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(2)	In March 2019, we entered into an agreement for the sale of Pen Place to Amazon, which we expect to close during the second quarter of 2022.

4.Investments in Unconsolidated Real Estate Ventures

The following is a summary of our investments in unconsolidated real estate ventures:


	Effective
	Ownership
Real Estate Venture Partners	Interest ⁽¹⁾	September 30, 2021		December 31, 2020

		(In thousands)
Prudential Global Investment Management	50.0%	$	209,261	$	216,939
Landmark	1.8% - 49.0%		53,295		66,724
CBREI Venture	5.0% - 64.0%		59,028		65,190
Canadian Pension Plan Investment Board ("CPPIB")	55.0%		49,098		47,522
J.P. Morgan Global Alternatives ("J.P. Morgan") ⁽²⁾	50.0%		47,362		—
Berkshire Group	50.0%		53,589		50,649
Brandywine Realty Trust	30.0%		13,755		13,710
Other			664		635
Total investments in unconsolidated real estate ventures ⁽³⁾		$	486,052	$	461,369

(1)	Reflects our effective ownership interests in the underlying real estate as of September 30, 2021. We have multiple investments with certain venture partners with varying ownership interests in the underlying real estate.

(2)	J.P. Morgan is the advisor for an institutional investor.

(3)

As of September 30, 2021 and December 31, 2020, our total investments in unconsolidated real estate ventures were greater than the net book value of the underlying assets by $20.2 million and $18.9 million, resulting principally from capitalized interest and our zero investment balance in the real estate venture with CPPIB that owns 1101 17th Street.

In April 2021, we entered into two real estate ventures with an institutional investor advised by J.P. Morgan, in which we have 50% ownership interests, to design, develop, manage and own approximately 2.0 million square feet of new mixed-use development located in Potomac Yard, the southern portion of National Landing. Our venture partner contributed a land site that is entitled for 1.3 million square feet of development at Potomac Yard Landbay F, while we contributed cash and adjacent land with over 700,000 square feet of estimated development capacity at Potomac Yard Landbay G. We will also act as pre-developer, developer, property manager and leasing agent for all future commercial and residential properties on the site. We have determined the ventures are VIEs, but we are not the primary beneficiary of the VIEs and, accordingly, we have not consolidated either venture. We recognized an $11.3 million gain on the land contributed to one of the real estate ventures based on the cash received and the remeasurement of our retained interest in the asset, which was included in "Gain on sale of real estate" in our statements of operations for the nine months ended September 30, 2021. As part of the transaction, our venture partner elected to accelerate the monetization of a 2013 promote interest in the land contributed by it to the ventures. During the second quarter of 2021, the total amount of the promote paid was $17.5 million, of which $4.2 million was paid to certain of our non-employee trustees and certain of our executives.

The following is a summary of disposition activity by our unconsolidated real estate ventures for the nine months ended September 30, 2021:

Proportionate

Real Estate

Gross

Share of

Venture

Ownership

Sales

Aggregate

Date Disposed

Partners

Assets

Percentage

Price

Gain ⁽¹⁾

(In thousands)

May 3, 2021

CBREI Venture

Fairway Apartments/Fairway Land ("Fairway") ⁽²⁾

10.0%

93,000

2,094

May 19, 2021

Landmark

Courthouse Metro Land/Courthouse Metro Land – Option ("Courthouse Metro")

18.0%

3,000

2,352

May 27, 2021

Landmark

5615 Fishers Lane

18.0%

6,500

743

September 17, 2021

Landmark

500 L'Enfant Plaza ⁽³⁾

49.0%

166,500

23,137

28,326

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(1)	Included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations.

(2)	The venture repaid a related mortgage payable of $45.3 million.

(3)	The venture repaid a related mortgage payable of $80.0 million.

We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $5.9 million and $17.8 million for the three and nine months ended September 30, 2021, and $6.3 million and $19.3 million for the three and nine months ended September 30, 2020, for such services.

A reconsideration event could cause us to consolidate an unconsolidated real estate venture in the future or deconsolidate a consolidated entity. We evaluate reconsideration events as we become aware of them. Reconsideration events include amendments to real estate venture agreements and changes in our partner's ability to make contributions to the venture. Under certain circumstances, we may purchase our partner's interest.

The following is a summary of the debt of our unconsolidated real estate ventures:


	Weighted
	Average Effective
	Interest Rate ⁽¹⁾	September 30, 2021		December 31, 2020

		(In thousands)
Variable rate ⁽²⁾	2.59%	$	786,169	$	863,617
Fixed rate ⁽³⁾ ⁽⁴⁾	4.16%		293,920		323,050
Mortgages payable			1,080,089		1,186,667
Unamortized deferred financing costs			(5,785)		(7,479)
Mortgages payable, net ⁽⁴⁾		$	1,074,304	$	1,179,188

(1)	Weighted average effective interest rate as of September 30, 2021.

(2)	Includes variable rate mortgages payable with interest rate cap agreements.

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

(4)	See Note 17 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures.

The following is a summary of financial information for our unconsolidated real estate ventures:


	September 30, 2021		December 31, 2020

	(In thousands)
Combined balance sheet information:
Real estate, net	$	2,170,039	$	2,247,384
Other assets, net		257,138		270,516
Total assets	$	2,427,177	$	2,517,900

Mortgages payable, net	$	1,074,304	$	1,179,188
Other liabilities, net		128,554		140,304
Total liabilities		1,202,858		1,319,492
Total equity		1,224,319		1,198,408
Total liabilities and equity	$	2,427,177	$	2,517,900

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	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Combined income statement information: ⁽¹⁾
Total revenue	$	45,289	$	47,235		$	141,370	$	162,128
Operating income (loss) ⁽²⁾		51,068		1,296			94,275		(24,418)
Net income (loss) ⁽²⁾		42,261		(6,265)			69,091		(60,331)

(1)

Excludes information related to the venture that owned The Marriott Wardman Park hotel for the three months ended September 30, 2020 as we suspended equity loss recognition for the venture after June 30, 2020. On October 1, 2020, we transferred our interest in the related venture to our venture partner.

(2)

Includes the gain from the sale 500 L'Enfant Plaza of $47.4 million during the three months ended September 30, 2021. Includes the gain from the sale of Fairway, Courthouse Metro, 5615 Fishers Lane and 500 L'Enfant Plaza totaling $85.5 million during the nine months ended September 30, 2021. Includes the loss from the sale of Woodglen of $16.4 million during the nine months ended September 30, 2020.

5.Variable Interest Entities

We hold various interests in entities deemed to be VIEs, which we evaluate at acquisition, formation, after a change in the ownership agreement, after a change in the entity's economics or after any other reconsideration event to determine if the VIE should be consolidated in our financial statements or should no longer be considered a VIE. An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk, or conducts substantially all its operations on behalf of an investor with disproportionately few voting rights. We will consolidate a VIE if we are the primary beneficiary of the VIE, which entails having the power to direct the activities that most significantly impact the VIE’s economic performance. Certain criteria we assess in determining whether we are the primary beneficiary of the VIE include our influence over significant business activities, our voting rights, and any noncontrolling interest kick-out or participating rights.

Unconsolidated VIEs

As of September 30, 2021 and December 31, 2020, we had interests in entities deemed to be VIEs. Although we are engaged to act as the managing partner in charge of day-to-day operations of these investees, we are not the primary beneficiary of these VIEs, as we do not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's economic performance. We account for our investment in these entities under the equity method. As of September 30, 2021 and December 31, 2020, the net carrying amount of our investment in these entities was $165.4 million and $116.2 million, which is included in "Investments in unconsolidated real estate ventures" in our balance sheets. Our equity in the income of unconsolidated VIEs is included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees. See Note 17 for additional information.

Consolidated VIEs

JBG SMITH LP is our most significant consolidated VIE. We hold 90.8% of the limited partnership interest in JBG SMITH LP, act as the general partner and exercise full responsibility, discretion and control over its day-to-day management. The noncontrolling interests of JBG SMITH LP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest limited partners (including by such a limited partner unilaterally). Because the noncontrolling interest holders do not have these rights, JBG SMITH LP is a VIE. As general partner, we have the power to direct the activities of JBG SMITH LP that most significantly affect its economic performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP. Accordingly, we are the primary beneficiary of JBG SMITH LP and consolidate it in our financial statements. Because we conduct our business and hold our assets and liabilities through JBG SMITH LP, its total assets and liabilities comprise substantially all of our consolidated assets and liabilities.

Through the structure of the 1900 Crystal Drive transaction we executed in March 2021, we have the ability to facilitate an exchange out of an asset into 1900 Crystal Drive. We leased the land underlying 1900 Crystal Drive located in National

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Landing to a lessee, which plans to construct an 808-unit multifamily asset comprising two towers with ground floor retail. The ground lessee has engaged us to be the development manager for the construction of 1900 Crystal Drive, and separately, we are the lessee in a master lease of the asset. We have an option to acquire the asset until a specified period after completion. In March 2021, the ground lessee entered into a mortgage loan collateralized by the leasehold interest with a maximum principal balance of $227.0 million and an interest rate of LIBOR plus 3.0% per annum. As of September 30, 2021, no proceeds had been received from the mortgage loan. In connection with the mortgage loan, we have guaranteed the completion of the asset and provided certain carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy). The ground lessee was obligated to invest $17.5 million of equity funding, all of which has been funded, and we are obligated to provide additional project funding through a mezzanine loan to the ground lessee, of which we have funded $11.7 million as of September 30, 2021. We determined that 1900 Crystal Drive is a VIE and that we are the primary beneficiary of the VIE. Accordingly, we consolidate the VIE with the lessee's ownership interest shown as "Noncontrolling interests" in our balance sheet. The ground lease, the mezzanine loan and the master lease described above are eliminated in consolidation. As of September 30, 2021, the VIE had total assets and liabilities of $29.7 million and $4.5 million. The assets of the VIE can only be used to settle the obligations of the VIE, and the liabilities include third-party liabilities of the VIE for which the creditors or beneficial interest holders do not have recourse against us.

6.Other Assets, Net

The following is a summary of other assets, net:


	September 30, 2021		December 31, 2020

	(In thousands)
Deferred leasing costs, net	$	116,544	$	117,141
Lease intangible assets, net		11,055		15,565
Management and leasing contracts, net		21,084		25,512
Other identified intangible assets		17,360		17,500
Wireless spectrum licenses ⁽¹⁾		25,730		—
Operating lease right-of-use assets		3,326		3,542
Finance lease right-of-use assets		41,675		41,996
Prepaid expenses		20,171		14,000
Deferred financing costs, net		9,352		6,656
Deposits ⁽¹⁾		12,026		28,560
Other		22,214		16,103
Total other assets, net	$	300,537	$	286,575

(1)

During 2020, we deposited $25.3 million with the Federal Communications Commission in connection with the acquisition of wireless spectrum licenses. In March 2021, we received the licenses. While the licenses are issued for ten years, as long as we act within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. Accordingly, we have concluded that the licenses are indefinite-lived intangible assets.

7.Debt

Mortgages Payable

The following is a summary of mortgages payable:


	Weighted Average
	Effective
	Interest Rate ⁽¹⁾	September 30, 2021		December 31, 2020

		(In thousands)
Variable rate ⁽²⁾	2.08%	$	762,246	$	678,346
Fixed rate ⁽³⁾	4.32%		922,161		925,523
Mortgages payable			1,684,407		1,603,869
Unamortized deferred financing costs and premium / discount, net ⁽⁴⁾			(10,122)		(10,131)
Mortgages payable, net		$	1,674,285	$	1,593,738

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(1)	Weighted average effective interest rate as of September 30, 2021.

(2)	Includes variable rate mortgages payable with interest rate cap agreements.

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

(4)	As of September 30, 2021, net deferred financing costs related to an unfunded mortgage loan totaling $4.0 million were included in "Other assets, net."

As of September 30, 2021 and December 31, 2020, the net carrying value of real estate collateralizing our mortgages payable totaled $1.8 billion. Our mortgages payable 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. Certain mortgages payable are recourse to us. See Note 17 for additional information.

In July 2021, we entered into a mortgage loan with a principal balance of $85.0 million, collateralized by 1225 S. Clark Street. The mortgage loan has a seven-year term and an interest rate of LIBOR plus 1.60% per annum.

As of September 30, 2021 and December 31, 2020, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $1.3 billion. See Note 15 for additional information.

Credit Facility

As of September 30, 2021 and December 31, 2020, our $1.4 billion credit facility consisted of a $1.0 billion revolving credit facility maturing in January 2025, a $200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023 and a $200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024. The following is a summary of amounts outstanding under the credit facility:


	Effective
	Interest Rate ⁽¹⁾	September 30, 2021		December 31, 2020

		(In thousands)
Revolving credit facility ^{(2) (3) (4)}	1.13%	$	—	$	—

Tranche A-1 Term Loan ⁽⁵⁾	2.59%	$	200,000	$	200,000
Tranche A-2 Term Loan ⁽⁵⁾	2.49%		200,000		200,000
Unsecured term loans			400,000		400,000
Unamortized deferred financing costs, net			(1,507)		(2,021)
Unsecured term loans, net		$	398,493	$	397,979

(1)	Effective interest rate as of September 30, 2021.

(2)	As of September 30, 2021 and December 31, 2020, letters of credit with an aggregate face amount of $1.4 million and $1.5 million were outstanding under our revolving credit facility.

(3)	As of September 30, 2021 and December 31, 2020, net deferred financing costs related to our revolving credit facility totaling $5.4 million and $6.7 million were included in "Other assets, net."

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

(5)

As of September 30, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the respective term loan and provide a weighted average interest rate of 1.39% for the Tranche A-1 Term Loan and 1.34% for the Tranche A-2 Term Loan.

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8.Other Liabilities, Net

The following is a summary of other liabilities, net:


	September 30, 2021		December 31, 2020

	(In thousands)
Lease intangible liabilities, net	$	8,567	$	10,300
Lease assumption liabilities		6,257		10,126
Lease incentive liabilities		14,125		13,913
Liabilities related to operating lease right-of-use assets		8,914		10,752
Liabilities related to finance lease right-of-use assets		40,733		40,221
Prepaid rent		20,343		19,809
Security deposits		17,953		13,654
Environmental liabilities		18,168		18,242
Deferred tax liability, net		6,290		2,509
Dividends payable		—		34,075
Derivative agreements, at fair value		28,406		44,222
Deferred purchase price ⁽¹⁾		19,639		19,479
Other		10,809		10,472
Total other liabilities, net	$	200,204	$	247,774

(1)	Deferred purchase price associated with the December 2020 acquisition of the former Americana Hotel site.

9.Redeemable Noncontrolling Interests

JBG SMITH LP

OP Units held by persons other than JBG SMITH are redeemable for cash or, at our election, our common shares, subject to certain limitations. During the nine months ended September 30, 2021 and 2020, unitholders redeemed 829,107 and 1.1 million OP Units, which we elected to redeem for an equivalent number of our common shares. As of September 30, 2021, outstanding OP Units totaled 13.1 million, representing a 9.2% ownership interest in JBG SMITH LP. On our balance sheets, our OP Units and certain vested long-term incentive partnership units ("LTIP Units") are presented at the higher of their redemption value or their carrying value, with adjustments to the redemption value recognized in "Additional paid-in capital." Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period. In October 2021, unitholders redeemed 20,953 OP Units, which we elected to redeem for an equivalent number of our common shares.

Consolidated Real Estate Venture

We are a partner in a consolidated real estate venture that owns a multifamily asset located in Washington, D.C. Pursuant to the terms of the real estate venture agreement, we are obligated to fund all capital contributions until our ownership interest reaches a maximum of 97.0%. Our partner can redeem its interest for cash under certain conditions. As of September 30, 2021, we held a 96.0% ownership interest in the real estate venture.

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The following is a summary of the activity of redeemable noncontrolling interests:


	Three Months Ended September 30,
	2021						2020
			Consolidated						Consolidated
	JBG		Real Estate				JBG		Real Estate
	SMITH LP		Venture		Total		SMITH LP		Venture		Total

	(In thousands)
Balance, beginning of period	$	536,171	$	8,468	$	544,639	$	493,067	$	6,016	$	499,083
OP Unit redemptions		(5,670)		—		(5,670)		(4,796)		—		(4,796)
Net income (loss) attributable to redeemable noncontrolling interests		116		(13)		103		(2,176)		(36)		(2,212)
Other comprehensive income		413		—		413		309		—		309
Distributions		(3,993)		—		(3,993)		(3,723)		—		(3,723)
Share-based compensation expense		10,695		—		10,695		14,496		—		14,496
Adjustment to redemption value		(20,748)		1,474		(19,274)		(14,012)		1,776		(12,236)
Balance, end of period	$	516,984	$	9,929	$	526,913	$	483,165	$	7,756	$	490,921

	Nine Months Ended September 30,
	2021						2020
			Consolidated						Consolidated
	JBG		Real Estate				JBG		Real Estate
	SMITH LP		Venture		Total		SMITH LP		Venture		Total

	(In thousands)
Balance, beginning of period	$	522,882	$	7,866	$	530,748	$	606,699	$	6,059	$	612,758
OP Unit redemptions		(27,350)		—		(27,350)		(40,674)		—		(40,674)
LTIP Units issued in lieu of cash bonuses ⁽¹⁾		5,614		—		5,614		4,066		—		4,066
Net loss attributable to redeemable noncontrolling interests		(2,400)		(72)		(2,472)		(366)		(79)		(445)
Other comprehensive income (loss)		1,621		—		1,621		(3,446)		—		(3,446)
Distributions		(9,282)		—		(9,282)		(7,505)		—		(7,505)
Share-based compensation expense		36,066		—		36,066		51,742		—		51,742
Adjustment to redemption value		(10,167)		2,135		(8,032)		(127,351)		1,776		(125,575)
Balance, end of period	$	516,984	$	9,929	$	526,913	$	483,165	$	7,756	$	490,921

(1)	See Note 11 for additional information.

10.Property Rental Revenue

The following is a summary of property rental revenue from our non-cancellable leases:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Fixed	$	114,100	$	109,321		$	339,321	$	326,866
Variable		11,800		9,359			31,639		27,653
Property rental revenue	$	125,900	$	118,680		$	370,960	$	354,519

11.Share-Based Payments

LTIP Units and Time-Based LTIP Units

During the nine months ended September 30, 2021, we granted to certain employees 498,955 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") with a weighted average grant-date fair value of $29.21 per unit that

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primarily vest ratably over four years subject to continued employment. Compensation expense for these units is being recognized over a four-year period.

Additionally, in January 2021, we granted 163,065 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonus, related to 2020 service, as LTIP Units. The LTIP units had a grant-date fair value of $29.54 per unit. Compensation expense totaling $4.8 million for these LTIP Units was recognized in 2020.

In April 2021, as part of their annual compensation, we granted to non-employee trustees a total of 71,792 fully vested LTIP Units with an aggregate grant-date fair value of $1.9 million. The LTIP Units may not be sold while a trustee is serving on the Board of Trustees.

In July 2021, we granted to certain employees 608,325 Time-Based LTIP Units with a weighted average grant-date fair value of $31.73 per unit that vest 50% on the fifth anniversary of the grant date and 25% on each of the sixth and seventh anniversaries of the grant date, subject to continued employment. Compensation expense for these units is being recognized over a seven-year period.

The aggregate grant-date fair value of the Time-Based LTIP Units and LTIP Units granted during the nine months ended September 30, 2021 was $40.6 million. The Time-Based LTIP Units and LTIP Units were valued based on the closing common share price on the date of grant, less a discount for post-grant restrictions. The discount was determined using Monte Carlo simulations, and the following is a summary of the significant assumptions used to value these units:


Expected volatility		34.0% to 39.0%
Risk-free interest rate		0.1% to 0.4%
Post-grant restriction periods		2 to 3 years

Performance-Based LTIP Units

In January 2021, we granted to certain employees 627,874 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") with a weighted average grant-date fair value of $15.14 per unit. Our Performance-Based LTIP Units have a three-year performance period. 50% of any Performance-Based LTIP Units that are earned vest at the end of the three-year performance period and the remaining 50% vest on the fourth anniversary of the date of grant, subject to continued employment. If, however, the Performance-Based LTIP Units do not achieve a positive absolute total shareholder return ("TSR") at the end of the three-year performance period, but satisfy the relative performance criteria thereof, 50% of the units that otherwise could have been earned will be forfeited, and the remaining units that are earned will vest if and when we achieve a positive TSR during the succeeding seven years, measured at the end of each quarter. Compensation expense for these units is generally being recognized over a four-year period. In January 2021, the three-year performance period ended for the Performance-Based LTIP Units granted on February 2, 2018. Based on our relative performance and absolute TSR over the three-year performance period, 100% of the units granted were earned.

In July 2021, we granted to certain employees 844,070 Performance-Based LTIP Units with a weighted average grant-date fair value of $23.08 per unit that vest 50% on the fifth anniversary of the grant date and 25% on each of the sixth and seventh anniversaries of the grant date, subject to continued employment, and earn based on our achievement of four share price targets during the performance period commencing on the first anniversary of the grant date and ending on the sixth anniversary of the grant date. Compensation expense for these units is being recognized over a seven-year period.

The aggregate grant-date fair value of the Performance-Based LTIP Units granted during the nine months ended September 30, 2021 was $29.0 million, valued using Monte Carlo simulations. The following is a summary of the significant assumptions used to value the Performance-Based LTIP Units:


Expected volatility		31.0% - 34.0%
Dividend yield		2.6%
Risk-free interest rate		0.2% - 1.0%

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Restricted Share Units ("RSUs")

In January 2021, we granted to certain non-executive employees 22,194 RSUs with time-based vesting requirements ("Time-Based RSUs") with a weighted average grant-date fair value of $31.52 per unit and 13,516 RSUs with performance-based vesting requirements ("Performance-Based RSUs") with a weighted average grant-date fair value of $15.16 per unit. Vesting requirements and compensation expense recognition for the Time-Based RSUs and the Performance-Based RSUs are identical to those of the Time-Based LTIP Units and Performance-Based LTIP Units granted in January 2021.

The aggregate grant-date fair value of the RSUs granted during the nine months ended September 30, 2021 was $905,000. The Time-Based RSUs were valued based on the closing common share price on the date of grant and the Performance-Based RSUs were valued using Monte Carlo simulations with the same significant assumptions used to value the Performance-Based LTIP Units above.

ESPP

Pursuant to the ESPP, employees purchased 34,320 common shares for $880,000 during the nine months ended September 30, 2021. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model:


Expected volatility		39.0%
Dividend yield		1.5%
Risk-free interest rate		0.1%
Expected life		6 months

Share-Based Compensation Expense

The following is a summary of share-based compensation expense:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Time-Based LTIP Units	$	3,999	$	3,364		$	12,494	$	11,003
Performance-Based LTIP Units		3,216		3,999			9,615		14,207
LTIP Units		—		—			1,091		1,100
Other equity awards ⁽¹⁾		1,473		1,690			4,395		4,829
Share-based compensation expense - other		8,688		9,053			27,595		31,139
Formation Awards		476		875			1,923		3,473
OP Units ⁽²⁾		1,610		4,780			6,508		17,398
LTIP Units ⁽²⁾		66		95			217		310
Special Performance-Based LTIP Units ⁽³⁾		629		657			2,014		2,015
Special Time-Based LTIP Units ⁽³⁾		699		726			2,204		2,236
Share-based compensation related to Formation Transaction and special equity awards ⁽⁴⁾		3,480		7,133			12,866		25,432
Total share-based compensation expense		12,168		16,186			40,461		56,571
Less: amount capitalized		(740)		(1,177)			(2,141)		(3,388)
Share-based compensation expense	$	11,428	$	15,009		$	38,320	$	53,183

(1)	Primarily comprising compensation expense for: (i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonus earned, (ii) RSUs and (iii) shares issued under our ESPP.

(2)	Represents share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which are subject to post-Combination employment obligations.

(3)	Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in National Landing.

(4)	Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in the accompanying statements of operations.

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As of September 30, 2021, we had $73.7 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 3.5 years.

12.Transaction and Other Costs

The following is a summary of transaction and other costs:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Demolition costs	$	1,422	$	179		$	2,869	$	179
Integration and severance costs		154		406			616		3,066
Completed, potential and pursued transaction expenses		1,375		260			5,426		281
Other ⁽¹⁾		—		—			—		4,000
Transaction and other costs	$	2,951	$	845		$	8,911	$	7,526

(1)	Related to a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington, D.C. metropolitan area.

13.Interest Expense

The following is a summary of interest expense:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Interest expense before capitalized interest	$	17,278	$	18,274		$	50,744	$	52,751
Amortization of deferred financing costs		1,096		857			3,188		2,255
Interest expense related to finance lease right-of-use assets		430		464			1,284		1,026
Net unrealized (gain) loss on derivative financial instruments not designated as cash flow hedges		37		202			(50)		173
Capitalized interest		(1,598)		(2,912)			(4,854)		(11,545)
Interest expense	$	17,243	$	16,885		$	50,312	$	44,660

14.Shareholders' Equity and Earnings Per Common Share

Common Shares Repurchased

In March 2020, our Board of Trustees authorized the repurchase of up to $500 million of our outstanding common shares. During three and nine months ended September 30, 2021, we repurchased and retired 2.3 million and 2.9 million common shares for $68.9 million and $88.1 million, an average purchase price of $29.73 and $29.99 per share. During the three and nine months ended September 30, 2020, we repurchased and retired 1.4 million and 2.9 million common shares for $38.4 million and $79.6 million, an average purchase price of $26.64 and $27.82 per share. Since we began the share repurchase program, we have repurchased and retired 6.7 million common shares for $192.9 million, an average purchase price of $28.71 per share.

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Earnings (Loss) Per Common Share

The following is a summary of the calculation of basic and diluted earnings (loss) per common share and a reconciliation of the amounts of net income (loss) available to common shareholders used in calculating basic and diluted earnings per common share to net income (loss):


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands, except per share amounts)
Net income (loss)	$	996	$	(25,005)		$	(26,391)	$	(17,093)
Net (income) loss attributable to redeemable noncontrolling interests		(103)		2,212			2,472		445
Net loss attributable to noncontrolling interests		—		—			1,108		—
Net income (loss) attributable to common shareholders		893		(22,793)			(22,811)		(16,648)
Distributions to participating securities		(763)		(822)			(1,497)		(1,729)
Net income (loss) available to common shareholders - basic and diluted	$	130	$	(23,615)		$	(24,308)	$	(18,377)

Weighted average number of common shares outstanding - basic and diluted		131,351		133,620			131,456		133,924

Earnings (loss) per common share - basic and diluted	$	0.00	$	(0.18)		$	(0.18)	$	(0.14)

The effect of the redemption of OP Units, LTIP Units and Time-Based LTIP Units that were outstanding as of September 30, 2021 and 2020 is excluded in the computation of diluted earnings per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings per share). Since OP Units, LTIP Units and Time-Based LTIP Units, which are held by noncontrolling interests, are attributed gains at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average OP Units, LTIP Units and Time-Based LTIP Unit impact are excluded from net income (loss) available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings per common share. Performance-Based LTIP Units, Special Performance-Based LTIP Units, Formation Awards and RSUs, which totaled 5.2 million and 4.9 million for the three and nine months ended September 30, 2021, and 4.4 million and 4.9 million for the three and nine months ended September 30, 2020, were excluded from the calculation of diluted earnings per common share as they were antidilutive, but potentially could be dilutive in the future.

Dividends Declared in October 2021

On October 27, 2021, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on November 24, 2021 to shareholders of record as of November 10, 2021.

15.Fair Value Measurements

Fair Value Measurements on a Recurring Basis

To manage or hedge our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative financial instruments for speculative purposes.

As of September 30, 2021 and December 31, 2020, we had various derivative financial instruments consisting of interest rate swap and cap agreements that are measured at fair value on a recurring basis. The net unrealized loss on our derivative financial instruments designated as cash flow hedges was $27.8 million and $43.9 million as of September 30, 2021 and December 31, 2020 and was recorded in "Accumulated other comprehensive loss" in our balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $14.6 million of net unrealized loss as an increase to interest expense.

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Accounting Standards Codification 820 ("Topic 820"), Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

Level 1 — quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities;

Level 2 — observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and

Level 3 — unobservable inputs that are used when little or no market data is available.

The fair values of the derivative financial instruments are based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and observable inputs. The derivative financial instruments are classified within Level 2 of the valuation hierarchy.

The following is a summary of assets and liabilities measured at fair value on a recurring basis:


	Fair Value Measurements
	Total		Level 1		Level 2		Level 3

	(In thousands)
September 30, 2021
Derivative financial instruments designated as cash flow hedges:
Classified as liabilities in "Other liabilities, net"	$	28,406		—	$	28,406		—
Derivative financial instruments not designated as cash flow hedges:
Classified as assets in "Other assets, net"		266		—		266		—

December 31, 2020
Derivative financial instruments designated as cash flow hedges:
Classified as liabilities in "Other liabilities, net"	$	44,222		—	$	44,222		—
Derivative financial instruments not designated as cash flow hedges:
Classified as assets in "Other assets, net"		35		—		35		—

The fair values of our derivative financial instruments were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument. This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of September 30, 2021 and December 31, 2020, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy. The net unrealized gains and losses included in "Other comprehensive income (loss)" in our statements of comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020 were attributable to the net change in unrealized gains or losses related to the interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

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Financial Assets and Liabilities Not Measured at Fair Value

As of September 30, 2021 and December 31, 2020, all financial assets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:


	September 30, 2021				December 31, 2020
	Carrying				Carrying
	Amount ⁽¹⁾		Fair Value		Amount ⁽¹⁾		Fair Value

	(In thousands)
Financial liabilities:
Mortgages payable	$	1,684,407	$	1,739,548	$	1,603,869	$	1,606,470
Unsecured term loans		400,000		400,201		400,000		399,678

(1)	The carrying amount consists of principal only.

The fair values of the mortgages payable and unsecured term loans were determined using Level 2 inputs of the fair value hierarchy. The fair value of our mortgages payable is estimated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit profiles based on market sources. The fair value of our unsecured term loans is calculated based on the net present value of payments over the term of the facilities using estimated market rates for similar notes and remaining terms.

16.Segment Information

We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We define our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.

The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the net operating income ("NOI") of properties within each segment. NOI includes property rental revenue and parking revenue, and deducts property operating expenses and real estate taxes.

With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative: third-party real estate services"), which are both disclosed separately in our statements of operations. The following represents the components of revenue from our third-party real estate services business:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Property management fees	$	4,831	$	4,694		$	14,549	$	15,453
Asset management fees		2,145		2,301			6,602		7,400
Development fees ⁽¹⁾		4,032		2,614			22,705		8,474
Leasing fees		1,822		1,086			4,106		3,627
Construction management fees		—		584			375		2,057
Other service revenue		1,295		2,000			4,783		5,452
Third-party real estate services revenue, excluding reimbursements		14,125		13,279			53,120		42,463
Reimbursement revenue ⁽²⁾		11,717		13,708			37,574		41,407
Third-party real estate services revenue, including reimbursements		25,842		26,987			90,694		83,870
Third-party real estate services expenses		25,542		28,207			80,035		86,260
Third-party real estate services revenue less expenses	$	300	$	(1,220)		$	10,659	$	(2,390)

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(1)	Estimated development fee revenue totaling $51.2 million as of September 30, 2021 is expected to be recognized over the next six years as unsatisfied performance obligations are completed.

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

Management company assets primarily consist of management and leasing contracts with a net book value of $21.1 million and $25.5 million as of September 30, 2021 and December 31, 2020, which are classified in "Other assets, net" in our balance sheets. Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.

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


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

		(In thousands)
Net income (loss) attributable to common shareholders	$	893	$	(22,793)		$	(22,811)	$	(16,648)
Add:
Depreciation and amortization expense		56,726		56,481			178,130		157,586
General and administrative expense:
Corporate and other		12,105		11,086			38,475		37,478
Third-party real estate services		25,542		28,207			80,035		86,260
Share-based compensation related to Formation Transaction and special equity awards		3,480		7,133			12,866		25,432
Transaction and other costs		2,951		845			8,911		7,526
Interest expense		17,243		16,885			50,312		44,660
Loss on extinguishment of debt		—		—			—		33
Income tax expense (benefit)		217		(488)			4,527		(3,721)
Net income (loss) attributable to redeemable noncontrolling interests		103		(2,212)			(2,472)		(445)
Net loss attributable to noncontrolling interests		—		—			(1,108)		—
Less:
Third-party real estate services, including reimbursements revenue		25,842		26,987			90,694		83,870
Other revenue		1,568		2,292			5,658		5,438
Income (loss) from unconsolidated real estate ventures, net		20,503		(965)			23,513		(17,142)
Interest and other income, net		192		—			163		1,021
Gain on sale of real estate		—		—			11,290		59,477
Consolidated NOI	$	71,155	$	66,830		$	215,547	$	205,497

The following is a summary of NOI by segment. Items classified in the Other column include future development assets, corporate entities and the elimination of intersegment activity.


	Three Months Ended September 30, 2021
	Commercial		Multifamily		Other		Total

	(In thousands)
Property rental revenue	$	92,522	$	35,020	$	(1,642)	$	125,900
Parking revenue		3,520		111		81		3,712
Total property revenue		96,042		35,131		(1,561)		129,612
Property expense:
Property operating		27,068		14,212		(1,082)		40,198
Real estate taxes		12,098		4,930		1,231		18,259
Total property expense		39,166		19,142		149		58,457
Consolidated NOI	$	56,876	$	15,989	$	(1,710)	$	71,155

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	Three Months Ended September 30, 2020
	Commercial		Multifamily		Other		Total

	(In thousands)
Property rental revenue	$	90,050	$	30,452	$	(1,822)	$	118,680
Parking revenue		3,002		74		—		3,076
Total property revenue		93,052		30,526		(1,822)		121,756
Property expense:
Property operating		26,701		13,226		(2,355)		37,572
Real estate taxes		12,136		4,656		562		17,354
Total property expense		38,837		17,882		(1,793)		54,926
Consolidated NOI	$	54,215	$	12,644	$	(29)	$	66,830


	Nine Months Ended September 30, 2021
	Commercial		Multifamily		Other		Total

	(In thousands)
Property rental revenue	$	275,736	$	100,324	$	(5,100)	$	370,960
Parking revenue		9,169		286		188		9,643
Total property revenue		284,905		100,610		(4,912)		380,603
Property expense:
Property operating		76,155		38,449		(4,675)		109,929
Real estate taxes		36,018		15,240		3,869		55,127
Total property expense		112,173		53,689		(806)		165,056
Consolidated NOI	$	172,732	$	46,921	$	(4,106)	$	215,547

	Nine Months Ended September 30, 2020
	Commercial		Multifamily		Other		Total

	(In thousands)
Property rental revenue	$	266,823	$	94,873	$	(7,177)	$	354,519
Parking revenue		10,018		249		—		10,267
Total property revenue		276,841		95,122		(7,177)		364,786
Property expense:
Property operating		78,645		34,238		(7,016)		105,867
Real estate taxes		36,532		14,088		2,802		53,422
Total property expense		115,177		48,326		(4,214)		159,289
Consolidated NOI	$	161,664	$	46,796	$	(2,963)	$	205,497

The following is a summary of certain balance sheet data by segment:


	Commercial		Multifamily		Other		Total

	(In thousands)
September 30, 2021
Real estate, at cost	$	3,494,929	$	2,135,448	$	395,758	$	6,026,135
Investments in unconsolidated real estate ventures		300,304		110,369		75,379		486,052
Total assets ⁽¹⁾		3,541,397		1,779,416		688,165		6,008,978
December 31, 2020
Real estate, at cost	$	3,459,171	$	2,036,131	$	505,329	$	6,000,631
Investments in unconsolidated real estate ventures		327,798		108,593		24,978		461,369
Total assets⁽¹⁾		3,430,509		1,787,718		861,320		6,079,547

(1)	Includes assets held for sale. See Note 3 for additional information.

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17.Commitments and Contingencies

Insurance

We maintain general liability insurance with limits of $150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $1.5 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 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 mortgages payable secured by our properties, a revolving credit facility and unsecured 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 reasonable costs in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties.

Construction Commitments

As of September 30, 2021, we had assets under construction that will, based on our current plans and estimates, require an additional $320.3 million to complete, which we anticipate will be primarily expended over the next three years. These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset recapitalizations and sales, issuance and sale of securities, and available cash.

Environmental Matters

Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the assets. The environmental assessments did not reveal 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. Environmental liabilities totaled $18.2 million as of September 30, 2021 and December 31, 2020 and are included in "Other liabilities, net" in our balance sheets.

Other

As of September 30, 2021, we had committed tenant-related obligations totaling $76.9 million ($73.6 million related to our consolidated entities and $3.3 million 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.

There are various legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

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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 September 30, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.1 million. As of September 30, 2021, we had no principal payment guarantees related to our unconsolidated real estate ventures.

Additionally, with respect to borrowings of our consolidated entities, we have agreed, and may in the future agree, to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion of development projects. As of September 30, 2021, the aggregate amount of principal payment guarantees was $8.3 million for our consolidated entities.

18.Transactions with Related Parties

Our third-party asset management and real estate services business provides fee-based real estate services to the WHI, Amazon, the JBG Legacy Funds and other third parties. We provide services for the benefit of the JBG Legacy Funds that own interests in the assets retained by the JBG Legacy Funds. In connection with the contribution to us of the assets formerly owned by the JBG Legacy Funds as part of the Formation Transaction, the general partner and managing member interests in the JBG Legacy Funds that were held by certain former JBG executives (and who became members of our management team and/or Board of Trustees) were not transferred to us and remain under the control of these individuals. In addition, certain members of our senior management and Board of Trustees have ownership interests in the JBG Legacy Funds and own carried interests in each fund and in certain of our real estate ventures that entitle them to receive cash payments if the fund or real estate venture achieves certain return thresholds.

We launched the WHI with the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. We are the manager for the WHI Impact Pool, which is the social impact debt financing vehicle of the WHI. As of September 30, 2021, the WHI Impact Pool had completed closings of capital commitments totaling $114.4 million, which included a commitment from us of $11.2 million. As of September 30, 2021, our remaining commitment was $8.3 million.

The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool was $5.6 million and $17.2 million for the three and nine months ended September 30, 2021, and $4.6 million and $17.3 million for the three and nine months ended September 30, 2020. As of September 30, 2021 and December 31, 2020, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $3.5 million and $7.5 million for such services.

We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $246,000 and $1.0 million for the three and nine months ended September 30, 2021, and $403,000 and $4.1 million for the three and nine months ended September 30, 2020.

We have agreements with Building Maintenance Services ("BMS"), an entity in which we have a minor preferred interest, to supervise cleaning, engineering and security services at our properties. We paid BMS $4.9 million and $13.4 million during the three and nine months ended September 30, 2021, and $4.0 million and $12.6 million for the three and nine months ended September 30, 2020, which is included in "Property operating expenses" in our statements of operations.

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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, 2020 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 on Form 10-K for the year ended December 31, 2020.

One of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the current pandemic of the novel coronavirus ("COVID-19") on our financial condition, results of operations, cash flows, performance, tenants, the real estate market, and the global economy and financial markets. The significance, extent and duration of the impact of COVID-19 on us and our tenants remains largely uncertain and dependent on near-term and future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19, the distribution, effectiveness and willingness of people to take COVID-19 vaccines, the extent and effectiveness of the containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in the area in which we operate. Moreover, investors are cautioned to interpret many of the risks identified under the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.

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 ("REIT"), owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail. JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in the Washington, D.C. metropolitan area that have high barriers to entry and vibrant urban amenities. Over half of our portfolio is in National Landing where we serve as the exclusive developer for Amazon.com, Inc.'s ("Amazon") new headquarters and where Virginia Tech's under-construction $1 billion Innovation Campus is located. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, Amazon, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership. JBG SMITH is referred to 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.

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References to our financial statements refer to our unaudited condensed consolidated financial statements as of September 30, 2021 and December 31, 2020, and for the three and nine months ended September 30, 2021 and 2020. References to our balance sheets refer to our condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020. References to our statements of operations refer to our condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020. References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the nine months ended September 30, 2021 and 2020.

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

We continue to focus on our comprehensive plan to reposition our holdings in National Landing in Northern Virginia by executing a broad array of Placemaking strategies. Our Placemaking strategies include the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces. In keeping with our dedication to Placemaking, each new project is intended to contribute to authentic and distinct neighborhoods by creating a vibrant street environment with robust retail offerings and other amenities including improved public spaces. We have also invested in Citizens Broadband Radio Service ("CBRS") wireless spectrum in National Landing as part of our efforts to make National Landing among the first 5G-operable submarkets in the nation.

In November 2018, Amazon announced it had selected sites that we own in National Landing as the location of its new headquarters. We currently have leases with Amazon totaling approximately 1.0 million square feet at six office buildings

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in National Landing. In March 2019, we executed purchase and sale agreements with Amazon for two of our National Landing development sites, Metropolitan Park and Pen Place, which will serve as the initial phase of construction associated with Amazon's new headquarters at National Landing. In January 2020, we sold Metropolitan Park to Amazon for $155.0 million and began constructing two new office buildings thereon, totaling 2.1 million square feet, inclusive of over 50,000 square feet of street-level retail with new shops and restaurants. We are the developer, property manager and retail leasing agent for Amazon's new headquarters at National Landing.

2021 Outlook

A fundamental component of our strategy to maximize long-term net asset value per share is active capital allocation. Since our inception in 2017, we have completed the sale, recapitalization and/or ground lease of $1.7 billion of primarily office assets, and we intend to opportunistically sell at least another $1.4 billion of non-core office assets and land. We are currently targeting dispositions primarily of office assets in submarkets where we have less concentration and where we anticipate lower growth rates going forward relative to other opportunities within our portfolio. Additionally, we may market select land assets where ground lease or joint venture execution may represent the clearest path to maximizing value. Redeploying the proceeds from any such sales and recapitalizations will not only help fund our planned growth but will also further advance the strategic shift of our portfolio to majority multifamily.

On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. On March 13, 2020, a National Emergency was declared in the United States in response to COVID-19. The efforts made by federal, state and local governments to mitigate the spread of COVID-19 included orders requiring the temporary closure of or imposed limitations on the operations of certain non-essential businesses, which adversely affected many tenants, especially tenants in the retail industry.

The pandemic continues to evolve, and while we are optimistic about the future, we remain cautious about the medium-term implications for office assets. Vacancy is still at record highs across the region, and most companies are still not fully back in the office. Occupancy of our commercial portfolio declined by 180 basis points from June 30, 2021, the majority of which was related to pre-pandemic decision making, although we had two civilian agency Government Services Administration tenants that reduced their leased square footage due to a planned shift toward working from home. We expect continued pressure on our office occupancy through the end of the year and into 2022. Although parking revenue increased during the three months ended September 30, 2021 as compared to the same period in 2020, parking revenue in our commercial portfolio was approximately 60% below pre-pandemic levels of approximately $30 million annually due to delayed return-to-the-office plans for many of our office tenants.

We are seeing improvements in our multifamily portfolio, with a 390 basis point increase in the occupancy of our operating multifamily portfolio from June 30, 2021 and an increase in market rents due to increased demand and limited new supply.

The significance, extent and duration of the impact of COVID-19 on our business remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time. These developments include: the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the continued speed of the vaccine distribution, the effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and the efficacy of vaccines against variants of COVID-19, the extent and effectiveness of other containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in areas in which we operate, as containment measures continue to be lifted, and whether the residential market in the Washington, D.C. region and any of our properties will be materially impacted by the moratoriums on residential evictions, among others. These uncertainties make it difficult to predict operating results for our business for 2021. Therefore, we could experience material declines in revenue, net income, NOI and/or Funds from Operations ("FFO"). For more information, see "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

Operating Results

Key highlights for the three and nine months ended September 30, 2021 included:

●	net income attributable to common shareholders of $893,000, or $0.00 per diluted common share, for the three months ended September 30, 2021 compared to a net loss attributable to common shareholders of $22.8 million, or $0.18 per

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diluted common share, for the three months ended September 30, 2020. Net loss attributable to common shareholders of $22.8 million, or $0.18 per diluted common share, for the nine months ended September 30, 2021 compared to $16.6 million, or $0.14 per diluted common share, for the nine months ended September 30, 2020;

●	third-party real estate services revenue, including reimbursements, of $25.8 million and $90.7 million for the three and nine months ended September 30, 2021 compared to $27.0 million and $83.9 million for the three and nine months ended September 30, 2020;

●	operating commercial portfolio leased and occupied percentages at our share of 84.9% and 82.6% as of September 30, 2021 compared to 85.9% and 84.4% as of June 30, 2021, and 88.4% and 85.3% as of September 30, 2020;

●

operating multifamily portfolio leased and occupied percentages at our share of 92.9% and 90.2% as of September 30, 2021 compared to 91.6% and 86.3% as of June 30, 2021, and 83.0% and 76.6% as of September 30, 2020. The in-service operating multifamily portfolio was 95.1% leased and 92.1% occupied as of September 30, 2021, compared to 95.0% leased and 89.8% occupied as of June 30, 2021, and 92.8% leased and 88.1% occupied as of September 30, 2020;

●

the leasing of 159,000 square feet, or 126,000 square feet at our share, at an initial rent⁽¹⁾of $44.82 per square foot and a GAAP-basis weighted average rent per square foot ⁽²⁾of $45.87 for the three months ended September 30, 2021, and the leasing of 1.2 million square feet on a consolidated basis and at our share, at an initial rent⁽¹⁾of $46.04 per square foot and a GAAP-basis weighted average rent per square foot ⁽²⁾of $45.43 for the nine months ended September 30, 2021; and

●

same store ⁽³⁾NOI of $72.7 million for the three months ended September 30, 2021 was unchanged compared to the three months ended September 30, 2020, and a decrease in same store ⁽³⁾NOI of 3.3% to $223.3 million for the nine months ended September 30, 2021 compared to $231.0 million for the nine months ended September 30, 2020.

(1)	Represents the cash basis weighted average starting rent per square foot at our share, which excludes free rent and fixed escalations.

(2)	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.

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

Additionally, investing and financing activity during the nine months ended September 30, 2021 included:

●

the lease of the land underlying 1900 Crystal Drive located in National Landing to a lessee, which plans to construct an 808-unit multifamily asset comprising two towers with ground floor retail. Through the structure of the 1900 Crystal Drive transaction, we have the ability to facilitate an exchange out of an asset into 1900 Crystal Drive. The ground lessee has engaged us to be the development manager for the construction of 1900 Crystal Drive, and separately, we are the lessee in a master lease of the asset. We have an option to acquire the asset until a specified period after completion. See Note 5 to the financial statements for additional information;

●

an investment in two real estate ventures, in which we have 50% ownership interests, to design, develop, manage and own approximately 2.0 million square feet of new mixed-use development located in Potomac Yard, the southern portion of National Landing. We recognized an $11.3 million gain on the land contributed to one of the real estate ventures based on the cash received and the remeasurement of our retained interest in the asset. See Note 4 to the financial statements for additional information;

●	recognition of an aggregate gain of $28.3 million from the sale of various assets by our unconsolidated real estate ventures. See Note 4 to the financial statements for additional information;

●

the execution of an agreement to acquire The Batley, a 432-unit multifamily asset in the Union Market submarket of Washington, D.C., for a purchase price of approximately $205 million, which we intend to use as a replacement property in a like-kind exchange for the proceeds from the sale of Pen Place to Amazon. See Note 3 to the financial statements for additional information;

●	a new mortgage loan with a principal balance of $85.0 million, collateralized by 1225 S. Clark Street. The mortgage loan has a seven-year term and an interest rate of LIBOR plus 1.60% per annum;

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●	the payment of dividends to our common shareholders totaling $88.9 million and distributions to our noncontrolling interests of $13.7 million;

●	the repurchase and retirement of 2.9 million of our common shares for $88.1 million, an average purchase price of $29.99 per share; and

●	the investment of $108.4 million in development, construction in progress and real estate additions.

Activity subsequent to September 30, 2021 included:

●	the declaration of a quarterly dividend of $0.225 per common share, payable on November 24, 2021 to shareholders of record as of November 10, 2021.

Critical Accounting Policies and Estimates

Our Annual Report on Form 10-K for the year ended December 31, 2020 contains a description of our critical accounting policies, including asset acquisitions and business combinations, real estate, investments in real estate ventures, revenue recognition and share-based compensation. There have been no significant changes to our policies during the nine months ended September 30, 2021.

Recent Accounting Pronouncements

See Note 2 to the financial statements for a description of recent accounting pronouncements.

Results of Operations

In January 2020, we sold Metropolitan Park. In December 2020, we acquired the Americana Portfolio, which consists of a 1.4-acre future development parcel in National Landing that was formerly occupied by the Americana Hotel and three other parcels. In April 2021, we contributed Potomac Yard Landbay G to an unconsolidated real estate venture.

Comparison of the Three Months Ended September 30, 2021 to 2020

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended September 30, 2021 compared to the same period in 2020:


	Three Months Ended September 30,
	2021		2020		% Change

	(Dollars in thousands)
Property rental revenue	$	125,900	$	118,680	6.1	%
Third-party real estate services revenue, including reimbursements		25,842		26,987	(4.2)	%
Depreciation and amortization expense		56,726		56,481	0.4	%
Property operating expense		40,198		37,572	7.0	%
Real estate taxes expense		18,259		17,354	5.2	%
General and administrative expense:
Corporate and other		12,105		11,086	9.2	%
Third-party real estate services		25,542		28,207	(9.4)	%
Share-based compensation related to Formation Transaction and special equity awards		3,480		7,133	(51.2)	%
Transaction and other costs		2,951		845	249.2	%
Income (loss) from unconsolidated real estate ventures, net		20,503		(965)	*
Interest expense		17,243		16,885	2.1	%

* Not meaningful.

Property rental revenue increased by approximately $7.2 million, or 6.1%, to $125.9 million in 2021 from $118.7 million in 2020. The increase was primarily due to (i) a $5.1 million increase related to the deferral of rent and the write-off of deferred rent receivables for tenants that were placed on the cash basis of accounting in 2020 and a decrease in uncollectable operating lease receivables attributable to COVID-19 in 2021, (ii) a $4.7 million increase related to 4747 Bethesda Avenue,

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West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (iii) a $2.6 million increase related to 1770 Crystal Drive, which was placed into service in the fourth quarter of 2020, and (iv) a $1.8 million increase related to the commencement of the lease with Amazon at 2100 Crystal Drive. The increase in property rental revenue was partially offset by a $6.4 million decrease related to lower occupancy at the Universal Buildings, 2011 Crystal Drive, 2101 L Street and RTC-West.

Third-party real estate services revenue, including reimbursements, decreased by approximately $1.1 million, or 4.2%, to $25.8 million in 2021 from $27.0 million in 2020. The decrease was primarily due to a $2.0 million decrease in reimbursements revenue, a $705,000 decrease in other service revenue and a $584,000 decrease in construction management fees, partially offset by a $1.4 million increase in development fee revenue primarily related to the timing of development projects and a $736,000 increase in leasing fees.

Depreciation and amortization expense increased by approximately $245,000, or 0.4%, to $56.7 million in 2021 from $56.5 million in 2020. The increase was primarily due to (i) a $1.9 million increase related to 2345 Crystal Drive due to an increase in tenant improvements, (ii) a $1.7 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, and (iii) a $924,000 increase due to 1770 Crystal Drive being placed into service. The increase in depreciation and amortization expense was partially offset by a $4.0 million decrease related to 2000 South Bell Street and 2001 South Bell Street as we commenced construction on two new buildings in 2021.

Property operating expense increased by approximately $2.6 million, or 7.0%, to $40.2 million in 2021 from $37.6 million in 2020. The increase was primarily due to (i) a $1.2 million increase related to 2451 Crystal Drive for costs incurred for construction management services provided to tenants, (ii) an $885,000 increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (iii) a $576,000 increase due to 1770 Crystal Drive being placed into service and (iv) $535,000 related to 2221 South Clark Street due to higher operating expenses. The increase in property operating expense was partially offset by a $1.5 million decrease related to 1901 South Bell Street due to costs incurred in 2020 for construction management services provided to tenants.

Real estate tax expense increased by approximately $905,000, or 5.2%, to $18.3 million in 2021 from $17.4 million in 2020. The increase was primarily due to a $548,000 increase related to 4747 Bethesda Avenue and The Wren as these properties placed additional space into service, and a $543,000 increase related to 5 M Street Southwest due to an increase in its applicable tax rate in 2021.

General and administrative expense: corporate and other increased by approximately $1.0 million, or 9.2%, to $12.1 million in 2021 from $11.1 million in 2020. The increase was primarily due to a decrease in capitalizable payroll costs related to development projects.

General and administrative expense: third-party real estate services decreased by approximately $2.7 million, or 9.4%, to $25.5 million in 2021 from $28.2 million in 2020. The decrease was primarily due to a decrease in reimbursable expenses.

General and administrative expense: share-based compensation related to Formation Transaction and special equity awards decreased by approximately $3.7 million, or 51.2%, to $3.5 million in 2021 from $7.1 million in 2020. The decrease was primarily due to the graded vesting of certain awards issued in prior years, which resulted in lower expense as portions of the awards vested.

Transaction and other costs of $3.0 million in 2021 primarily included $1.4 million of demolition costs related to 2000 South Bell Street and 2001 South Bell Street and $1.4 million of expenses related to completed, potential and pursued transactions. Transaction and other costs of $845,000 in 2020 consisted of $406,000 of integration and severance costs, $260,000 of expenses related to completed, potential and pursued transactions, and $179,000 of demolition costs related to 223 23rd Street and 2300 Crystal Drive.

Income from unconsolidated real estate ventures increased by approximately $21.5 million to $20.5 million for 2021 from a loss of $965,000 in 2020. The increase was primarily due to the recognition of our proportionate share of the gain from the sale of 500 L'Enfant Plaza of $23.1 million. The increase in income from unconsolidated real estate ventures was

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partially offset by a $1.4 million impairment of our investment in an unconsolidated real estate venture due to a decrease in the value of the underlying asset.

Interest expense increased by approximately $358,000, or 2.1%, to $17.2 million in 2021 from $16.9 million in 2020. The increase was primarily due to a $1.3 million decrease in capitalized interest primarily due to the placing of additional space into service at 4747 Bethesda Avenue, West Half, The Wren, 901 W Street and 1770 Crystal Drive, and a $293,000 increase due to a new mortgage loan at 1225 S. Clark Street. The increase in interest expense was partially offset by a $1.2 million decrease related to the repayment of a mortgage loan at WestEnd25 in 2020.

Comparison of the Nine Months Ended September 30, 2021 to 2020

The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the nine months ended September 30, 2021 compared to the same period in 2020:


		Nine Months Ended September 30,
		2021		2020		% Change

	(Dollars in thousands)
Property rental revenue		$	370,960	$	354,519	4.6	%
Third-party real estate services revenue, including reimbursements			90,694		83,870	8.1	%
Depreciation and amortization expense			178,130		157,586	13.0	%
Property operating expense			109,929		105,867	3.8	%
Real estate taxes expense			55,127		53,422	3.2	%
General and administrative expense:
Corporate and other			38,475		37,478	2.7	%
Third-party real estate services			80,035		86,260	(7.2)	%
Share-based compensation related to Formation Transaction and special equity awards			12,866		25,432	(49.4)	%
Transaction and other costs			8,911		7,526	18.4	%
Income (loss) from unconsolidated real estate ventures, net			23,513		(17,142)	237.2	%
Interest expense			50,312		44,660	12.7	%
Gain on sale of real estate			11,290		59,477	(81.0)	%

Property rental revenue increased by approximately $16.4 million, or 4.6%, to $371.0 million in 2021 from $354.5 million in 2020. The increase was primarily due to (i) a $12.8 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) an $11.1 million increase due to the deferral of rent and the write-off of deferred rent receivable for tenants that were placed on the cash basis of accounting in 2020 and a decrease in uncollectable operating lease receivables attributable to COVID-19, (iii) a $7.4 million increase related to 1770 Crystal Drive, which was placed into service in the fourth quarter of 2020, (iv) a $3.9 million increase related to 1225 S. Clark Street due to the commencement of a lease and (v) a $3.2 million increase related to the additional space leased by Amazon at 2345 Crystal Drive. The increase in property rental revenue was partially offset by (i) a $14.1 million decrease related to lower occupancy at the Universal Buildings, 2011 Crystal Drive, 2101 L Street and RTC-West, (ii) a $4.2 million decrease related to RiverHouse Apartments and The Bartlett due to increased rent concessions and lower market rents, and (iii) a $3.4 million decrease related to 1901 South Bell Street due to tenant reimbursements for construction services in 2020.

Third-party real estate services revenue, including reimbursements, increased by approximately $6.8 million, or 8.1%, to $90.7 million in 2021 from $83.9 million in 2020. The increase was primarily due to a $14.2 million increase in development fees related to the timing of development projects. The increase in third-party real estate services revenue was partially offset by a $3.8 million decrease in reimbursements revenue, a $1.7 million decrease in property and asset management fees due to the sale of assets within the JBG Legacy Funds and a $1.7 million decrease in construction management fees due to the timing of construction projects.

Depreciation and amortization expense increased by approximately $20.5 million, or 13.0%, to $178.1 million in 2021 from $157.6 million in 2020. The increase was primarily due to (i) an $8.1 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $6.8 million increase related to the Universal Buildings due to the write-off of certain tenant improvements, (iii) a $6.0 million increase related to 2345 Crystal Drive due to an increase in tenant improvements, (iv) a $2.5 million increase due to 1770

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Crystal Drive being placed into service, (v) a $1.5 million increase related to 1550 Crystal Drive as additional space was placed into service and (vi) a $1.3 million increase related to RTC-West due to the acceleration of depreciation of certain assets. The increase in depreciation and amortization expense was partially offset by a $5.1 million decrease related to 2000 South Bell Street and 2001 South Bell Street as we commenced construction on two new buildings in 2021.

Property operating expense increased by approximately $4.1 million, or 3.8%, to $109.9 million in 2021 from $105.9 million in 2020. The increase was primarily due to (i) a $3.3 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $2.8 million increase related to 2451 Crystal Drive due to costs incurred for construction management services provided to tenants, (iii) a $1.4 million increase due to 1770 Crystal Drive being placed into service and (iv) an $832,000 increase at Courthouse Plaza 1 and 2 related to ground rent expense. The increase in property operating expense was partially offset by a $4.3 million decrease related to 1901 South Bell Street due to costs incurred in 2020 for construction management services provided to tenants.

Real estate tax expense increased by approximately $1.7 million, or 3.2%, to $55.1 million in 2021 from $53.4 million in 2020. The increase was primarily due to (i) a $1.8 million increase at 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $701,000 increase related to 5 M Street Southwest due to an increase in its applicable tax rate in 2021 and (iii) an increase of $533,000 due to 1770 Crystal Drive being placed into service. The increase in real estate tax expense was partially offset by a decrease in real estate tax assessments for various properties located in National Landing.

General and administrative expense: corporate and other increased by approximately $997,000, or 2.7%, to $38.5 million in 2021 from $37.5 million in 2020. The increase was primarily due to a decrease in capitalizable payroll costs related to development projects.

General and administrative expense: third-party real estate services decreased by approximately $6.2 million, or 7.2%, to $80.0 million in 2021 from $86.3 million in 2020. This decrease was primarily due to a decrease in reimbursable expenses and a decrease in share-based compensation expense.

General and administrative expense: share-based compensation related to Formation Transaction and special equity awards decreased by approximately $12.6 million, or 49.4%, to $12.9 million in 2021 from $25.4 million in 2020. The decrease was primarily due to the graded vesting of certain awards issued in prior years, which resulted in lower expense as portions of the awards vested.

Transaction and other costs of $8.9 million in 2021 consisted of $5.4 million of expenses related to completed, potential and pursued transactions, $2.9 million of demolition costs related to 2000 South Bell Street and 2001 South Bell Street and $616,000 of integration and severance costs. Transaction and other costs of $7.5 million in 2020 primarily included $4.0 million of costs related to a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington, D.C. metropolitan area, and $3.1 million of integration and severance costs.

Income from unconsolidated real estate ventures increased by approximately $40.7 million, or 237.2%, to $23.5 million for 2021 from a loss of $17.1 million in 2020. The increase was primarily due to (i) the recognition of our proportionate share of the gain from the sale of various assets totaling $28.3 million as compared to a $3.0 million loss from the sale of Woodglen in 2020 and (ii) a $6.5 million impairment charge recognized in 2020 related to our investment in a venture that owned The Marriott Wardman Park hotel, and $2.7 million for losses incurred from its COVID-19 related closure. The increase in income from unconsolidated real estate ventures was partially offset by a $1.4 million impairment of our investment in an unconsolidated real estate venture due to a decrease in the value of the underlying asset.

Interest expense increased by approximately $5.7 million, or 12.7%, to $50.3 million in 2021 from $44.7 million in 2020. The increase was primarily due to a $6.7 million decrease in capitalized interest primarily due to the placing of additional space into service at 4747 Bethesda Avenue, West Half, The Wren, 901 W Street and 1770 Crystal Drive and a $5.7 million increase due to new mortgage loans entered into in 2020 at 1221 Van Street, The Bartlett and 220 20^th Street. The increase was also due to higher average outstanding balances under our unsecured term loans. The increase in interest expense was

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partially offset by a lower outstanding balance under our revolving credit facility and a $3.6 million decrease related to the repayment of a mortgage loan at WestEnd25 in 2020.

Gain on the sale of real estate of $11.3 million in 2021 was based on the cash received and the remeasurement of our retained interest in the land we contributed to one of our unconsolidated real estate ventures. See Note 4 to the financial statements for additional information. Gain on the sale of real estate of $59.5 million in 2020 was due to the sale of Metropolitan Park.

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 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.

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 and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures used by other companies.

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


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Net income (loss) attributable to common shareholders	$	893	$	(22,793)		$	(22,811)	$	(16,648)
Net income (loss) attributable to redeemable noncontrolling interests		103		(2,212)			(2,472)		(445)
Net loss attributable to noncontrolling interests		—		—			(1,108)		—
Net income (loss)		996		(25,005)			(26,391)		(17,093)
Gain on sale of real estate		—		—			(11,290)		(59,477)
(Gain) loss on sale of unconsolidated real estate assets		(23,137)		—			(28,326)		2,952
Real estate depreciation and amortization		54,547		54,004			171,522		149,590
Impairment of investments in unconsolidated real estate ventures ⁽¹⁾		1,380		—			1,380		6,522
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures		7,002		7,350			21,590		21,730
FFO attributable to noncontrolling interests		(54)		(4)			976		(7)
FFO attributable to OP Units		40,734		36,345			129,461		104,217
FFO attributable to redeemable noncontrolling interests		(4,703)		(3,945)			(13,242)		(11,353)
FFO attributable to common shareholders	$	36,031	$	32,400		$	116,219	$	92,864

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

NOI and Same Store NOI

NOI is a non-GAAP financial measure management uses to assess a segment'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

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of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent, 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 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.

During the three months ended September 30, 2021, our same store pool decreased to 55 properties from 56 properties due to the exclusion of 500 L'Enfant Plaza, which was sold by an unconsolidated real estate venture during the period. During the nine months ended September 30, 2021, our same store pool increased from 52 properties to 55 properties due to the inclusion of 1800 South Bell Street, F1RST Residences, 1221 Van Street and the commercial portion of 2221 S. Clark Street, and the exclusion of Fairway Apartments, which was sold during the period. 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 properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. 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 remained at $72.7 million for the three months ended September 30, 2021 compared to the same period in 2020. Same Store NOI was positively impacted by a decrease in uncollectable operating lease receivables and rent deferrals, which was offset by lower occupancy in our commercial portfolio, and lower rents and higher concessions for certain of our multifamily assets.

Same store NOI decreased $7.7 million, or 3.3%, to $223.3 million for the nine months ended September 30, 2021 from $231.0 million for the same period in 2020. The decrease was substantially attributable to the COVID-19 pandemic, which commenced at the end of the first quarter of 2020, including (i) higher concessions and lower rents in our multifamily portfolio and (ii) lower occupancy and a decline in parking revenue in our commercial portfolio. These declines were partially offset by a decrease in cleaning expenses across our commercial portfolio.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

	(Dollars in thousands)
Net income (loss) attributable to common shareholders	$	893	$	(22,793)	$	(22,811)	$	(16,648)
Add:
Depreciation and amortization expense		56,726		56,481		178,130		157,586
General and administrative expense:
Corporate and other		12,105		11,086		38,475		37,478
Third-party real estate services		25,542		28,207		80,035		86,260
Share-based compensation related to Formation Transaction and special equity awards		3,480		7,133		12,866		25,432
Transaction and other costs		2,951		845		8,911		7,526
Interest expense		17,243		16,885		50,312		44,660
Loss on extinguishment of debt		—		—		—		33
Income tax expense (benefit)		217		(488)		4,527		(3,721)
Net income (loss) attributable to redeemable noncontrolling interests		103		(2,212)		(2,472)		(445)
Net loss attributable to noncontrolling interests		—		—		(1,108)		—
Less:
Third-party real estate services, including reimbursements revenue		25,842		26,987		90,694		83,870
Other revenue		1,568		2,292		5,658		5,438
Income (loss) from unconsolidated real estate ventures, net		20,503		(965)		23,513		(17,142)
Interest and other income, net		192		—		163		1,021
Gain on sale of real estate		—		—		11,290		59,477
Consolidated NOI		71,155		66,830		215,547		205,497
NOI attributable to unconsolidated real estate ventures at our share		7,336		7,130		22,951		23,206
Non-cash rent adjustments ⁽¹⁾		(3,701)		(4,934)		(12,554)		(9,898)
Other adjustments ⁽²⁾		4,683		2,881		14,608		9,236
Total adjustments		8,318		5,077		25,005		22,544
NOI		79,473		71,907		240,552		228,041
Less: out-of-service NOI loss ⁽³⁾		(2,019)		(442)		(4,638)		(2,774)
Operating Portfolio NOI		81,492		72,349		245,190		230,815
Non-same store NOI ⁽⁴⁾		8,777		(388)		21,868		(165)
Same store NOI ⁽⁵⁾	$	72,715	$	72,737	$	223,322	$	230,980

Change in same store NOI		0.0%				(3.3)%
Number of properties in same store pool		55				55

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

(2)	Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and allocated corporate general and administrative expenses to operating properties.

(3)	Includes the results of our under-construction assets, and near-term and future development pipelines.

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

(5)	Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared.

Reportable Segments

We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We defined our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.

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	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Property management fees	$	4,831	$	4,694		$	14,549	$	15,453
Asset management fees		2,145		2,301			6,602		7,400
Development fees ⁽¹⁾		4,032		2,614			22,705		8,474
Leasing fees		1,822		1,086			4,106		3,627
Construction management fees		—		584			375		2,057
Other service revenue		1,295		2,000			4,783		5,452
Third-party real estate services revenue, excluding reimbursements		14,125		13,279			53,120		42,463
Reimbursement revenue ⁽²⁾		11,717		13,708			37,574		41,407
Third-party real estate services revenue, including reimbursements		25,842		26,987			90,694		83,870
Third-party real estate services expenses		25,542		28,207			80,035		86,260
Third-party real estate services revenue less expenses	$	300	$	(1,220)		$	10,659	$	(2,390)

(1)	Estimated development fee revenue totaling $51.2 million as of September 30, 2021 is expected to be recognized over the next six years as unsatisfied performance obligations are completed.

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

See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three and nine months ended September 30, 2021 in the preceding pages under "Results of Operations."

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

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Property revenue is calculated as property rental revenue plus parking revenue. Property expense is calculated as property operating expenses plus real estate taxes. Consolidated NOI is calculated as property revenue less property expense. See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three and nine months ended September 30, 2021 and 2020. The following is a summary of NOI by segment:


	Three Months Ended September 30,					Nine Months Ended September 30,
	2021		2020		X	2021		2020

	(In thousands)
Property revenue:
Commercial	$	96,042	$	93,052		$	284,905	$	276,841
Multifamily		35,131		30,526			100,610		95,122
Other ⁽¹⁾		(1,561)		(1,822)			(4,912)		(7,177)
Total property revenue		129,612		121,756			380,603		364,786

Property expense:
Commercial		39,166		38,837			112,173		115,177
Multifamily		19,142		17,882			53,689		48,326
Other ⁽¹⁾		149		(1,793)			(806)		(4,214)
Total property expense		58,457		54,926			165,056		159,289

Consolidated NOI:
Commercial		56,876		54,215			172,732		161,664
Multifamily		15,989		12,644			46,921		46,796
Other ⁽¹⁾		(1,710)		(29)			(4,106)		(2,963)
Consolidated NOI	$	71,155	$	66,830		$	215,547	$	205,497

(1)	Includes activity related to future development assets and corporate entities and the elimination of intersegment activity.

Comparison of the Three Months Ended September 30, 2021 to 2020

Commercial: Property rental revenue increased by $3.0 million, or 3.2%, to $96.0 million in 2021 from $93.1 million in 2020. Consolidated NOI increased by $2.7 million, or 4.9%, to $56.9 million in 2021 from $54.2 million in 2020. The increase in property revenue and consolidated NOI was due to (i) a decline in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, (ii) increases related to 1770 Crystal Drive as the property was placed into service, and (iii) increases related to 2100 Crystal Drive, 1225 South Clark Street and 2345 Crystal Drive due to higher occupancy. These increases were partially offset by a decrease related to the Universal Buildings and 2101 L Street due to lower occupancy.

Multifamily: Property rental revenue increased by $4.6 million, or 15.1%, to $35.1 million in 2021 from $30.5 million in 2020. Consolidated NOI increased by $3.3 million, or 26.5%, to $16.0 million in 2021 from $12.6 million in 2020. The increase in property revenue and consolidated NOI was due to The Wren, 900 W Street, 901 W Street and West Half as these properties placed additional units into service. These increases were partially offset by lower rents and higher concessions at RiverHouse Apartments and 2221 South Clark Street.

Comparison of the Nine Months Ended September 30, 2021 to 2020

Commercial: Property rental revenue increased by $8.1 million, or 2.9%, to $284.9 million in 2021 from $276.8 million in 2020. Consolidated NOI increased by $11.1 million, or 6.8%, to $172.7 million in 2021 from $161.7 million in 2020. The increase in property revenue and consolidated NOI was due to (i) a decline in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, (ii) increases in revenues related to 4747 Bethesda Avenue and 1770 Crystal Drive as these properties were placed into service, and (iii) increases related to 2100 Crystal Drive, 1225 South Clark Street and 2345 Crystal Drive due to higher occupancy. These increases were partially offset by a decrease in parking revenue due to reduced transient and office parking and decreases related to the Universal Buildings, 2101 L Street and RTC-West due to lower occupancy.

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Multifamily: Property rental revenue increased by $5.5 million, or 5.8%, to $100.6 million in 2021 from $95.1 million in 2020. Consolidated NOI increased by $125,000, or 0.3%, to $46.9 million in 2021 from $46.8 million in 2020. The increase in property revenue and consolidated NOI was due to The Wren, 900 W Street, 901 W Street and West Half as these properties placed additional units into service. These increases were partially offset by lower rents and higher concessions at RiverHouse Apartments and The Bartlett.

Liquidity and Capital Resources

Property rental income is our primary source of operating cash flow and is dependent on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the WHI, Amazon, the JBG Legacy Funds and other third parties. Our assets provide a relatively consistent level of cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders and distributions to holders of OP Units. 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, recapitalizations and asset sales, 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 over the next 12 months.

Financing Activities

The following is a summary of mortgages payable:


	Weighted Average
	Effective
	Interest Rate ⁽¹⁾	September 30, 2021		December 31, 2020

		(In thousands)
Variable rate ⁽²⁾	2.08%	$	762,246	$	678,346
Fixed rate ⁽³⁾	4.32%		922,161		925,523
Mortgages payable			1,684,407		1,603,869
Unamortized deferred financing costs and premium/discount, net ⁽⁴⁾			(10,122)		(10,131)
Mortgages payable, net		$	1,674,285	$	1,593,738

(1)	Weighted average effective interest rate as of September 30, 2021.

(2)	Includes variable rate mortgages payable with interest rate cap agreements.

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

(4)	As of September 30, 2021, net deferred financing costs related to an unfunded mortgage loan totaling $4.0 million were included in "Other assets, net."

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Credit Facility


	Effective
	Interest Rate ⁽¹⁾	September 30, 2021		December 31, 2020

		(In thousands)
Revolving credit facility ^{(2) (3) (4)}	1.13%	$	—	$	—

Tranche A-1 Term Loan ⁽⁵⁾	2.59%	$	200,000	$	200,000
Tranche A-2 Term Loan ⁽⁵⁾	2.49%		200,000		200,000
Unsecured term loans			400,000		400,000
Unamortized deferred financing costs, net			(1,507)		(2,021)
Unsecured term loans, net		$	398,493	$	397,979

(1)	Effective interest rate as of September 30, 2021.

(2)	As of September 30, 2021 and December 31, 2020, letters of credit with an aggregate face amount of $1.4 million and $1.5 million were outstanding under our revolving credit facility.

(3)	As of September 30, 2021 and December 31, 2020, net deferred financing costs related to our revolving credit facility totaling $5.4 million and $6.7 million were included in "Other assets, net."

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

(5)

Our existing floating rate debt instruments, including our credit facility, with a principal balance totaling $1.6 billion and our hedging arrangements with a notional value totaling $1.7 billion currently use as a reference rate the U.S. dollar London Interbank Offered Rate ("LIBOR"), and we expect a transition from LIBOR to another reference rate due to plans to phase out the reference rate by the end of 2021, after which point its continuation cannot be assured. Though an alternative reference rate for LIBOR, the Secured Overnight Financing Rate ("SOFR"), exists, significant uncertainties still remain. We can provide no assurance regarding the future of LIBOR and when our LIBOR-based instruments will transition from LIBOR as a reference rate to SOFR or another reference rate. The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things, result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions. In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations.

Common Shares Repurchased

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,

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applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice.

Liquidity Requirements

Our principal liquidity needs for the next 12 months and beyond include:

●	normal recurring expenses;

●	debt service and principal repayment obligations, including balloon payments on maturing debt;

●	capital expenditures, including major renovations, tenant improvements and leasing costs;

●	development expenditures;

●	dividends to shareholders and distributions to holders of OP Units;

●	common share repurchases; and

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

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

●	cash and cash equivalent balances;

●	cash flows from operations;

●	distributions from real estate ventures; and

●	proceeds from financings, recapitalizations and asset sales.

While we do not expect the need to do so during the next 12 months, we also can issue securities to raise funds.

While we have not experienced a significant impact to date in this regard, we expect COVID-19 to continue to have an adverse impact on our liquidity and capital resources. Future decreases in cash flows from operations resulting from tenant defaults, rent deferrals or decreases in our rents or occupancy, would decrease the cash available for the capital uses described above.

As of September 30, 2021, we had $998.6 million of availability under our credit facility (net of outstanding letters of credit totaling $1.4 million). As of September 30, 2021, we had no debt on a consolidated basis and at our share scheduled to mature in 2021.

Contractual Obligations and Commitments

During the nine months ended September 30, 2021, there were no material changes to the contractual obligation information presented in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2020.

As of September 30, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.1 million.

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completed closings of capital commitments totaling $114.4 million, which included a commitment from us of $11.2 million. As of September 30, 2021, our remaining commitment was $8.3 million.

On October 27, 2021, our Board of Trustees declared a quarterly dividend of $0.225 per common share.

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:


	Nine Months Ended September 30,
	2021		2020

	(In thousands)
Net cash provided by operating activities	$	154,412	$	127,855
Net cash used in investing activities		(96,751)		(57,696)
Net cash (used in) provided by financing activities		(91,820)		280,038

Cash Flows for the Nine Months Ended September 30, 2021

Cash and cash equivalents, and restricted cash decreased $34.2 million to $229.2 million as of September 30, 2021, compared to $263.3 million as of December 31, 2020. This decrease resulted from $91.8 million of net cash used in financing activities and $96.8 million of net cash used in investing activities, partially offset by $154.4 million of net cash provided by operating activities. Our outstanding debt was $2.1 billion and $2.0 billion as of September 30, 2021 and December 31, 2020.

Net cash provided by operating activities of $154.4 million primarily comprised: (i) $147.7 million of net income (before $185.4 million of non-cash items and $11.3 million gain on sale of real estate), (ii) $13.2 million of return on capital from unconsolidated real estate ventures and (iii) $6.5 million of net change in operating assets and liabilities. Non-cash income adjustments of $185.4 million primarily include depreciation and amortization expense, share-based compensation expense, net income from unconsolidated real estate ventures, deferred rent and amortization of lease incentives.

Net cash used in investing activities of $96.8 million comprised: (i) $108.4 million of development costs, construction in progress and real estate additions, (ii) $32.7 million of investments in unconsolidated real estate ventures and other, and (iii) $10.3 million of deposits for real estate and other acquisitions, partially offset by (iv) $40.2 million of distributions of capital from unconsolidated real estate ventures and (v) $14.4 million of proceeds from the sale of real estate.

Net cash used in financing activities of $91.8 million primarily comprised: (i) $88.9 million of dividends paid to common shareholders, (ii) $82.3 million of common shares repurchased, (iii) $13.7 million of distributions to redeemable noncontrolling interests, (iv) $5.7 million of debt issuance costs, and (v) $4.5 million of repayments of mortgages payable, partially offset by (vi) $85.0 million of borrowings under mortgages payable and (vii) $17.5 million of contributions from noncontrolling interests.

Off-Balance Sheet Arrangements

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 September 30, 2021, we have investments in unconsolidated real estate ventures totaling $486.1 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.

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From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings or (iii) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees. 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.

Commitments and Contingencies

Insurance

Construction Commitments

Other

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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 have agreed, and may in the future agree, to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion of development projects. As of September 30, 2021, the aggregate amount of principal payment guarantees was $8.3 million for our consolidated entities.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's ability to sell such real estate or to borrow using such real estate as collateral. In connection with the ownership and operation of our assets, we may be potentially liable for such costs. The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous materials or generated hazardous wastes. The release of such hazardous materials and wastes could result in us incurring liabilities to 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 which 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 send contaminated materials to other locations for treatment or disposal, we may be liable for cleanup of those sites if they become contaminated.

Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the 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 the preparation and issuance of a written report. Soil and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any issues raised by the initial assessment that could reasonably be expected to pose a material concern to the property or result in us incurring material environmental liabilities as a result of redevelopment. They 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 did not reveal 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 $18.2 million as of September 30, 2021 and December 31, 2020 and are included in "Other liabilities, net" in our balance sheets.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. The following is a summary of our annual exposure to a change in interest rates:


	September 30, 2021						December 31, 2020
			Weighted						Weighted
			Average		Annual				Average
			Effective		Effect of 1%				Effective
			Interest		Change in				Interest
	Balance		Rate		Base Rates		Balance		Rate

	(Dollars in thousands)
Debt (contractual balances):
Mortgages payable:
Variable rate ⁽¹⁾	$	762,246		2.08%	$	7,728	$	678,346	2.18%
Fixed rate ⁽²⁾		922,161		4.32%		—		925,523	4.32%
	$	1,684,407			$	7,728	$	1,603,869
Credit facility:
Revolving credit facility ⁽³⁾	$	—		1.13%	$	—	$	—	1.19%
Tranche A-1 Term Loan ⁽⁴⁾		200,000		2.59%		—		200,000	2.59%
Tranche A-2 Term Loan ⁽⁴⁾		200,000		2.49%		—		200,000	2.49%
	$	400,000			$	—	$	400,000
Pro rata share of debt of unconsolidated real estate ventures (contractual balances):
Variable rate ⁽¹⁾	$	281,752		2.57%	$	2,857	$	319,057	2.47%
Fixed rate ⁽²⁾		83,707		4.46%		—		79,989	4.36%
	$	365,459			$	2,857	$	399,046

(1)	Includes variable rate mortgages payable with interest rate cap agreements.

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

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

(4)

As of September 30, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.39% for the Tranche A-1 Term Loan and 1.34% for the Tranche A-2 Term Loan.

The fair value of our mortgages payable is estimated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit profiles based on market sources. The fair value of our unsecured term loans is calculated based on the net present value of payments over the term of the facilities using estimated market rates for similar notes and remaining terms. As of September 30, 2021 and December 31, 2020, the estimated fair value of our consolidated debt was $2.1 billion and $2.0 billion. These estimates of fair value, which are made at the end of the reporting period, may be different from the amounts that may ultimately be realized upon the disposition of our financial instruments.

Hedging Activities

To manage, or hedge, our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative financial instruments for speculative purposes.

Derivative Financial Instruments Designated as Cash Flow Hedges

Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are designated as cash flow hedges, and are carried at their estimated fair value on a recurring basis. We assess the effectiveness of our cash flow hedges

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both at inception and on an ongoing basis. If the hedges are deemed to be effective, the fair value is recorded in “Accumulated other comprehensive loss” in our balance sheets and is subsequently reclassified into "Interest expense" in our statements of operations in the period that the hedged forecasted transactions affect earnings. Our cash flow hedges become less than perfectly effective if the critical terms of the hedging instrument and the forecasted transactions do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and interest rates. In addition, we evaluate the default risk of the counterparty by monitoring the creditworthiness of the counterparty. While management believes its judgments are reasonable, a change in a derivative's effectiveness as a hedge could materially affect expenses, net income and equity.

As of September 30, 2021 and December 31, 2020, we had interest rate swap agreements with an aggregate notional value of $862.7 million, which were designated as cash flow hedges. The fair value of our interest rate swaps designated as cash flow hedges consisted of liabilities totaling $28.4 million and $44.2 million as of September 30, 2021 and December 31, 2020, included in "Other liabilities, net" in our balance sheets.

Derivative Financial Instruments Not Designated as Hedges

Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are considered economic hedges, but not designated as accounting hedges, and are carried at their estimated fair value on a recurring basis. Realized and unrealized gains are recorded in "Interest expense" in our statements of operations in the period in which the change occurs. As of September 30, 2021 and December 31, 2020, we had various interest rate cap agreements with an aggregate notional value of $867.7 million, which were not designated as cash flow hedges. The fair value of our interest rate caps not designated as hedges consisted of assets totaling $266,000 and $35,000 as of September 30, 2021 and December 31, 2020, included in "Other assets, net" in our balance sheets.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2021, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are, from time to time, involved in 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.

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors previously disclosed in our Annual Report for the year ended December 31, 2020, filed with the SEC on February 23, 2021.

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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a)

Not applicable.

(b)

Not applicable.

(c)

Purchases of equity securities by the issuer and affiliated purchasers:


Period	Total Number Of Common Shares Purchased		Average Price Paid Per Common Share	Total Number Of Common Shares Purchased As Part Of Publicly Announced Plans Or Programs		Approximate Dollar Value Of Common Shares That May Yet Be Purchased Under the Plan Or Programs
July 1, 2021 - July 31, 2021	-	$	-	-	$	376,038,752
August 1, 2021 - August 31, 2021	972,766		29.70	972,766		347,130,941
September 1, 2021 - September 30, 2021	1,344,318		29.75	1,344,318		307,107,767
Total for the three months ended September 30, 2021	2,317,084		29.73	2,317,084
Total for the nine months ended September 30, 2021	2,936,833		29.99	2,936,833
Program total since inception in March 2020	6,713,185		28.71	6,713,185

In March 2020, our Board of Trustees authorized the repurchase of up to $500 million of our outstanding common shares. 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

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ITEM 6. EXHIBITS

(a) Exhibit Index


Exhibits	Description
3.1	Declaration of Trust of JBG SMITH Properties, as amended and restated (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on July 21, 2017).
3.2	Articles Supplementary to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on March 6, 2018).
3.3	Articles of Amendment to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K, filed on May 3, 2018).
3.4	Amended and Restated Bylaws of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on February 21, 2020).
10.1†	Form of July 2021 Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.3 to our Current Report on Form 10-Q, filed on August 3, 2021).
10.2**†	Amended Form of July 2021 Performance LTIP Unit Agreement.
10.3†	Form of July 2021 Restricted LTIP Unit Agreement (incorporated by reference to Exhibit 10.5 to our Current Report on Form 10-Q, filed on August 3, 2021).
10.4†	Form of July 2021 Restricted LTIP Unit Agreement (Special Termination & Vesting Provisions) (incorporated by reference to Exhibit 10.6 to our Current Report on Form 10-Q, filed on August 3, 2021).
31.1**	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and 18 U.S.C 1350, as created by Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema
101.CAL	Inline XBRL Extension Calculation Linkbase
101.LAB	Inline XBRL Extension Labels Linkbase
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


**	Filed herewith.
†	Denotes a management contract or compensatory plan, contract or arrangement.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		JBG SMITH Properties

Date:	November 2, 2021	/s/ M. Moina Banerjee
		M. Moina Banerjee
		Chief Financial Officer
		(Principal Financial Officer)


		JBG SMITH Properties

Date:	November 2, 2021	/s/ Angela Valdes
		Angela Valdes
		Chief Accounting Officer
		(Principal Accounting Officer)