JBG SMITH
Annual Report 2023

Plain-text annual report

2023 Annual Report M. Moina Banerjee Chief Financial Officer Kevin P. Reynolds Chief Development Officer George L. Xanders Chief Investment Officer Steven A. Museles Chief Legal Officer David Ritchey Chief Commercial Officer Executive Officers W. Matthew Kelly Chief Executive Officer and Trustee Evan Regan-Levine Chief Strategy Officer Board of Trustees Robert A. Stewart Independent Chairman of the Board of Trustees W. Matthew Kelly Chief Executive Officer and Trustee Scott A. Estes Independent Trustee Alan S. Forman Independent Trustee Charles E. Haldeman, Jr. Alisa M. Mall Independent Trustee Independent Trustee William J. Mulrow Independent Trustee D. Ellen Shuman Independent Trustee Phyllis R. Caldwell Independent Trustee Michael J. Glosserman Independent Trustee Carol A. Melton Independent Trustee 1900 Crystal Drive (under-construction multifamily asset) 3/5/24 16:59 3/5/24 16:59 4747 Bethesda Avenue, Suite 200 Bethesda, MD 20814JBGSMITH.com | 240.333.3600 | NYSE: JBGSJBG SMITH At a Glance Operating Portfolio C O M M E R C I A L S F M U LT I F A M I L Y U N I T S Q 4 2 0 2 3 A N N U A L I Z E D N O I 7.7M 6,318 $322.4M N AT I O N A L L A N D I N G C O N C E N T R AT I O N ( % O F A N N U A L I Z E D N O I ) L E A S E D I N - S E R V I C E P O R T F O L I O W E I G H T E D AV E R A G E L E A S E T E R M ( P O R T F O L I O - W I D E ) 69% 90.2% 5.1 YEARS Development Portfolio U N D E R - C O N S T R U C T I O N D E V E L O P M E N T P I P E L I N E 1,583 UNITS 8.8M SF Balance Sheet T O TA L E N T E R P R I S E V A L U E ( 1 ) N E T D E B T / T O TA L E N T E R P R I S E VA L U E ( 1 ) N E T D E B T / A N N U A L I Z E D A D J U S T E D E B I T D A $4.3B 57.2% 8.7x (1) Total Enterprise Value is based on the closing price per share of $17.01 as of December 29, 2023. 3/5/24 16:59 F e b r u a r y 2 0 , 2 0 2 4 To Our Fellow Shareholders: On December 13th we, along with Monumental Sports & Entertainment, the Commonwealth of Virginia, and the City of Alexandria announced our plan to build a new sports and entertainment anchor in National Landing. This 1.2 million square foot economic development engine would include a new arena for the Washington Capitals and Washington Wizards as well as practice facilities, studio space, team offices, e-sports facilities, and an adjacent 5,000+ person performing arts venue. The addition of these sports and entertainment uses would complement the academic, technology, and defense demand generators already thriving in this neighborhood and clearly establish National Landing as an even more powerful center of gravity in the broader Surreal Washington metro area. We anticipate the legislative process to consider this opportunity will conclude during the second quarter, and if approved, definitive documentation would follow. On top of this potentially game-changing outcome and notwithstanding still- frozen capital markets, we continued our capital recycling success in finding haystack needles with our sale last week of Central Place Tower to the CoStar Group. This sale further fuels the trend of businesses seeking out lower-cost, more business-friendly Virginia over DC; it also sources valuable liquidity and capital at (or above) NAV to allocate to more accretive uses. Despite another year of challenging market conditions, 2023 was a year filled with accomplishments, we are pleased to share them with you below: “The addition of these sports and entertainment uses would complement the academic, technology, and defense demand generators already thriving in this neighborhood and clearly establish National Landing as an even more powerful center of gravity in the broader Washington metro area.” 1 2023 ANNUAL REPORT 2023 Accomplishments Announced Monumental Sports & Entertainment’s Planned Relocation to National Landing • Subject to definitive documentation and applicable governmental approvals, we expect to entitle, plan, and develop a mixed-use Entertainment District anchored by a new arena for the Washington Wizards and Washington Capitals in the Potomac Yard section of National Landing. • Along with the arena, the plans call for a global corporate headquarters for Monumental Sports & Entertainment, a Monumental Sports Network media studio, the Wizards practice facility, a performing arts venue, and an expanded e-sports facility – all situated adjacent to the Virginia Tech Innovation Campus, the recently delivered Potomac Yard-VT Metro Station, and approximately 8.1 million square feet of future development opportunities, of which JBG SMITH owns approximately 1.5 million square feet and serves as master developer for the remainder. Completed the 2.1 Million Square Foot Metropolitan Park, the First Phase of Amazon’s New Headquarters • As of March 2023, roughly 8,000 employees had been hired at Amazon’s new headquarters, surpassing Amazon’s 2023 year-end commitment to the Commonwealth of Virginia. Doubled Crystal Drive Retail and Delivered Two Critical Placemaking Projects in National Landing • These include: (i) Water Park, a 1.6-acre dining destination comprising 11 different food and drink concepts, including nine eateries operated by emerging local-, minority- and women-led businesses, a gourmet pizzeria, and a wine and oyster bar overlooking the park; and (ii) Surreal, a unique indoor/outdoor dining concept by Michelin-rated chef Enrique Limardo of Seven Restaurant Group. 2 • Additional amenities including novel culinary experiences, indoor/outdoor dining, and neighborhood-serving shops and entertainment will open later this year when 1900 Crystal Drive delivers. Completed $444.1 Million of Dispositions at Attractive Valuations • Achieved a weighted average capitalization rate of 5.1% (5.8% on income-producing assets and $46 per square foot on over 1.0 million square feet of land). • Significant transactions included: ❍ $196 million sale of an 80% pari-passu interest in 4747 Bethesda Avenue (office) at approximately $815 per square foot ❍ $95 million sale of Falkland Chase, a 438- unit class-B multifamily asset in Silver Spring, Maryland ❍ $80 million sale of Crystal City Marriott, a 345- key hotel in National Landing ❍ $29.5 million sale of 5M Street Southwest, a Washington, DC land parcel entitled for over 664,000 square feet of potential high-rise development density Achieved Strong Operating Performance Despite Macroeconomic Headwinds • Occupancy in the multifamily portfolio increased 110 basis points year-over-year, ending the quarter at 94.7%. • Multifamily Same-Store NOI grew 14.1% in the fourth quarter and 10.9% during the year, driven by higher market rents and higher occupancy across the portfolio fueled by the current low level of supply in the DC market. • Completed 927,000 square feet of office leases with a weighted average lease term of 5.5 years. • Continued to see consistent demand for office space in National Landing from defense and technology industries: 90.3% of leases (on a square footage basis) executed in 2023 were with defense and technology tenants JBG SMITHStreamlined Business Operations Amidst Transition to Majority Multifamily and Realized Total G&A Savings of Approximately 10% • Reorganized teams and internal processes to help scale our multifamily portfolio while providing industry-leading service to our residents. • Neared completion on 1,583 under-construction multifamily units, bringing new housing options to National Landing while furthering our transformation to a majority multifamily company. Addressed Over $1.0 billion of Debt in Challenging Market Conditions • Recast our $750 million revolving credit facility, which now has a fully extended maturity date of June 2028. • Addressed our $398 million of debt maturing in 2023; as of year-end our weighted average debt maturity stands at 3.7 years, after adjusting for by- right extension options. Continued as a Market Leader in Sustainability and Housing Affordability • Honored with the United States Green Building Council Leadership Award for Organizational Excellence. • Received a 5-star ranking in the GRESB Assessment for our operating portfolio and development pipeline, ranking second in our sector as a U.S. Diversified Office/Residential company and first in our sector in the development assessment for U.S. Residential Listed companies. • Presented with Nareit’s Leader in the Light award for companies that have demonstrated superior and sustained sustainability practices. • Invested in 268 affordable housing units through the WHI Impact Pool. The WHI Impact Pool has preserved a cumulative 2,833 affordable housing units across five jurisdictions, satisfying almost 95% of its goal to finance 3,000 units by 2025. 3 2023 ANNUAL REPORT Capital Allocation Although U.S. Treasuries have recently seen a modest decline, institutional capital remains on the sidelines. Despite the effectively frozen transaction market, we continued to execute our plan to dispose of non-core assets, successfully closing $130.4 million (at our share) of asset dispositions during the fourth quarter, including: (i) Crystal City Marriott, a 345-key hotel in National Landing, for $80.0 million, (ii) 5 M Street Southwest, a Washington, DC land parcel entitled for over 664,000 square feet of potential development density, for $29.5 million, (iii) Capitol Point North – 75 New York Avenue, a Washington, DC land parcel entitled for over 285,000 square feet of potential development density, for $11.5 million, and (iv) Rosslyn Gateway North and South, an Arlington, Virginia covered land parcel entitled for over 800,000 square feet of potential development density, for $9.4 million at our 18% share. These sales represent an average capitalization rate of 4.8% on the income-producing assets and approximately $46 per square foot on the land parcels. Additionally, subsequent to year-end, we sold two more non-core assets: (i) Central Place Tower, a 550,000 square foot office tower in Rosslyn, Virginia, for $162.5 million at our 50% share (adjusting for credits as well as other payments made by the purchaser, the sale price equates to approximately $660 per square foot), and (ii) North End Retail, a 27,000 square foot retail asset in the U Street/Shaw submarket of Washington, DC, for $14.3 million. These sales represent a 4.0% average capitalization rate after accounting for known and expected vacates and an estimated 6.0% – 6.5% capitalization rate once re-stabilized. We expect new investments, including development projects, acquisitions, and share repurchases, to be largely funded, whether up front or after the fact, by asset recycling. We believe share repurchases continue to be the most accretive use of capital available to us, given the material discount of our share price to NAV. Our strong balance sheet and ample liquidity afford us the ability to capitalize on this disconnect. Over the course of 2023, we repurchased 22.6 million shares at a weighted average price of $14.83, totaling $335.3 million. Since the inception of our share repurchase program in 2020, we have repurchased 48.6 million shares, or approximately 33% of shares and OP units outstanding as of December 31, 2019, at a weighted average price per share of $20.63, totaling $1.0 billion. Last week, our Board of Trustees, in consultation with management, reduced our annual dividend rate to $0.70; in making this determination, the Board considered several factors, including (i) our on-going capital recycling strategy, (ii) the expected performance and capital requirements of our commercial portfolio, and (iii) the upcoming delivery of our 1,583 under-construction multifamily units (upon delivery, capitalized interest ceases which reduces FAD and taxable income). Upon delivery of 1900 Crystal Drive, expected in Q2 2024, we will no longer be able to capitalize interest, which will increase annual interest expense by approximately $17.3 million once the construction loan is fully drawn. Upon delivery of 2000/2001 South Bell Street, expected in Q3 2025, we will no longer be able to capitalize interest, which will increase annual interest expense by approximately $14.1 million once the construction loan is fully drawn. The current weighted average interest rate on these loans is 7.2%, and while we anticipate refinancing upon stabilization, the ultimate terms of those future refinancings are not yet known. We believe the reduced dividend rate will help preserve JBG SMITH’s financial flexibility, reinforce our already strong financial position, continue to cover our taxable income distribution requirements, and enhance the Company’s ability to take advantage of compelling opportunities, such as share repurchases, as they arise. Share buybacks are a form of capital return to investors, as are dividends. At our current discount to NAV, we believe buybacks are more accretive to our long- term NAV per share than excess (above taxable income) dividends. Having bought F1RST Residences (multifamily asset) “We believe share repurchases continue to be the most accretive use of capital available to us, given the material discount of our share price to NAV. Our strong balance sheet and ample liquidity afford us the ability to capitalize on this disconnect.” 4 JBG SMITH back approximately 33% of the shares and OP units that were outstanding when we began our buyback program, we have eliminated approximately $34.0 million in annual dividends on those securities at the current dividend level. Financial and Operating Metrics For the three months ended December 31, 2023, we reported Core FFO attributable to common shareholders of $36.1 million, or $0.38 per diluted share. Annualized NOI increased 3.0% quarter-over-quarter, excluding assets that were sold or recapitalized. Our multifamily portfolio ended the quarter at 96.0% leased and 94.7% occupied. Our office portfolio ended the quarter at 86.3% leased and 84.9% occupied. As of December 31, 2023, our Net Debt/Total Enterprise Value was 57.2%, and our Net Debt/Annualized Adjusted EBITDA was 8.7x. Our floating rate exposure remains limited, with 92.3% of our debt fixed or hedged as of the end of the fourth quarter, after accounting for in-place interest rate swaps and caps. The remaining floating rate exposure is tied to our revolving credit facility and assets where the business plan warrants preserving flexibility. We continue to be well-positioned with respect to our near-term debt maturities: (i) we have $120.3 million of debt maturing by year-end 2024 (4.5% of total debt), which is non-recourse asset-level financing related to a non-core office asset; (ii) our weighted average debt maturity stands at 3.7 years, after adjusting for by- right extension options; and (iii) we have zero debt maturities tied to office assets in National Landing until 2025. Our primarily non-recourse asset-level financing strategy is most valuable in an environment like today, providing a floor on our downside risk. Operating Portfolio Multifamily Trends Our multifamily portfolio ended the quarter at 94.7% occupied and 96.0% leased, both down 90 basis points quarter-over-quarter. Leasing levels remained solid throughout the quarter despite some anticipated seasonality typical for the winter months. Across our portfolio, we increased effective rents by 7.0% upon renewal for fourth quarter lease expirations while achieving a 56.0% renewal rate. We continue to see concessions vary by submarket with National Landing remaining among the lowest, ranging from zero to one month. Our multifamily portfolio generated 14.1% and 10.9% same store NOI growth for the three and 12 months ended December 31, 2023. We believe our placemaking interventions, the delivery of Amazon’s new headquarters, and Amazon’s continued return to the office will drive demand in the lease-up of 1900 Crystal Drive – two residential towers in the heart of National Landing totaling 808 units – which began leasing in January 2024. Move-ins commenced this month, and we are seeing healthy levels of interest thus far, illustrated by a leasing pace that exceeds all five of our multifamily deliveries since 2017. With this asset’s completion, the soon-to-follow delivery of 2000/2001 South Bell Street and recent asset sales, our transition to majority multifamily is almost complete. Water Bar at Water Park “We believe our placemaking interventions, the delivery of Amazon’s new headquarters, and Amazon’s continued return to the office will drive demand in the lease-up of 1900 Crystal Drive – two residential towers in the heart of National Landing totaling 808 units.” 5 2023 ANNUAL REPORT Market-Wide (DC Metro) Multifamily Trends (based on CoStar, UrbanTurf, and Apartment List data) The DC area apartment market’s historic character of resilience and slow-but- steady growth was fully on display in 2023. Year-end occupancy was 94.8% according to ApartmentList data – putting it right on top of the ending figure for our own portfolio. The strength of the market came through in its ability to hold this relatively high level of occupancy from 2022 (94.7% as of year-end) even as the other Gateway markets saw occupancy decline slightly during the same period. Even as the DC market held occupancy, it grew rents, with market rents rising 3.1% versus just 1.6% in the other Gateways. While not countercyclical given the strong level of job growth across the country through 2023, this growth demonstrates the depth of demand in our market – particularly at high income levels. The supply picture in the market also remains near-term constrained. 2023 saw very few new starts with just below 1,000 units breaking ground in our core multifamily submarkets (nearly a quarter of those were in a single office conversion). While the next few years are still likely to be supply constrained, increasing conversion activity (JLL reports nearly 13,000 units planned for office conversion in Northern Virginia alone) and repurposing of sites outside of the traditional new-build multifamily markets (like the 900 units starting on the former Wardman Park Marriott site in DC) suggest that there could be momentum building for new supply as policy favors conversion and use changes in light of a dwindling market for office buildings. Even with these potential sources for new starts, we remain bullish on the supply and demand environment over the next few years given how few units are actively under construction relative to historic levels, the high cost of both capital and construction, and continued robust demand for apartments. With high mortgage rates and an extremely limited supply of for-sale housing, we expect this strong demand to continue for some time. Office Trends Our office portfolio ended the fourth quarter at 86.3% leased and 84.9% occupied. In the fourth quarter, we executed 170,000 square feet of leases with a weighted average lease term of 6.9 years. For second generation leases, the rental rate mark- to-market increased 3.5%. Our 2023 office retention rate in National Landing was 67.8%, generally in-line with the average retention rates we’ve seen over the past few years, but higher than we expected due to early renewals by Amazon and other tenants. The 2023 vacates amounted to approximately 330,000 square feet of office leases (approximately $15.3 million of annualized rent). Despite the relatively stable retention we saw in 2023, we anticipate a lower retention rate in 2024, as we’ve previously reported, primarily driven by long-expected Amazon vacates. In 2024, we have over 1.5 million square feet expiring in National Landing and expect only approximately 320,000 square feet (20.0%) to be renewed. Among the expected vacates are Amazon vacating 1800 South Bell Street (191,000 square feet) and 2100 Crystal Drive (253,000 square feet), which together generated $14.8 million of annualized NOI in the fourth quarter. We anticipate an additional approximately 750,000 square feet (approximately $36.9 million of annualized rent) will vacate in 2024. Of the vacating space, approximately 47% will be taken out of service for redevelopment or conversion to an alternate use. In 2025, we have approximately 375,000 square feet expiring, and while it is too early to determine a precise retention rate, we expect at least 110,000 square feet or 29% (at least $4.4 million of annualized rent) will vacate, but that number could increase as those expirations grow nearer. We may also experience early renewals and new demand as the year draws closer. Over the last three years, we averaged approximately 150,000 square feet of new leasing per year excluding Amazon leases. Our 2024 prospect pipeline is stronger than it has been in years and, thus far, would indicate a potential increase in new leasing activity, but it West Half (multifamily asset) “Our 2024 prospect pipeline is stronger than it has been in years and, thus far, would indicate a potential increase in new leasing activity, but it is too early to tell how much of these vacates will be backfilled.” 6 JBG SMITH is too early to tell how much of these vacates will be backfilled. As we’ve seen throughout the year, the defense and technology industries continue to drive our leasing activity in National Landing, as 99.0% of the leases executed this quarter (based on square footage) were with tenants in those industries. These tenants continue to show their stickiness as office users; our assets in National Landing, excluding buildings going out of service, have been reporting physical occupancy close to 84.0% on peak days. That level of physical occupancy is ahead of Austin, Texas – Kastle’s peak-day occupancy champ which reported a best day of 78.2%, and it far outstrips peak days in cities like New York (62.7%) and DC (60.0%). Nonetheless, our efforts to re-lease certain spaces will be targeted toward buildings with long-term viability, concentrating occupancy in areas of National Landing that we amenitized and are near multi-modal transportation. In addition to 1800 South Bell Street, which we took out of service following Amazon’s lease expiration, and 2100 Crystal Drive, which we plan to take out of service once Amazon vacates in the second quarter, we also began phasing 2200 Crystal Drive out of service as tenants’ leases expire in that building. Moving these three buildings out of service reduces our office stock by approximately 725,000 square feet, or 12.0%, which should allow us to curate a more stable, healthier, long-term-focused office market in National Landing over the next few years. We expect to repurpose these older, obsolete, and under- leased buildings for redevelopment, conversion to multifamily, hospitality, or another specialty use, ultimately reducing cannibalistic competitive inventory in National Landing. Market-Wide (DC Metro) Office Trends (based on JLL, CBRE, and Kastle Systems Q4 2022 reporting) We ended 2023 in the fortunate position of having the vast majority of our office holdings located squarely in the crosshairs of demand that has managed to break free of the black hole of statistical despair that is the broader metro and national office market. Tech and defense – intensely interwoven in our economy – continue to be the industries that embrace return-to-work policies and, as a result, sustain strong office demand. While not enough on their own to significantly mitigate the 22%+ overall vacancy figure that JLL reported as of year-end, these industries helped Northern Virginia end the year in the black from an absorption perspective based on figures from the same firm. Tech and defense also are the industries at the top of leasing activity charts from the major brokerage houses so submarkets (like National Landing) that appeal to these industry sectors are likely to come out ahead – a trend borne out in the statistics: nearly 70% of CBRE’s top lease transactions in Northern Virginia in the fourth quarter occurred in National Landing. There are also some more macro signs that the bleeding may be slowing (although not totally stopping) including a consecutive quarterly reduction in the amount of sublease space on the market and the commitment of over 8.0 million square feet of leasable office inventory for conversions in Northern Virginia. While those conversions represent just 5.0% of total inventory, they also remove potential future competitive office development sites – the traditional next life for obsolete office. It’s also still early in the trend toward converting obsolete office, so that figure is likely to increase over time. Both are good long-term indicators for a market that is severely under- demolished relative to what looks like a “new normal” of significantly reduced demand. Another market-wide phenomenon that is starting to appear, given historically low office valuations, is the trend toward owner-occupiers (a la our sale of Central Place Tower mentioned above). Users are less dependent upon the office debt markets and are able to acquire assets at less than replacement cost without construction downtime at values superior to sellers’ alternatives – a true win-win and one that we expect to see continue until the capital markets recover. User sales further reduce leasable competitive inventory, particularly in the already-tight trophy class market segment and provide an alternative path to liquidity during a period in which non-distressed office investors are largely sidelined. 1550 Crystal Drive (commercial asset) “Nearly 70% of CBRE’s top lease transactions in Northern Virginia in the fourth quarter occurred in National Landing.” 7 2023 ANNUAL REPORT View from Water Park The capital markets and interest rates have more impact on NAV than any other force. While debt for office assets is almost non-existent, and equity capital remains skittish and sidelined, we continue to find opportunities to recycle out of low-return office and land assets at attractive valuations – often in excess of analyst-reported NAV – and into our discounted stock at levels well below NAV. We accomplish this recycling while maintaining balance sheet strength and liquidity, and we will continue to do this for so long as the opportunity exists. At some point, markets will thaw, and we will consider other opportunities for capital allocation, including acquisitions where pricing is attractive (not yet) and investing balance sheet and/or third-party capital to activate our valuable land bank in National Landing. We have landed two enormous, tailwind amenity and growth anchors – Amazon and Virginia Tech – and expect to add a third with Monumental. This is no accident. Our concentration in National Landing and our placemaking work there have drawn these users, and the payback is beginning to materialize. Thankfully, we continue to control a sizable portfolio with which to capitalize on that payback, and as we shrink and convert more of the office denominator there and re-stabilize the remaining portfolio, we expect that payback to grow. This will be a multi-year process, but through the excellence, dedication, and relentless hard work of our outstanding team we are well positioned to execute against this strategy and deliver. For your continued support, trust and confidence, we remain deeply appreciative. Sincerely, W. Matthew Kelly Chief Executive Officer 8 JBG SMITH UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ☐ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR 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 (State or other jurisdiction of incorporation or organization) 81-4307010 (I.R.S. Employer Identification No.) 4747 Bethesda Avenue Suite 200 (Address of Principal Executive Offices) Bethesda MD 20814 (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 Common Shares, par value $0.01 per share Trading Symbol(s) JBGS Name of each exchange on which registered New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒ 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 ☒ 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 has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐ Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐ 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 February 16, 2024, JBG SMITH Properties had 91,927,506 common shares outstanding. As of June 30, 2023, the aggregate market value of common stock held by non-affiliates of the Registrant was approximately $1.6 billion based on the June 30, 2023 closing share price of $15.04 per share on the New York Stock Exchange. Smaller reporting company ☐ Non-accelerated filer ☐ Accelerated filer ☐ DOCUMENTS INCORPORATED BY REFERENCE Part III incorporates by reference information from certain portions of the registrant's definitive proxy statement for its 2024 annual meeting of shareholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. JBG SMITH PROPERTIES ANNUAL REPORT ON FORM 10-K YEAR ENDED DECEMBER 31, 2023 TABLE OF CONTENTS 9 Definitions Business Item 1. Item 1A. Risk Factors Item 1B. Unresolved Staff Comments Item 1C. Cybersecurity Item 2. Item 3. Item 4. Properties Legal Proceedings Mine Safety Disclosures PART I PART II Item 5. Market For Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Management's Discussion and Analysis of Financial Condition and Results of Operations [Reserved] Item 6. Item 7. Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Item 9. Item 9A. Controls and Procedures Item 9B. Other Information Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III Item 10. Directors, Executive Officers and Corporate Governance Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Item 13. Certain Relationships and Related Transactions and Director Independence Item 14. Principal Accounting Fees and Services Item 15. Exhibits and Financial Statement Schedules Item 16. Form 10-K Summary Signatures PART IV 2 Page 3 8 20 35 35 37 41 41 42 44 44 63 65 113 113 115 137 138 138 138 138 138 139 147 148 Defined terms used in this Annual Report on Form 10-K: DEFINITIONS "2000/2001 South Bell Street" refers to 2000 South Bell Street and 2001 South Bell Street, an under-construction multifamily asset. "2023 Term Loan" refers to the $120.0 million term loan maturing in June 2028. "ADA" means the Americans with Disabilities Act. "Amazon" refers to Amazon.com, Inc. "Annualized rent" means: (i) for multifamily assets, or the multifamily component of a mixed-use asset, the in- place monthly base rent before free rent as of December 31, 2023, multiplied by 12, and (ii) for commercial assets, or the retail component of a mixed-use asset, the in-place monthly base rent before free rent, plus tenant reimbursements as of December 31, 2023, multiplied by 12. Annualized rent excludes rent from leases that have been signed but the tenant has not yet taken occupancy (not yet included in percent occupied metrics) and percentage rent. The in-place monthly base rent does not take into consideration temporary rent relief arrangements. "At JBG SMITH Share" and "Our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our: (i) 10.0% subordinated interest in one commercial building, (ii) 33.5% subordinated interest in four commercial buildings, (iii) 49.0% interest in three commercial buildings and (iv) 9.9% interest in one commercial building, as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures; these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures and we have not guaranteed their obligations or otherwise committed to providing financial support. "BOMA" means Building Owners and Managers Association International. "CBRS" means the Citizens Broadband Radio Service. "CIRP" means cybersecurity incident response plan. "Code" refers to the Internal Revenue Code of 1986, as amended. "CODM" means our Chief Operating Decision Maker. "Combination" refers to our acquisition of the management business and certain assets and liabilities of JBG. "COVID-19" refers to the novel coronavirus pandemic. "D&I" means diversity and inclusion. "Development pipeline" refers to assets that have the potential to commence construction subject to receipt of full entitlements, completion of design and market conditions where we (i) own land or control the land through a ground lease or (ii) are under a long-term conditional contract to purchase, or enter into, a leasehold interest with respect to land. "ESG" means environmental, social and governance. "Estimated potential development density" reflects management's estimate of developable gross square feet based on our current business plans with respect to real estate owned or controlled as of December 31, 2023. Our current business plans may contemplate development of less than the maximum potential development density for individual assets. As 3 market conditions change, our business plans, and therefore, the estimated potential development density, could change accordingly. Given timing, zoning requirements and other factors, we make no assurance that estimated potential development density amounts will become actual density to the extent we complete development of assets for which we have made such estimates. "Exchange Act" refers to the Securities Exchange Act of 1934, as amended. "FATCA" means the Foreign Account Tax Compliance Act. "FATCA withholding" refers to a FATCA withholding tax. "FIRPTA" means the Foreign Investment in Real Property Tax Act of 1980, as amended. "Falkland Chase" refers to Falkland Chase-South & West and Falkland Chase-North. "Formation Transaction" refers to the Separation and the Combination. "Free rent" means the amount of base rent and tenant reimbursements that are abated according to the applicable lease agreement(s). "FFO" means funds from operations, a non-GAAP financial measure computed in accordance with the definition established by Nareit in the Nareit FFO White Paper - 2018 Restatement. See Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations-FFO" for further discussion. "GAAP" means accounting principles generally accepted in the United States of America. "GSA" means the General Services Administration, the independent U.S. federal government agency that manages real estate procurement for the federal government and federal agencies. "GRESB" refers to the Global ESG Benchmark for Real Estate Assets. "In-service" refers to multifamily or commercial operating assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of December 31, 2023. "IRS" means the Internal Revenue Service. "ISO" means the International Organization for Standardization. "JBG" refers to The JBG Companies. "JBG Legacy Funds" refers to the legacy funds formerly organized by The JBG Companies. "JBG SMITH" refers to JBG SMITH Properties together with its consolidated subsidiaries. "JBG SMITH LP" refers to JBG SMITH Properties LP, our operating partnership, together with its consolidated subsidiaries. "JBG Excluded Assets" refers to the assets of the JBG Legacy Funds that were not contributed to JBG SMITH LP in the Combination. "LIBOR" means the London Interbank Offered Rate. "LTIP Units" means long-term incentive partnership units. 4 "MAAL" means modeled average annual loss, which is the sum of climate-related expenses, decreased revenue, and/or business interruption over a fixed decadal period and expressed as an annual average within that decade. "Metro" is the public transportation network serving the Washington, D.C. metropolitan area operated by the Washington Metropolitan Area Transit Authority. "Metro-served" are locations, submarkets or assets that are within 0.5 miles of an existing or planned Metro station. "MGCL" means the Maryland General Corporation Law. "MTA" means the Master Transaction Agreement, dated as of October 31, 2016, by and among Vornado, certain affiliates of Vornado, JBG SMITH and certain affiliates of JBG SMITH, as amended. "Nareit" means the National Association of Real Estate Investment Trusts. "NAV" refers to net asset value. "NOI" means net operating income, a non-GAAP financial measure management uses to assess an asset's performance. The most directly comparable GAAP measure is net income (loss) attributable to common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable. NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below- market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure of our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non- cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe that 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 consolidated 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. "NYSE" means the New York Stock Exchange. "Non-same store" refers to all operating assets excluded from the same store pool. "OP Units" refers to JBG SMITH LP common limited partnership units. "Percent leased" is based on leases signed as of December 31, 2023, and is calculated as total rentable square feet less rentable square feet available for lease divided by total rentable square feet expressed as a percentage. Out-of-service square feet are excluded from this calculation. "Percent occupied" is based on occupied rentable square feet/units as of December 31, 2023, and is calculated as: (i) for multifamily space, total units less unoccupied units divided by total units, expressed as a percentage, and (ii) for office and retail space, total rentable square feet less unoccupied square feet divided by total rentable square feet. Out-of-service square feet and units are excluded from this calculation. 5 "QRS" means qualified real estate investment trust subsidiaries. "REC" means renewable energy credit. "REIT" means a real estate investment trust under Section 856 through 860 of the Code. "REMIC" means a real estate mortgage investment conduit. "Rosslyn Gateway" refers to Rosslyn Gateway-North, Rosslyn Gateway-South, Rosslyn Gateway-South Land and Rosslyn Gateway-North Land. "SaaS" means software as a service. "Same store" refers to the pool of assets that were in-service for the entirety of both periods being compared, except for assets for which significant redevelopment, renovation, or repositioning occurred during either of the periods being compared. "SEC" means the Securities and Exchange Commission. "Separation" refers to the spin-off transaction on July 17, 2017 through which we received substantially all the assets and liabilities of Vornado's Washington, D.C. segment. "Separation Agreement" refers to the Separation and Distribution Agreement. "Signed but not yet commenced leases" means leases that, as of December 31, 2023, have been executed but for which rent has not commenced. "SOC" means systems and organization controls. "SOFR" means the Secured Overnight Financing Rate. "Square feet" ("SF") refers to the area that can be rented to tenants, defined as: (i) for multifamily assets, management's estimate of approximate rentable square feet, (ii) for commercial assets, rentable square footage defined in the current lease and for vacant space the rentable square footage defined in the previous lease for that space, (iii) for under- construction assets, management's estimate of approximate rentable square feet based on current design plans as of December 31, 2023, and (iv) for assets in the development pipeline, management's estimate of developable gross square feet based on current business plans with respect to real estate owned or controlled as of December 31, 2023. "STEM" means science, technology, engineering and mathematics. "Tax Matters Agreement" refers to an agreement with Vornado regarding tax matters. "TCFD" means Task Force on Climate-Related Financial Disclosures. "TIN" means taxpayer identification number. "TMP" means taxable mortgage pool. "Total annualized estimated rent" represents contractual monthly base rent before free rent, plus estimated tenant reimbursements for the month in which the lease is expected to commence, multiplied by 12. "Tranche A-1 Term Loan" refers to the $200.0 million term loan maturing in January 2025. 6 "Tranche A-2 Term Loan" refers to the $400.0 million term loan maturing in January 2028. "Transaction and other costs" include pursuit costs related to completed, potential and pursued transactions, demolition costs, and severance and other costs. "TRS" refers to taxable REIT subsidiaries. "Under-construction" refers to assets that were under construction during the three months ended December 31, 2023. "Vornado" means Vornado Realty Trust, a Maryland REIT. "WHI" means the Washington Housing Initiative. "WHI Impact Pool" is an investment vehicle managed by JBG SMITH on behalf of third-party investors that invests in affordable workforce housing. 7 ITEM 1. BUSINESS The Company PART I JBG SMITH, a Maryland REIT, owns, operates, invests in and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, D.C., most notably National Landing. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, D.C. metropolitan area. Approximately 75.0% of our holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon's new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and our deployment of 5G digital infrastructure. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the JBG Legacy Funds, other third parties and the WHI Impact Pool. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH LP. As of December 31, 2023, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 87.8% of its OP Units, after giving effect to the conversion of certain vested LTIP Units that are convertible into OP Units. JBG SMITH is referred to herein as "we," "us," "our" or other similar terms. As of December 31, 2023, our Operating Portfolio consisted of 44 operating assets comprising 16 multifamily assets totaling 6,318 units (6,318 units at our share), 26 commercial assets totaling 8.3 million square feet (7.7 million square feet at our share) and two wholly owned land assets for which we are the ground lessor. Additionally, we have two under- construction multifamily assets with 1,583 units (1,583 units at our share) and 17 assets in the development pipeline totaling 10.8 million square feet (8.8 million square feet at our share) of estimated potential development density. We present combined portfolio operating data that aggregates assets we consolidate in our consolidated financial statements and assets in which we own an interest, but do not consolidate in our financial results. For additional information regarding our assets, see Item 2 "Properties." Certain terms used throughout this Annual Report on Form 10-K are defined under "Definitions" starting on page 3. Our Strategy We own and operate urban mixed-use properties concentrated in what we believe are the highest growth, Metro-served submarkets in and around Washington, D.C., most notably National Landing, that have significant barriers to entry and key urban amenities. We have significant expertise with multifamily, office and retail assets. We believe that we are known for our creative deal-making and capital allocation skills and for our development and value creation expertise. We intend to continue to opportunistically sell or recapitalize assets as well as land sites where a ground lease or joint venture execution may represent the most attractive path to maximizing value. Recycling the proceeds from these sales will not only fund our planned growth through value-added development and potential acquisitions but will also further advance the strategic shift in the composition of our portfolio to majority multifamily, with an office portfolio concentrated in National Landing. One of our approaches to value creation uses a series of complementary disciplines through a process we call "Placemaking." Placemaking involves strategically mixing high-quality multifamily and commercial buildings with anchor, specialty and neighborhood retail in a high density, thoughtfully planned and designed public space. Through this process, we create synergies, and thus value, across those varied uses leading to unique, amenity-rich, walkable neighborhoods that are desirable and enhance tenant and investor demand. We believe our Placemaking approach will increase occupancy and rental rates in our portfolio, in particular with respect to our concentrated and extensive land and operating asset holdings in National Landing. National Landing, situated in Northern Virginia directly across the Potomac River from Washington, D.C., is the interconnected and walkable neighborhood that encompasses Crystal City, the eastern portion of Pentagon City and the northern portion of Potomac Yard. We believe National Landing is one of the region's best-located urban mixed-use communities due to its central and easily accessible location, its adjacency to Reagan National Airport, and its large base of existing offices, apartments and hotels. 8 We are repositioning our holdings in National Landing by executing a broad array of Placemaking strategies, including 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. Utilizing our Placemaking expertise, 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. Amazon's new headquarters is located in National Landing. During the second quarter of 2023, we completed the construction of two new office buildings for Amazon on Metropolitan Park in National Landing, totaling 2.1 million square feet, inclusive of approximately 50,000 square feet of street-level retail with new shops and restaurants, and Amazon took occupancy of its new headquarters in June 2023. We are the developer, property manager and retail leasing agent for Amazon's new headquarters at National Landing. As of December 31, 2023, we have leases with Amazon totaling approximately 927,000 square feet across five office buildings in National Landing. In connection with Amazon's new headquarters in National Landing, the Commonwealth of Virginia agreed to provide tax incentives to Amazon to create a minimum of 25,000 new full-time jobs and potentially 37,850 full-time jobs in National Landing with average annual wage targets for each calendar year, starting with $150,000 in 2019, and escalating 1.5% per year. As of March 2023, Amazon has created approximately 8,000 new full-time jobs in National Landing. We, alongside Amazon, Virginia Tech, and federal, state, and local governments plan to invest over $12.0 billion, including infrastructure investments, that will directly benefit National Landing. The infrastructure investments include: a new Metro station (Potomac Yard), a new Metro entrance (Crystal Drive) a pedestrian bridge to Reagan National Airport; a new commuter rail station located between two of our Crystal Drive office assets; lowering of elevated sections of U.S. Route 1 that currently divide parts of National Landing to create better multimodal access and walkability; funding for the innovation campus anchored by Virginia Tech; and Long Bridge, the planned two-track rail connection between Washington, D.C. and National Landing. The Potomac Yard Metro station opened in May 2023. In the fall of 2020, Virginia Tech virtually launched the inaugural academic year of its $1 billion Innovation Campus in National Landing, which is under construction. This expected powerful demand driver sits adjacent to 2.0 million square feet of development density we own in National Landing and the new Potomac Yard Metro station, which opened in May 2023, all approximately one mile south of Amazon's new headquarters. The campus is part of a 20-acre innovation district, of which the fully entitled first phase encompasses approximately 1.6 million square feet of space, including four office towers and two residential buildings, with ground-level retail. On this campus, Virginia Tech intends to create an innovation ecosystem by co-locating academic and private sector uses to accelerate research and development spending, as well as the commercialization of technology. When the Innovation Campus is fully operational, Virginia Tech plans to annually enroll approximately 750 master students and 200 PhD students in STEM fields. Virginia Tech is expected to occupy a 3.5-acre campus in the Innovation Campus. In December 2023, we, along with Monumental Sports & Entertainment, the Commonwealth of Virginia, and the City of Alexandria announced a plan to build a new sports and entertainment anchor in National Landing, subject to definitive documentation and applicable government approvals. This 1.2 million square foot anchor would include a new arena for the Washington Capitals and Washington Wizards, along with a global corporate headquarters for Monumental Sports & Entertainment, a Monumental Sports Network media studio, the Wizards practice facility, a performing arts venue, and an expanded e-sports facility – all situated adjacent to the Virginia Tech Innovation Campus and the recently delivered Potomac Yard Metro Station. We are making cutting-edge digital infrastructure investments to establish National Landing as among the first 5G- operable submarkets in the nation. Building upon our Placemaking efforts, we are leveraging our concentrated and extensive land and operating asset holdings in National Landing to deploy a digital infrastructure platform at a neighborhood scale that delivers an amenity that we believe enhances tenant demand, specifically in the technology and defense sectors, and further differentiates National Landing. The following are key components of our strategy: Capitalize on Significant Demand Catalysts in National Landing. We believe the strong technology sector tailwinds created by Amazon, the Virginia Tech Innovation Campus, the Pentagon and our National Landing digital infrastructure 9 platform will contribute to substantial growth from our Operating Portfolio and our 6.6 million square foot development pipeline in National Landing. Approximately 75.0% of our portfolio is located in National Landing where Amazon is incentivized to employ a minimum of 25,000 new full-time jobs and potentially 37,850 planned employees, and Virginia Tech's $1 billion Innovation Campus is under construction. Given National Landing’s proximity to the Pentagon, recent historic increases in the U.S. defense budget and robust foreign defense spending, we believe National Landing is positioned to capture growing defense demand, particularly as tech and defense are increasingly intertwined. In 2023, 47.4% of leases executed by us in National Landing were with the Department of Defense and defense contractors. We believe our investment in digital infrastructure including dense, redundant, and secure fiber networks, data center access, next-generation 5G connectivity, and privately held CBRS wireless spectrum provide a key advantage in continuing to attract companies to National Landing. The digital infrastructure provides us with valuable tenant inducement tools, such as the ability to offer ubiquitous and redundant fiber connectivity and 5G private cellular networks. Based on our experience, these features, delivered with support from industry-leading service providers including AT&T, Cisco, and Federated Wireless, are increasingly important to technology and defense companies, especially innovators in cybersecurity, internet of things, artificial intelligence and cloud computing. In 2023, we believe that access to the unique digital infrastructure amenity was a decision factor for many of the tenants who executed leases in National Landing. In addition to our Primary Focus on National Landing, Invest in and Operate Mixed-Use Assets in Other High- Growth, Metro-Served Submarkets in the Washington, D.C. Metropolitan Area. We intend to continue our longstanding strategy of owning and operating urban mixed-use properties concentrated in what we believe are the highest growth, Metro-served submarkets in the Washington, D.C. metropolitan area with high barriers to entry and vibrant urban amenities. In addition to National Landing, these submarkets include the Rosslyn-Ballston Corridor in Northern Virginia; the Ballpark, U Street/Shaw, and Union Market/NoMa, in the District of Columbia; and Bethesda in Maryland. These submarkets generally feature strong economic and demographic attributes, as well as superior transportation infrastructure that caters to the preferences of multifamily, office and retail tenants. We believe these positive attributes will enable our assets located in these high-growth submarkets to outperform the Washington, D.C. metropolitan area as a whole. Drive Incremental Growth Through Lease-up and Stabilization of Our Operating Assets, and Deliver Our Under- Construction Assets. Given our leasing capabilities and tenant demand for high-quality space in our submarkets, we believe that we are well positioned to achieve significant internal growth from the lease-up of vacant space in our in- service Operating Portfolio. As of December 31, 2023, we had 16 multifamily assets totaling 6,318 units (6,318 units at our share), which were 96.0% leased at our share. As of December 31, 2023, we had 26 commercial assets totaling 8.3 million square feet (7.7 million square feet at our share), which were 86.3% leased at our share, resulting in 1.0 million square feet available for lease. In addition to portfolio lease-up, we expect increases in NOI from: (i) the commencement of signed but not yet commenced office and retail leases ($4.7 million total annualized estimated rent as of December 31, 2023, of which $2.7 million is expected in 2024) and (ii) contractual rent escalators in our non-GSA office and retail leases, which are based on increases in the Consumer Price Index or a fixed percentage. As of December 31, 2023, we had 1,583 multifamily units under construction in National Landing across two projects (4 buildings): 1900 Crystal Drive and 2000/2001 South Bell Street. Based on our current plans and estimates, these assets will require an additional $177.1 million to complete. Monetize Our Significant Development Pipeline. We expect our pipeline of ground-up development opportunities will produce favorable risk-adjusted returns on invested capital. As of December 31, 2023, our development pipeline consisted of 17 assets, and we estimate it can support 10.8 million square feet (8.8 million square feet at our share) of estimated potential development density: 82.1% of this potential development density comprises multifamily projects located in the high-growth submarkets of National Landing, the Ballpark, and Union Market/NoMa; and 100.0% of this potential development density is Metro-served. Subject to market conditions, we intend to invest in multifamily development and in new office development subject to preleasing. The estimated potential development densities and uses reflect our current business plans as of December 31, 2023 and are subject to change based on market conditions. 10 In addition to developing select assets in this pipeline, we expect to unlock value through opportunistic asset sales, ground leases and recapitalizations. Actively Allocate our Capital, Reposition Our Portfolio to Majority Multifamily and Concentrate our Office Portfolio in National Landing. A fundamental component of our strategy to maximize long-term NAV per share is active capital allocation. We evaluate development, acquisition, disposition, share repurchases and other investment decisions based on how they may impact long-term NAV per share. We intend to continue to opportunistically sell or recapitalize assets as well as land sites where a ground lease or joint venture execution may represent the most attractive path to maximizing value. Successful execution of our capital allocation strategy enables us to source capital at NAV from the disposition of assets generating low cash yields and invest those proceeds in new acquisitions with higher cash yields and growth, development projects with significant yield spreads and profit potential, and share repurchases. Consequently, at any given time, we expect to be in various stages of discussions and negotiations with potential buyers, real estate venture partners, ground lessors, and other counterparties with respect to sales, joint ventures, and/or ground leases for certain of our assets, including portfolios thereof. These discussions and negotiations may or may not lead to definitive documentation or closed transactions. We anticipate redeploying the proceeds from these sales will not only help fund our planned growth but will also further advance the strategic shift of our portfolio to majority multifamily. Current market conditions, however, have significantly slowed down the pace of asset sales, and we expect this reduced activity to continue in 2024. In the meantime, we continue to advance our two under-construction multifamily assets in National Landing, 1900 Crystal Drive and 2000/2001 South Bell Street, totaling 1,583 units. We expect near-term acquisition activity to be focused on assets in emerging growth neighborhoods, as well as assets adjacent to our existing holdings where the combination of sites can add unique value to any new investment with a focus on multifamily given our long-term objective of growing our portfolio to majority multifamily. Where there are opportunities to trade out of higher risk assets with extensive capital needs or those outside of our geographic footprint, we will consider like-kind exchanges under Section 1031 of the Code. Third-Party Services Business Our third-party asset management and real estate services business provides fee-based real estate services to the JBG Legacy Funds, other third parties and the WHI Impact Pool. Although a significant portion of the assets and interests in assets formerly owned by certain of the JBG Legacy Funds were contributed to us in the Combination, the JBG Legacy Funds retained certain assets that were not consistent with our long-term business strategy. With respect to the remaining investments of the JBG Legacy Funds, we provide asset management, property management, development, construction management, leasing and other services. We expect to continue to earn fees for the management of the JBG Legacy Funds until their investments are liquidated. Certain individual members of our management team own direct equity co- investment and promote interests in the JBG Legacy Funds and certain of the funds' investments that were not contributed to us. These economic interests will be eliminated as the JBG Legacy Funds are wound down over time. Additionally, we often retain management of properties we sell as part of our capital allocation strategy. These assets, while no longer owned by us, continue to generate third-party service fees. We believe that the fees we earn in connection with providing these third-party services enhance our overall returns, provide additional scale and efficiency in our operating, development and acquisition businesses and absorb a portion of the overhead and other administrative costs of our platform. This scale provides competitive advantages, including market knowledge, buying power and operating efficiencies across all product types. We also believe that our existing relationships arising out of our third-party asset management and real estate services business will continue to provide potential access to capital and new investment opportunities. Competition The commercial real estate markets in which we operate are highly competitive. We compete with numerous acquirers, developers, owners and operators of commercial real estate including other REITs, private equity investors, domestic and foreign financial institutions, life insurance companies, pension trusts, partnerships, and individual investors, many of which own or may seek to acquire or develop assets similar to ours in the same markets in which our assets are located. These competitors may have greater financial resources or access to capital than we do or be willing to acquire assets in 11 transactions which are more highly leveraged or are less attractive from a financial viewpoint than we are willing to pursue, which may reduce the number of suitable investment opportunities available to us or increase pricing. Leasing is a major component of our business and is highly competitive. The principal means of competition in leasing are lease terms (including rent charged and tenant improvement allowances), location, services provided, and the nature and condition of the asset to be leased. If our competitors offer space at rental rates below current market rates, below the rental rates we currently charge our tenants, in better locations within our markets, in higher quality assets or offer better services, we may lose existing and potential tenants, and we may be pressured to reduce our rental rates below those we currently charge to retain tenants when our tenants' leases expire. Segment Data We operate in the following business segments: multifamily, commercial and third-party asset management and real estate services. Financial information related to these business segments for each of the three years in the period ended December 31, 2023 is set forth in Note 20 to the consolidated financial statements. Tax Status We have elected to be taxed as a REIT under Sections 856-860 of 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. Future distributions will be declared and paid at the discretion of our Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Code and such other factors as our Board of Trustees deems relevant. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as TRSs under the Code. As such, we are subject to federal, state, and local taxes on the income from these activities. For additional information regarding our REIT status, see Item 9B "Other Information." Significant Tenants Only the U.S. federal government accounted for 10% or more of our rental revenue, which consists of property rental and other property revenue, as follows: Rental revenue from the U.S. federal government Percentage of commercial segment rental revenue Percentage of rental revenue ESG $ 2023 Year Ended December 31, 2022 (Dollars in thousands) 75,516 2021 64,439 $ 23.0 % 12.9 % $ 23.7 % 14.8 % 83,256 22.8 % 16.2 % Our business values integrate environmental sustainability, social responsibility, D&I, and strong governance practices throughout our organization. We believe that by understanding the social and environmental impacts of our business, we are better able to protect asset value, reduce risk, and advance initiatives that result in positive social and environmental outcomes creating shared value. Our business model prioritizes maximizing long-term NAV per share. By investing in urban infill and transit-oriented development and strategically mixing high-quality multifamily and commercial buildings with public areas, retail spaces, and walkable streets, we are working to define neighborhoods that deliver benefits to the environment and our community, as well as long-term value to our shareholders. We remain committed to transparent reporting of ESG financial and non-financial indicators. We intend to continue publishing an annual ESG report with key performance indicators that are aligned with the Global Reporting Initiative 12 reporting framework, United Nations Sustainable Development Goals, Sustainability Accounting Standards Board Standards, and recommendations set forth by the Task Force on Climate-Related Financial Disclosures. In 2023, we maintained a carbon neutral operating portfolio for Scope 1 and Scope 2. Carbon neutrality was accomplished first through energy and water efficiency, then the purchase of verified carbon offsets for Scope 1 emissions produced by onsite natural gas consumption and fugitive refrigerant emissions, and the purchase of Green-e RECs for Scope 2 emissions produced by consuming onsite electricity procured by us. (We own three company vehicles with emissions that are less than 0.01% of our carbon footprint and, therefore, are not included in our calculations of carbon neutrality.) Our planned next step toward long-term sustainability includes the development and execution of an offsite renewable energy strategy, which is expected to replace a significant portion of our annual REC purchases, which add renewable energy capacity to the national electrical grid. Our detailed sustainability information, including our strategy, key performance targets and indicators, annual absolute comparisons, achievements and historical ESG reports are available on our website at https://www.JBGSMITH.com/About/Sustainability. All energy, water, waste and greenhouse gas emissions data in our ESG report is third-party, limited assurance verified following ISO 14064-3. Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. We focus on operating efficiency, responding to evolving environmental and social trends, and delivering on the needs of our tenants and communities. We have demonstrated the results of this focus by: • Achieving a 5-star designation in the GRESB Global ESG Benchmark for Real Assets for both diversified operating assets and future development, and being recognized as a 2023 Global Sector Leader - Development - Residential Sector. • Being named 2023 Nareit Diversified Leader in the Light award winner for sustained ESG excellence. • Being named a 2023 U.S. Green Building Council Leadership award winner for sustainability leadership in the real estate sector. • Maintaining an ESG Committee and oversight of environmental and social matters by the Board of Trustees' Corporate Governance & Nominating Committee. • Being named to Bloomberg's Gender Equality Index. • Maintaining the diversity of our Board of Trustees, which currently comprises 40% women. Reflecting the strength and diversity of our national labor force, our Board of Trustees has made a long-term commitment to evolve its composition to have equal balance between men and women and to reflect the ethnic diversity of our country. • Surpassing $114 million in investor commitments to the JBG SMITH-managed WHI Impact Pool, which raises funds from third parties and, through 2023, has closed $72.0 million in financing related to the purchase of residential communities containing 2,833 units. We launched the WHI in 2018 in partnership with the Federal City Council to preserve or build between 2,000 and 3,000 units of affordable workforce housing in the Washington, D.C. region. Our sustainability team works directly with our business units to integrate our ESG principles throughout our operations and investment processes. Our sustainability team is responsible for leading annual ESG reporting efforts, maintaining building certifications, energy, water and waste benchmarking, sustainability strategy development, and implementation and coordination with industry and community partners. To ensure that our ESG principles are fully integrated into our business practices, our sustainability, human resources, legal, accounting, D&I, and social impact investing teams, as well as members of our management team, provide top- down support for the implementation of ESG initiatives. Our ESG Committee is responsible for ESG improvement initiatives and provides our Board of Trustees' Corporate Governance & Nominating and Audit Committees with periodic updates on ESG strategy. Accomplishments of this group in 2023 include an update to climate-related risks inclusive of physical and transition risks and the potential financial impacts of those risks, and the creation and adoption of human rights and ESG policies. 13 Energy and Water Efficiency and Management We believe that the efficient use of natural resources will result in sustainable long-term value and mitigate climate-related risks. By 2030, we have committed to reduce: energy consumption 25%, predicted energy consumption 25%, water consumption 20% and greenhouse gas emissions (Scope 1 and 2) 25%. Further, by 2030, we have committed to increase waste diversion to 60% and verify all assets using green building and health and well-being certifications across our Operating Portfolio and development pipeline. In addition to our 2030 targets, we have a legacy commitment to improve the energy efficiency of our commercial Operating Portfolio by at least 20% over the 10-year period ending in 2024 through the Department of Energy Better Buildings Challenge. We achieve this improvement through real time energy use monitoring. We are tracking a 15% reduction in energy consumption, a 12% reduction in water consumption and a 25% reduction in carbon emissions from our 2018 baseline through 2022. We report progress on these commitments annually in our ESG report. Our long-term strategy to reduce energy and water consumption includes operational and capital improvements that align with our business plan and contribute to attaining our performance targets. Asset teams review historical performance, conduct energy audits and regularly assess opportunities to achieve efficiency targets. Capital investment planning considers the useful life of equipment, energy and water efficiency, occupant health impacts and maintenance requirements. Asset-level business plans that include energy and water efficiency capital investments were completed in 2023. Our development strategy focuses on reducing predicted energy and water consumption and embodied carbon, contributing to attaining our performance targets. Development teams use energy, water, and embodied carbon modeling to inform design decisions that best fit each individual building program, adapt to identified climate change conditions for our region, and promote healthy buildings. Since the establishment of performance targets for our development projects, we are tracking an aggregate 25% reduction in predicted energy consumption, 35% reduction in predicted water use and 20% reduction in embodied carbon as of December 31, 2023. We use green building and health and well-being certifications as a verification tool across our portfolio. These certifications demonstrate our commitment to green, smart, and healthy buildings and verify predicted operational performance. We seek to benchmark 100% of our assets to help inform capital improvement projects. As of December 31, 2023: • 95% of all operating assets, based on square footage, have earned at least one green building or health and well- being certification: o 3.2 million square feet of LEED Certified Multifamily Space (61%) o 3.3 million square feet of LEED Certified Commercial Space (43%) o 2.7 million square feet of ENERGY STAR Certified Multifamily Space (52%) o 3.9 million square feet of ENERGY STAR Certified Commercial Space (51%) o 7.5 million square feet of BOMA 360 Certified Commercial Space (99%) o 3.8 million square feet of Fitwel Full Building Certified Commercial and Multifamily Space (29%) o 7.3 million square feet of Fitwel Viral Response Module Certified Commercial Space (96%) • 99.4% of our operating assets' energy and water use are benchmarked Tenant Sustainability Impacts Customer service is an integral component of real estate management. Our mission includes creating a unique experience at all our properties where our tenants' needs are our highest priority. We believe in sustainability as a service — by integrating efficiency and conservation into standard operating practices, we engage on topics that are most impactful to our tenants and residents. We are committed to providing a healthy living and working environment for building occupants. We accomplish this goal through monitoring and improving indoor air quality, eliminating toxic chemicals, providing access to nature and daylight, fresh foods, fitness, composting and waste reduction programs. 14 We are a Green Lease Leader established by the Institute for Market Transformation and the U.S. Department of Energy's Better Buildings Alliance. Green Lease Leaders recognizes companies who use the leasing process to achieve better collaboration between landlords and tenants with the goal of reducing building energy consumption and operating costs. Our standard lease contains a cost recovery clause for resource efficiency-related capital improvements and requires tenants to provide data for measuring, managing, and reporting sustainability performance. This language is included in 100% of our new office and retail leases and renewals. Nearly all our commercial tenants are metered at the whole building level for their grid electricity and water usage. Many of our retail tenants in multifamily buildings are billed directly for electricity and water. As such, the percentage of our directly sub-metered tenants is very low. In most cases, we receive a bill at the whole building level for grid electricity and water usage, and bill tenants based on the percentage of the building's square footage that they occupy. These tenants are not considered to be separately metered or sub-metered. Climate Change Resilience We take climate change and the associated risks seriously, and we are committed to managing and avoiding the impacts of climate change using science to inform action. We stand with our communities, tenants and shareholders in supporting meaningful solutions that address this global challenge. To develop a more informed view of future climate conditions and further our understanding of the direct climate-related risks to our properties, we have conducted a new climate-related risk assessment (both acute and chronic risks across our operating assets and development pipeline) which addresses both physical and transition climate risk factors, and estimates the financial implications of those modeled risks at the asset level. Climate Change Risk Management Strategy We have aligned our climate-related disclosures with the recommendations of the TCFD. As defined by the TCFD framework, physical risks associated with climate change include acute risks (extreme weather-related events) and chronic risks (such as extreme heat and coastal flooding), and transition risks associated with climate change include policy and legal risks, market and reputation-related risks and decarbonization technology risks. Our 2023 assessment of climate change risk relied on S&P Global Inc.'s Climanomics modeling tool. The Climanomics methodology projects portfolio level risk exposure as well as individual asset risk exposure over four reference scenarios, or representative concentration pathways, established by the Intergovernmental Panel on Climate Change and across a range of time horizons through 2100. Climanomics’ primary output is a risk exposure metric called MAAL. This value is presented as both absolute MAAL ($ in millions) and relative MAAL (% of total asset or portfolio value). We intend to conduct periodic climate-related risk assessments as the composition of our portfolio changes. The assessment included all in-service assets, and our development pipeline and landholdings, and included climate events such as hurricane, wildfire, temperature extremes, water stress, drought, fluvial and coastal flooding. The assessment of our portfolio identified fluvial and coastal flooding and temperature extremes (heat stress) as top hazards. We currently have no properties in a Federal Emergency Management Agency hazard designated area. Asset-Level Risk Management We are managing transition risks by benchmarking energy, carbon, water and waste performance at the asset level and review this information with asset management and operations teams quarterly. As a leader in green building, we will continue to make capital investments that enhance building performance and tenant comfort, energy and water efficiency, on-site renewable energy and other decarbonization strategies. We work with our insurance team to benchmark resilience features and develop adaptations for short-term horizons. We aim to develop risk mitigation and physical resilience plans for all assets taking into account the outputs from the Climanomics tool. 15 Carbon-Neutral Operations Strategy Our strategy to maintain carbon-neutral operations includes the following steps: • First and foremost, plan for and deploy energy and water efficiency at all assets. • Plan for and deploy energy, water, and embodied carbon reductions in the design of our buildings. • Deploy on-site renewable energy where most impactful. • Develop and deploy off-site renewable procurement strategies. • To the extent necessary, offset any remaining emissions by purchasing verified renewable energy credits and carbon offsets. Social Responsibility We believe the economic strength of our region is central to sustaining the long-term value of our portfolio. We are committed to the economic development of the Washington D.C. metropolitan area through continued investment in our projects and local communities. We recognize, however, that new development can foster challenging growth dynamics, with matters of social equity at the forefront. We strive to work alongside community members, leaders, and local and federal governments to appropriately respond to these challenges. One of our efforts is the WHI, which we launched in 2018 in partnership with the Federal City Council. The WHI is a transformational market-driven approach to producing affordable workforce housing and creating sustainable, mixed-income communities. The WHI is a scalable, market-driven model funded by a unique relationship between philanthropy and private investment. As of December 31, 2023, we have invested $7.7 million of our $11.2 million commitment in the WHI Impact Pool. The WHI Impact Pool completed fundraising in 2020 with capital commitments totaling $114.4 million, and has closed $72.0 million in financing related to the purchase of residential communities containing 2,833 units through December 31, 2023. To learn more about our ESG initiatives and performance, please visit https://www.JBGSMITH.com/About/Sustainability and download our ESG Report. The expected publication date of our 2024 ESG report is April 30, 2024. Our website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. D&I We have a comprehensive, multi-year D&I strategy. See "Human Capital" below for further discussion. Governance We are engaged in addressing ESG matters, including climate-related matters, at all levels of our organization. Management’s role in overseeing, assessing, and managing climate-related risks, opportunities and initiatives is integrated throughout our business units. We have a dedicated team of sustainability professionals focused on ESG matters that coordinate and collaborate across business units and with our Board of Trustees and management, and which advises on environmental sustainability matters and develops and implements related initiatives. In 2022, management established a new ESG Committee to help inform ESG strategy and more robustly advise the Board of Trustees on climate-related risks and opportunities. The ESG Committee is responsible for ensuring compliance with guidelines from the SEC and other regulatory bodies, and assists in establishing our general strategy as it relates to ESG matters that may affect our business, operation, performance or reputation. The ESG Committee reports to the Chief Legal Officer, with oversight provided by the Corporate Governance and Nominating Committee. Co-chairs include our Deputy General Counsel and Senior Vice President of Sustainability, with representation by business leaders from various groups across the organization. 16 Regulatory Matters Environmental Matters Under various federal, state and local laws, ordinances and regulations, a current or former owner or operator of real estate may be liable for conducting or paying for the costs of the investigation, removal or remediation of certain hazardous or toxic substances on that real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances, and the liability may be joint and several. The costs of remediation or removal of these substances may be substantial and could exceed the value of the property, and the presence of these substances, or the failure to promptly remediate these substances, may adversely affect the owner's ability to sell or develop the real estate or to borrow using the real estate as collateral. In connection with the ownership and operation of our current and former assets, we may be potentially liable for these costs. The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous substances or generated hazardous wastes, and indemnities in our lease agreements may not fully protect us from liability, if, for example, a tenant responsible for environmental noncompliance or contamination becomes insolvent. The release of these hazardous substances and wastes could result in us incurring liabilities to remediate any resulting contamination. The presence of contamination or the failure to remediate contamination at our properties may (i) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or property damage), (ii) subject our properties to liens in favor of the government for damages and costs the government incurs in connection with the contamination, (iii) impose restrictions on the manner in which a property may be used or businesses may be operated, or (iv) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. In addition, our assets are exposed to the risk of contamination originating from other sources. While a property owner may not be responsible for remediating contamination that has migrated onsite from an identifiable and viable offsite source, the contaminant's presence can have adverse effects on operations and the redevelopment of our assets. To the extent we arrange for contaminated materials to be sent to other locations for treatment or disposal, we may be liable for the cleanup of those sites if they become contaminated, without regard to whether we complied with environmental laws in doing so. Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the subject and surrounding assets. These environmental assessments generally have included a historical review, a public records review, a visual inspection of the site and surrounding assets, visual or historical evidence of underground storage tanks and other features, and the preparation and issuance of a written report. Soil, soil vapor and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any 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. The tests may not, however, have included extensive sampling or subsurface investigations. In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated appropriate actions. The environmental assessments have not revealed any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. Affordable Housing and Tenant Protection Regulations Certain states and municipalities have adopted laws and regulations imposing restrictions on the timing or amount of rent increases and other tenant protections. As of December 31, 2023, approximately 7% of the multifamily units in our Operating Portfolio were designated as affordable housing. In addition, Washington, D.C. and Montgomery County, Maryland have laws that require, in certain circumstances, an owner of a multifamily rental property to allow tenant organizations the option to purchase the building at a market price if the owner attempts to sell the property. We expect to continue operating and acquiring assets in areas that either are subject to these types of laws or regulations or where such laws or regulations may be enacted in the future. Such laws and regulations limit our ability to charge market rents, increase rents, evict tenants or recover increases in our operating expenses and could make it more difficult for us to dispose of assets in certain circumstances. 17 The Americans with Disabilities Act and other Federal, State and Local Regulations The ADA generally requires that public buildings, including our assets, meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants and/or legal fees to their counsel. If, under the ADA, we are required to make substantial alterations and capital expenditures in one or more of our assets, including the removal of access barriers, it could have a material adverse effect on us. Additionally, our assets are subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements. If we fail to comply with these requirements, we could incur fines or private damage awards. We do not know whether existing requirements will change or whether compliance with future requirements will require significant unanticipated expenditures that will affect our cash flow and results of operations. Regulation Related to Government Tenants As discussed above, the U.S. federal government is a significant tenant. Lease agreements with federal government agencies contain provisions required by federal law, which require, among other things, that the lessor of the property agree to comply with certain rules and regulations, including rules and regulations related to anti-kickback procedures, examination of records, audits and records, equal opportunity provisions, prohibition against segregated facilities, certain executive orders, subcontractor cost or pricing data, and certain provisions intending to assist small businesses. We directly manage assets with federal government agency tenants, which subjects us to additional risks associated with compliance with applicable federal rules and regulations. In addition, there are additional requirements relating to the potential application of equal opportunity provisions and related requirements to prepare written affirmative action plans applicable to government contractors and subcontractors. Some of the factors used to determine whether these requirements apply to a company that is affiliated with the actual government contractor (the legal entity that is the lessor under a lease with a federal government agency) include whether that company and the government contractor are under common ownership, have common management, and are under common control. We own the entity that is the government contractor and the property manager, increasing the risk that requirements of the Employment Standards Administration's Office of Federal Contract Compliance Programs and requirements to prepare affirmative action plans pursuant to the applicable executive order may be determined to be applicable to us. Compliance with these regulations is costly and any increase in regulation could increase our costs, which could have a material adverse effect on us. Human Capital Our headquarters is located at 4747 Bethesda Avenue, Suite 200, Bethesda, MD 20814. As of December 31, 2023, we had 844 employees. We believe that our talent is our competitive advantage. To that end, we focus on talent development and succession planning, pay-for-performance, and D&I. We utilize talent management practices in the broadest sense to create an engaging workplace experience for our employees, where they feel valued, respected and supported. Based on our most recent engagement survey, our employees are highly satisfied with their jobs (90% favorable) and feel positive about our D&I efforts and progress (88% favorable). We are keenly focused on the employee experience and want every person to feel respected for what makes them unique. At the same time, our core values provide a sound structure for finding common ground and working together as a team to deliver the best possible outcomes. In addition to our inclusive culture, our pay equity study results show no systemic disparity in compensation related to race or gender, affirming our strong belief in treating people equitably. With our hybrid corporate office schedule, flexibility, and emphasis on health and welfare, we offer our employees an environment that enables them to be confident in their in-office experience and demonstrate the energy and excitement that comes from being together and collaborating with coworkers to achieve desirable outcomes. In addition, we are proud to have been recognized by the Washington Post as a "Top Workplace" several times in past years, and are focused on providing a positive employee experience to ensure that we remain an employer of choice. 18 We continually invest in our employee population, ensuring our employee experience more broadly continues to help us attract and retain the best talent in the industry. The list below is a sampling of offerings that help create a compelling employee experience: • Streamlined annual performance reviews • Executive coaching available • Employee share purchase plan • Hybrid / flexible work schedules • Flexible paid time off • Regular town halls where senior management updates the entire team on recent progress and other important matters • Employee surveys • Mentorship and coaching programs to develop and retain talent • Monthly D&I communications • Employee roundtable discussions on pertinent current events, workplace issues and teambuilding • Utilization of JBGS Inclusion Community and Women's Initiative to guide D&I programming and events • Partnerships with schools and organizations to facilitate recruitment of diverse talent • Employee referral program • Generous company subsidy on health-related benefits • Lunches with Leaders • Volunteer opportunities In addition to the above, we have a strong pay-for-performance culture where compensation is tied to both company and individual performance, ensuring that employees are focused on our success, as well as their individual goals. We want our employees to feel aligned with our company vision and enabled to grow in their careers. To that end, we have a strong track record of promoting from within; in 2023, 50% of promotions went to people of color. Consequently, the opportunities for growth and development also help to keep our population engaged and motivated. 2023 continued the evolution of our comprehensive, multi-year D&I strategy. With an ongoing focus on our three strategic pillars – (i) employee development, (ii) engagement and (iii) recruiting – we have made additional progress and have continued to drive cultural and behavioral change. We offered a broad range of events and activities to recognize and celebrate our employees’ rich cultural diversity. We recognize that diversity in our workforce brings valuable perspectives, views and ideas to our organization. We pride ourselves on our strong, collaborative culture, and we strive to create an inclusive and healthy work environment for our employees, which helps us continue to attract innovators to our organization. Our workforce comprises 38% women and 61% people of color, and our senior leadership has 39% women representation. In addition, we were proud to be named to the 2023 Bloomberg Gender Equality Index. Implementing more inclusive, equitable systems and practices had a significant impact on our ability to identify diverse talent, particularly related to our entry-level recruitment efforts. 100% of 2023 intern hires were from underrepresented groups, and 81% of our new hires at all levels were people of color. In addition, we have continued to expand our strategic partnerships with diverse educational, professional and community organizations to ensure that we are building a strong, diverse pipeline of talent. Available Information Copies of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available free of charge through our website (https://www.JBGSMITH.com) as soon as 19 reasonably practicable after they are electronically filed with, or furnished to, the SEC. Also available on our website are copies of our Audit Committee Charter, Compensation Committee Charter, Corporate Governance and Nominating Committee Charter, Code of Business Conduct and Ethics and Corporate Governance Guidelines. In the event of any changes to these charters or the code or guidelines, changed copies will also be made available on our website. Copies of these documents are also available directly from us free of charge. Our website also includes other financial information, including certain financial measures not in compliance with GAAP, none of which is a part of this Annual Report on Form 10-K. Copies of our filings under the Exchange Act are also available free of charge from us, upon request. ITEM 1A. RISK FACTORS You should carefully consider the following risks in evaluating our company and our common shares. If any of the following risks were to occur, our business, prospects, financial condition, results of operations, cash flow, and the ability to make distributions to our shareholders could be materially and adversely affected, which we refer to herein collectively as a "material adverse effect on us," the per share trading price of our common shares could decline significantly, and you could lose all or part of your investment. Some statements in this Form 10-K, including statements in the following risk factors, constitute forward-looking statements. Refer to the section entitled "Cautionary Statement Concerning Forward-Looking Statements" for additional information regarding these forward-looking statements. Risks Related to Our Business and Operations A material portion of our portfolio comprises office assets, which have generally experienced a decrease in demand and may experience a further decrease in demand that could have a material adverse effect on us. Furthermore, the decline in the attractiveness of office assets, particularly combined with a lack of transactional activity and the current challenging capital markets could delay our capital recycling plans and our planned transition to majority multifamily. A material portion of our portfolio comprises office assets, which, due to the increase in work-from-home policies and practices, have generally experienced a decrease in demand and may experience a further decrease in demand as some tenants do not renew leases as they expire or renew space with a smaller footprint, which could have a material adverse effect on us. Demand for office space in the Washington, D.C. metropolitan area and nationwide, including in our portfolio, has declined and may continue to decline due to increased usage of teleworking arrangements and more flexible work- from-anywhere policies leading to reconsiderations regarding amount of square footage needed (e.g. certain tenants have reduced their leased square footage or advised us of their intention to do so), and cost cutting resulting from the pandemic, which could lead to continued lower office occupancy (as of December 31, 2023, 25.7% of our commercial and retail leases at our share, based on square footage, were scheduled to expire in 2024 or had month-to-month terms, and 6.8% were scheduled to expire in 2025), and new leasing has been slow to recover and will likely continue to lag due to delayed return-to-office plans and decision-making related to future office utilization. Furthermore, the decline in the attractiveness of office assets, particularly combined with a lack of transactional activity and the current challenging capital markets could delay our capital recycling plans and our plan to transition to a portfolio comprising a majority of multifamily assets. Finally, a key demand driver in National Landing is the presence of Amazon’s headquarters, Phase I of which was completed in 2023. Phase II has not yet commenced construction due to a pause announced by Amazon; if Amazon determines to further delay construction, reduce the size of Phase II, or otherwise shrink its footprint in National Landing, that could have a material adverse impact on our plans for National Landing. Our portfolio of assets is geographically concentrated in Washington, D.C. metropolitan area submarkets, and particularly concentrated in National Landing, which makes us susceptible to adverse economic and other conditions such that an economic downturn affecting this area could have a material adverse effect on us. We are particularly susceptible to adverse economic or other conditions in the Washington D.C. metropolitan market (such as periods of economic slowdown or recession, business layoffs or downsizing, industry slowdowns, actual or anticipated federal government shutdowns, uncertainties related to federal elections, relocations of businesses, increases in real estate and other taxes, actual or perceived increases in retail theft and other crime, imposed curfews or states of security, and the cost of complying with governmental regulations or increased regulation), as well as to natural disasters (including earthquakes, floods, storms and hurricanes), utility outages (including electricity and drinking water), potentially adverse effects of climate change and other disruptions that occur in this market (such as terrorist activity or threats of terrorist activity and other events), any of which may have a greater impact on the value of our assets or on our operating results than if we owned a more geographically diverse portfolio. 20 Additionally, acts of violence, including terrorist attacks in the Washington, D.C. metropolitan area could directly or indirectly damage our assets, both physically and financially, or cause losses that materially exceed our insurance coverage. Properties that are occupied by federal government tenants may be more likely to be the target of a future attack. Moreover, the same risks that apply to the Washington, D.C. metropolitan area as a whole also apply to the individual submarkets where our assets are located. National Landing makes up more than half of our portfolio based on square footage at our share. Portions of our markets, including National Landing, have underperformed other markets in the region with respect to rent growth and occupancy. Any adverse economic or other conditions in the Washington, D.C. metropolitan area and our submarkets, especially National Landing, or any decrease in demand for multifamily, office or retail assets could have a material adverse effect on us. Our assets and the property development market in the Washington, D.C. metropolitan area are dependent on an economy that is heavily reliant on federal government spending and use of office assets, and any actual or anticipated curtailment of such spending could have a material adverse effect on us. Any curtailment of federal government spending, whether due to a change of presidential administration or control of Congress, federal government sequestrations, furloughs or shutdowns, a slowdown of the U.S. and/or global economy, any change in federal government agencies work-from-home policies or uses of office space or other factors, could have an adverse impact on real estate values and property development in the Washington, D.C. metropolitan area, on demand and willingness to enter into long-term contracts for office space by the federal government and companies dependent upon the federal government, as well as on occupancy rates and annualized rents of multifamily and retail assets by occupants or patrons whose employment is by or related to the federal government. For instance, certain of our GSA tenants reduced their leased square footage. Any such curtailments in federal spending or changes in federal leasing policy could occur in the future, which could have a material adverse effect on us. We have significant exposure to Amazon and the National Landing submarket. The impact of Amazon's headquarters in National Landing is difficult to forecast and quantify and may differ from what we, financial or industry analysts or investors anticipate and have anticipated since Amazon’s November 2018 announcement that it had selected sites in National Landing as the location of its new headquarters. We have significant exposure to Amazon, both as a result of their status as a tenant and as a result of fees we expect to continue to receive from them as developer, property manager, and retail leasing agent for the company’s new headquarters at National Landing. As of December 31, 2023, we have leases with Amazon across five office buildings in National Landing totaling approximately 927,000 square feet with annualized rent totaling $41.6 million, of which 191,000 square feet are month- to-month and 378,000 square feet expire in 2024. Of the month-to-month leases and leases expiring in 2024, 444,000 square feet represent the entirety of 1800 South Bell Street and 2100 Crystal Drive. 1800 South Bell Street was taken out of service in the first quarter of 2024, and we plan to take 2100 Crystal Drive out of service when Amazon vacates in the second quarter of 2024. If Amazon invests less than the announced amounts in National Landing or makes such investment over a longer period than anticipated, if its business prospects decline, if it reduces the size of its workforce in National Landing below initially anticipated levels or further delays hiring or if it leases, releases or develops less square footage than anticipated, our ability to achieve the benefits associated with Amazon's headquarters location in National Landing could be adversely affected. If we, Virginia Tech, Amazon, federal, state and local governments do not make the anticipated investments, including infrastructure investments, that would directly benefit National Landing, we could be adversely affected. Furthermore, Amazon's headquarters may not have the anticipated collateral financial effect on the National Landing submarket. If we do not achieve the perceived benefits of such location as rapidly or to the extent anticipated by us, financial or industry analysts or investors, we and potentially the market price of our common shares could be adversely affected. If we are unable to re-lease that space at attractive rents, it could have a material adverse effect on us and the market price of our common shares. Additionally, if the Virginia Tech Innovation Campus reduces its contemplated size, further delays its opening, or does not have the anticipated collateral financial effect, or if any of our other key demand drivers in National Landing fail to materialize, it could have a material adverse effect on us. We derive a significant portion of our revenue from U.S. federal government tenants, and we may face additional risks and costs associated with directly managing assets occupied by government tenants. For the year ended December 31, 2023, 23.0% of the rental revenue from our commercial segment was generated by rentals to federal government tenants, and federal government tenants historically have been a significant source of new leasing for us. For the year ended December 31, 2023, GSA was our largest single tenant, with 37 leases comprising 22.7% 21 of total annualized rent at our share. The occurrence of events that have a negative impact on the demand for federal government office space, such as a decrease in federal government payrolls or a change in policy that prevents governmental tenants from renting our office space, would have a much larger adverse effect on our revenue than a corresponding occurrence affecting other categories of tenants. Additionally, a federal government shutdown could delay or prevent us from collecting rent payments from our federal government tenants. If demand for federal government office space were to decline, it would be more difficult for us to lease our buildings and could reduce overall market demand and corresponding rental rates, all of which could have a material adverse effect on us. For example, we have been notified by various GSA tenants that they are vacating their space totaling approximately 293,000 square feet in 2024. Lease agreements with these federal government agencies contain provisions required by federal law, which require, among other things, that the lessor of the property agree to comply with certain rules and regulations, including rules and regulations related to audits and records and subcontractor cost or pricing data. In addition, there are additional requirements relating to the potential application of equal opportunity provisions and related requirements to prepare written affirmative action plans applicable to government contractors and subcontractors. Some of the factors used to determine whether these requirements apply to a company that is affiliated with the actual government contractor (the legal entity that is the lessor under a lease with a federal government agency) include whether such company and the government contractor are under common ownership, have common management, and are under common control. We own the entity that is the government contractor and the property manager, increasing the risk that requirements of the Employment Standards Administration's Office of Federal Contract Compliance Programs and requirements to prepare affirmative action plans pursuant to the applicable executive order may be determined to be applicable to us. Compliance with these regulations is costly and any increase in regulation could increase our costs, which could have a material adverse effect on us. We are exposed to risks associated with real estate development and redevelopment, such as unanticipated expenses, delays and other contingencies, any of which could have a material adverse effect on us. Real estate development and redevelopment activities are a critical element of our business strategy, and we expect to engage in such activities with respect to several of our properties and with properties that we may acquire in the future. To the extent that we do so, we will continue to be subject to risks, including, without limitation: • • • • • • • • • • construction or redevelopment costs of a project may exceed original estimates, possibly making the project less profitable than originally estimated, or unprofitable; inflation could increase the costs of construction and development projects, which could decrease the yield on such projects, delaying their commencement or resulting in fewer such pursuits. In 2023, these conditions made new development starts infeasible; time required to complete the construction or redevelopment of a project or to lease-up the completed project may be greater than originally anticipated, thereby adversely affecting our cash flow and liquidity; contractor, subcontractor and supplier disputes, strikes, labor disputes or shortages, weather conditions or supply disruptions (including those related to the supply chain); failure to achieve expected occupancy and/or rent levels within the projected time frame, if at all; delays with respect to obtaining, or the inability to obtain, necessary zoning, occupancy, land use and other governmental permits, and changes in zoning and land use laws; occupancy rates and rents of a completed project may not be sufficient to make the project profitable; incurrence of design, permitting and other development costs for opportunities that we ultimately abandon; the ability of prospective real estate venture partners or buyers of our properties to obtain financing; and the availability and pricing of financing to fund our development activities on favorable terms or at all. These risks could result in substantial unanticipated delays or expenses and, under certain circumstances, could prevent the initiation or the completion of development or redevelopment activities, any of which could have a material adverse effect on us. 22 Partnership or real estate venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on partners' or co-venturers' financial condition and disputes between us and our partners or co-venturers, which could have a material adverse effect on us. As of December 31, 2023, 7.2% of our assets measured by total square feet at our share was held through real estate ventures, and we expect to co-invest in the future with other third parties through partnerships, real estate ventures or other entities, acquiring noncontrolling interests in or sharing responsibility for managing the affairs of a property, partnership, real estate venture or other entity. In particular, we may use real estate ventures as a significant source of equity capital to fund our development strategy. Consequently, with respect to any such third-party arrangement, we would not be in a position to exercise sole decision-making authority regarding the property, partnership, real estate venture or other entity, or structure of ownership and may, under certain circumstances, be exposed to risks not present were a third party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their share of required capital contributions, and we may be forced to make contributions to maintain the value of the property. Partners or co-venturers may have economic or other business interests or goals that are inconsistent or in direct conflict with our business interests or goals and may be in a position to take action or withhold consent contrary to our policies or objectives. These investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the partner or co-venturer would have full control over the partnership or real estate venture. We and our respective partners or co-venturers may each have the right to trigger a buy-sell right or forced sale arrangement, which could cause us to sell our interest, or acquire our partners' or co-venturers' interest, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. In addition, a sale or transfer by us to a third party of our interests in the partnership or real estate venture may be subject to consent rights or rights of first refusal in favor of our partners or co-venturers, which would in each case restrict our ability to dispose of our interest in the partnership or real estate venture. Where we are a limited partner or non-managing member in any partnership or limited liability company, if the entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in that entity, including by contributing our interest to a subsidiary of ours that is subject to corporate level income tax. Disputes between us and partners or co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or trustees from focusing their time and effort on our business. In addition, we may in certain circumstances be liable for the actions of our third-party partners or co- venturers. Our real estate ventures may be subject to debt, and the refinancing of such debt may require equity capital calls. Furthermore, any cash distributions from real estate ventures will be subject to the operating agreements of the real estate ventures, which may limit distributions, the timing of distributions or specify certain preferential distributions among the respective parties. The occurrence of any of the risks described above could have a material adverse effect on us. We depend on major tenants in our commercial portfolio, and the bankruptcy, insolvency or inability to pay rent of any of these tenants could have a material adverse effect on us. As of December 31, 2023, the 20 largest office and retail tenants in our Operating Portfolio represented 61.7% of our share of total annualized office and retail rent. In many cases, through tenant improvement allowances and other concessions, we have made substantial upfront investments in leases with our major tenants that we may not recover if they fail to pay rent through the end of the lease term. The inability or failure of a major tenant to pay rent, or the bankruptcy or insolvency of a major tenant, may adversely affect the income produced by our Operating Portfolio. Additionally, we may experience delays in enforcing our rights as landlord due to federal, state and local laws and regulations and may incur substantial costs in protecting our investment. Any such event could have a material adverse effect on us. We derive a significant portion of our revenue from five of our assets. As of December 31, 2023, five of our assets in the aggregate generated 26.1% of our share of annualized rent. The occurrence of events that have a negative impact on one or more of these assets, such as a natural disaster that damages one or more of these assets, would have a much larger adverse effect on our revenue than a corresponding occurrence affecting a less significant property. A substantial decline in the revenue generated by one or more of these assets could have a material adverse effect on us. Our Placemaking depends in significant part on a retail component, which frequently involves retail assets embedded in or adjacent to our multifamily assets and/or commercial assets, making us subject to risks that affect the retail environment generally, such as competition from discount and online retailers, weakness in the economy, fluctuations in foot traffic, pandemics, a decline in consumer spending and the financial condition of major retail tenants, any of 23 which could adversely affect market rents for retail space and the willingness or ability of retailers to lease space in our retail assets. If our retail assets lose tenants, whether to the proliferation of online businesses and discount retailers, a decline in general economic conditions and consumer spending or otherwise, it could have a material adverse effect on us. If we fail to reinvest in and redevelop our assets to maintain their attractiveness to retailers and shoppers, then retailers or shoppers may perceive that shopping at other venues or online is more convenient, cost-effective or otherwise more attractive, which could negatively affect our ability to rent retail space at our assets. In addition, some of our assets depend on anchor or major retail tenants and/or occupancy in surrounding offices to attract shoppers and could be adversely affected by the loss of, or a store closure by, one or more of these tenants or changes to in-office policies of surrounding businesses. Any of the foregoing factors could adversely affect the financial condition of our retail tenants, the willingness of retailers to lease space from us, and the success of our Placemaking, which could have a material adverse effect on us. The loss of one or more members of our senior management team could adversely affect our ability to manage our business and to implement our growth strategies or could create a negative perception in the capital markets. Our success and our ability to implement and manage anticipated future growth depend, in large part, upon the efforts of our senior management team. Members of our senior management team have national or regional industry reputations that attract business and investment opportunities and assist us in negotiations with lenders, existing and potential tenants and other industry participants. The loss of services of one or more members of our senior management team, or our inability to attract and retain similarly qualified personnel, could adversely affect our business, diminish our investment opportunities and weaken our relationships with lenders, business partners, existing and prospective tenants and industry participants, which could have a material adverse effect on us. The actual density of our development pipeline and/or any development parcel may not be consistent with our estimated potential development density. As of December 31, 2023, we estimate that our 17 assets in the development pipeline will total 10.8 million square feet (8.8 million square feet at our share) of estimated potential development density. The potential development density estimates for our development pipeline and/or any particular development parcel are based solely on our estimates, using data available to us, and our business plans as of December 31, 2023. The actual density of our development pipeline and/or any development parcel may differ substantially from our estimates based on numerous factors, including our inability to obtain necessary zoning, land use and other required entitlements, legal challenges to our plans by activists and others, as well as building, occupancy and other required governmental permits and authorizations, and changes in the entitlement, permitting and authorization processes that restrict or delay our ability to develop, redevelop or use our development pipeline at anticipated density levels. We can provide no assurance that the actual density of our development pipeline and/or any development parcel will be consistent with our estimated potential development density. The occurrence of cyber incidents, or a deficiency in our cybersecurity, or the cybersecurity of our service providers, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, regulatory enforcement and other legal proceedings, and/or damage to our business relationships, all of which could negatively impact our financial results. A cyber incident is any intentional or unintentional adverse event that threatens the confidentiality, integrity, or availability of our information resources and can include unauthorized persons gaining access to systems to disrupt operations, corrupting data or stealing confidential information. The risk of a cyber incident or disruption, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks have increased globally. As our reliance on technology increases, so do the risks posed to our systems – both internal and external. Our primary risks that could directly result from the occurrence of a cyber incident are theft of assets; operational interruption; reputational damage; stolen funds; regulatory enforcement, lawsuits and other legal proceedings; damage to our relationships with our tenants; and private data exposure. A significant and extended disruption could damage our business or reputation, cause a loss of revenue, have an adverse effect on tenant relations, cause an unintended or unauthorized public disclosure, or lead to the misappropriation of proprietary, personally identifying, and confidential information, any of which could result in us incurring significant expenses to resolve these kinds of issues. Although we have implemented processes, procedures and controls to help mitigate the risks associated with a cyber incident, there can be no assurance that these measures will be sufficient for all possible situations. Even security measures 24 that are appropriate, reasonable and/or in accordance with applicable legal requirements may not be sufficient to protect the information we maintain. Unauthorized parties, whether within or outside our company, may disrupt or gain access to our systems, or those of third parties with whom we do business, through human error, misfeasance, fraud, trickery, or other forms of deceit, including break-ins, use of stolen credentials, social engineering, phishing, computer viruses or other malicious codes, and similar means of unauthorized and destructive tampering. A successful attack on one of our service providers could result in a compromise of our own network, theft of our data, legal obligations or liabilities, deployment of ransomware or a disruption in our supply chain or of services upon which we rely. Even the most well protected information, networks, systems and facilities remain potentially vulnerable because the techniques used in such attempted cyber incidents evolve and generally are not recognized until they have been launched against a number of targets. Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures, making it impossible for us to entirely mitigate this risk. If any of the foregoing risks materialize, it could have a material adverse effect on us. Pandemics and other health concerns, including COVID-19, could have a negative effect on our business, results of operations, cash flows and financial condition. Pandemics, including COVID-19, as well as both future widespread and localized outbreaks of infectious diseases and other health concerns, and the measures taken to prevent the spread or lessen the impact, could cause a material disruption to multifamily and office industry or the economy as a whole. The impacts of such events could be severe and far-reaching, and may impact our operations in several ways. Additionally, pandemic outbreaks could lead governments and other authorities around the world, including federal, state and local authorities in the United States, to impose new or heightened measures intended to mitigate its spread, including restrictions on freedom of movement and business operations such as issuing guidelines, travel bans, border closings, business closures, quarantine orders, and orders not allowing the collection of rents, rent increases, or eviction of non-paying tenants. In the event of a decline in business activity and demand for real estate transactions, our ability or desire to grow or diversify our portfolio could be affected. Additionally, local and national authorities could extend or re-implement certain measures imposing restrictions on our ability to enforce contractual rental obligations upon our residents and tenants. Unanticipated costs and operating expenses coupled with decreased anticipated and actual revenue as a result of compliance with regulations, could negatively impact our business, results of operations, cash flow, and overall financial condition and/or our ability to satisfy certain REIT-related requirements. The full extent of the impact of a pandemic on our business is largely uncertain and dependent on a number of factors beyond our control, and we are not able to estimate with any degree of certainty the effect a pandemic, or measures intended to curb its spread, could have on our business, results of operations, financial condition and cash flows. Moreover, many of the other risk factors described herein could be more likely to impact us as a result of a pandemic or measures intended to curb its spread. Increased focus on our ESG business values may constrain our business operations, impose additional costs and expose us to new risks that could have a material adverse effect on us. Our business values integrate environmental sustainability, social responsibility, D&I and strong governance practices throughout our organization—these types of ESG matters have become increasingly important to investors and other stakeholders. Some investors may use these factors to determine their investment strategies, while current and potential employees and business partners may consider these factors when considering relationships with us. Certain organizations that provide corporate risk and corporate governance advisory services to investors have developed scores and ratings to evaluate companies based upon ESG metrics, and investors may consider a company's score as a factor in making an investment decision. There can be no assurance that our focus on our ESG business values will be well regarded by investors, particularly since the criteria by which companies are rated for their ESG efforts may change. Additionally, focus and activism related to ESG matters may constrain our business operations or increase expenses, and we may face reputational damage if our corporate responsibility initiatives do not meet the standards set by various constituencies, including those of third-party providers of corporate responsibility ratings and reports. A low ESG score could result in a negative perception of us, exclusion of our securities from consideration by certain investors and/or cause investors to reallocate their capital away from us, each of which could have an adverse impact on the price of our securities. As we continue to integrate environmental sustainability, social responsibility, D&I and strong governance practices throughout our organization, we could also be criticized by ESG detractors for the scope or nature of our ESG initiatives 25 or goals. We could also encounter negative reactions from governmental actors (such as anti-ESG legislation or retaliatory legislative treatment), tenants and residents, that that could have a material adverse effect on us. We face risks related to the real estate industry. As a REIT we are subject to significant risks related to the real estate industry, any of which could have a material adverse effect on us. These include, among other things: • The value of real estate fluctuates depending on conditions in the general economy and the real estate business. Additionally, adverse changes in these conditions may result in a decline in rental revenue, sales proceeds and occupancy levels at our assets and adversely impact our revenue and cash flows. If rental revenue, sales proceeds and/or occupancy levels decline, we generally would expect to have less cash available to pay indebtedness and for distribution to shareholders. In addition, some of our major expenses, including mortgage loan payments, real estate taxes and maintenance costs generally do not decline when the related rents decline. • The cost and availability of credit may be adversely affected by illiquid credit markets and wider credit spreads, and our inability or the inability of our tenants to timely refinance maturing liabilities to meet liquidity needs may materially affect our financial condition and results of operations. Additionally, mortgage loan obligations expose us to risk of foreclosure and the loss of properties subject to such obligations. • It may be difficult to buy and sell real estate quickly, or we or potential buyers of our assets may experience difficulty in obtaining financing, which may limit our ability to vary our portfolio promptly in response to changes in economic or other conditions. Additionally, we may be unable to identify, negotiate, finance or consummate acquisitions of properties, or acquire properties on favorable terms, or at all. • The composition of our portfolio by asset type is likely to continue to change over time, which could expose us to different asset class risks than if our portfolio composition remained static, and we may be adversely affected by trends in the asset classes we currently own. • We may not be able to control the operating expenses associated with our properties, which include real estate taxes, insurance, loan payments, maintenance, and costs of compliance with governmental regulation, or our operating expenses may remain constant or increase, even if our revenue does not increase, which could have a material adverse effect on us. • Macroeconomic trends, including increases in inflation and interest rates, could have a material adverse effect on us, as well as our tenants, which may adversely impact our business, financial condition and results of operations. • We may be unable to renew leases, lease vacant space or re-let space as leases expire, or do so on favorable terms, which could have a material adverse effect on us. As of December 31, 2023, leases representing 25.7% of our share of the office and retail square footage in our Operating Portfolio were scheduled to expire in 2024 or have month-to-month terms, 6.8% were scheduled to expire in 2025, and 14.4% of our share of the square footage of the assets in our commercial portfolio was unoccupied and not generating rent. We may find it necessary to make rent or other concessions and/or significant capital expenditures to improve our assets to retain and attract tenants. • We may be unable to maintain or increase our occupancy and revenue at certain multifamily, commercial and other assets due to an increase in supply, more favorable terms offered by competitors, and/or deterioration in our markets. • Increased affordability of residential homes and other competition for tenants of our multifamily properties could affect our ability to retain current residents of our multifamily properties, attract new ones or increase or maintain rents, which could adversely affect our results of operations and our financial condition. • We may from time to time be subject to litigation, which may significantly divert the attention of our officers and/or trustees and result in defense costs, settlements, fines or judgments against us, some of which are not, or cannot be, covered by insurance, any of which could have a material adverse effect on us. For example, we are currently a defendant in an antitrust lawsuit, brought by the Washington, D.C. Attorney General, involving RealPage, which is one of our vendors, alleging that RealPage and lessors of multifamily residential real estate conspired, principally in connection with the alleged use of RealPage revenue management systems, to artificially inflate the rental rates for multifamily residential real estate above competitive levels. • We own leasehold interests in certain land on which some of our assets are located. If we default under the terms 26 of any of these ground leases, we may be liable for damages and could lose our leasehold interest in the property or our option to purchase the underlying fee interest in such asset. In addition, unless we purchase the underlying fee interests in the land on which a particular property is located, we will lose our right to operate the property or we will continue to operate it at much lower profitability, which would significantly adversely affect our results of operations. In addition, if we are perceived to have breached the terms of a ground lease, the fee owner may initiate proceedings to terminate the lease. • Our assets may be subject to impairment losses, which could have a material adverse effect on our results of operations. • Climate change, including rising sea levels, flooding, prolonged periods of extreme temperature or other extreme weather, and changes in precipitation and temperature, may result in physical damage to, or a total loss of, our assets located in areas affected by these conditions, including those in low-lying areas close to sea level, such as National Landing, and/or decreases in demand, rent from, or the value of those assets. In addition, we may incur material costs to protect these assets, including increases in our insurance premiums as a result of the threat of climate change, or the effects of climate change may not be covered by our insurance policies. Furthermore, changes in federal and state legislation and regulations on climate change could result in increased utility expenses and/or increased capital expenditures to improve the energy efficiency and reduce carbon emissions of our properties in order to comply with such regulations or result in fines for non-compliance. Any of the foregoing could have a material and adverse effect on us. We may incur significant costs to comply with environmental laws, and environmental contamination may impair our ability to lease and/or sell real estate. Our operations and assets are subject to various federal, state and local laws and regulations concerning the protection of the environment including air and water quality, hazardous or toxic substances and health and safety. Under some environmental laws, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances released at a property. The owner or operator may also be held liable to a governmental entity or to third parties for property damage or personal injuries and for investigation and clean-up costs incurred by those parties because of the contamination. These laws often impose liability without regard to whether the owner or operator knew of the release of the substances or caused such release. The presence of contamination or the failure to remediate contamination 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) result in restrictions on the manner in which a property may be used or businesses may be operated, or (iv) impair our ability to sell or lease real estate or to borrow using the real estate as collateral. 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. Other laws and regulations govern indoor and outdoor air quality including those that can require the abatement or removal of asbestos-containing materials in the event of damage, demolition, renovation or remodeling, and also govern emissions of and exposure to asbestos fibers in the air. The maintenance and removal of lead paint and certain electrical equipment containing polychlorinated biphenyls (PCBs) are also regulated by federal and state laws. We are also subject to risks associated with human exposure to chemical or biological contaminants such as molds, pollens, viruses and bacteria which, above certain levels, can be alleged to be connected to allergic or other health effects and symptoms in susceptible individuals. Our predecessor companies may be subject to similar liabilities for activities of those companies in the past. We could incur fines for environmental noncompliance and be held liable for the costs of remedial action with respect to the foregoing regulated substances or related claims arising out of environmental contamination or human exposure at or from our assets. Most of our assets have been subjected to varying degrees of environmental assessment at various times. To date, these environmental assessments have not revealed any environmental condition material to our business. However, identification of new compliance concerns or undiscovered areas of contamination, changes in the extent or known scope of contamination, human exposure to contamination or changes in cleanup or compliance requirements could result in significant costs to us. In addition, we may become subject to costs or taxes, or increases therein, associated with natural resource or energy usage (such as a "carbon tax"). These costs or taxes could increase our operating costs and decrease the cash available to pay our obligations or distribute to equity holders. 27 Increasingly competitive labor markets and our need to provide additional incentives to remain competitive in our hiring and retention efforts may hurt our ability to effectively operate our business and have a negative effect on our business, results of operations, cash flows, and financial condition. Our success depends on our ability to continue to attract, retain and motivate qualified personnel, but we may not be able to do so on acceptable terms or at all. Recently, the U.S. job market has experienced labor shortages, resulting in intense competition for retaining and hiring skilled employees. Additionally, the competitive labor conditions have significantly increased compensation expectations for our existing and prospective personnel. If we are unable to hire and retain qualified personnel as required for our operations, our business, results of operations, cash flows and financial condition could be adversely affected. Risks Related to the Capital Markets and Related Activities We face risks related to our common shares. These risks include, among other things, the risk that an economic downturn or a deterioration in the capital markets may materially affect the value of our equity securities; the absence of any guarantee or certainty regarding the timing, amount, or payment of future dividends on our common shares; the risk of dilution of ownership in our company due to certain actions taken by us; the risk that future offerings of debt or preferred equity securities, which would be senior to our common shares upon liquidation, and in the case of preferred equity securities may be senior to our common shares for purposes of dividend distributions or upon liquidation, may adversely affect the per share trading price of our common shares; and the risk that the announcement of a material acquisition may result in a rapid and significant decline in the price of our common shares. If any of the foregoing risks materialize, it could have a material adverse effect on us. We have a substantial amount of indebtedness, and our debt agreements include restrictive covenants and other requirements, which may limit our financial and operating activities, our future acquisition and development activities, or otherwise affect our financial condition. As of December 31, 2023, we had $2.6 billion aggregate principal amount of consolidated debt outstanding, and our unconsolidated real estate ventures had $235.0 million aggregate principal amount of debt outstanding ($68.0 million at our share), resulting in a total of $2.6 billion aggregate principal amount of debt outstanding at our share. A portion of our outstanding debt is guaranteed by JBG SMITH LP. Our cash flow from operations may be insufficient to meet our required debt service and payments of principal and interest on borrowings may leave us with insufficient cash resources to operate our assets or to pay the dividends currently contemplated. Additionally, our debt agreements include customary restrictive covenants, that, among other things, restrict our ability to incur additional indebtedness, to engage in material asset sales, mergers, consolidations and acquisitions, and to make capital expenditures, and some of our debt agreements also include requirements to maintain financial ratios. Our ability to borrow is subject to compliance with these and other covenants, and failure to comply with our covenants could cause a default under the applicable debt instrument, and we may then be required to repay such debt with capital from other sources or give possession of a property to the lender. Any of the foregoing could affect our ability to obtain additional funds as needed, or on favorable terms, which could, among other things, adversely affect our ability to meet operational needs or to finance our future acquisition and development activities. We may not be able to obtain capital to make investments. We are primarily dependent on external capital to fund the expected growth of our business. Our access to debt or equity capital depends on the willingness of third parties to lend or make equity investments and on conditions in the capital markets generally. There can be no assurance that new capital will be available or available on acceptable terms. Our future development plans are capital intensive. To complete these plans, we anticipate funding construction and development through asset sales, real estate ventures with third parties, recapitalizations of assets, and public or private securities offerings, or a combination thereof. Similarly, these plans require a significant amount of debt financing which subjects us to additional risks, such as rising interest rates. For information about our available sources of funds, see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources" and the notes to the consolidated financial statements included herein. 28 We are subject to interest rate risk, which could increase our interest expense, increase the cost to refinance and increase the cost of issuing new debt. As of December 31, 2023, $670.6 million of our outstanding consolidated debt was subject to instruments that bear interest at variable rates, and we may continue to incur indebtedness that bears interest at variable interest rates. While some of this debt is protected against interest rate increases above specified rates via interest rate cap agreements, the remainder does not benefit from such arrangements. Further, we may borrow money at variable interest rates in the future without the benefit of associated hedges and caps. With respect to these unhedged amounts, increases in interest rates would increase our interest expense under these instruments, increase the cost of refinancing these instruments or issuing new debt, and adversely affect our cash flow and our ability to service our indebtedness and make distributions to our shareholders, which could, in turn, adversely affect the market price of our common shares. We may enter into hedging transactions to protect ourselves from the effects of interest rate fluctuations on floating rate debt. As of December 31, 2023, our hedging transactions included interest rate cap agreements, which covered $466.1 million of our outstanding consolidated debt, a significant portion of which is with one counterparty, which also exposes us to counterparty risk. Interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates, which could reduce the overall returns on our investments. Moreover, there can be no assurance that our hedging arrangements will qualify as highly effective hedges under applicable accounting standards. Furthermore, should we desire to terminate a hedging agreement, there could be significant costs and cash requirements. Additionally, we are required to maintain interest rate cap agreements under certain of our variable rate debt agreements. Renewing, extending or entering into new interest rate cap agreements in a rising and volatile interest rate environment may cause us to incur significant upfront costs. Finally, the REIT provisions of the Code impose certain restrictions on our ability to use hedges, swaps and other types of derivatives to hedge our liabilities. Any of the foregoing could increase our interest expense, increase the cost to refinance and increase the cost of issuing new debt. Risks and Conflicts of Interest Related to Our Organization and Structure Tax consequences to holders of OP Units upon a sale of certain of our assets may cause the interests of our senior management to differ from your own. Some holders of OP Units, including some members of our senior management, may suffer different and more adverse tax consequences than holders of our common shares upon the sale of certain of the assets owned by JBG SMITH LP, and therefore these holders may have different objectives regarding the material terms of any sale or refinancing of certain assets, or whether to sell such assets at all. Certain of our trustees and executive officers may have actual or potential conflicts of interest, including because of their previous or continuing equity interest in, or positions at JBG, including trustees and members of our senior management, who have an ownership interest in the JBG Legacy Funds and own carried interests in certain JBG Legacy Funds and in certain of our real estate ventures that entitle them to receive additional compensation if certain funds or real estate ventures achieve certain return thresholds. Some of our trustees and executive officers are persons who were employees of JBG, and they own equity interests in certain JBG Legacy Funds and related entities. Ownership of interests in the JBG Legacy Funds and current or past service as a managing member, at JBG, could create, or appear to create, potential conflicts of interest. Certain of the JBG Legacy Funds own the JBG Excluded Assets, which JBG Legacy Funds are owned in part by members of our senior management and certain trustees. In addition, although the asset management and property management fees associated with the JBG Excluded Assets were assigned to us upon completion of the Formation Transaction, the general partner and managing member interests in the JBG Legacy Funds held by former JBG executives (who became members of our management team) and certain trustees were not transferred to us and remain under the control of these individuals. Our management's time and efforts may be diverted from the management of our assets to management of the JBG Legacy Funds, which could adversely affect the execution of our business plan and our results of operations and cash flow. Members of our senior management and certain trustees have an ownership interest 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 additional compensation if the fund or real estate venture achieves certain return thresholds. Additionally, in the future, we may elect to assign to certain employees a percentage of third-party fees, carried interests or other equity interests in certain assets, joint ventures or other real estate ventures. As a result, such employees could be incentivized to spend time and effort maximizing the 29 cash flow from the assets being retained by the JBG Legacy Funds or other relevant real estate ventures in which they have an ownership or other interest, including through sales of assets, which may, for example, accelerate payments of the carried interest but would reduce the asset management and other fees that would otherwise be payable to us with respect to the JBG Excluded Assets. These actions could adversely impact our results of operations and cash flow. Other potential conflicts of interest may arise with the JBG Legacy Funds or other relevant real estate ventures if we engage in direct transactions or compete for tenants. For example, we have entered, and in the future may enter into transactions with the JBG Legacy Funds, such as purchasing assets from them. Any such transaction creates a conflict of interest as a result of our management team's interests on both sides of the transaction, because we manage the JBG Legacy Funds and because members of our management and Board of Trustees own interests in the general partner or other managing entities of the funds. Any of the above-described conflicts of interest could have a material adverse effect on us. We may acquire properties or portfolios of properties through tax deferred contribution transactions, which could result in shareholder dilution and limit our ability to sell or refinance such assets. In the future, we may acquire properties or portfolios of properties through tax deferred contribution transactions in exchange for partnership interests in JBG SMITH LP, which may result in shareholder dilution through the issuance of OP Units that may be exchanged for common shares. This acquisition structure may have the effect of, among other things, reducing the amount of tax depreciation we could deduct (as compared to a transaction where we do not inherit the contributor's tax basis but acquire tax basis equal to the value of the consideration exchanged for the property) until the OP Units issued in such transactions are redeemed for cash or converted into common shares. While no such protection arrangements existed as of December 31, 2023, in the future we may agree to protect the contributors' ability to defer recognition of taxable gain through restrictions on our ability to dispose of, or refinance the debt on, the acquired properties for specified periods of time. Similarly, we may be required to incur or maintain debt we would otherwise not incur or maintain so that we can allocate the debt to the contributors to maintain their tax bases. These restrictions could limit our ability to sell an asset at a time, or on terms that would be favorable absent such restrictions. Our declaration of trust and bylaws, the partnership agreement of JBG SMITH LP and MGCL, and the Code contain provisions that may delay, defer or prevent a change of control transaction that might involve a premium price for our common shares or that our shareholders otherwise believe to be in their best interest. Our declaration of trust contains ownership limits with respect to our shares. Generally, to maintain our qualification as a REIT under the Code, not more than 50% in value of our outstanding shares of beneficial interest may be owned, directly or indirectly, by five or fewer "individuals" (including some types of entities) at any time during the last half of our taxable year. To address this requirement and other tax considerations, our declaration of trust prohibits, among other things, the actual, beneficial or constructive ownership by any person of more than 7.5% in value or number of shares, whichever is more restrictive, of the outstanding shares of any class or series, including our common shares. For these purposes, our declaration of trust includes a "group" as that term is used for purposes of Section 13(d)(3) of the Exchange Act in the definition of "person." Our Board of Trustees may exempt a person, prospectively or retroactively, from these ownership limits if certain conditions are satisfied, but is not required to grant any exemption. Our Board of Trustees may determine not to grant an exemption even if no adverse tax or REIT qualification consequences would be caused by ownership in excess of the 7.5% ownership limit. This ownership limit and the other restrictions on ownership and transfer of our shares contained in our declaration of trust may: (i) discourage a tender offer or other transactions or a change in management or of control that might involve a premium price for our common shares or that our shareholders might otherwise believe to be in their best interest; or (ii) result in the transfer of shares acquired in excess of the restrictions to a trust for the benefit of a charitable beneficiary and, as a result, the forfeiture by the acquirer of the benefits of owning the additional shares. Additionally, our declaration of trust authorizes the Board of Trustees, without shareholder approval, to establish a class or series of common or preferred shares whose terms could delay, deter or prevent a change in control or other transaction that might involve a premium price or otherwise be in the best interest of our shareholders. Our declaration of trust and bylaws contain other provisions that may delay, deter or prevent a change of control or other transaction that might involve a premium price or otherwise be in the best interest of our shareholders. Provisions of MGCL could inhibit changes in control, which may discourage third parties from conducting a tender offer or seeking other change of control transactions that might involve a premium price for our common shares or that our shareholders might otherwise believe to be in their best interest. Provisions of the MGCL, may have the effect of inhibiting 30 a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of common shares with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • • provisions that prohibit business combinations between us and an "interested shareholder," defined generally as any holder or affiliate of any holder who beneficially owns 10% or more of the voting power of our shares, for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter impose fair price and/or supermajority shareholder voting requirements on these combinations; and provisions that provide that a shareholder's "control shares" acquired in a "control share acquisition," as defined in the MGCL, have no voting rights, except to the extent approved by our shareholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding all interested shares. As permitted by the MGCL, we have elected in our bylaws to opt out of the business combination and control share provisions of the MGCL. However, we cannot assure you that our Board of Trustees will not opt to be subject to such provisions of the MGCL in the future, including opting to be subject to such provisions retroactively. The limited partnership agreement of JBG SMITH LP requires the approval of the limited partners with respect to certain extraordinary transactions involving JBG SMITH, which may reduce the likelihood of such transactions being consummated, even if they are in the best interests of, and have been approved by, our shareholders. The limited partnership agreement of JBG SMITH LP provides that we may not engage in a merger, consolidation or other combination with or into another person, a sale of all or substantially all of our assets, or a reclassification, recapitalization or a change in outstanding shares (except for changes in par value, or from par value to no par value, or as a result of a subdivision or combination of our common shares), which we refer to collectively as an extraordinary transaction, unless specified criteria are met. In particular, with respect to any extraordinary transaction, if partners will receive consideration for their limited partnership units and if we seek the approval of our shareholders for the transaction (or if we would have been required to obtain shareholder approval of any such extraordinary transaction but for the fact that a tender offer shall have been accepted with respect to a sufficient number of our common shares to permit consummation of such extraordinary transaction without shareholder approval), then the limited partnership agreement prohibits us from engaging in the extraordinary transaction unless we also obtain "partnership approval." To obtain "partnership approval," we must obtain the consent of our limited partners (including us and any limited partners majority owned, directly or indirectly, by us) representing a percentage interest in JBG SMITH LP that is equal to or greater than the percentage of our outstanding common shares required (or that would have been required in the absence of a tender offer) to approve the extraordinary transaction, provided that we and any limited partners majority owned, directly or indirectly, by us will be deemed to have provided consent for our partnership units solely in proportion to the percentage of our common shares approving the extraordinary transaction (or, if there is no shareholder vote with respect to such extraordinary transaction because a tender offer shall have been accepted with respect to a sufficient number of our common shares to permit consummation of the extraordinary transaction without shareholder approval, the percentage of our common shares with respect to which such tender offer shall have been accepted). The limited partners of JBG SMITH LP may have interests in an extraordinary transaction that differ from those of common shareholders, and there can be no assurance that, if we are required to seek "partnership approval" for such a transaction, we will be able to obtain it. As a result, if a sufficient number of limited partners oppose such an extraordinary transaction, the limited partnership agreement may prohibit us from consummating it, even if it is in the best interests of, and has been approved by, our shareholders. Substantially all our assets are owned by subsidiaries. We depend on dividends and distributions from these subsidiaries. The creditors of these subsidiaries are entitled to amounts payable to them by the subsidiaries before the subsidiaries may pay any dividends or other distributions to us. Substantially all of our assets are held through JBG SMITH LP, which holds substantially all of its assets through wholly owned subsidiaries. JBG SMITH LP's cash flow is dependent on cash distributions to it by its subsidiaries, and in turn, substantially all of our cash flow is dependent on cash distributions to us by JBG SMITH LP. The creditors of each of our subsidiaries are entitled to payment of that subsidiary's obligations to them when due and payable before distributions may be made by that subsidiary to its equity holders. In addition, the operating agreements governing some of our subsidiaries which are parties to real estate joint ventures may have restrictions on distributions which could limit the ability of those subsidiaries to make distributions to JBG SMITH LP. Thus, JBG SMITH LP's ability to make distributions to holders of its units, including us, depends on its subsidiaries' ability first to satisfy their obligations to their creditors, and then to 31 make distributions to holders of its units. Likewise, our ability to pay dividends depends on JBG SMITH LP's ability first to satisfy its obligations, if any, to its creditors and make distributions payable to holders of preferred units (if any), and then to make distributions to us. In addition, our participation in any distribution of the assets of any of our subsidiaries upon the liquidation, reorganization or insolvency of the subsidiary, occurs only after the claims of the creditors, including trade creditors, and preferred security holders, if any, of the applicable direct or indirect subsidiaries are satisfied. Our rights and the rights of our shareholders to take action against our trustees and officers are limited. As permitted by MGCL, under our declaration of trust, trustees and officers shall not be liable to us and our shareholders for money damages, except for liability resulting from actual receipt of an improper benefit or profit in money, property or services; or a final judgment based upon a finding of active and deliberate dishonesty by the trustee or officer that was material to the cause of action adjudicated. In addition, our declaration of trust and indemnification agreements require us to indemnify our trustees and officers (in some cases, without requiring a preliminary determination of the trustee's or officer's ultimate entitlement to indemnification) for actions taken by them in those and certain other capacities to the maximum extent permitted by MGCL. The Maryland REIT law permits a REIT to indemnify and advance expenses to its trustees, officers, employees and agents to the same extent as permitted by the MGCL for directors and officers of a Maryland corporation. Generally, MGCL permits a Maryland corporation to indemnify its present and former directors and officers except in instances where the person seeking indemnification acted in bad faith or with active and deliberate dishonesty, actually received an improper personal benefit in money, property or services or, in the case of a criminal proceeding, had reasonable cause to believe that his or her actions were unlawful. Under MGCL, a Maryland corporation also may not indemnify a director or officer in a suit by or in the right of the corporation in which the director or officer was adjudged liable to the corporation or for a judgment of liability on the basis that a personal benefit was improperly received. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the prescribed standard of conduct; however, indemnification for an adverse judgment in a suit by us or in our right, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses. As a result, we and our shareholders may have more limited rights against our trustees and officers than might otherwise exist. Accordingly, if actions taken in good faith by any of our trustees or officers impede the performance of our company, our shareholder’s ability to recover damages from such trustee or officer will be limited. Risks Related to Our Status as a REIT We may fail to qualify or remain qualified as a REIT and may be required to pay income taxes at corporate rates. Although we believe that we are organized and intend to operate to qualify as a REIT for federal income tax purposes, we may fail to remain so qualified. Qualification and taxation as a REIT are governed by highly technical and complex provisions of the Code for which there are only limited judicial or administrative interpretations and depend on various facts and circumstances that are not entirely within our control. If, with respect to any taxable year, we fail to maintain our qualification as a REIT and do not qualify under the relevant statutory relief provisions, we would have to pay federal income tax on our taxable income at regular corporate rates, could not deduct our distributions in determining our taxable income subject to tax, and would possibly also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the nondeductible 1% excise tax on certain stock repurchases. If we had to pay federal income tax, the amount of money available to distribute to shareholders and pay our indebtedness would be reduced for the year or years involved, and we would not be required to make distributions to shareholders in that taxable year and in future years until we again were able to qualify as a REIT. In addition, we would also be disqualified from treatment as a REIT for the four taxable years following the year during which qualification was lost, unless we were entitled to relief under the relevant statutory provisions. REIT distribution requirements could adversely affect our liquidity and our ability to execute our business plan or require us to make distributions of our shares or other securities. For us to qualify to be taxed as a REIT, we generally must distribute to our shareholders each year at least 90% of our REIT taxable income, determined without regard to the dividends paid deduction and excluding any net capital gains. We intend to distribute 100% of our REIT taxable income to our shareholders out of assets legally available therefor. From time to time, we may generate taxable income greater than our cash flow. If we do not have other funds available, we could be required to borrow funds on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that 32 would otherwise be invested in future acquisitions, capital expenditures or repayment of debt, or make taxable distributions of our shares to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and avoid corporate income tax and a 4% excise tax in a particular year. These alternatives could increase our costs or reduce our equity. Because amounts distributed will not be available to fund investment activities, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the value of our shares. Restrictions on our ability to incur additional indebtedness or make certain distributions could preclude us from meeting the 90% distribution requirement. Consequently, there can be no assurance that we will be able to make distributions at the anticipated distribution rate or any other rate. The tax imposed on REITs engaging in "prohibited transactions" may limit our ability to engage in transactions that would be treated as sales for U.S. federal income tax purposes. A REIT's net income from prohibited transactions is subject to a 100% penalty tax. In general, prohibited transactions are sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. Although we and our subsidiary REITs believe that we have held, and intend to continue to hold, our properties for investment and do not intend to hold directly (rather than through taxable corporate subsidiaries) any properties that could be characterized as held for sale to customers in the ordinary course of our business, such characterization is a factual determination and no guarantee can be given that the IRS would agree with our characterization of our properties or that we will always be able to make use of the available statutory safe harbor. In the case of some of our properties held through partnerships with third parties, our ability to control the disposition of such properties in a manner that avoids the imposition of the prohibited transactions tax depends in part on the action of third parties over which we have no control or only limited influence. To comply with the restrictions imposed on REITs, we may have to conduct certain activities and own certain assets through a TRS, which will be subject to normal corporate income tax, and we could be subject to a 100% penalty tax if our transactions with our TRSs are not conducted on arm's length terms. A TRS is an entity taxed as a corporation in which a REIT directly or indirectly holds stock and which has elected with the REIT to be treated as a TRS of the REIT and which is taxable as a regular corporation, at regular corporate income tax rates. As a REIT, we cannot own certain assets or conduct certain activities directly, without risking failing the income or asset tests that apply to REITs. We can, however, hold these assets or undertake these activities through a TRS. For example, we generally cannot provide certain non-customary services to our tenants, and we cannot derive income from a third party that provides such services. If we forego providing such services to our tenants, we may be at a disadvantage to competitors who are not subject to the same restrictions. Accordingly, we provide such non-customary services to our tenants and share in the revenue from such services through our TRSs. As noted, the income earned through our TRSs will be subject to corporate income taxes. In addition, a 100% excise tax will be imposed on certain transactions between us and our TRSs that are not conducted on an arm's length basis. Risks Related to the Formation Transaction We could be required to indemnify Vornado for certain material tax obligations that could arise as addressed in the Tax Matters Agreement and certain obligations under the Separation and Distribution Agreement. Furthermore, Vornado agreed to indemnify us for certain pre-distribution liabilities and liabilities related to Vornado assets and there can be no assurance that these obligations will be sufficient to protect us. Additionally, there may be undisclosed liabilities of the Vornado and JBG assets contributed to us in the Formation Transaction that might expose us to potentially large, unanticipated costs. Under the Tax Matters Agreement that we entered into with Vornado, we may be required to indemnify Vornado against any taxes and related amounts and costs if the distribution of JBG SMITH shares by Vornado, together with certain related transactions, is not tax-free and that treatment results from (i) actions or failures to act by us, or (ii) our breach of certain representations or undertakings. The Separation Agreement provides for indemnification obligations designed to make us financially responsible for substantially all liabilities that may exist relating to our business activities, whether incurred prior to or after the Formation Transaction, as well as those obligations of Vornado that we assumed pursuant to the Separation Agreement. If we are required to indemnify Vornado under the circumstances set forth in the Tax Matters Agreement or the Separation Agreement, we may be subject to substantial liabilities. Pursuant to the Separation Agreement, Vornado agreed to indemnify us for certain liabilities. However, third parties could seek to hold us responsible 33 for any of the liabilities that Vornado agreed to retain, and there can be no assurance that Vornado will be able to fully satisfy its indemnification obligations. Moreover, even if we ultimately succeed in recovering from Vornado any amounts for which we are held liable, such indemnification may be insufficient to fully offset the financial impact of such liabilities and/or we may be temporarily required to bear these losses while seeking recovery from Vornado. Additionally, prior to entering into the MTA, the diligence reviews performed by each of Vornado and JBG with respect to the business and assets of the other were necessarily limited in nature and scope and may not have adequately uncovered all of the contingent or undisclosed liabilities that we assumed in connection with the Formation Transaction, many of which may not be covered by insurance. The MTA does not provide for indemnification for these types of liabilities by either party post- closing, and, therefore, we may not have any recourse with respect to such unexpected liabilities. Any such liabilities could cause us to experience losses, which may be significant, which could have a material adverse effect on us. Unless Vornado and JBG SMITH were both REITs following the Separation, JBG SMITH could be required to recognize certain corporate-level gains for tax purposes as a result of the Separation. We believe that each of Vornado and JBG SMITH operated in a manner so that each qualified as a REIT immediately after the Separation and at all times during the two years after the Separation. However, if either Vornado or JBG SMITH failed to qualify as a REIT following the Separation, then, for our taxable year that includes the Separation, the IRS may assert that JBG SMITH would have to recognize corporate-level gain on assets acquired in the Separation. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS Certain statements contained herein constitute forward-looking statements within the meaning of the federal securities laws. 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 Annual Report on Form 10-K. Investors are cautioned to interpret many of the risks identified under the section titled "Risk Factors" in this Annual Report on Form 10-K as being heightened as a result of the numerous adverse impacts of COVID-19. In particular, information included under "Business," "Risk Factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements. 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. Such factors include: • • • the economic health and public safety climate of the greater Washington Metro region and our geographic concentration therein, particularly our concentration in National Landing; decreases in demand for office space in the Washington, D.C. metropolitan area, particularly with respect to our two largest tenants, Amazon and the federal government; the amount and timing of Amazon’s investments in National Landing and revenue we receive from them currently and may receive in the future; • whether any or all of the other three demand drivers discussed above will fail to materialize; • whether the plan to build a sports and entertainment anchor in National Landing will materialize at the planned scale, or at all; • • • • • reductions in or actual or threatened changes to the timing of federal government spending; changes in general political, economic, public safety and competitive conditions and specific market conditions; the risks associated with real estate development and redevelopment, including unanticipated expenses, delays and other contingencies; the risks associated with the acquisition, disposition and ownership of real estate in general and our real estate assets in particular; the ability to control our operating expenses; 34 • • • • • • • • • • • • • the risks related to co-investments in real estate ventures and partnerships; the ability to renew leases, lease vacant space or re-let space as leases expire, and to do so on favorable terms; the economic health of our tenants; fluctuations in interest rates; the supply of competing properties and competition in the real estate industry generally; the availability and terms of financing and capital and the general volatility of securities markets; the risks associated with mortgage loans and other indebtedness; compliance with applicable laws, including those concerning the environment and access by persons with disabilities; increased investor focus and activism related to ESG matters; terrorist attacks, acts of violence and the occurrence of cyber incidents or system failures; the ability to maintain key personnel; failure to qualify and maintain our qualification as a REIT and the risks of changes in laws affecting REITs; and other factors discussed under the caption "Risk Factors." For a further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors" in this Annual Report on Form 10-K. 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 Annual Report on Form 10-K or the date of any document incorporated by reference. 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 Annual Report on Form 10-K. ITEM 1B. UNRESOLVED STAFF COMMENTS There are no unresolved comments from the staff of the SEC as of the date of this Annual Report on Form 10-K. ITEM 1C. CYBERSECURITY Strategy and Risk Management To mitigate cybersecurity risks we have adopted a process of continuous improvement and adaptation to the ever-changing threat landscape. As part of this process, we engage with industry-leading managed security service provider(s) to supplement our efforts in preventing, identifying and responding to cybersecurity threats. Our information technology operations, information security processes and CIRP are generally aligned with the National Institute of Standards and Technology’s framework. We have adopted a cloud-first strategy which is a foundational element to our overall cybersecurity posture. For essential systems, we utilize SaaS-based software partners who annually conduct Statement on Standards for Attestation Engagements SOC 1 or SOC 2 assessments, as appropriate, based on functional use within our company. Based on the nature of services provided by our technology partners, our third-party risk management process may include: 35 • Reviewing cybersecurity practices of such provider. • Contractually obligating the provider to share detailed results of cybersecurity assessments on an annual basis. • Contractually obligating the provider to make us aware of significant cybersecurity related incidents. • Coordinating independent security assessments with the provider utilizing our own resources. Cybersecurity Risk Management We have adopted a cybersecurity risk management process that is designed to identify and mitigate potential cybersecurity risks. On an annual basis, we work with credible, third-party cybersecurity experts to assess our ability to prevent, identify, and respond to cybersecurity threats through internal and external penetration tests and monthly vulnerability scans. We also test our organizational cybersecurity capabilities through facilitated tabletop exercises which simulate real life scenarios. Together with the findings of the SOC 1 and 2 assessments, and our threat intelligence and monitoring activities, these exercises, tests and scans help us identify potential cybersecurity risks. We seek to mitigate cybersecurity risks we identify through a variety of methods, including: • When practical and necessary, we patch vulnerabilities that are identified. • We deploy endpoint detection and monitoring technologies to identify potential cybersecurity incidents. • We back up our systems and data to mitigate the impact of a cybersecurity event that would impact our ability to operate or result in the loss of data. • We partner with strategic managed cybersecurity service providers to supplement the capabilities of our internal team. • We update and refine our CIRP in response to identified risks. • To manage the third-party cybersecurity risk introduced by our cloud-first strategy, we have implemented a due diligence process for new software partners as well as an annual review process for essential SaaS system partners. • We conduct cybersecurity awareness training annually and simulated phishing campaigns no less than quarterly to test and educate our employees. Notwithstanding the steps we take to address cybersecurity, we may not be successful in preventing or mitigating all cybersecurity incidents or threats. See Item 1A. Risk Factors - Risks Related to Our Business and Operations – The occurrence of cyber incidents, or a deficiency in our cybersecurity, or the cybersecurity of our service providers, could negatively impact our business by causing a disruption to our operations, a compromise or corruption of our confidential information, regulatory enforcement and other legal proceedings, and/or damage to our business relationships, all of which could negatively impact our financial results – for a discussion of cybersecurity risks. To date, we have not experienced any material cybersecurity incidents. Governance Our Chief Information & Technology Officer along with our Vice President of Cybersecurity & Cloud Infrastructure provide principal oversight and guidance of our cybersecurity risk management strategy, programs and processes. The Chief Information & Technology Officer has over 20 years of experience in information technology in the real estate sector, leading organizations through strategic technology and process improvement initiatives. The Vice President of Cybersecurity & Cloud Infrastructure has over 15 years of extensive experience in cybersecurity and information technology. They are supported in their efforts by a team of technical experts who have had formal training and possess relevant industry related experience in addition to managed cybersecurity service providers who specialize in preventing, identifying, and responding to cybersecurity threats. The Audit Committee of our Board of Trustees provides board-level governance and oversight regarding cybersecurity matters. Management meets with the Audit Committee periodically to discuss cybersecurity strategy, risk, trends, and internal personnel and qualifications. As part of our annual enterprise risk assessment, technology and cyber risks are standing risk factors which are ranked and reviewed by management. 36 In the event of a cyberattack, we engage our CIRP, which provides a framework of processes and procedures related to identifying, categorizing, responding, containing, analyzing, and eradicating cybersecurity threats to mitigate downtime and promptly restore systems and services. Management has responsibility for reporting cybersecurity incidents to the Audit Committee as they occur, if consistent with our CIRP. The CIRP also addresses management's responsibility, with Audit Committee oversight, with respect to any reporting or disclosure determinations related to a given cybersecurity incident and provides for Audit Committee and Board of Trustee briefings as appropriate. ITEM 2. PROPERTIES Note on presentation of "at share" information. We present certain financial information and metrics "at JBG SMITH Share," which is calculated on an entity-by-entity basis, but exclude our: (i) 10.0% subordinated interest in one commercial building, (ii) 33.5% subordinated interest in four commercial buildings, (iii) 49.0% interest in three commercial buildings and (iv) 9.9% interest in one commercial building, as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures; these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures and we have not guaranteed their obligations or otherwise committed to providing financial support. "At JBG SMITH Share" information, which we also refer to as being "at share," "our pro rata share" or "our share," is not, and is not intended to be, a presentation in accordance with GAAP. Because as of December 31, 2023, 7.2% of our assets, as measured by total square feet, was held through real estate ventures in which we own less than 100% of the ownership interest, we believe this form of presentation, which includes our economic interests in the unconsolidated real estate ventures, provides investors important information regarding a significant component of our portfolio, its composition, performance and capitalization. We classify our portfolio as "operating," "under-construction," or "development pipeline." The following tables provide information about our multifamily, commercial and development pipeline portfolios as of December 31, 2023. Many of our assets in the development pipeline are adjacent to or an integrated component of operating multifamily or commercial assets in our portfolio. A number of our assets included in the following tables are held through real estate ventures with third parties or are subject to ground leases. In addition to other information, the following tables indicate our percentage ownership, whether the asset is consolidated or unconsolidated, and whether the asset is subject to a ground lease. 37 Multifamily Assets Multifamily Assets National Landing RiverHouse Apartments The Bartlett 220 20th Street 2221 S. Clark Street - Residential (3) D.C. West Half Fort Totten Square The Wren The Batley WestEnd25 F1RST Residences Atlantic Plumbing 1221 Van Street 901 W Street 900 W Street (3) North End Retail (4) MD 8001 Woodmont Operating - Total / Weighted Average (3) Under-Construction National Landing 1900 Crystal Drive (5) 2000/2001 South Bell Street (5) Under-Construction - Total Total Totals at JBG SMITH Share (3) National Landing D.C. MD Operating - Total / Weighted Average Under-construction assets Note: At 100% share, unless otherwise noted. % Ownership C/U (1) Same Store (2): YTD 2022-2023 Units Number Total Square Feet of Multifamily % Retail % % Leased Occupied Occupied Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y N 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C — — C C 1,676 699 265 216 1,327,551 96.6% 619,372 97.2% 271,476 95.1% 96,948 88.6% 465 345 433 432 283 325 310 291 161 95 — 385,368 94.4% 384,956 97.3% 96.8% 332,682 300,388 96.1% 273,264 94.3% 270,928 95.1% 245,143 94.0% 225,592 96.0% 94.5% 154,379 61.1% 71,050 27,355 96.0% 96.0% 96.7% 94.0% 85.9% 93.1% 91.6% 94.2% 94.4% 93.6% 94.2% 93.9% 93.1% 95.7% 47.4% — 100.0% 100.0% 100.0% — 83.1% 100.0% 100.0% — — 100.0% 89.2% 100.0% 63.9% — 96.0% 322 6,318 363,979 96.2% 5,350,431 96.0% 94.1% 94.7% 95.1% 95.3% 808 775 1,583 7,901 633,985 580,966 1,214,951 6,565,382 2,856 3,140 322 6,318 1,583 2,315,347 96.6% 95.5% 2,671,105 363,979 96.2% 5,350,431 96.0% 1,214,951 96.0% 93.7% 94.1% 94.7% 100.0% 94.7% 95.1% 95.3% (1) (2) (3) (4) (5) "C" denotes a consolidated interest and "U" denotes an unconsolidated interest. "Y" denotes an asset as same store and "N" denotes an asset as non-same store. 2221 S. Clark Street - Residential and 900 W Street are excluded from percent leased and percent occupied metrics as they are operated as short- term rental properties. In January 2024, we sold North End Retail for a gross sales price of $14.3 million. In 2021, we leased the land underlying 1900 Crystal Drive and 2000/2001 South Bell Street to a lessee. The assets are consolidated in our financial statements as they are owned through variable interest entities for which we are the primary beneficiary. See Note 6 to the consolidated financial statements for additional information. 38 Commercial Assets Commercial Assets National Landing 1550 Crystal Drive (3) 2121 Crystal Drive 2345 Crystal Drive 2231 Crystal Drive 2011 Crystal Drive 2451 Crystal Drive 1235 S. Clark Street 241 18th Street S. (3) 1215 S. Clark Street 201 12th Street S. 251 18th Street S. (3) 1225 S. Clark Street 1901 South Bell Street 1770 Crystal Drive 2100 Crystal Drive 1800 South Bell Street (3) 200 12th Street S. 2200 Crystal Drive (3) Crystal Drive Retail (3) Crystal City Shops at 2100 (3) Central Place Tower (4) Other 2101 L Street 800 North Glebe Road One Democracy Plaza (4) (5) 4747 Bethesda Avenue (6) 1101 17th Street Operating - Total / Weighted Average Totals at JBG SMITH Share National Landing Other Operating - Total / Weighted Average % Same Store (2): Ownership C/U (1) YTD 2022-2023 Total Square Feet % Office % Retail % Leased Occupied Occupied 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 100.0 % C 50.0 % U 100.0 % C 100.0 % C 100.0 % C 20.0 % U 55.0 % U Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y Y 95.3% 555,302 89.7% 509,922 55.4% 499,688 72.7% 468,907 57.6% 440,510 86.3% 402,375 97.5% 384,656 96.3% 355,728 99.6% 336,159 99.8% 329,687 82.7% 309,450 94.2% 276,203 274,912 67.6% 273,787 100.0% 253,437 100.0% 203,273 100.0% 202,761 77.5% 161,668 100.0% 42,938 100.0% 34,452 100.0% 96.4% 551,594 375,493 303,759 213,139 300,535 209,401 76.1% 99.3% 85.5% 98.0% 88.6% 8,269,736 87.0% 91.4% 87.0% 55.0% 69.6% 57.7% 86.1% 95.4% 93.8% 100.0% 98.4% 81.7% 91.1% 67.6% 100.0% 100.0% 100.0% 77.5% 100.0% — — 96.2% 74.6% 100.0% 85.6% 97.9% 88.9% 85.7% 100.0% 100.0% 74.3% 97.4% 50.3% 92.6% 95.0% 100.0% 44.5% 100.0% 100.0% 80.9% — 100.0% — 100.0% — — 100.0% 100.0% 100.0% 92.6% 92.4% 70.5% 100.0% 82.8% 95.9% 6,591,612 1,067,669 7,659,281 86.2% 87.2% 86.3% 84.6% 86.9% 84.9% 96.5% 91.4% 95.8% Note: At 100% share, unless otherwise noted. (1) (2) (3) "C" denotes a consolidated interest and "U" denotes an unconsolidated interest. "Y" denotes an asset as same store and "N" denotes an asset as non-same store. The following assets contain space that is held for development or not otherwise available for lease. This out-of-service square footage is excluded from square feet, leased and occupancy metrics in the above table. Commercial Asset 1550 Crystal Drive 241 18th Street S. 251 18th Street S. 1800 South Bell Street 2200 Crystal Drive Crystal Drive Retail Crystal City Shops at 2100 2221 S. Clark Street - Office In-Service 555,302 355,728 309,450 203,273 161,668 42,938 34,452 — Not Available for Lease 3,270 6,612 29,996 2,913 121,940 14,027 37,763 35,182 (4) Asset is subject to a ground lease where we are the lessee. In February 2024, one of our unconsolidated real estate ventures sold Central Place Tower for a gross sales price of $325.0 million. (5) Not Metro-served. (6) Includes our corporate office lease for approximately 84,400 square feet. 39 Development Pipeline Asset National Landing % Estimated Potential Development Density (SF) Ownership Total Multifamily Office Retail Estimated Number of Units Potomac Yard Landbay F/G/H 1415 S. Eads Street 3330 Exchange Avenue 3331 Exchange Avenue RiverHouse Land 2250 Crystal Drive 223 23rd Street 2525 Crystal Drive 101 12th Street S. 1800 South Bell Street Land (1) 50.0% / 100.0% 100.0% 50.0% 50.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 2,614,000 531,400 239,800 180,600 1,988,400 696,200 492,100 373,000 239,600 311,000 1,147,000 527,400 216,400 164,300 1,960,600 681,300 484,100 370,000 — — 758,200 434,100 605,200 1,369,000 — — — — — — — 234,400 307,000 — — — 98,000 4,000 23,400 16,300 27,800 14,900 8,000 3,000 5,200 4,000 60,900 17,300 39,000 — — 1,240 635 240 170 1,665 825 610 370 — — 820 470 645 — 1,248,100 142,200 1,105,900 10,828,900 7,490,800 3,016,300 321,800 7,690 6,649,000 2,107,000 8,756,000 5,137,300 1,840,200 6,977,500 1,375,900 149,600 1,525,500 135,800 117,200 253,000 5,280 1,935 7,215 100.0% 100.0% 100.0% 819,100 451,400 644,200 D.C. Gallaudet Parcel 2-3 (2) Capitol Point - North Gallaudet Parcel 4 (2) Other Development Parcels (3) Total Totals at JBG SMITH Share National Landing D.C. Note: At 100% share, unless otherwise noted. (1) Currently encumbered by an operating commercial asset. (2) Controlled through an option to acquire a leasehold interest. As of December 31, 2023, the weighted average remaining term for the option is 1.4 years. (3) Comprises four assets in which we have a minority interest. Major Tenants The following table sets forth information for our 10 largest tenants by annualized rent for the year ended December 31, 2023: Tenant GSA Amazon Gartner, Inc Lockheed Martin Corporation Accenture LLP Public Broadcasting Service Booz Allen Hamilton Inc Greenberg Traurig LLP The International Justice Mission Family Health International Total Number of Square Leases 37 6 1 2 2 1 3 1 1 1 55 Feet 1,810,310 926,703 174,424 207,095 116,736 120,328 107,415 64,090 74,833 59,514 3,661,448 At JBG SMITH Share Annualized % of Total Square Feet Rent (In thousands) % of Total Annualized Rent 26.1 % $ 13.4 % 2.5 % 3.0 % 1.7 % 1.7 % 1.5 % 0.9 % 1.1 % 0.9 % 52.8 % $ 72,167 41,640 12,878 10,001 5,722 5,004 4,859 4,698 4,508 4,047 165,524 22.7 % 13.1 % 4.1 % 3.2 % 1.8 % 1.6 % 1.5 % 1.5 % 1.4 % 1.3 % 52.2 % Note: Includes all leases as of December 31, 2023 for which a tenant has taken occupancy for office and retail space within our Operating Portfolio. 40 Lease Expirations The following table sets forth as of December 31, 2023 the scheduled expirations of tenant leases in our Operating Portfolio for each year from 2024 through 2032 and thereafter: At JBG SMITH Share Year of Lease Expiration Month-to-Month 2024 2025 2026 2027 2028 2029 2030 2031 2032 Thereafter Total / Weighted Average Number of Square Leases 34 84 59 52 34 39 27 22 27 20 62 460 Feet 350,538 1,425,853 470,183 246,936 508,033 429,762 199,507 608,111 552,510 793,813 1,345,827 6,931,073 % of Total Square Feet Annualized 5.1 % $ Rent (1) (In thousands) 12,823 67,318 21,600 12,414 24,879 20,916 9,730 29,839 21,122 36,919 59,766 317,326 20.6 % 6.8 % 3.6 % 7.3 % 6.2 % 2.9 % 8.8 % 8.0 % 11.5 % 19.2 % 100.0 % $ % of Total Annualized Rent Annualized 4.0 % $ Rent Per Square Foot (1) 36.58 47.21 45.94 50.27 48.97 48.67 48.77 49.07 38.23 46.51 45.74 46.04 21.2 % 6.8 % 3.9 % 7.8 % 6.6 % 3.1 % 9.4 % 6.7 % 11.6 % 18.9 % 100.0 % $ Note: Includes all leases as of December 31, 2023 for which a tenant has taken occupancy for office and retail space within our Operating Portfolio and assuming no exercise of renewal options or early termination rights. The weighted average remaining lease term for the entire portfolio is 5.1 years. (1) Annualized rent and annualized rent per square foot exclude percentage rent and the square footage of tenants that only pay percentage rent. ITEM 3. 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 4. MINE SAFETY DISCLOSURES Not applicable. 41 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Dividends Our common shares trade under the symbol "JBGS." On February 16, 2024, there were 832 holders of record of our common shares. This number does not reflect individuals or other entities who hold their shares in "street name." Dividends declared for the year ended December 31, 2023 totaled $0.675 per common share (quarterly dividends of $0.225 per common share for the first three quarters of 2023. On February 14, 2024, our Board of Trustees declared a quarterly dividend of $0.175 per common share, payable on March 15, 2024 to shareholders of record as of March 1, 2024. Dividends declared for the years ended December 31, 2022 and 2021 totaled $0.90 per common share (quarterly dividends of $0.225 per common share). Future dividends will be declared at the discretion of our Board of Trustees and will depend upon cash generated by our operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Code and such other factors as our Board of Trustees deems relevant. To qualify for the beneficial tax treatment accorded to REITs under the Code, we are currently required to make distributions to holders of our shares in an amount equal to at least 90% of our REIT taxable income as defined in Section 857 of the Code. The annual distribution amounts are different from dividends as calculated for federal income tax purposes. Distributions to the extent of our current and accumulated earnings and profits for federal income tax purposes generally will be taxable to a shareholder as ordinary dividend income. Distributions in excess of current and accumulated earnings and profits will be treated as a nontaxable reduction of the shareholder's basis in the shareholder's shares, to the extent thereof, and thereafter as taxable capital gain. Distributions that are treated as a reduction of the shareholder's basis in its shares will have the effect of increasing the amount of gain, or reducing the amount of loss, recognized upon the sale of the shareholder's shares. No assurances can be given regarding what portion, if any, of distributions in 2024 or subsequent years will constitute a return of capital for federal income tax purposes. During a year in which a REIT earns a net long-term capital gain, the REIT can elect under Section 857(b)(3) of the Code to designate a portion of dividends paid to shareholders as capital gain dividends. If this election is made, the capital gain dividends are generally taxable to the shareholder as long-term capital gains. Performance Graph This performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act or the Exchange Act. The graph below compares the cumulative total return of our common shares, the S&P MidCap 400 Index and the FTSE Nareit Equity Office Index, from December 31, 2018 through December 31, 2023. The comparison assumes $100 was invested on December 31, 2018 in our common shares and in each of the foregoing indexes and assumes reinvestment of dividends, as applicable. We have included the FTSE Nareit Equity Office Index because we believe that it is representative of the industry in which we compete and is relevant to an assessment of our performance. There can be no assurance that the performance of our shares will continue in line with the same or similar trends depicted in the graph below. 42 TOTAL RETURN PERFORMANCE E U L A V X E D N I 190 170 150 130 110 90 70 50 JBG SMITH Properties S&P MidCap 400 Index FTSE NAREIT Equity Office Index JBG SMITH Properties S&P MidCap 400 Index FTSE Nareit Equity Office Index Sales of Unregistered Shares 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 57.98 181.15 83.23 61.77 155.58 81.58 89.58 178.95 130.77 94.71 143.44 107.19 100.00 100.00 100.00 117.23 126.20 131.42 During the year ended December 31, 2023, we did not sell any unregistered securities. 43 Repurchases of Equity Securities The following is a summary of common shares repurchased: Period October 1, 2023 - October 31, 2023 November 1, 2023 - November 30, 2023 December 1, 2023 - December 31, 2023 Total for the three months ended December 31, 2023 Total for the year ended December 31, 2023 Program total since inception in March 2020 (1) Total Number Of Common Shares $ Purchased 2,021,688 914,797 1,194,234 4,130,719 22,576,594 45,874,003 Average Price Paid Per Common Share 13.85 13.40 15.31 14.17 14.83 20.88 Total Number Of Common Shares Purchased As Part Of Publicly Announced Plans Or Programs 2,021,688 $ 914,797 1,194,234 4,130,719 22,576,594 45,874,003 Approximate Dollar Value Of Common Shares That May Yet Be Purchased Under the Plan Or Programs 559,438,395 547,157,665 528,849,166 (1) During the first quarter of 2024, through the date of this filing, we repurchased and retired 2.7 million common shares for $45.4 million, a weighted average purchase price per share of $16.52, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Our Board of Trustees previously authorized the repurchase of up to $1.0 billion of our outstanding common shares, and in May 2023, increased the authorized repurchase amount to $1.5 billion. 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. Equity Compensation Plan Information Information regarding equity compensation plans is presented in Part III, Item 12 of this Annual Report on Form 10-K and incorporated herein by reference. ITEM 6. [RESERVED] ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is intended to provide material information relevant to our financial condition and results of operations, including cash flows, and should be read in conjunction with the consolidated financial statements and notes thereto appearing in Item 8 - Financial Statements and Supplementary Data of this Annual Report on Form 10-K. Organization and Basis of Presentation JBG SMITH, a Maryland REIT, owns, operates, invests in and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, D.C., most notably National Landing. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, D.C. metropolitan area. Approximately 75.0% of our holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon's new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and our deployment of 5G digital infrastructure. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the 44 JBG Legacy Funds, other third parties and the WHI Impact Pool. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH LP. We were organized for the purpose of receiving, via the spin-off on July 17, 2017, substantially all the assets and liabilities of Vornado's Washington, D.C. segment. On July 18, 2017, we acquired the management business and certain assets and liabilities of JBG. We have elected to be taxed as a REIT under sections 856-860 of 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. As a REIT, we can reduce our taxable income by distributing all or a portion of such taxable income to shareholders. Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Code, and such other factors as our Board of Trustees deems relevant. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as TRSs under the Code. As such, we are subject to federal, state, and local taxes on the income from these activities. Income taxes attributable to our TRSs are accounted for under the asset and liability method. Under the asset and liability method, deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. We aggregate our operating segments into three reportable segments (multifamily, commercial and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services. We compete with many property owners and developers. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our assets at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due. Overview As of December 31, 2023, our Operating Portfolio consisted of 44 operating assets comprising 16 multifamily assets totaling 6,318 units (6,318 units at our share), 26 commercial assets totaling 8.3 million square feet (7.7 million square feet at our share) and two wholly owned land assets for which we are the ground lessor. Additionally, we have two under- construction multifamily assets with 1,583 units (1,583 units at our share) and 17 assets in the development pipeline totaling 10.8 million square feet (8.8 million square feet at our share) of estimated potential development density. We continue to implement our comprehensive plan to reposition our holdings in the National Landing submarket in Northern Virginia by executing a broad array of Placemaking strategies. Our Placemaking includes the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces. In keeping with our dedication to Placemaking, each new project is intended to contribute to authentic and distinct neighborhoods by creating a vibrant street environment with robust retail offerings and other amenities, including improved public spaces. To that end, we saw the delivery of two Placemaking projects, Water Park and Surreal, this year. Additionally, the digital infrastructure investments we are making, including our ownership of CBRS wireless spectrum in National Landing and our agreements with AT&T, Cisco and Federated Wireless, are advancing our efforts to make National Landing among the first 5G-operable submarkets in the nation. During the second quarter of 2023, we completed the construction of two new office buildings for Amazon on Metropolitan Park in National Landing, totaling 2.1 million square feet, inclusive of approximately 50,000 square feet of street-level retail with new shops and restaurants, and Amazon took occupancy of its new headquarters in June 2023. We are the developer, property manager and retail leasing agent for Amazon's new headquarters at National Landing. As of December 45 31, 2023, we also have leases with Amazon totaling approximately 927,000 square feet across five office buildings in National Landing. Outlook A fundamental component of our strategy to maximize long-term NAV per share is active capital allocation. We evaluate development, acquisition, disposition, share repurchases and other investment decisions based on how they may impact long-term NAV per share. We intend to continue to opportunistically sell or recapitalize assets as well as land sites where a ground lease or joint venture execution may represent the most attractive path to maximizing value. Successful execution of our capital allocation strategy enables us to source capital at NAV from the disposition of assets generating low cash yields and invest those proceeds in new acquisitions with higher cash yields and growth, development projects with significant yield spreads and profit potential, and share repurchases. Consequently, at any given time, we expect to be in various stages of discussions and negotiations with potential buyers, real estate venture partners, ground lessors and other counterparties with respect to sales, joint ventures and/or ground leases for certain of our assets, including portfolios thereof. These discussions and negotiations may or may not lead to definitive documentation or closed transactions. We anticipate redeploying the proceeds from these sales will not only help fund our planned growth, but will also further advance the strategic shift of our portfolio to majority multifamily. Current market conditions have significantly slowed down the pace of asset sales, and we expect this reduced activity to continue in 2024. Our multifamily portfolio occupancy as of December 31, 2023 increased by 110 basis points compared to December 31, 2022. For fourth quarter lease expirations, we increased effective rents, which represent the average change in rental rates versus expiring rental rates net of concessions, by 7.0% upon renewal while achieving a 56.0% renewal rate across our portfolio. We continue to advance our two under-construction multifamily assets in National Landing, 1900 Crystal Drive and 2000/2001 South Bell Street, totaling 1,583 units. Upon delivery of 1900 Crystal Drive, expected in the second quarter of 2024, we will no longer be able to capitalize interest, which will increase annual interest expense by approximately $17.3 million once the mortgage loan is fully drawn. Upon delivery of 2000/2001 South Bell Street, expected in the third quarter of 2025, we will no longer be able to capitalize interest, which will increase annual interest expense by approximately $14.1 million once the mortgage loan is fully drawn. The current weighted average interest rate on these mortgage loans is 7.2%, and while we anticipate refinancing with agency debt upon stabilization, the ultimate terms of those future refinancings are not yet known. Our office portfolio occupancy as of December 31, 2023 decreased by 20 basis points compared to December 31, 2022. During 2023, we executed 927,000 square feet of office leases during the year at our share, approximately 89% of which comprised leases in National Landing and 90.3% of leases (on a square footage basis) were with defense and technology tenants. We have 1.5 million square feet of office leases in National Landing expiring in 2024 or on a month-to-month status and expect only approximately 20.0% of this space to be renewed. As of December 31, 2023, we have leases with Amazon across five office buildings in National Landing totaling approximately 927,000 square feet with annualized rent totaling $41.6 million, of which 191,000 square feet are month-to-month and 378,000 square feet expire in 2024. Of the month-to-month leases and leases expiring in 2024, 444,000 square feet represent the entirety of 1800 South Bell Street and 2100 Crystal Drive (which together generated $14.7 million of NOI in 2023). In addition, we anticipate approximately 750,000 square feet (approximately $36.9 million of annualized rent) will be vacated in 2024. In 2025, we have approximately 375,000 square feet expiring, and while it is too early to determine a precise retention rate, we expect at least 110,000 square feet or 29% (at least $4.4 million of annualized rent) will vacate, but that number could increase as those expirations grow nearer. As the office market continues to experience headwinds due to hybrid work trends and the broader macroeconomic environment, we anticipate continued weakness in the commercial office sector. In this environment, we expect many tenants will look for space that is newer or repurposed for their current flexible workspace needs. We have also seen tenants lease space but contract their total footprint. Accordingly, our efforts to re-lease certain spaces will be targeted toward buildings with long-term viability where we can concentrate occupancy, and we intend to take some of our other buildings out of service. In addition to 1800 South Bell Street, which we took out of service in the first quarter of 2024, we plan to take 2100 Crystal Drive out of service when Amazon vacates in the second quarter of 2024. We also plan to begin phasing 2200 Crystal Drive out of service as leases expire. With the objective of ultimately reducing our competitive 46 inventory in National Landing, we expect to repurpose these older, obsolete and vacant buildings for redevelopment, conversion to multifamily or another specialty use. Operating Results Highlights of operating results for the year ended December 31, 2023 included: • • • • • • net loss attributable to common shareholders of $80.0 million, or $0.78 per diluted common share, compared to net income attributable to common shareholders of $85.4 million, or $0.70 per diluted common share, for 2022; third-party real estate services revenue, including reimbursements, of $92.1 million compared to $89.0 million for 2022; operating multifamily portfolio leased and occupied percentages (1) at our share of 96.0% and 94.7% compared to 94.5% and 93.6% as of December 31, 2022; operating commercial portfolio leased and occupied percentages at our share of 86.3% and 84.9% compared to 88.5% and 85.1% as of December 31, 2022; the leasing of 927,000 square feet at our share, at an initial rent (2) of $47.14 per square foot and a GAAP-basis weighted average rent per square foot (3) of $45.52; and an increase in same store (4) NOI of 1.6% to $299.9 million compared to $295.0 million for 2022. (1) 2221 S. Clark Street - Residential and 900 W Street are excluded from leased and occupied percentages as they are operated as short-term rental properties. (2) Represents the cash basis weighted average starting rent per square foot, which excludes free rent and fixed escalations. (3) Represents the weighted average rent per square foot recognized over the term of the respective leases, including the effect of free (4) rent and fixed escalations. Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. Additionally, investing and financing activity during the year ended December 31, 2023 included: • • • • • • • • • • • the sale of Falkland Chase, 5 M Street Southwest, Crystal City Marriott and Capitol Point-North-75 New York Avenue. See Note 3 to the consolidated financial statements for additional information; the sale of an 80.0% interest in 4747 Bethesda Avenue, and the sale of Stonebridge at Potomac Town Center and Rosslyn Gateway by our unconsolidated real estate ventures. See Note 5 to the consolidated financial statements for additional information; a $187.6 million loan facility, collateralized by The Wren and F1RST Residences. See Note 10 to the consolidated financial statements for additional information; the repayment of $142.4 million in mortgage loans collateralized by Falkland Chase-South & West and 800 North Glebe Road; net borrowings of $62.0 million under our revolving credit facility; the amendment of our revolving credit facility. See Note 10 to the consolidated financial statements for additional information; the drawing of the $50.0 million remaining advance under our Tranche A-2 Term Loan; a $120.0 million term loan. See Note 10 to the consolidated financial statements for additional information; the payment of dividends totaling $94.0 million and distributions to our noncontrolling interests of $15.3 million; the repurchase and retirement of 22.6 million of our common shares for $335.3 million, a weighted average purchase price per share of $14.83; and the investment of $333.7 million in development costs, construction in progress and real estate additions. 47 Activity subsequent to December 31, 2023 included: • • • • • the repurchase and retirement of 2.7 million common shares for $45.4 million, a weighted average purchase price per share of $16.52, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended; the repayment of our outstanding revolving credit facility; the sale of North End Retail, a multifamily asset, for a gross sales price of $14.3 million; the sale of Central Place Tower by one of our unconsolidated real estate ventures for a gross sales price of $325.0 million; and the declaration of a quarterly dividend of $0.175 per common share, payable on March 15, 2024 to shareholders of record as of March 1, 2024. Critical Accounting Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that in certain circumstances may significantly impact our financial results. These estimates are prepared using management's best judgment, after considering past and current events and economic conditions. In addition, certain information relied upon by management in preparing such estimates includes internally generated financial and operating information, external market information, when available, and when necessary, information obtained from consultations with third-party experts. Actual results could differ from these estimates. We consider an accounting estimate to be critical if changes in the estimate could have a material impact on our consolidated results of operations or financial condition. Our significant accounting policies are fully described in Note 2 to the consolidated financial statements; however, the most critical accounting estimates, which involve the use of judgments as to future uncertainties and, therefore, may result in actual amounts that differ from estimates, are as follows: Asset Acquisitions Description: We account for asset acquisitions, which includes the consolidation of previously unconsolidated real estate ventures, at cost, including transaction costs, plus the fair value of any assumed debt. We estimate the fair values of acquired assets and liabilities assumed based on our evaluation of information and estimates available at the date of acquisition. Based on these estimates, we allocate the purchase price, including all transaction costs related to the acquisition and any contingent consideration, to the identified assets acquired and liabilities assumed based on their relative fair value. Judgments and Uncertainties: Asset acquisitions primarily consist of buildings and land. The fair values of buildings are determined using the "as-if vacant" approach whereby we use discounted cash flow models with inputs and assumptions that we believe are consistent with current market conditions for similar assets. The most significant assumptions in determining the allocation of the purchase price to buildings are the exit capitalization rate, discount rate, estimated market rents and hypothetical expected lease-up periods, when applicable. We assess the fair value of land based on market comparisons and development projects using an income approach of cost plus a margin. Sensitivity of Estimate to Change: While our methodology did not change in 2023, to the extent the estimates and assumptions in our discounted cash flow models used to value our buildings or our projections of land value change due to market conditions or other factors, our estimated fair values may be different and such differences could be material to our consolidated financial statements. Real Estate Description: Real estate is carried at cost, net of accumulated depreciation and amortization. As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest expense, are capitalized to the extent that we believe such costs are recoverable through the value of the property. 48 Judgments and Uncertainties: Our real estate and related intangible assets are reviewed for impairment whenever there are changes in circumstances or indicators that the carrying amount of the assets may not be recoverable. These indicators may include declining operating performance, below average occupancy, shortened anticipated holding periods, costs in excess of budgets for under-construction assets and other adverse changes. An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Estimates of future cash flows are based on our current plans, anticipated holding periods and available market information at the time the analyses are prepared. An impairment loss is recognized if the carrying amount of the asset is not recoverable and is measured based on the excess of the property's carrying amount over its estimated fair value. Estimated fair values are calculated based on the following information in order of preference, dependent upon availability: (i) pending or executed agreements, (ii) market prices for comparable properties or (iii) the sum of discounted cash flows. Sensitivity of Estimate to Change: While our methodology did not change in 2023, if our estimates of future cash flows, anticipated holding periods, asset strategy or fair values change, based on market conditions, anticipated selling prices or other factors, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates, capitalization and discount rates, and capital requirements that could differ materially from actual results. Longer anticipated 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 a shorter holding period, an impairment loss may be recognized, and such loss could be material. Investments in Real Estate Ventures Description: We use the equity method of accounting for investments in unconsolidated real estate ventures when we have significant influence, but do not have a controlling financial interest. Judgments and Uncertainties: On a periodic basis, we evaluate our investments in unconsolidated real estate ventures for impairment. An investment in a real estate venture is considered impaired if we determine that its fair value is less than the net carrying value of the investment in that real estate venture on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, anticipated holding periods, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include the age of the venture, our intent and ability to retain our investment in the real estate venture, financial condition and long-term prospects of the real estate venture and relationships with our partners and banks. If we believe that the decline in the fair value of the investment is temporary, no impairment loss is recorded. If our analysis indicates that there is an other-than temporary impairment related to the investment in a particular real estate venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment. In the event our investment in a real estate venture is reduced to zero, and we are not obligated to provide for additional losses, have not guaranteed its obligations or otherwise committed to providing financial support, we will discontinue the equity method of accounting until such point that our share of net income equals the share of net losses not recognized during the period the equity method was suspended. Sensitivity of Estimate to Change: While our methodology did not change in 2023, if our cash flow projections or our evaluation of qualitative factors change, based on market conditions or other factors, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. Cash flow projections are subjective and are based, in part, on assumptions regarding expected future operating income, trends and prospects, anticipated holding periods, as well as the effects of demand, competition and other factors that could differ materially from actual results. If our assessment that an impairment is other-than-temporary changes, it could result in an impairment loss that could be material to our consolidated financial statements. Revenue Recognition Description: We have leases with various tenants across our portfolio of properties, which generate rental income and operating cash flows for our benefit. Property rental revenue includes base rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the lease. 49 Judgments and Uncertainties: We periodically evaluate the collectability of amounts due from tenants and recognize an adjustment to property rental revenue for accounts receivable and deferred rent receivable if we conclude it is not probable we will collect the remaining lease payments under the lease agreements. We exercise judgment in assessing the probability of collection and consider payment history, current credit status and economic outlook in making this determination. Sensitivity of Estimate to Change: If the probability of collection changes, due to tenant creditworthiness, changes to tenant payment patterns or economic trends, our evaluation of collectability may be different and such differences could be material to our consolidated financial statements. Recent Accounting Pronouncements See Note 2 to the consolidated financial statements for a description of recent accounting pronouncements. Results of Operations The following section discusses certain line items from our consolidated statements of operations and the year-to-year comparisons between 2023 and 2022. Discussions of the year-to-year comparisons between 2022 and 2021 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 21, 2023. In 2023, we sold an 80.0% interest in 4747 Bethesda Avenue to an unconsolidated real estate venture, and we sold Falkland Chase, 5 M Street Southwest, Crystal City Marriott and Capital Point-North-75 New York Avenue. In 2022, we sold the Universal Buildings and Pen Place, and sold 7200 Wisconsin Avenue, 1730 M Street, RTC-West/RTC-West Trophy Office/RTC-West Land and Courthouse Plaza 1 and 2 to an unconsolidated real estate venture. We collectively refer to these assets as the "Disposed Properties" in the discussion below. In 2022, we acquired the remaining 36.0% ownership interest in Atlantic Plumbing and the remaining 50.0% ownership interest in 8001 Woodmont, which were previously owned by unconsolidated real estate ventures and consolidated upon acquisition. Comparison of the Year Ended December 31, 2023 to 2022 The following summarizes certain line items from our consolidated statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the year ended December 31, 2023 compared to the same period in 2022: Year Ended December 31, 2023 2022 % Change Property rental revenue Third-party real estate services revenue, including reimbursements Depreciation and amortization expense Property operating expense Real estate taxes expense General and administrative expense: Corporate and other Third-party real estate services Share-based compensation related to Formation Transaction and special equity awards $ Loss from unconsolidated real estate ventures, net Interest and other income, net Interest expense Gain on the sale of real estate, net Impairment loss * Not meaningful. $ (Dollars in thousands) 491,738 89,022 213,771 150,004 62,167 483,159 92,051 210,195 144,049 57,668 54,838 88,948 549 26,999 15,781 108,660 79,335 90,226 58,280 94,529 5,391 17,429 18,617 75,930 161,894 — (1.7)% 3.4 % (1.7)% (4.0)% (7.2)% (5.9)% (5.9)% (89.8)% 54.9 % (15.2)% 43.1 % (51.0)% * Property rental revenue decreased by $8.6 million, or 1.7%, to $483.2 million in 2023 from $491.7 million in 2022. The decrease was primarily due to a $39.1 million decrease in revenue from our commercial assets, partially offset by a $26.6 50 million increase in revenue from our multifamily assets and a $3.9 million increase in other revenue. The decrease in revenue from our commercial assets was primarily due to a $31.2 million decrease related to the Disposed Properties, and lower occupancy and rents across the portfolio. The increase in revenue from our multifamily assets was primarily due to a $16.9 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and higher occupancy and rents across the portfolio, partially offset by a $2.0 million decrease related to the sale of Falkland Chase. Third-party real estate services revenue, including reimbursements, increased by $3.0 million, or 3.4%, to $92.1 million in 2023 from $89.0 million in 2022. The increase was primarily due to a $1.9 million increase in development fees related to the timing of development projects, a $1.9 million increase in reimbursement revenue and an $861,000 increase in construction management fees due to an increase in active projects, partially offset by a $1.2 million decrease in asset management fees due to the sale of assets within the JBG Legacy Funds. Depreciation and amortization expense decreased by $3.6 million, or 1.7%, to $210.2 million in 2023 from $213.8 million in 2022. The decrease was primarily due to a $14.9 million decrease related to the Disposed Properties, a $4.3 million decrease due to the amortization of the acquired in-place lease intangible at The Batley in 2022 and a $3.9 million decrease related to 2221 S. Clark Street-Residential due to the amortization and disposal of certain tenant improvements in 2022. The decrease in depreciation and amortization expense was partially offset by an $8.9 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, a $6.5 million increase related to 2100 Crystal Drive due to the acceleration of depreciation of certain assets as the building will be taken out of service in the second quarter of 2024, and a $4.2 million increase related to 2451 Crystal Drive and 1550 Crystal Drive due to the amortization and disposal of certain tenant improvements in 2023. Property operating expense decreased by $6.0 million, or 4.0%, to $144.0 million in 2023 from $150.0 million in 2022. The decrease was primarily due to a $11.0 million decrease in property operating expense from our commercial assets and a $5.2 million decrease in other property operating expense, partially offset by a $10.2 million increase in property operating expense from our multifamily assets. The decrease in property operating expense from our commercial assets was primarily due to a $9.5 million decrease related to the Disposed Properties and a $1.4 million decrease in construction management services provided to tenants. The decrease in other property operating expense was primarily due to a $1.9 million decrease in insurance claims covered by our captive insurance subsidiary, a $1.1 million decrease in costs incurred related to digital infrastructure initiatives in National Landing and a $1.1 million decrease related to operating expenses for properties under development. The increase in property operating expense from our multifamily assets was primarily due to a $6.9 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont, and a $3.6 million increase in operating expenses across our multifamily portfolio, primarily related to higher compensation, temporary staffing, cleaning, marketing, legal and security expenses. Real estate taxes expense decreased by $4.5 million, or 7.2%, to $57.7 million in 2023 from $62.2 million in 2022. The decrease was primarily due to a $5.8 million decrease related to the Disposed Properties and lower assessments across the portfolio, partially offset by a $2.1 million increase related to the consolidation of Atlantic Plumbing and 8001 Woodmont. General and administrative expense: corporate and other decreased by $3.4 million, or 5.9%, to $54.8 million in 2023 from $58.3 million in 2022. The decrease was primarily due to lower compensation expense resulting from lower headcount, partially offset by a decrease in capitalized payroll. General and administrative expense: third-party real estate services decreased by $5.6 million, or 5.9%, to $88.9 million in 2023 from $94.5 million in 2022. The decrease was primarily due to lower compensation expense resulting from lower headcount, partially offset by an increase in third-party reimbursable expenses. General and administrative expense: share-based compensation related to Formation Transaction and special equity awards decreased by $4.8 million, or 89.8%, to $549,000 in 2023 from $5.4 million in 2022. 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. Loss from unconsolidated real estate ventures increased by $9.6 million, or 54.9%, to $27.0 million for 2023 from $17.4 million in 2022. The increase was primarily due to a $9.3 million increase in impairment losses, a $6.4 million reduction in gains at our share from the sale of various assets in 2022 and a decrease in income at our share. The increase in loss 51 from unconsolidated real estate ventures was partially offset by a $5.6 million decrease in loss related to the consolidation of Atlantic Plumbing and 8001 Woodmont as these assets were not yet stabilized and incurring losses and a $1.6 million decrease related to our suspension of the equity method of accounting for the L’Enfant Plaza Assets. Interest and other income decreased by approximately $2.8 million, or 15.2%, to $15.8 million in 2023 from $18.6 million in 2022. The decrease was primarily due to a $12.6 million decrease in realized gains primarily from the sale of investments in equity securities in 2022 and an $883,000 decrease in unrealized gains from investments. The decrease in interest and other income was partially offset by a $6.2 million increase in interest income from our outstanding cash balances and a $6.0 million gain from the settlement of litigation in 2023. Interest expense increased by $32.7 million, or 43.1%, to $108.7 million in 2023 from $75.9 million in 2022. The increase in interest expense was primarily due to (i) a $32.3 million increase due to higher outstanding debt, (ii) a $15.2 million decrease related to the mark-to-market associated with our non-designated derivatives, (iii) a $14.0 million increase related to rising interest rates on variable rate mortgage loans and (iv) a $3.8 million increase related to the consolidation of 8001 Woodmont. The increase in interest expense was partially offset by (v) a $15.9 million increase in capitalized interest, (vi) a $7.7 million decrease related to mortgage loans collateralized by 2121 Crystal Drive and Falkland Chase-South & West, which were repaid during 2023, and (vii) a $7.1 million decrease related to the Disposed Properties, excluding Falkland Chase-South & West. Gain on the sale of real estate of $79.3 million in 2023 and $161.9 million in 2022 was due to the sale of the Disposed Properties. Impairment loss of $90.2 million in 2023 related to various commercial assets (2101 L Street, 2100 Crystal Drive and 2200 Crystal Drive) and a development parcel, which were written down to their estimated fair value. FFO FFO is a non-GAAP financial measure computed in accordance with the definition established by Nareit in the Nareit FFO White Paper - 2018 Restatement. Nareit defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization expense related to real estate, gains (losses) from the sale of certain real estate assets, gains (losses) from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures. We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions, and other non-comparable income and expenses. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP), as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures used by other companies. 52 The following is the reconciliation of net income (loss) attributable to common shareholders, the most directly comparable GAAP measure, to FFO: Year Ended December 31, 2022 2023 2021 Net income (loss) attributable to common shareholders Net income (loss) attributable to redeemable noncontrolling interests Net income (loss) attributable to noncontrolling interests Net income (loss) Gain on the sale of real estate, net of tax Gain on the sale of unconsolidated real estate assets Real estate depreciation and amortization Real estate impairment loss, net of tax Impairment related to unconsolidated real estate ventures (1) Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures FFO attributable to noncontrolling interests FFO attributable to OP Units FFO attributable to redeemable noncontrolling interests FFO attributable to common shareholders (1) Related to decreases in the value of the underlying real estate assets. NOI and Same Store NOI (79,978) $ (10,596) (1,135) (91,709) (79,335) (411) 203,269 90,226 28,598 (In thousands) 85,371 13,244 371 98,986 (158,769) (6,797) 204,752 — 19,286 $ (79,257) (8,728) (1,740) (89,725) (11,290) (28,326) 227,424 24,301 25,263 11,545 1,024 163,207 (22,820) 140,387 $ 21,169 (735) 177,892 (21,846) 156,046 28,216 1,522 177,385 (18,034) $ 159,351 $ $ NOI is a non-GAAP financial measure management uses to assess an asset's performance. The most directly comparable GAAP measure is net income (loss) attributable to common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable. NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure of our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to common shareholders as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. Information provided on a same store basis includes the results of properties that are owned, operated and in-service for the entirety of both periods being compared, which excludes disposed properties or properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. During the year ended December 31, 2023, our same store pool decreased to 42 properties from 47 properties due to (i) the sale of Falkland Chase, Crystal City Marriott, Stonebridge at Potomac Town Center and Rosslyn Gateway, (ii) the exclusion of The Foundry as we discontinued the equity method of accounting for this unconsolidated real estate venture and our investment in the venture was reduced to zero and (iii) the inclusion of The Wren and The Batley as they were in service for the entirety of the comparable periods. While there is judgment surrounding changes in designations, a property is removed 53 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 increased by $4.8 million, or 1.6%, to $299.9 million for the year ended December 31, 2023 from $295.0 million for the year ended December 31, 2022. The increase was substantially attributable to (i) higher rents and occupancy, partially offset by higher concessions and higher operating expenses in our multifamily portfolio and (ii) lower occupancy, partially offset by the burn off of rent abatements, higher parking revenue and lower operating expenses in our commercial portfolio. The following is the reconciliation of net income (loss) attributable to common shareholders to NOI and same store NOI: Year Ended December 31, Net income (loss) attributable to common shareholders Add: Depreciation and amortization expense General and administrative expense: Corporate and other Third-party real estate services Share-based compensation related to Formation Transaction and special equity awards Transaction and other costs Interest expense Loss on the extinguishment of debt Impairment loss Income tax expense (benefit) Net income (loss) attributable to redeemable noncontrolling interests Net income (loss) attributable to noncontrolling interests Less: Third-party real estate services, including reimbursements revenue Other revenue Loss from unconsolidated real estate ventures, net Interest and other income, net Gain on the sale of real estate, net Consolidated NOI NOI attributable to unconsolidated real estate ventures at our share Non-cash rent adjustments (1) Other adjustments (2) Total adjustments NOI Less: out-of-service NOI loss (3) Operating Portfolio NOI Non-same store NOI (4) Same store NOI (5) Change in same store NOI Number of properties in same store pool $ $ 2023 (Dollars in thousands) (79,978) $ 2022 85,371 210,195 213,771 58,280 94,529 5,391 5,511 75,930 3,073 — 1,264 13,244 371 89,022 7,421 (17,429) 18,617 161,894 297,210 26,861 (17,442) 27,739 37,158 334,368 (4,849) 339,217 44,174 295,043 54,838 88,948 549 8,737 108,660 450 90,226 (296) (10,596) (1,135) 92,051 10,902 (26,999) 15,781 79,335 299,528 19,452 (23,482) 22,994 18,964 318,492 (3,512) 322,004 22,125 299,879 $ 1.6 % 42 (1) Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization. (2) Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and related party management fees. Includes the results of our under-construction assets and assets in the development pipeline. (3) 54 (4) (5) Includes the results of properties that were not in-service for the entirety of both periods being compared, including disposed properties, and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. 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 define our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our CODM, makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (multifamily, commercial and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services. The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the NOI of properties within each segment. With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative: third-party real estate services"), which are both disclosed separately in our consolidated statements of operations. The following represents the components of revenue from our third-party asset management and real estate services business: Property management fees Asset management fees Development fees Leasing fees Construction management fees Other service revenue Third-party real estate services revenue, excluding reimbursements Reimbursement revenue (1) Third-party real estate services revenue, including reimbursements Third-party real estate services expenses Third-party real estate services revenue less expenses Year Ended December 31, 2022 2023 (In thousands) 19,930 $ 5,030 10,253 5,592 1,383 5,316 47,504 44,547 92,051 88,948 3,103 $ 19,589 6,191 8,325 6,017 522 5,706 46,350 42,672 89,022 94,529 (5,507) $ $ (1) Represents reimbursements of expenses incurred by us on behalf of third parties, including allocated payroll costs and amounts paid to third-party contractors for construction management projects. See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the year ended December 31, 2023 in the preceding pages under "Results of Operations." Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below. Property revenue is calculated as property rental revenue plus parking revenue. Property expense is calculated as property operating expenses plus real estate taxes. Consolidated NOI is calculated as property revenue less property expense. See Note 20 to the consolidated financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the years ended December 31, 2023 and 2022. 55 The following is a summary of NOI by segment: Property revenue: (1) Multifamily Commercial Other (2) Total property revenue Property expense: (3) Multifamily Commercial Other (2) Total property expense Consolidated NOI: Multifamily Commercial Other (2) Consolidated NOI Year Ended December 31, 2023 2022 (In thousands) $ 207,752 $ 279,670 13,823 501,245 94,225 108,800 (1,308) 201,717 113,527 170,870 15,131 $ 299,528 $ 180,925 318,485 9,971 509,381 82,597 124,173 5,401 212,171 98,328 194,312 4,570 297,210 (1) (2) (3) Includes property rental revenue and parking revenue. Includes activity related to development assets, corporate entities, land assets for which we are the ground lessor and the elimination of inter-segment activity. Includes property operating expenses and real estate taxes. Comparison of the Year Ended December 31, 2023 to 2022 Multifamily: Property revenue increased by $26.8 million, or 14.8%, to $207.8 million in 2023 from $180.9 million in 2022. Consolidated NOI increased by $15.2 million, or 15.5%, to $113.5 million in 2023 from $98.3 million in 2022. The increases in property revenue and consolidated NOI were primarily due to the consolidation of Atlantic Plumbing and 8001 Woodmont, and higher occupancy and rents across the portfolio. The increase in consolidated NOI was partially offset by an increase in property operating costs. Commercial: Property revenue decreased by $38.8 million, or 12.2%, to $279.7 million in 2023 from $318.5 million in 2022. Consolidated NOI decreased by $23.4 million, or 12.1%, to $170.9 million in 2023 from $194.3 million in 2022. The decreases in property revenue and consolidated NOI were primarily due to the Disposed Properties and lower occupancy and rents across the portfolio. Liquidity and Capital Resources Property rental revenue is our primary source of operating cash flow and depends on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the JBG Legacy Funds, other third parties and the WHI Impact Pool. Our assets provide a relatively consistent level of cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders and distributions to holders of OP Units and LTIP Units. Other sources of liquidity to fund cash requirements include proceeds from financings, recapitalizations, asset sales, and the issuance and sale of securities. We anticipate that cash flows from continuing operations and proceeds from financings, asset sales and recapitalizations, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, any dividends to shareholders, and distributions to holders of OP Units and LTIP Units. 56 Mortgage Loans The following is a summary of mortgage loans: Variable rate (2) Fixed rate (3) Mortgage loans Unamortized deferred financing costs and premium/discount, net (4) Mortgage loans, net Weighted Average Effective Interest Rate (1) 6.25% 4.78% December 31, 2023 2022 (In thousands) 608,582 $ 1,189,643 1,798,225 (15,211) 1,783,014 $ 892,268 1,009,607 1,901,875 (11,701) 1,890,174 $ $ (1) Weighted average effective interest rate as of December 31, 2023. (2) Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.33%, and the weighted average maturity date of the interest rate caps is March 2025. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of December 31, 2023, one-month term SOFR was 5.35%. Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements. (3) (4) As of December 31, 2022, excludes $2.2 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net" in our consolidated balance sheet. As of December 31, 2023 and 2022, the net carrying value of real estate collateralizing our mortgage loans totaled $2.2 billion. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. Certain mortgage loans are recourse to us. See Note 21 to the consolidated financial statements for additional information. In January 2023, we entered into a $187.6 million loan facility, collateralized by The Wren and F1RST Residences. The loan has a seven-year term and a fixed interest rate of 5.13%. This loan is the initial advance under a Fannie Mae multifamily credit facility which provides flexibility for collateral substitutions, future advances tied to performance, ability to mix fixed and floating rates, and staggered maturities. Proceeds from the loan were used, in part, to repay the $131.5 million mortgage loan collateralized by 2121 Crystal Drive, which had a fixed interest rate of 5.51%. In June 2023, we repaid $142.4 million in mortgage loans collateralized by Falkland Chase-South & West and 800 North Glebe Road. In August 2022, we entered into a mortgage loan with a principal balance of $97.5 million collateralized by WestEnd25. The mortgage loan has a seven-year term and an interest rate of SOFR plus 1.45%. We also entered into an interest rate swap with a total notional value of $97.5 million, which effectively fixes SOFR at an average interest rate of 2.71% through the maturity date. During the year ended December 31, 2021, we entered into two separate mortgage loans with an aggregate principal balance of $190.0 million, collateralized by 1225 S. Clark Street and 1215 S. Clark Street. As of December 31, 2023 and 2022, we had various interest rate swap and cap agreements on certain of our mortgage loans with an aggregate notional value of $1.7 billion and $1.3 billion. See Note 19 to the consolidated financial statements for additional information. Revolving Credit Facility and Term Loans As of December 31, 2023, our unsecured revolving credit facility and term loans totaling $1.5 billion consisted of a $750.0 million revolving credit facility maturing in June 2027, a $200.0 million Tranche A-1 Term Loan maturing in January 2025, a $400.0 million Tranche A-2 Term Loan maturing in January 2028 and a $120.0 million 2023 Term Loan maturing in June 2028. 57 In January 2022, the Tranche A-1 Term Loan was amended to extend the maturity date to January 2025 with two one-year extension options, and to amend the interest rate to SOFR plus 1.15% to SOFR plus 1.75%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. In July 2022, the Tranche A-2 Term Loan was amended to increase its borrowing capacity by $200.0 million. The incremental $200.0 million included a delayed draw feature, of which $150.0 million was drawn in September 2022 and the remaining $50.0 million was drawn in May 2023. The amendment extended the maturity date of the term loan to January 2028 and amended the interest rate to SOFR plus 1.25% to SOFR plus 1.80%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. Effective as of June 29, 2023, the revolving credit facility was amended to: (i) reduce the borrowing capacity from $1.0 billion to $750.0 million, (ii) extend the maturity date from January 2025 to June 2027 and (iii) amend the interest rate to daily SOFR plus 1.40% to daily SOFR plus 1.85%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. We have the option to increase the $750.0 million revolving credit facility or add term loans up to $500.0 million, and we also have the right to extend the maturity date beyond June 2027 via two six-month extension options. In addition, on June 29, 2023, we entered into a $120.0 million term loan maturing in June 2028 with an interest rate of one-month term SOFR plus 1.25% to one-month term SOFR plus 1.80%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. In July 2023, we amended the covenants related to the Tranche A-1 Term Loan and the Tranche A-2 Term Loan to be consistent with the revolving credit facility and 2023 Term Loan covenants. The following is a summary of amounts outstanding under the revolving credit facility and term loans: Revolving credit facility (2) (3) Tranche A-1 Term Loan (4) Tranche A-2 Term Loan (5) 2023 Term Loan (6) Term loans Unamortized deferred financing costs, net Term loans, net Effective Interest Rate (1) December 31, 2023 2022 6.83% 2.70% 3.58% 5.31% $ $ $ (In thousands) 62,000 $ 200,000 400,000 120,000 720,000 (2,828) 717,172 $ $ — 200,000 350,000 — 550,000 (2,928) 547,072 (1) Effective interest rate as of December 31, 2023. The interest rate for the revolving credit facility excludes a 0.15% facility fee. (2) As of December 31, 2023, daily SOFR was 5.38%. As of December 31, 2023 and 2022, letters of credit with an aggregate face amount of $467,000 were outstanding under our revolving credit facility. In February 2024, we repaid all amounts outstanding under our revolving credit facility. (3) As of December 31, 2023 and 2022, excludes net deferred financing costs related to our revolving credit facility of $10.2 million and $3.3 million that were included in "Other assets, net" in our consolidated balance sheets. (4) As of December 31, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46%. Interest rate swaps with a total notional value of $200.0 million mature in July 2024. We have two forward-starting interest rate swaps that will be effective July 2024 with a total notional value of $200.0 million, which will effectively fix SOFR at a weighted average interest rate of 4.00% through January 2027. (5) As of December 31, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 2.29%. Interest rate swaps with a total notional value of $200.0 million mature in July 2024 and with a total notional value of $200.0 million mature in January 2028. We have two forward-starting interest rate swaps that will be effective July 2024 with a total notional value of $200.0 million, which will effectively fix SOFR at a weighted average interest rate of 2.81% through the maturity date. (6) As of December 31, 2023, the outstanding balance was fixed by an interest rate swap agreement, which fixes SOFR at an interest rate of 4.01% through the maturity date. 58 Common Shares Repurchased Our Board of Trustees previously authorized the repurchase of up to $1.0 billion of our outstanding common shares, and in May 2023, increased the common share repurchase authorization to $1.5 billion. During the year ended December 31, 2023, we repurchased and retired 22.6 million common shares for $335.3 million, a weighted average purchase price per share of $14.83. During the year ended December 31, 2022, we repurchased and retired 14.2 million common shares for $361.0 million, a weighted average purchase price per share of $25.49. During the year ended December 31, 2021, we repurchased and retired 5.4 million common shares for $157.7 million, a weighted average purchase price per share of $29.34. Since we began the share repurchase program through December 31, 2023, we have repurchased and retired 45.9 million common shares for $958.8 million, a weighted average purchase price per share of $20.88. During the first quarter of 2024, through the date of this filing, we repurchased and retired 2.7 million common shares for $45.4 million, a weighted average purchase price per share of $16.52, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice. Material Cash Requirements Our material cash requirements for the next 12 months and beyond are to fund: • • • • • • • normal recurring expenses; debt service and principal repayment obligations, including balloon payments on maturing mortgage debt — As of December 31, 2023, we had $120.3 million on a consolidated basis and at our share related to a mortgage loan scheduled to mature in 2024; capital expenditures, including major renovations, tenant improvements and leasing costs — As of December 31, 2023, we had committed tenant-related obligations totaling $46.8 million ($46.0 million related to our consolidated entities and $828,000 related to our unconsolidated real estate ventures at our share); development expenditures — As of December 31, 2023, we had assets under construction that, based on our current plans and estimates, require an additional $177.1 million to complete, which we anticipate will be primarily expended over the next two years; dividends to shareholders and distributions to holders of OP Units and LTIP Units — on February 14, 2024, our Board of Trustees declared a quarterly dividend of $0.175 per common share; possible common share repurchases — during the first quarter of 2024, through the date of this filing, we repurchased and retired 2.7 million common shares for $45.4 million; and possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests. We expect to satisfy these requirements using one or more of the following: • • • • • cash and cash equivalents — As of December 31, 2023, we had cash and cash equivalents of $164.8 million; cash flows from operations; distributions from real estate ventures; borrowing capacity under our current revolving credit facility — As of December 31, 2023, we had $687.5 million of availability under our revolving credit facility; proceeds from financings, asset sales and recapitalizations; and 59 • proceeds from the issuance of securities. The following is a summary of our material cash requirements as of December 31, 2023: Total 2024 2025 2026 (In thousands) 2027 2028 Thereafter Material cash requirements (principal and interest): $ 3,120,752 93,848 662 $ 3,215,262 Debt obligations (1) (2) Operating leases (3) Other Total material cash requirements (4) $ 254,845 6,539 365 $ 261,749 $ 712,085 6,737 108 $ 718,930 $ 213,919 6,942 105 $ 220,966 $ 560,265 $ 660,333 5,934 — $ 567,503 $ 666,267 7,154 84 $ 719,305 60,542 — $ 779,847 (1) Interest was computed giving effect to interest rate hedges. One-month term SOFR of 5.35% and daily SOFR of 5.38% was applied to loans, as applicable, which are variable (no hedge) or variable with an interest rate cap. Additionally, we assumed no additional borrowings on construction loans. (2) Excludes our proportionate share of unconsolidated real estate venture indebtedness. See additional information in Unconsolidated Real Estate Ventures section below. (3) We have operating lease right-of-use assets and lease liabilities associated with various ground leases for which we are the lessee in our consolidated balance sheet. See Note 21 to the consolidated financial statements for additional information. (4) Excludes obligations related to construction or development contracts totaling $177.1 million since payments are only due upon satisfactory performance under the contracts. Also excludes committed tenant-related obligations totaling $46.8 million ($46.0 million related to our consolidated entities and $828,000 related to our unconsolidated real estate ventures at our share) as timing and amounts of payments are uncertain and may only be due upon satisfactory performance of certain conditions. See Commitments and Contingencies section below for additional information. Summary of Cash Flows The following summary discussion of our cash flows is based on our consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows: Net cash provided by operating activities Net cash (used in) provided by investing activities Net cash used in financing activities Cash Flows for the Year Ended December 31, 2023 Year Ended December 31, 2023 2022 (In thousands) $ $ 183,372 (98,179) (158,825) 178,037 524,021 (730,080) Cash and cash equivalents, and restricted cash decreased $73.6 million to $200.4 million as of December 31, 2023, compared to $274.1 million as of December 31, 2022. This decrease resulted from $158.8 million of net cash used in financing activities and $98.2 million of net cash used in investing activities, partially offset by $183.4 million of net cash provided by operating activities. Our outstanding debt was $2.6 billion and $2.5 billion as of December 31, 2023 and 2022. Net cash provided by operating activities of $183.4 million primarily comprised: (i) $185.2 million of net income (before $356.2 million of non-cash items and $79.3 million of gain on the sale of real estate), (ii) $20.7 million of return on capital from unconsolidated real estate ventures and (iii) $22.5 million of net change in operating assets and liabilities. Non-cash income adjustments of $356.2 million primarily include depreciation and amortization expense, impairment loss, share- based compensation expense, loss from unconsolidated real estate ventures, deferred rent and other non-cash items. Net cash used in investing activities of $98.2 million primarily comprised: (i) $333.7 million of development costs, construction in progress and real estate additions, (ii) $29.0 million of investments in unconsolidated real estate ventures and other investments and (iii) a $19.6 million payment of a deferred purchase price related to the 2020 acquisition of a development parcel, partially offset by (iv) $281.5 million of proceeds from the sale of real estate and (v) $10.5 million of distributions of capital from unconsolidated real estate ventures and other investments. 60 Net cash used in financing activities of $158.8 million primarily comprised: (i) $335.3 million of common shares repurchased, (ii) $309.8 million of repayments of the revolving credit facility, (iii) $281.9 million of repayments of mortgage loans, (iv) $94.0 million of dividends paid to common shareholders, (v) $17.6 million of debt issuance and modification costs and (vi) $15.3 million of distributions to redeemable noncontrolling interests, partially offset by (vii) $371.8 million of proceeds from borrowings under the revolving credit facility, (viii) $345.1 million of borrowings under mortgage loans and (ix) $170.0 million of borrowings under the term loans. 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 December 31, 2023, we have investments in unconsolidated real estate ventures totaling $264.3 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 5 to the consolidated financial statements. From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings or (iii) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees. At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable. As of December 31, 2023, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $61.3 million. As of December 31, 2023, we had no principal payment guarantees related to our unconsolidated real estate ventures. 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 $1.0 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both conventional terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per occurrence. These policies are partially reinsured by third-party insurance providers. We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material. Our debt, consisting of mortgage loans secured by our properties, a revolving credit facility and term loans, contains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at a reasonable cost in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties. 61 Construction Commitments As of December 31, 2023, we had assets under construction that will, based on our current plans and estimates, require an additional $177.1 million to complete, which we anticipate will be primarily expended over the next two 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, and available cash. Other As of December 31, 2023, we had committed tenant-related obligations totaling $46.8 million ($46.0 million related to our consolidated entities and $828,000 related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions. 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. During the year ended December 31, 2023, we recognized a $6.0 million gain from the settlement of litigation, which was included in "Interest and other income, net" in our consolidated statement of operations. 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 December 31, 2023, the aggregate amount of principal payment guarantees was $8.3 million for our consolidated entities. In connection with the Formation Transaction, we have a Tax Matters Agreement that provides special rules that allocate tax liabilities if the distribution of JBG SMITH shares by Vornado, together with certain related transactions, is determined not to be tax-free. Under the Tax Matters Agreement, we may be required to indemnify Vornado against any taxes and related amounts and costs resulting from a violation by us of the Tax Matters Agreement. Environmental Matters Under various federal, state and local laws, ordinances and regulations, a current or former owner or operator of real estate may be liable for conducting or paying for the costs of the investigation, removal or remediation of certain hazardous or toxic substances on that real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances, and the liability may be joint and several. The costs of remediation or removal of these substances may be substantial and could exceed the value of the property, and the presence of these substances, or the failure to promptly remediate these substances, may adversely affect the owner's ability to sell or develop the real estate or to borrow using the real estate as collateral. In connection with the ownership and operation of our current and former assets, we may be potentially liable for these costs. The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous substances or generated hazardous wastes, and indemnities in our lease agreements may not fully protect us from liability, if, for example, a tenant responsible for environmental noncompliance or contamination becomes insolvent. The release of these hazardous substances and wastes could result in us incurring liabilities to remediate any resulting contamination. The presence of contamination or the failure to remediate contamination at our properties may (i) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or property damage), (ii) subject our properties to liens in favor of the government for damages and costs the government incurs in connection with the contamination, (iii) impose restrictions on the manner in which a property may be used or businesses may be operated, or (iv) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. In addition, our assets are exposed to the risk of contamination originating from other sources. While a property owner may not be responsible for remediating contamination that has migrated onsite from an identifiable and viable offsite source, the contaminant's presence can have adverse effects on operations and the redevelopment of our assets. To the extent we arrange for contaminated materials to be sent to other locations for treatment or disposal, we may be liable for the cleanup of those sites if they become contaminated, without regard to whether we complied with environmental laws in doing so. 62 Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the subject and surrounding assets. These environmental assessments generally have included a historical review, a public records review, a visual inspection of the site and surrounding assets, visual or historical evidence of underground storage tanks and other features, and the preparation and issuance of a written report. Soil, soil vapor and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any 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. The tests may not, however, have included extensive sampling or subsurface investigations. In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated appropriate actions. The environmental assessments have not revealed any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. As disclosed in Note 21 to the consolidated financial statements, environmental liabilities totaled $17.6 million and $18.0 million as of December 31, 2023 and 2022, and are included in "Other liabilities, net" in our consolidated balance sheets. ITEM 7A. 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 exposure to a change in interest rates: Debt (contractual balances): Mortgage loans: Variable rate (1) Fixed rate (2) Revolving credit facility and term loans: Revolving credit facility (3) Tranche A-1 Term Loan (4) Tranche A-2 Term Loan (4) 2023 Term Loan (5) Pro rata share of debt of unconsolidated real estate ventures (contractual balances): Variable rate (1) Fixed rate (2) Balance $ 608,582 1,189,643 $ 1,798,225 $ $ $ $ 62,000 200,000 400,000 120,000 782,000 35,000 33,000 68,000 December 31, 2023 Weighted Average Effective Interest Rate Annual Effect of 1% Change in Base Rates (Dollars in thousands) December 31, 2022 Weighted Average Effective Interest Balance Rate 6.25% 4.78% 6.83% 2.70% 3.58% 5.31% 5.00% 4.13% $ $ $ $ $ $ 1,445 $ — 892,268 1,009,607 1,445 $ 1,901,875 629 $ — — — 629 $ — 200,000 350,000 — 550,000 — $ — — $ 22,065 33,000 55,065 5.21% 4.44% 5.51% 2.61% 3.40% — 6.45% 4.13% (1) (2) Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.33%, and the weighted average maturity date of the interest rate caps is March 2025. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of December 31, 2023, one-month term SOFR was 5.35%. The impact of these interest rate caps is reflected in our calculation of the annual effect of a 1% change in base rates. Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements. 63 (3) As of December 31, 2023, daily SOFR was 5.38%. The interest rate for the revolving credit facility excludes a 0.15% facility fee. In February 2024, we repaid all amounts outstanding under our revolving credit facility. (4) As of December 31, 2023 and 2022, the outstanding balance was fixed by interest rate swap agreements. As of December 31, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46% for the Tranche A-1 Term Loan and 2.29% for the Tranche A-2 Term Loan. See Note 10 to the consolidated financial statements for additional information. (5) As of December 31, 2023, the outstanding balance was fixed by an interest rate swap agreement, which fixes SOFR at an interest rate of 4.01% through the maturity date. The fair value of our mortgage loans 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 revolving credit facility and 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 December 31, 2023 and 2022, the estimated fair value of our consolidated debt was $2.5 billion and $2.4 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. Derivative Financial Instruments Designated as Effective Hedges Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are cash flow hedges that are designated as effective hedges, and are carried at their estimated fair value on a recurring basis. We assess the effectiveness of our hedges 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 income" in our consolidated balance sheets and is subsequently reclassified into "Interest expense" in our consolidated statements of operations in the period that the hedged forecasted transactions affect earnings. Our 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 (loss) and equity. As of December 31, 2023 and 2022, we had interest rate swap and cap agreements with an aggregate notional value of $2.2 billion and $1.4 billion, which were designated as effective hedges. The fair value of our interest rate swaps and caps designated as effective hedges consisted of assets totaling $35.6 million and $53.5 million as of December 31, 2023 and 2022 included in "Other assets, net" in our consolidated balance sheets, and liabilities totaling $7.9 million as of December 31, 2023 included in "Other liabilities, net" in our consolidated balance sheet. Non-Designated Derivatives Certain derivative financial instruments, consisting of interest rate cap agreements, do not meet the accounting requirements to be classified as hedging instruments. These derivatives are carried at their estimated fair value on a recurring basis with realized and unrealized gains recorded in "Interest expense" in our consolidated statements of operations. As of December 31, 2023 and 2022, we had various interest rate cap agreements with an aggregate notional value of $642.7 million and $711.8 million, which were non-designated derivatives. The fair value of our interest rate cap agreements which were non-designated derivatives consisted of assets totaling $6.7 million and $8.1 million as of December 31, 2023 and 2022, included in "Other assets, net" in our consolidated balance sheets, and liabilities totaling $6.5 million as of December 31, 2023, included in "Other liabilities, net" in our consolidated balance sheet. 64 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA TABLE OF CONTENTS Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) Consolidated Balance Sheets as of December 31, 2023 and 2022 Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Equity for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 Notes to Consolidated Financial Statements Page 66 69 70 71 72 73 75 65 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of JBG SMITH Properties Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of JBG SMITH Properties and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows, for each of the three years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 20, 2024, expressed an unqualified opinion on the Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Real Estate – Impairment Indicators and Impairment- Refer to Notes 2 and 19 to the consolidated financial statements Critical Audit Matter Description The Company evaluates real estate assets for impairment whenever there are changes in circumstances or indicators that the carrying amount of the asset may not be recoverable. These indicators may include declining operating performance, below average occupancy, shortened anticipated holding periods, and other adverse changes. An impairment exists when 66 the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. For those real estate assets where an indicator of impairment has been identified, estimates of future cash flows are based on the Company’s current plans, anticipated holding periods and available market information. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements. An impairment loss is recognized if the carrying amount of the asset is not recoverable and is measured based on the excess of a property's carrying amount over its estimated fair value. Estimated fair values are calculated based on the following information in order of preference, dependent upon availability: (i) pending or executed agreements, (ii) market prices for comparable properties or (iii) the sum of discounted cash flows. The Company’s estimates of fair value are determined using either a discounted cash flow model which requires judgements related to the anticipated holding periods, current market conditions and unobservable quantitative inputs, including appropriate capitalization and discount rates, or a market approach. Given (1) the Company's evaluation of possible indicators of impairment of real estate assets requires management to make significant judgments, including anticipated holding periods, when determining whether events or changes in circumstances indicate that the carrying amounts of real estate assets may not be recoverable and (2) for those real estate assets where indicators of impairment have been identified, the Company’s evaluation of the recoverability and fair value of such assets requires management to make significant estimates and assumptions, our audit procedures to evaluate (a) whether management appropriately identified impairment indicators (b) the reasonableness of management’s undiscounted future cash flows analysis and (c) when required, the reasonableness of the estimated fair values of real estate assets required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures related to the assessment of real estate assets for possible indicators of impairment, the estimate of future operating cash flows, and the determination of fair value for those assets where impairment has been identified included the following, among others: • We tested the effectiveness of controls over management’s identification of possible circumstances that may indicate that the carrying amounts of real estate assets may not be recoverable. We tested the effectiveness of controls over management’s cash flow recoverability and fair value analyses, including controls over management’s estimates of future occupancy, rental rates, capital requirements and, as applicable, capitalization and discount rates and management’s selection of comparable properties used in the market approach, when applicable. • We evaluated the Company’s assessment of impairment indicators by: – Testing real estate assets for possible indicators of impairment, including searching for adverse asset-specific and/or market conditions. – Inquiring of management and reading business performance reports and board minutes to identify properties that should be evaluated for shortened anticipated holding periods. – Developing an expectation of assets for which impairment indicators are identified in management's analysis. • We evaluated the Company’s future cash flows prepared when an indicator of impairment has been identified by performing the following: – Discussing with management the assumptions used in the Company’s undiscounted cash flow models and evaluating the consistency of the assumptions used with evidence obtained in other areas of the audit. – Testing the recoverability assessments by developing independent estimates, based in part on applicable third- party market data, and compared our estimates to those used by management. 67 • We evaluated the Company’s determination of fair value for those assets where impairment had been identified by performing the following: – With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology and the market prices for comparable properties, and we developed a range of independent estimates of fair value and compared our estimates to those used by management. /s/ Deloitte & Touche LLP McLean, Virginia February 20, 2024 We have served as the Company's auditor since 2016. 68 JBG SMITH PROPERTIES Consolidated Balance Sheets (In thousands, except par value amounts) ASSETS Real estate, at cost: Land and improvements Buildings and improvements Construction in progress, including land Less: accumulated depreciation Real estate, net Cash and cash equivalents Restricted cash Tenant and other receivables Deferred rent receivable Investments in unconsolidated real estate ventures Deferred leasing costs, net Intangible assets, net Other assets, net TOTAL ASSETS December 31, 2023 2022 $ $ 1,194,737 $ 4,021,322 659,103 5,875,162 (1,338,403) 4,536,759 164,773 35,668 44,231 171,229 264,281 81,477 56,616 163,481 5,518,515 $ 1,302,569 4,310,821 544,692 6,158,082 (1,335,000) 4,823,082 241,098 32,975 56,304 170,824 299,881 94,069 68,177 117,028 5,903,438 LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY Liabilities: Mortgage loans, net Revolving credit facility Term loans, net Accounts payable and accrued expenses Other liabilities, net Total liabilities Commitments and contingencies Redeemable noncontrolling interests Shareholders' equity: Preferred shares, $0.01 par value - 200,000 shares authorized; none issued Common shares, $0.01 par value - 500,000 shares authorized; 94,309 and 114,013 shares issued and outstanding as of December 31, 2023 and 2022 Additional paid-in capital Accumulated deficit Accumulated other comprehensive income Total shareholders' equity of JBG SMITH Properties Noncontrolling interests Total equity $ 1,783,014 $ 62,000 717,172 124,874 138,869 2,825,929 1,890,174 — 547,072 138,060 132,710 2,708,016 440,737 481,310 — — 944 2,978,852 (776,962) 20,042 2,222,876 28,973 2,251,849 1,141 3,263,738 (628,636) 45,644 2,681,887 32,225 2,714,112 TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY $ 5,518,515 $ 5,903,438 See accompanying notes to the consolidated financial statements. 69 JBG SMITH PROPERTIES Consolidated Statements of Operations (In thousands, except per share data) Year Ended December 31, 2022 2023 2021 REVENUE Property rental Third-party real estate services, including reimbursements Other revenue Total revenue EXPENSES Depreciation and amortization Property operating Real estate taxes General and administrative: Corporate and other Third-party real estate services Share-based compensation related to Formation Transaction and special equity awards Transaction and other costs Total expenses OTHER INCOME (EXPENSE) Loss from unconsolidated real estate ventures, net Interest and other income, net Interest expense Gain on the sale of real estate, net Loss on the extinguishment of debt Impairment loss Total other income (expense) INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT Income tax (expense) benefit NET INCOME (LOSS) Net (income) loss attributable to redeemable noncontrolling interests Net (income) loss attributable to noncontrolling interests NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED $ $ $ 483,159 92,051 28,988 604,198 210,195 144,049 57,668 54,838 88,948 549 8,737 564,984 (26,999) 15,781 (108,660) 79,335 (450) (90,226) (131,219) (92,005) 296 (91,709) 10,596 1,135 $ 491,738 $ 89,022 25,064 605,824 213,771 150,004 62,167 58,280 94,529 5,391 5,511 589,653 (17,429) 18,617 (75,930) 161,894 (3,073) — 84,079 100,250 (1,264) 98,986 (13,244) (371) 499,586 114,003 20,773 634,362 236,303 150,638 70,823 53,819 107,159 16,325 10,429 645,496 (2,070) 8,835 (67,961) 11,290 — (25,144) (75,050) (86,184) (3,541) (89,725) 8,728 1,740 (79,978) $ 85,371 $ (79,257) (0.78) $ 0.70 $ (0.63) 105,095 119,005 130,839 See accompanying notes to the consolidated financial statements. 70 JBG SMITH PROPERTIES Consolidated Statements of Comprehensive Income (Loss) (In thousands) NET INCOME (LOSS) OTHER COMPREHENSIVE INCOME (LOSS): Change in fair value of derivative financial instruments Reclassification of net (income) loss on derivative financial instruments from accumulated other comprehensive income (loss) into interest expense Total other comprehensive income (loss) COMPREHENSIVE INCOME (LOSS) Net (income) loss attributable to redeemable noncontrolling interests Net (income) loss attributable to noncontrolling interests Other comprehensive (income) loss attributable to redeemable noncontrolling interests Other comprehensive (income) loss attributable to noncontrolling interests COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG Year Ended December 31, 2022 2021 2023 $ (91,709) $ 98,986 $ (89,725) 2,603 67,576 11,326 (34,776) (32,173) (123,882) 10,596 1,135 4,486 2,085 2,574 70,150 169,136 (13,244) (371) 15,378 26,704 (63,021) 8,728 1,740 (8,411) (2,675) (145) — SMITH PROPERTIES $ (105,580) $ 146,965 $ (55,228) See accompanying notes to the consolidated financial statements. 71 JBG SMITH PROPERTIES Consolidated Statements of Equity (In thousands) Common Shares Shares Amount $ 131,778 1,319 Additional Paid-In Capital $ 3,657,643 Accumulated Deficit (412,944) $ $ — (79,257) Accumulated Other Comprehensive Income (Loss) BALANCE AS OF DECEMBER 31, 2020 Net loss attributable to common shareholders and noncontrolling interests Redemption of common limited partnership units ("OP Units") for common shares Common shares repurchased Common shares issued pursuant to employee incentive compensation plan and employee share purchase plan ("ESPP") Dividends declared on common shares ($0.90 per common share) Contributions from noncontrolling interests, net Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation Total other comprehensive income BALANCE AS OF DECEMBER 31, 2021 Net income attributable to common shareholders and noncontrolling interests Redemption of OP Units for common shares Common shares repurchased Common shares issued pursuant to employee incentive compensation plan and ESPP Dividends declared on common shares ($0.90 per common share) Contributions from noncontrolling interests, net Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation Total other comprehensive income Other comprehensive income attributable to noncontrolling interests BALANCE AS OF DECEMBER 31, 2022 Net loss attributable to common shareholders and noncontrolling interests Redemption of OP Units for common shares Common shares repurchased Common shares issued pursuant to employee incentive compensation plan and ESPP Dividends declared on common shares ($0.675 per common share) Distributions to noncontrolling interests, net Redeemable noncontrolling interests redemption value adjustment and total other comprehensive loss allocation Total other comprehensive loss Other comprehensive loss attributable to noncontrolling interests BALANCE AS OF DECEMBER 31, 2023 — 906 (5,370) 64 — — — — 127,378 — 701 (14,151) 85 — — — — — 9 (54) 1 — — 29,625 (157,632) 2,426 — — — — 1,275 — 7 (142) 7,854 — 3,539,916 — 16,697 (360,900) 1 — — — — 2,661 — — 65,364 — — 114,013 — 2,758 (22,576) — 1,141 — 3,263,738 — 28 (225) — 44,592 (335,088) 114 — — — — — — — — — 2,506 — — 3,104 — — — — (117,130) — — — (609,331) 85,371 — — — (104,676) — — — — (628,636) (79,978) — — — (68,348) — Noncontrolling Interests (39,979) $ 167 Total Equity $ 3,206,206 — — — — — — (1,740) (80,997) — — — 29,634 (157,686) 2,427 — 24,080 (117,130) 24,080 (2,675) 26,704 (15,950) — — 22,507 5,179 26,704 2,938,417 — — — — — — (8,411) 70,150 (145) 45,644 — — — — — — 371 — — — 85,742 16,704 (361,042) 2,662 — 9,202 (104,676) 9,202 — — 56,953 70,150 145 32,225 — 2,714,112 (1,135) — — (81,113) 44,620 (335,313) — — (32) — — 2,506 (68,348) (32) 7,590 (32,173) — — 4,486 (32,173) — 94,309 $ — 944 — $ 2,978,852 — (776,962) $ $ 2,085 20,042 $ (2,085) 28,973 — $ 2,251,849 See accompanying notes to the consolidated financial statements. 72 JBG SMITH PROPERTIES Consolidated Statements of Cash Flows (In thousands) OPERATING ACTIVITIES: Net income (loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Share-based compensation expense Depreciation and amortization expense, including amortization of deferred financing costs Deferred rent Loss from unconsolidated real estate ventures, net Amortization of market lease intangibles, net Amortization of lease incentives Loss on the extinguishment of debt Impairment loss Gain on the sale of real estate, net Loss on operating lease and other receivables Income from investments, net Return on capital from unconsolidated real estate ventures Other non-cash items Changes in operating assets and liabilities: Tenant and other receivables Other assets, net Accounts payable and accrued expenses Other liabilities, net Net cash provided by operating activities INVESTING ACTIVITIES: Development costs, construction in progress and real estate additions Acquisition of real estate Proceeds from the sale of real estate Proceeds from the sale of investments Proceeds from derivative financial instruments Payments on derivative financial instruments Distributions of capital from unconsolidated real estate ventures and other investments Investments in unconsolidated real estate ventures and other investments Net cash (used in) provided by investing activities FINANCING ACTIVITIES: Borrowings under mortgage loans Borrowings under revolving credit facility Borrowings under term loans Repayments of mortgage loans Repayments of revolving credit facility Proceeds from derivative financial instruments Payments on derivative financial instruments Debt issuance and modification costs Redemption of partner's noncontrolling interest Finance lease payments Proceeds from common shares issued pursuant to ESPP Common shares repurchased Dividends paid to common shareholders Distributions to redeemable noncontrolling interests Distributions to noncontrolling interests Contributions from noncontrolling interests Net cash (used in) provided by financing activities 73 Year Ended December 31, 2022 2021 2023 $ (91,709) $ 98,986 $ (89,725) 32,100 41,272 51,551 215,628 (20,664) 26,999 (960) 1,711 450 90,226 (79,335) 882 (972) 20,701 10,818 11,123 (8,959) (11,255) (13,412) 183,372 (333,744) (19,551) 281,525 — 1,922 (9,830) 10,503 (29,004) (98,179) 345,140 371,750 170,000 (281,854) (309,750) 9,600 (1,922) (17,579) (647) — 1,102 (335,313) (94,002) (15,318) (32) — (158,825) 217,841 (23,602) 17,429 (1,127) 7,734 3,073 — (161,894) 2,160 (14,488) 11,407 (5,517) (13,154) (10,737) (1,282) 9,936 178,037 (326,741) (65,302) 928,908 19,030 — — 59,717 (91,591) 524,021 179,744 100,000 150,000 (270,676) (400,000) — — (5,137) (9,531) — 1,458 (361,042) (107,688) (16,409) (182) 9,383 (730,080) 240,454 (21,964) 2,070 (1,189) 7,973 — 25,144 (11,290) 2,595 (3,620) 15,912 (922) 8,812 (12,780) 8,700 (4,099) 217,622 (173,177) (208,342) 14,370 — — — 40,188 (41,780) (368,741) 190,000 300,000 — (5,611) — — — (6,610) — (19,970) 1,594 (157,686) (118,115) (17,804) (46) 24,126 189,878 JBG SMITH PROPERTIES Consolidated Statements of Cash Flows (In thousands) Year Ended December 31, 2022 2023 Net (decrease) increase in cash and cash equivalents, and restricted cash Cash and cash equivalents, and restricted cash, beginning of period Cash and cash equivalents, and restricted cash, end of period $ $ (73,632) 274,073 200,441 CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD: Cash and cash equivalents Restricted cash Cash and cash equivalents, and restricted cash $ $ 164,773 35,668 200,441 $ $ $ $ (28,022) 302,095 274,073 $ $ 2021 38,759 263,336 302,095 241,098 32,975 274,073 $ $ 264,356 37,739 302,095 SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION: Cash paid for interest (net of capitalized interest of $17,357, $10,888 and $6,734 in 2023, 2022 and 2021) $ 88,755 $ 71,861 $ 61,928 Accrued capital expenditures included in accounts payable and accrued expenses Write-off of fully depreciated assets Cash paid for income taxes Deconsolidation of real estate asset Accrued dividends to common shareholders Accrued distributions to redeemable noncontrolling interests Redemption of OP Units for common shares Recognition (derecognition) of operating lease right-of-use asset Recognition (derecognition) of liabilities related to operating lease right- of-use asset (Derecognition) recognition of finance lease right-of-use assets (Derecognition) recognition of liabilities related to finance lease right-of- use assets Cash paid for amounts included in the measurement of lease liabilities for operating leases 63,136 6,281 1,916 — — — 44,620 61,443 61,443 — — 5,178 73,612 19,794 1,205 — 25,653 3,968 16,704 — — (179,668) 43,290 61,123 815 26,476 28,665 3,938 29,634 (1,596) (1,587) 139,507 (163,586) 141,574 1,906 2,295 See accompanying notes to the consolidated financial statements. 74 JBG SMITH PROPERTIES Notes to Consolidated Financial Statements 1. Organization and Basis of Presentation Organization JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust ("REIT"), owns, operates, invests in and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, D.C., most notably National Landing. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, D.C. metropolitan area. Approximately 75.0% of our holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon.com, Inc.'s ("Amazon") new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and our deployment of 5G digital infrastructure. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds"), other third parties and the Washington Housing Initiative ("WHI") Impact Pool. 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 December 31, 2023, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 87.8% of its OP Units, after giving effect to the conversion of certain vested long-term incentive partnership units ("LTIP Units") that are convertible into OP Units. JBG SMITH is referred to herein as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our: (i) 10.0% subordinated interest in one commercial building, (ii) 33.5% subordinated interest in four commercial buildings (the "Fortress Assets"), (iii) 49.0% interest in three commercial buildings (the "L'Enfant Plaza Assets") and (iv) 9.9% interest in The Foundry, as well as the associated non- recourse mortgage loans, held through unconsolidated real estate ventures; these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures, and we have not guaranteed their obligations or otherwise committed to providing financial support. We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C. 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 December 31, 2023, our Operating Portfolio consisted of 44 operating assets comprising 16 multifamily assets totaling 6,318 units (6,318 units at our share), 26 commercial assets totaling 8.3 million square feet (7.7 million square feet at our share) and two wholly owned land assets for which we are the ground lessor. Additionally, we have two under- construction multifamily assets totaling 1,583 units (1,583 units at our share) and 17 assets in the development pipeline totaling 10.8 million square feet (8.8 million square feet at our share) of estimated potential development density. We derive our revenue primarily from leases with multifamily and commercial 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. 75 Only the U.S. federal government accounted for 10% or more of our rental revenue, which consists of property rental and other property revenue, as follows: Rental revenue from the U.S. federal government Percentage of commercial segment rental revenue Percentage of rental revenue Basis of Presentation $ 2023 Year Ended December 31, 2022 (Dollars in thousands) 75,516 $ 2021 83,256 64,439 $ 23.0 % 12.9 % 23.7 % 14.8 % 22.8 % 16.2 % The accompanying consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). All intercompany transactions and balances have been eliminated. The accompanying 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 6 for additional information. 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 consolidated financial statements. Reclassification Deferred leasing costs totaling $94.1 million were reclassified from "Intangible assets, net" to "Deferred leasing costs, net" in our balance sheet as of December 31, 2022 to present deferred leasing costs separately from intangible assets, which is consistent with our current year presentation. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Asset Acquisitions We account for asset acquisitions, which includes the consolidation of previously unconsolidated real estate ventures, at cost, including transaction costs, plus the fair value of any assumed debt. We estimate the fair values of acquired tangible assets (consisting of real estate, tenant and other receivables, and other assets, as applicable), identified intangible assets and liabilities (consisting of in-place leases and above- and below-market leases, as applicable), assumed debt and other liabilities, and noncontrolling interests, as applicable, based on our evaluation of information and estimates available at the date of acquisition. Based on these estimates, we allocate the purchase price, including all transaction costs related to the acquisition and any contingent consideration, to the identified assets acquired and liabilities assumed based on their relative fair value. The results of operations of acquisitions are prospectively included in our consolidated financial statements beginning with the date of the acquisition. The fair values of buildings are determined using the "as-if vacant" approach whereby we use discounted cash flow models with inputs and assumptions that we believe are consistent with current market conditions for similar assets. The most significant assumptions in determining the allocation of the purchase price to buildings are the exit capitalization rate, discount rate, estimated market rents and hypothetical expected lease-up periods, when applicable. We assess the fair value of land based on market comparisons and development projects using an income approach of cost plus a margin. 76 The fair values of identified intangible assets and liabilities are determined based on the following: • The value allocable to the above- or below-market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired lease) of the difference between: (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management's estimate of the amounts that would be received using market rates over the remaining term of the lease. Amounts allocated to above- market leases are recorded as lease intangible assets in "Intangible assets, net" in our consolidated balance sheets, and amounts allocated to below-market leases are recorded as lease intangible liabilities in "Other liabilities, net" in our consolidated balance sheets. These intangibles are amortized to "Property rental revenue" in our consolidated statements of operations over the remaining terms of the respective leases. • Factors considered in determining the value allocable to in-place leases during hypothetical lease-up periods related to space that is leased at the time of acquisition include: (i) lost rent and operating cost recoveries during the hypothetical lease-up period and (ii) theoretical leasing commissions required to execute similar leases. These intangible assets are recorded as lease intangible assets in "Intangible assets, net" in our consolidated balance sheets and are amortized to "Depreciation and amortization expense" in our consolidated statements of operations over the remaining term of the existing lease. Real Estate Real estate is carried at cost, net of accumulated depreciation and amortization. Maintenance and repairs are expensed as incurred and are included in "Property operating expenses" in our consolidated statements of operations. Construction in progress, including land, is carried at cost, and no depreciation is recorded. All direct and indirect costs related to development activities, including redevelopment activities, are capitalized to the extent that we believe such costs are recoverable through the value of the property into "Construction in progress, including land" in our consolidated balance sheets, except for certain demolition costs, which are expensed as incurred. Direct development costs incurred include: pre-development expenditures directly related to a specific project, development and construction costs, interest, insurance and real estate taxes. Indirect development costs include: employee salaries and benefits, travel and other related costs that are directly associated with the development. Our method of calculating capitalized interest expense is based upon applying our weighted average borrowing rate to the actual accumulated expenditures if the property does not have property specific debt. If the property is encumbered by specific debt, we will capitalize both the interest incurred applicable to that debt and additional interest expense using our weighted average borrowing rate for any accumulated expenditures in excess of the principal balance of the debt encumbering the property. The capitalization of such expenses ceases when the real estate is ready for its intended use, but no later than one-year from substantial completion of major construction activities at which point the costs associated with a property are allocated to its various components. Depreciation and amortization expense require an estimate of the useful life of each property and improvement. Depreciation and amortization expense are recognized on a straight-line basis over estimated useful lives, which range from three to 40 years. Tenant improvements are amortized on a straight-line basis over the lives of the related leases, which approximate the useful lives of the tenant improvements. When assets are sold or retired, their costs and related accumulated depreciation are removed from the accounts with the resulting gains (losses) reflected in net income (loss) for the period. Our real estate and related intangible assets are reviewed for impairment whenever there are changes in circumstances or indicators that the carrying amount of the assets may not be recoverable. These indicators may include declining operating performance, below average occupancy, shortened anticipated holding periods, costs in excess of budgets for under- construction assets and other adverse changes. An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Estimates of future cash flows are based on our current plans, anticipated holding periods and available market information at the time the analyses are prepared. Longer anticipated holding periods for real estate assets directly reduce the likelihood of recording an impairment loss. An impairment loss is recognized if the carrying amount of the asset is not recoverable and is measured based on the excess of the property's carrying amount over its estimated fair value. Estimated fair values are 77 calculated based on the following information in order of preference, dependent upon availability: (i) pending or executed agreements, (ii) market prices for comparable properties or (iii) the sum of discounted cash flows. If our estimates of future cash flows, anticipated holding periods, asset strategy or fair values change, based on market conditions, anticipated selling prices or other factors, our evaluation of impairment losses may be different and such differences could be material to our consolidated financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with a purchase date life to maturity of three months or less and are carried at cost, which approximates fair value due to their short-term maturities. Restricted Cash Restricted cash consists primarily of proceeds from property dispositions held in escrow, security deposits held on behalf of our tenants and cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements. Investments in Real Estate Ventures We analyze each real estate venture 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 whether the entity is 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. If it is determined that an entity is a VIE in which we have a variable interest, we assess whether we are the primary beneficiary of the VIE to determine whether it should be consolidated. 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. We are not the primary beneficiary of a VIE when we do not have voting control, lack the power to direct the activities that most significantly impact the entity's economic performance, or the limited partners (or non-managing members) have substantive participatory rights. If it is determined that the real estate venture is not a VIE, then the determination as to whether we consolidate is based on whether we have a controlling financial interest in the real estate venture, which is based on our voting interests and the degree of influence we have over the real estate venture. Management uses judgment when determining if we are the primary beneficiary of a VIE or have a controlling financial interest in a real estate venture determined not to be a VIE. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity's economic performance include voting rights, involvement in day-to-day capital and operating decisions, and the extent of our involvement in the entity. We use the equity method of accounting for investments in unconsolidated real estate ventures when we have significant influence but are not the primary beneficiary of a VIE or do not have a controlling financial interest in a real estate venture determined not to be a VIE. Significant influence is typically indicated through ownership of 20% or more of the voting interests. Under the equity method, we record our investments in these entities in "Investments in unconsolidated real estate ventures" in our consolidated balance sheets, and our proportionate share of earnings (losses) earned by the real estate venture is recognized in "Loss from unconsolidated real estate ventures, net" in the accompanying consolidated statements of operations. We earn revenue from the management services we provide to unconsolidated real estate ventures. These fees are determined in accordance with the terms specific to each arrangement and may include property and asset management fees, or transactional fees for leasing, acquisition, development and construction, financing and legal services provided. We account for this revenue gross of our ownership interest in each respective real estate venture and recognize such revenue in "Third-party real estate services, including reimbursements" in our consolidated statements of operations when earned. Our proportionate share of related expenses is recognized in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations. 78 We may also earn incremental promote distributions if certain financial return benchmarks are achieved upon ultimate disposition of the underlying properties. Promote revenue is recognized when certain earnings events have occurred, and the amount of revenue is determinable and collectible. Any promote revenue is reflected in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations. In the event our investment in a real estate venture is reduced to zero, and we are not obligated to provide for additional losses, have not guaranteed its obligations or otherwise committed to providing financial support, we will discontinue the equity method of accounting until such point that our share of net income equals the share of net losses not recognized during the period the equity method was suspended. With regard to distributions from unconsolidated real estate ventures, we use the information that is available to us to determine the nature of the underlying activity that generated the distributions. Using the nature of distribution approach, cash flows generated from the operations of an unconsolidated real estate venture are classified as a return on investment (cash inflow from operating activities) and cash flows from property sales, debt refinancing or sales of our investments are classified as a return of investment (cash inflow from investing activities). On a periodic basis, we evaluate our investments in unconsolidated real estate ventures for impairment. An investment in a real estate venture is considered impaired if we determine that its fair value is less than the net carrying value of the investment in that real estate venture on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, anticipated holding periods, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include the age of the venture, our intent and ability to retain our investment in the real estate venture, financial condition and long-term prospects of the real estate venture and relationships with our partners and banks. If we believe that the decline in the fair value of the investment is temporary, no impairment loss is recorded. If our analysis indicates that there is an other-than temporary impairment related to the investment in a particular real estate venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment. We evaluate reconsideration events as we become aware of them. Reconsideration events include, among other criteria, amendments to real estate venture agreements or changes in the capital requirements of the real estate venture. A reconsideration event could cause us to consolidate an unconsolidated real estate venture or deconsolidate a consolidated entity. Intangibles Intangible assets primarily consist of: (i) in-place leases, below-market ground rent obligations, and above-market real estate leases that were recorded in connection with the acquisition of properties and (ii) management and leasing contracts and options to enter into ground leases that were acquired in the Combination. Intangible liabilities consist of above-market ground rent obligations and below-market real estate leases that are also recorded in connection with the acquisition of properties. Both intangible assets and liabilities are amortized and accreted using the straight-line method over their applicable remaining useful life. When a lease or contract is terminated early, any remaining unamortized or unaccreted balances are charged to earnings. The useful lives of intangible assets are evaluated each reporting period with any changes in estimated useful lives being accounted for over the revised remaining useful life. Intangible assets also include the wireless spectrum licenses we acquired. 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, which would be capitalized as part of the asset. Accordingly, we have concluded that the licenses are indefinite-lived intangible assets. Investments Investments in equity securities without readily determinable fair values are carried at cost. Investments in investment funds without readily determinable fair values that qualify for the net asset value ("NAV") practical expedient are carried at fair value based on their reported NAV. Investments in equity securities and investment funds are included in "Other assets, net" in our consolidated balance sheets. Realized and unrealized gains (losses) are included in "Interest and other income, net" in our consolidated statements of operations. 79 Assets Held for Sale Assets, primarily consisting of real estate, are classified as held for sale when all the necessary criteria are met. The criteria include: (i) management, having the authority to approve action, commits to a plan to sell the property in its present condition, (ii) the sale of the property is at a price reasonable in relation to its current fair value and (iii) the sale is probable and expected to be completed within one year. Real estate held for sale is carried at the lower of carrying amounts or estimated fair value less disposal costs. Depreciation and amortization expense is not recognized on real estate classified as held for sale. Deferred Costs Deferred leasing costs include direct and incremental costs incurred in the successful negotiation of leases, including leasing commissions and other costs, which are deferred and amortized on a straight-line basis over the corresponding lease term. Unamortized leasing costs are charged to expense upon the early termination of the lease. Deferred financing costs consist of loan issuance costs directly related to financing transactions that are deferred and amortized over the term of the related loan as a component of interest expense. Unamortized deferred financing costs related to our mortgage loans and term loans are presented as a direct deduction from the carrying amounts of the related debt instruments, while such costs related to our revolving credit facility are included in other assets. Noncontrolling Interests We identify our noncontrolling interests separately in our consolidated balance sheets. Amounts of consolidated net income (loss) attributable to redeemable noncontrolling interests and to the noncontrolling interests in consolidated subsidiaries are presented separately in our consolidated statements of operations. Redeemable Noncontrolling Interests - Redeemable noncontrolling interests primarily consists of OP Units issued in conjunction with the Formation Transaction and LTIP Units issued to employees. Redeemable noncontrolling interests are generally redeemable at the option of the holder for our common shares, or cash at our election, subject to certain limitations, and are presented in the mezzanine section between total liabilities and shareholders' equity in our consolidated balance sheets. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in "Additional paid- in capital." See Note 13 for additional information. Noncontrolling Interests - Noncontrolling interests represents the portion of equity that we do not own in entities we consolidate, including interests in consolidated real estate ventures. Derivative Financial Instruments and Hedge Accounting Derivative financial instruments are used at times to manage exposure to variable interest rate risk. Derivative financial instruments are recognized as either assets or liabilities and are measured at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. Cash flows and related gains (losses) associated with derivative financial instruments are classified as operating cash flows in our consolidated statements of cash flows, unless the derivative financial instrument contains an other-than-insignificant financing element at inception, in which case the related cash flows are reported as either cash flows from investing or financing activities depending on the derivative's off-market nature at inception. Derivative Financial Instruments Designated as Effective Hedges - Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are cash flow hedges that are designated as effective hedges, and are carried at their estimated fair value on a recurring basis. We assess the effectiveness of our hedges 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 income" in our consolidated balance sheets and is subsequently reclassified into "Interest expense" in our consolidated statements of operations in the period that the hedged forecasted transactions affect earnings. Our hedges become less than perfectly effective if the critical terms of the hedging instrument and the forecasted transactions do not perfectly match such as 80 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. Derivative financial instruments and hedging activities require management to make judgments on the nature of its derivatives and their effectiveness as hedges. These judgments determine if the changes in fair value of the derivative instruments are reported in our consolidated statements of operations, or in our consolidated statements of comprehensive income (loss). Non-Designated Derivatives - Certain derivative financial instruments, consisting of interest rate cap agreements, are used to manage our exposure to interest rate movements, but do not meet the accounting requirements to be classified as hedging instruments. These derivatives are carried at their estimated fair value on a recurring basis with realized and unrealized gains (losses) recorded in "Interest expense" in our consolidated statements of operations. Fair Value of Assets and Liabilities Accounting Standards Codification ("ASC") 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 value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value. Investments that are valued using NAV as a practical expedient are excluded from the fair value hierarchy disclosures. Revenue Recognition We have leases with various tenants across our portfolio of properties, which generate rental income and operating cash flows for our benefit. Through these leases, we provide tenants with the right to control the use of our real estate, which tenants agree to use and control. The right to control our real estate conveys to our tenants substantially all of the economic benefits and the right to direct how and for what purpose the real estate is used throughout the period of use, thereby meeting the definition of a lease. Leases will be classified as either operating, sales-type or direct finance leases based on whether the lease is structured in effect as a financed purchase. Property rental revenue includes base rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the lease. When a renewal option is included within the lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Further, property rental revenue includes tenant reimbursement revenue from the recovery of all or a portion of the operating expenses and real estate taxes of the respective assets. Tenant reimbursements, which vary each period, are non-lease components that are not the predominant activity within the contract. We have elected the practical expedient that allows us to combine certain lease and non-lease components of our operating leases. Non-lease components are recognized together with fixed base rent in "Property rental revenue," as variable lease income in the same periods as the related expenses are incurred. Certain commercial leases may also provide for the payment by the lessee of additional rents based on a percentage of sales, which are recorded as variable lease income in the period the additional rents are earned. 81 We commence rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and when the leased space is substantially ready for its intended use. In circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of property rental revenue on a straight-line basis over the term of the lease commencing when the tenant takes possession of the space. Differences between rental revenue recognized and amounts due under the respective lease agreements are recorded as an increase or decrease to "Deferred rent receivable" in our consolidated balance sheets. Property rental revenue also includes the amortization or accretion of acquired above-and below-market leases. We periodically evaluate the collectability of amounts due from tenants and recognize an adjustment to property rental revenue for accounts receivable and deferred rent receivable if we conclude it is not probable we will collect substantially all of the remaining lease payments under the lease agreements. Any changes to the provision for lease revenue determined to be not probable of collection are included in "Property rental revenue" in our consolidated statements of operations. We exercise judgment in assessing the probability of collection and consider payment history, current credit status and economic outlook in making this determination. Third-party real estate services revenue, including reimbursements, includes property and asset management fees, and transactional fees for leasing, acquisition, development and construction, financing, and legal services. These fees are determined in accordance with the terms specific to each arrangement and are recognized as the related services are performed. Development fees are earned from providing services to third-party property owners and our unconsolidated real estate ventures. The performance obligations associated with our development services contracts are satisfied over time and we recognize our development fee revenue using a time-based measure of progress over the course of the development project due to the stand-ready nature of the promised services. The transaction prices for our performance obligations are variable based on the costs ultimately incurred to develop the underlying assets and are estimated based on their expected value. Our transaction prices, and the corresponding recognition of revenue, are constrained such that a significant reversal of revenue is not probable when the variability is subsequently resolved. Judgments impacting the timing and amount of revenue recognized from our development services contracts include the determination of the nature and number of performance obligations within a contract, estimates of total development project costs, from which the fees are typically derived, the application of a constraint to our transaction price and estimates of the period of time over which the development services are expected to be performed, which is the period over which the revenue is recognized. We recognize development fees earned from unconsolidated real estate venture projects to the extent of our venture partners' ownership interest. Third-Party Real Estate Services Expenses Third-party real estate services expenses include the costs associated with the management services provided to our unconsolidated real estate ventures and other third parties, including amounts paid to third-party contractors for construction projects that we manage. We allocate personnel and other overhead costs using estimates of the time spent performing services for our third-party real estate services and other allocation methodologies. Lessee Accounting We have, or have entered in the past, operating and finance leases, including ground leases on certain of our properties. When a renewal option is included within a lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the corresponding lease liability and right-of-use asset. Lease expense for our operating leases is recognized on a straight-line basis over the expected lease term and is included in our consolidated statements of operations in "Property operating expenses." Amortization of the right-of-use asset associated with a finance lease is recognized on a straight-line basis over the expected lease term and is included in our consolidated statements of operations in "Depreciation and amortization expense" with the related interest on our outstanding lease liability included in "Interest expense." Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, market rates or our share of expenditures of the leased premises. Such variable payments are recognized in lease expense in the period in which the variability is determined. Certain lease agreements may also include various non-lease 82 components that primarily relate to property operating expenses associated with our office leases, which also vary each period. We have elected the practical expedient which allows us to combine lease and non-lease components for our ground and office leases and recognize variable non-lease components in lease expense when incurred. We discount our future lease payments for each lease to calculate the related lease liability using an estimated incremental borrowing rate computed based on observable corporate borrowing rates reflective of the general economic environment, taking into consideration our creditworthiness and various financing and asset specific considerations, adjusted to approximate a secured borrowing for the lease term. We made a policy election to forgo recording right-of-use assets and the related lease liabilities for leases with initial terms of 12 months or less. 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. Prior to the Separation, Vornado operated as a REIT and distributed 100% of its REIT taxable income to its shareholders; accordingly, no provision for federal income taxes has been made in the accompanying consolidated financial statements for the periods prior to the Separation. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. As a REIT, we can reduce our taxable income by distributing all or a portion of such taxable income to shareholders. Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Code and such other factors as our Board of Trustees deems relevant. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries ("TRS") under the Code. As such, we are subject to federal, state, and local taxes on the income from these activities. Income taxes attributable to our TRSs are accounted for under the asset and liability method. Under the asset and liability method, deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in our consolidated financial statements, which will result in taxable or deductible amounts in the future. We provide for a valuation allowance for deferred income tax assets if we believe all or some portion of the deferred tax asset may not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances that causes a change in the estimated ability to realize the related deferred tax asset is included in deferred tax benefit (expense). ASC 740 ("Topic 740"), Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in our consolidated financial statements. Topic 740 requires the evaluation of tax positions taken in the course of preparing our tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold are recorded as a tax expense in the current year. Earnings (Loss) Per Common Share Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding during the period. Unvested share-based compensation awards that entitle holders to receive non-forfeitable distributions are considered participating securities. Consequently, we are required to apply the two-class method of computing basic and diluted earnings (loss) that would otherwise have been available to common shareholders. Under the two-class method, earnings for the period are allocated between common shareholders and participating securities based on their respective rights to receive dividends. During periods of net loss, losses are allocated only to the extent the participating securities are required to absorb their share of such losses. Distributions to participating securities in excess of their allocated income (loss) are shown as a reduction to net income (loss) attributable to common shareholders. Diluted earnings (loss) per common share reflects the potential dilution of the assumed exchange of various unit and share-based compensation awards into common shares to the extent they are dilutive. 83 Share-Based Compensation The fair value of share-based compensation awards granted to our trustees, management or employees is determined, depending on the type of award, using the Monte Carlo or Black-Scholes methods, which is intended to estimate the fair value of the awards at the grant date using dividend yields, expected volatilities that are primarily based on available implied data and peer group companies' historical data and post-vesting restriction periods. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The shortcut method is used for determining the expected life used in the valuation method. Compensation expense is based on the fair value of our common shares at the date of the grant and is recognized ratably over the vesting period using a graded vesting attribution model. Compensation expense for share-based compensation awards made to retirement eligible employees is recognized over a six-month period after the grant date or over the remaining period until they become retirement eligible. We account for forfeitures as they occur. Distributions paid on unvested OP Units and LTIP Units are recorded to "Redeemable noncontrolling interests" in our consolidated balance sheets. Distributions paid on unvested Restricted Share Units ("RSUs") are recorded to "Additional paid-in capital" in our consolidated balance sheets. Recent Accounting Pronouncements Standard Adopted Reference Rate Reform In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform ("Topic 848"), which was amended in December 2022 by ASU 2022-06, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. As of December 31, 2023, we have converted all our London Interbank Offered Rate-indexed debt and derivative financial instruments to Secured Overnight Financing Rate ("SOFR")-based indexes. For all derivative financial instruments designated as effective hedges, we utilized the elective relief in Topic 848 that allows for the continuation of hedge accounting through the transition process. Standards Not Yet Adopted Income Taxes In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" ("Topic 740"). Topic 740 modifies the rules on income tax disclosures to require entities to disclose (i) specific categories in the rate reconciliation, (ii) the income (loss) from continuing operations before income tax expense or benefit (separated between domestic and foreign) and (iii) income tax expense or benefit from continuing operations (separated by federal, state and foreign). Topic 740 also requires entities to disclose their income tax payments to international, federal, state and local jurisdictions, among other changes. The guidance is effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. This guidance should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures. Segment Reporting In November 2023, the FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segments Disclosures" ("Topic 280"). Topic 280 enhances disclosures of significant segment expenses and other segment items regularly provided to the chief operating decision maker ("CODM"), extends certain annual disclosures to interim periods and permits more than one measure of segment profit (loss) to be reported under certain conditions. The amendments are effective in fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Retrospective adoption to all periods presented is required, and early adoption of the 84 amendments is permitted. We are currently evaluating the potential impact of adopting this new guidance on our consolidated financial statements and related disclosures. 3. Acquisitions and Dispositions Acquisitions During 2023, we paid the deferred purchase price of $19.6 million related to the 2020 acquisition of a development parcel, formerly the Americana hotel. In October 2022, we acquired the remaining 50.0% ownership interest in 8001 Woodmont, a 322-unit multifamily asset in Bethesda, Maryland previously owned by an unconsolidated real estate venture, for a purchase price of $115.0 million, including the assumption of the $51.9 million mortgage loan at our share. The asset was encumbered by a $103.8 million mortgage loan and was consolidated as of the date of acquisition. We recorded our investment in the asset at the carryover basis for our previously held equity investment plus the incremental cash consideration paid to acquire our partner's interest. In August 2022, we acquired the remaining 36.0% ownership interest in Atlantic Plumbing, a 310-unit multifamily asset in Washington, D.C. previously owned by an unconsolidated real estate venture, which was encumbered by a $100.0 million mortgage loan, for a purchase price of $19.7 million and our partner’s share of the working capital. The mortgage loan was repaid in August 2022. Atlantic Plumbing was consolidated as of the date of acquisition. We recorded our investment in the asset at the carryover basis for our previously held equity investment plus the incremental cash consideration paid to acquire our partner's interest. In November 2021, we acquired The Batley, a 432-unit multifamily asset in the Union Market submarket of Washington, D.C., for $205.3 million, exclusive of $3.1 million of transaction costs that were capitalized as part of the acquisition. We used The Batley as a replacement property in a like-kind exchange for the sale of Pen Place, which closed during the second quarter of 2022. 85 Dispositions The following is a summary of disposition activity: Date Disposed Assets Segment Gross Sales Price Gain (Loss) on the Sale of Real Estate Cash Proceeds from Sale (In thousands) Year Ended December 31, 2023 March 17, 2023 March 23, 2023 September 20, 2023 Development Parcel 4747 Bethesda Avenue (1) Falkland Chase-South & West and Other Commercial Multifamily $ 5,500 $ 4,954 $ 95,000 93,094 October 4, 2023 November 30, 2023 December 5, 2023 Falkland Chase-North 5 M Street Southwest Crystal City Marriott Capitol Point-North-75 New York Avenue Other (2) Year Ended December 31, 2022 March 28, 2022 April 1, 2022 April 13, 2022 Development Parcel Universal Buildings (3) 7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2 (4) May 25, 2022 December 23, 2022 Pen Place Land Option Other Commercial Other 29,500 80,000 11,516 28,585 79,563 11,285 $ Other Commercial Commercial/ $ 3,250 228,000 580,000 $ 3,149 $ 194,737 527,694 Other Other Other 198,000 6,150 197,528 5,800 $ 121,502 3,330 161,894 (53) 40,053 1,208 430 37,051 (23) 669 79,335 (136) 41,245 (4,047) (1) We sold an 80.0% interest in the asset for a gross sales price of $196.0 million, representing a gross valuation of $245.0 million. See Note 5 for additional information. (2) Related to prior period dispositions. (3) Cash proceeds from sale excludes a lease termination fee of $24.3 million received during the first quarter of 2022. (4) Assets were sold to an unconsolidated real estate venture. See Note 5 for additional information. "RTC-West" refers to RTC-West, RTC-West Trophy Office and RTC-West Land. In April 2022, $164.8 million of mortgage loans related to 1730 M Street and RTC-West were repaid. In April 2021, we invested cash in and contributed land to two real estate ventures and recognized an $11.3 million gain on the disposition of land, which was included in "Gain on sale of real estate, net" in our consolidated statement of operations for the year ended December 31, 2021. See Note 5 for additional information. In January 2024, we sold North End Retail, a multifamily asset, for a gross sales price of $14.3 million. 4. Tenant and Other Receivables The following is a summary of tenant and other receivables: Tenants Third-party real estate services Other Total tenant and other receivables December 31, 2023 2022 (In thousands) $ $ 30,895 $ 8,959 4,377 44,231 $ 36,271 14,177 5,856 56,304 86 5. Investments in Unconsolidated Real Estate Ventures The following is a summary of the composition of our investments in unconsolidated real estate ventures: Real Estate Venture Prudential Global Investment Management (2) J.P. Morgan Global Alternatives ("J.P. Morgan") (3) 4747 Bethesda Venture Brandywine Realty Trust CBREI Venture (4) Landmark Partners (5) Other Total investments in unconsolidated real estate ventures (6) (7) Effective Ownership Interest (1) 50.0% 50.0% 20.0% 30.0% 10.0% 18.0% December 31, 2023 2022 (In thousands) $ $ 163,375 $ 72,742 13,118 13,681 180 605 580 264,281 $ 203,529 64,803 — 13,678 12,516 4,809 546 299,881 (1) Reflects our effective ownership interests in the underlying real estate as of December 31, 2023. We have multiple investments with certain venture partners in the underlying real estate. (3) (4) (2) An impairment loss of $25.3 million related to Central Place Tower was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statement of operations for the year ended December 31, 2023. In February 2024, the venture sold its interest in Central Place Tower for a gross sales price of $325.0 million. J.P. Morgan is the advisor for an institutional investor. In August 2023, the venture sold its interest in Stonebridge at Potomac Town Center. An impairment loss of $3.3 million related to The Foundry was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statement of operations for the year ended December 31, 2023. Excludes The Foundry for which we have a zero-investment balance and discontinued applying the equity method of accounting after September 30, 2023. In August 2022, we acquired the remaining 36.0% ownership interest in Atlantic Plumbing, an asset previously owned by the venture. See Note 3 for additional information. In November 2023, the venture sold its interest in Rosslyn Gateway-North, Rosslyn Gateway-South, Rosslyn Gateway-South Land and Rosslyn Gateway-North Land ("Rosslyn Gateway"). Impairment losses totaling $19.3 million related to the L'Enfant Plaza Assets and the Rosslyn Gateway assets, and $23.9 million on the L'Enfant Plaza Assets were included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations for the years ended December 31, 2022 and 2021. Excludes the L'Enfant Plaza Assets for which we have a zero-investment balance and discontinued applying the equity method of accounting after September 30, 2022. (5) (6) Excludes (i) 10.0% subordinated interest in one commercial building, (ii) the Fortress Assets, (iii) the L'Enfant Plaza Assets and (iv) The Foundry held through unconsolidated real estate ventures. See Note 1 for more information. Also, excludes our interest in an investment in the real estate venture that owns 1101 17th Street for which we have discontinued applying the equity method of accounting since June 30, 2018 because we received distributions in excess of our contributions and share of earnings, which reduced our investment to zero; further, we are not obligated to provide for losses, have not guaranteed its obligations or otherwise committed to provide financial support. (7) As of December 31, 2023 and 2022, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $8.7 million and $8.9 million, resulting principally from our zero-investment balance in certain real estate ventures and capitalized interest. We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $21.7 million, $24.0 million and $23.7 million for each of the three years in the period ended December 31, 2023, for such services. 87 The following is a summary of disposition activity by our unconsolidated real estate ventures: Date Disposed Real Estate Venture Partner Assets Ownership Percentage Gross Sales Price Mortgage Loans Repaid by Venture Proportionate Share of Aggregate Gain (Loss) (1) (In thousands) Stonebridge at Potomac Town Center Rosslyn Gateway 10.0% $ 172,500 $ 79,600 $ 18.0% 52,000 44,844 $ 641 (230) 411 1.8% - 18.0% $ 137,500 $ 79,829 $ 5,243 Year Ended December 31, 2023 August 24, 2023 CBREI Venture November 14, 2023 Landmark Year Ended December 31, 2022 Landmark January 27, 2022 May 10, 2022 June 1, 2022 December 15, 2022 CBREI Venture The Gale Eckington Landmark CPPIB The Alaire, The Terano and 12511 Parklawn Drive Galvan 1900 N Street Year Ended December 31, 2021 May 3, 2021 CBREI Venture Fairway May 19, 2021 Landmark May 27, 2021 Landmark September 17, 2021 Landmark Apartments/Fairway Land Courthouse Metro Land/Courthouse Metro Land – Option 5615 Fishers Lane 500 L'Enfant Plaza 1.8% 55.0% 5.0% 152,500 265,000 215,550 89,500 151,709 110,813 $ 407 529 618 6,797 10.0% $ 93,000 $ 45,343 $ 2,094 18.0% 3,000 — 2,352 18.0% 49.0% 6,500 166,500 — 80,000 $ 743 23,137 28,326 (1) Included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations. 4747 Bethesda Venture In March 2023, we sold an 80.0% interest in 4747 Bethesda Avenue to 4747 Bethesda Venture for a gross sales price of $196.0 million, representing a gross valuation of $245.0 million. In connection with the transaction, the real estate venture assumed the related $175.0 million mortgage loan. Fortress Investment Group LLC ("Fortress") In April 2022, we formed an unconsolidated real estate venture with affiliates of Fortress to recapitalize a 1.6 million square foot office portfolio and land parcels for a gross sales price of $580.0 million comprising four wholly owned commercial assets (7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2). Additionally, we contributed $66.1 million in cash for a 33.5% interest in the venture, while Fortress contributed $131.0 million in cash for a 66.5% interest in the venture. In connection with the transaction, the venture obtained mortgage loans totaling $458.0 million secured by the properties, of which $402.0 million was drawn at closing. We provide asset management, property management and leasing services to the venture. Because our interest in the venture is subordinated to a 15% preferred return to Fortress, we do not anticipate receiving any near-term cash flow distributions from it. Per the terms of the venture agreement, we determined the venture was not a VIE and we do not have a controlling financial interest in the venture. As of the transaction date, our investment in the venture was zero, and we have discontinued applying the equity method of accounting as we have not guaranteed its obligations or otherwise committed to providing financial support. 88 JP Morgan 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 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, net" in our consolidated statement of operations for the year ended December 31, 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 the debt of our unconsolidated real estate ventures: Variable rate (2) Fixed rate (3) Mortgage loans (4) Unamortized deferred financing costs and premium / discount, net Mortgage loans, net (4) (5) Weighted Average Effective Interest Rate (1) 5.00% 4.13% December 31, 2023 2022 (In thousands) $ $ 175,000 60,000 235,000 (8,531) 226,469 $ $ 184,099 60,000 244,099 (411) 243,688 (1) Weighted average effective interest rate as of December 31, 2023. (2) Includes variable rate mortgages with interest rate cap agreements. (3) Includes variable rate mortgages with interest rates fixed by interest rate swap agreements. (4) Excludes mortgages related to the Fortress Assets, the L'Enfant Plaza Assets and The Foundry. (5) See Note 21 for additional information on guarantees related to our unconsolidated real estate ventures. The following is a summary of the financial information for our unconsolidated real estate ventures: Combined balance sheet information: (1) Real estate, net Other assets, net Total assets Mortgage loans, net Other liabilities, net Total liabilities Total equity Total liabilities and equity December 31, 2023 2022 (In thousands) $ $ $ $ 729,791 137,771 867,562 226,469 47,251 273,720 593,842 867,562 $ $ $ $ 888,379 160,015 1,048,394 243,688 54,639 298,327 750,067 1,048,394 89 Combined income statement information: (1) Total revenue Operating income (loss) (2) Net income (loss) (2) 2023 Year Ended December 31, 2022 (In thousands) 2021 $ $ 85,280 (62,668) (85,551) 143,665 $ 91,473 59,215 187,252 48,214 16,051 (1) Excludes amounts related to the Fortress Assets. Excludes combined balance sheet information for both periods presented and combined income statement information for 2023 and the fourth quarter of 2022 related to the L'Enfant Plaza Assets as we discontinued applying the equity method of accounting after September 30, 2022. Excludes combined balance sheet information as of December 31, 2023 and combined income statement information for the fourth quarter of 2023 related to The Foundry as we discontinued applying the equity method of accounting after September 30, 2023. Includes the gain from the sale of various assets totaling $3.0 million, $114.9 million and $85.5 million for each of the three years in the period ended December 31, 2023. Includes impairment losses of $80.7 million, $37.7 million and $48.7 million for each of the three years in the period ended December 31, 2023. (2) 6. Variable Interest Entities Unconsolidated VIEs As of December 31, 2023 and 2022, we had interests in entities deemed to be VIEs. Although we may be responsible for managing the 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 December 31, 2023 and 2022, the net carrying amounts of our investment in these entities were $87.3 million and $83.2 million, which were included in "Investments in unconsolidated real estate ventures" in our consolidated balance sheets. Our equity in the income of unconsolidated VIEs was included in "Loss from unconsolidated real estate ventures, net" in our consolidated statements of operations. Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees. See Note 21 for additional information. Consolidated VIEs JBG SMITH LP is our most significant consolidated VIE. We hold 87.8% 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 through JBG SMITH LP, its total assets and liabilities comprise substantially all of our consolidated assets and liabilities. As of December 31, 2023 and 2022, we also consolidated two VIEs (1900 Crystal Drive and 2000/2001 South Bell Street) with total assets of $503.2 million and $265.5 million, and liabilities of $293.3 million and $116.3 million, primarily consisting of construction in process and mortgage loans. The assets of the VIEs can only be used to settle the obligations of the VIEs, and the liabilities include third-party liabilities of the VIEs for which the creditors or beneficial interest holders do not have recourse against us. 90 7. Deferred Leasing Costs, Net The following is a summary of the deferred leasing costs, net: Deferred leasing costs Accumulated amortization Deferred leasing costs, net 8. Intangible Assets, Net December 31, 2023 2022 (In thousands) $ $ 173,019 $ (91,542) 81,477 $ 182,609 (88,540) 94,069 The following is a summary of the intangible assets, net: December 31, 2023 Accumulated Amortization Gross December 31, 2022 Accumulated Amortization Net Net Gross (In thousands) Lease intangible assets: In-place leases Above-market real estate leases $ Other identified intangible assets: Wireless spectrum licenses Option to enter into ground lease Management and leasing contracts Total intangible assets, net $ 14,767 $ 5,321 20,088 (9,874) $ (4,580) (14,454) 4,893 $ 741 5,634 22,449 $ 6,110 28,559 (12,390) $ (4,564) (16,954) 10,059 1,546 11,605 25,780 17,090 43,600 86,470 106,558 $ — — (35,488) (35,488) (49,942) $ 25,780 17,090 8,112 50,982 56,616 $ 117,329 $ 25,780 17,090 45,900 88,770 — — (32,198) (32,198) (49,152) $ 25,780 17,090 13,702 56,572 68,177 The following is a summary of amortization expense related to lease and other identified intangible assets: In-place lease amortization (1) Above-market real estate lease amortization (2) Management and leasing contract amortization (1) Total amortization expense related to lease and other identified intangible assets $ $ 2021 2023 4,972 Year Ended December 31, 2022 (In thousands) 8,594 $ 738 5,905 15,237 720 5,590 11,282 $ $ $ 4,171 1,032 5,905 11,108 (1) Amounts are included in "Depreciation and amortization expense" in our consolidated statements of operations. (2) Amounts are included in "Property rental revenue" in our consolidated statements of operations. 91 The following is a summary of the estimated amortization related to lease and other identified intangible assets for the next five years and thereafter as of December 31, 2023: Year ending December 31, 2024 2025 2026 2027 2028 Thereafter Total (1) $ Amount (In thousands) 7,572 3,099 916 472 360 1,327 13,746 $ (1) Estimated amortization related to the option to enter into ground lease is excluded from the amortization table above as the ground lease does not have a definite start date. Additionally, the wireless spectrum licenses are excluded from the amortization table as they are indefinite-lived intangible assets. 9. Other Assets, Net The following is a summary of other assets, net: Prepaid expenses Derivative financial instruments, at fair value Deferred financing costs, net Deposits Operating lease right-of-use assets (1) Investments in funds (2) Other investments (3) Other Total other assets, net December 31, 2023 2022 (In thousands) 13,215 42,341 10,199 371 60,329 21,785 3,487 11,754 163,481 $ $ 16,440 61,622 5,516 483 1,383 16,748 3,524 11,312 117,028 $ $ Includes our corporate office lease at 4747 Bethesda Avenue as of December 31, 2023. (1) (2) Consists of investments in real estate-focused technology companies which are recorded at their fair value based on their reported net asset value. For each of the three years in the period ended December 31, 2023, unrealized gains totaled $1.3 million, $2.1 million and $4.6 million related to these investments. During the years ended December 31, 2023 and 2022, realized losses related to these investments totaled $758,000 and $1.2 million. Unrealized and realized gains (losses) were included in "Interest and other income, net" in our consolidated statements of operations. (3) Primarily consists of equity investments that are carried at cost. For each of the three years in the period ended December 31, 2023, realized gains (losses) totaled $436,000, $13.5 million and ($1.0) million related to these investments, which were included in "Interest and other income, net" in our consolidated statements of operations. 92 10. Debt Mortgage Loans The following is a summary of mortgage loans: Variable rate (2) Fixed rate (3) Mortgage loans Unamortized deferred financing costs and premium / discount, net (4) Mortgage loans, net Weighted Average Effective Interest Rate (1) 6.25% 4.78% December 31, 2023 2022 (In thousands) $ $ 608,582 $ 1,189,643 1,798,225 (15,211) 1,783,014 $ 892,268 1,009,607 1,901,875 (11,701) 1,890,174 (1) Weighted average effective interest rate as of December 31, 2023. (2) Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.33%, and the weighted average maturity date of the interest rate caps is March 2025. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of December 31, 2023, one-month term SOFR was 5.35%. Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements. (3) (4) As of December 31, 2022, excludes $2.2 million of net deferred financing costs related to unfunded mortgage loans that were included in "Other assets, net" in our consolidated balance sheet. As of December 31, 2023 and 2022, the net carrying value of real estate collateralizing our mortgage loans totaled $2.2 billion. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. Certain mortgage loans are recourse to us. See Note 21 for additional information. In January 2023, we entered into a $187.6 million loan facility, collateralized by The Wren and F1RST Residences. The loan has a seven-year term and a fixed interest rate of 5.13%. This loan is the initial advance under a Fannie Mae multifamily credit facility which provides flexibility for collateral substitutions, future advances tied to performance, ability to mix fixed and floating rates, and staggered maturities. Proceeds from the loan were used, in part, to repay the $131.5 million mortgage loan collateralized by 2121 Crystal Drive, which had a fixed interest rate of 5.51%. In June 2023, we repaid $142.4 million in mortgage loans collateralized by Falkland Chase-South & West and 800 North Glebe Road. In August 2022, we entered into a mortgage loan with a principal balance of $97.5 million collateralized by WestEnd25. The mortgage loan has a seven-year term and an interest rate of SOFR plus 1.45%. We also entered into an interest rate swap with a total notional value of $97.5 million, which effectively fixes SOFR at an average interest rate of 2.71% through the maturity date. During the year ended December 31, 2021, we entered into two separate mortgage loans with an aggregate principal balance of $190.0 million, collateralized by 1225 S. Clark Street and 1215 S. Clark Street. As of December 31, 2023 and 2022, we had various interest rate swap and cap agreements on certain of our mortgage loans with an aggregate notional value of $1.7 billion and $1.3 billion. See Note 19 for additional information. Revolving Credit Facility and Term Loans As of December 31, 2023, our unsecured revolving credit facility and term loans totaling $1.5 billion consisted of a $750.0 million revolving credit facility maturing in June 2027, a $200.0 million term loan ("Tranche A-1 Term Loan") maturing in January 2025, a $400.0 million term loan ("Tranche A-2 Term Loan") maturing in January 2028 and a $120.0 million term loan ("2023 Term Loan") maturing in June 2028. 93 In January 2022, the Tranche A-1 Term Loan was amended to extend the maturity date to January 2025 with two one-year extension options, and to amend the interest rate to SOFR plus 1.15% to SOFR plus 1.75%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. In July 2022, the Tranche A-2 Term Loan was amended to increase its borrowing capacity by $200.0 million. The incremental $200.0 million included a delayed draw feature, of which $150.0 million was drawn in September 2022 and the remaining $50.0 million was drawn in May 2023. The amendment extended the maturity date of the term loan to January 2028 and amended the interest rate to SOFR plus 1.25% to SOFR plus 1.80%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. Effective as of June 29, 2023, the revolving credit facility was amended to: (i) reduce the borrowing capacity from $1.0 billion to $750.0 million, (ii) extend the maturity date from January 2025 to June 2027 and (iii) amend the interest rate to daily SOFR plus 1.40% to daily SOFR plus 1.85%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. We have the option to increase the $750.0 million revolving credit facility or add term loans up to $500.0 million, and we also have the right to extend the maturity date beyond June 2027 via two six-month extension options. In addition, on June 29, 2023, we entered into a $120.0 million term loan maturing in June 2028 with an interest rate of one-month term SOFR plus 1.25% to one-month term SOFR plus 1.80%, varying based on a ratio of our total outstanding indebtedness to a valuation of certain real property and assets. In July 2023, we amended the covenants related to the Tranche A-1 Term Loan and the Tranche A-2 Term Loan to be consistent with the revolving credit facility and 2023 Term Loan covenants. The following is a summary of amounts outstanding under the revolving credit facility and term loans: Revolving credit facility (2) (3) Tranche A-1 Term Loan (4) Tranche A-2 Term Loan (5) 2023 Term Loan (6) Term loans Unamortized deferred financing costs, net Term loans, net Effective Interest Rate (1) December 31, 2023 2022 6.83% 2.70% 3.58% 5.31% $ $ $ (In thousands) 62,000 $ 200,000 400,000 120,000 720,000 (2,828) 717,172 $ $ — 200,000 350,000 — 550,000 (2,928) 547,072 (1) Effective interest rate as of December 31, 2023. The interest rate for the revolving credit facility excludes a 0.15% facility fee. (2) As of December 31, 2023, daily SOFR was 5.38%. As of December 31, 2023 and 2022, letters of credit with an aggregate face amount of $467,000 were outstanding under our revolving credit facility. In February 2024, we repaid all amounts outstanding under our revolving credit facility. (3) As of December 31, 2023 and 2022, excludes net deferred financing costs related to our revolving credit facility of $10.2 million and $3.3 million that were included in "Other assets, net" in our consolidated balance sheets. (4) As of December 31, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 1.46%. Interest rate swaps with a total notional value of $200.0 million mature in July 2024. We have two forward-starting interest rate swaps that will be effective July 2024 with a total notional value of $200.0 million, which will effectively fix SOFR at a weighted average interest rate of 4.00% through January 2027. (5) As of December 31, 2023, the interest rate swaps fix SOFR at a weighted average interest rate of 2.29%. Interest rate swaps with a total notional value of $200.0 million mature in July 2024 and with a total notional value of $200.0 million mature in January 2028. We have two forward-starting interest rate swaps that will be effective July 2024 with a total notional value of $200.0 million, which will effectively fix SOFR at a weighted average interest rate of 2.81% through the maturity date. (6) As of December 31, 2023, the outstanding balance was fixed by an interest rate swap agreement, which fixes SOFR at an interest rate of 4.01% through the maturity date. 94 Principal Maturities The following is a summary of principal maturities of debt outstanding, including mortgage loans and the term loans, as of December 31, 2023: Year ending December 31, 2024 2025 2026 2027 2028 Thereafter Total Amount (In thousands) 123,585 595,582 112,539 483,204 609,532 655,783 2,580,225 $ $ 11. Other Liabilities, Net The following is a summary of other liabilities, net: Lease intangible liabilities Accumulated amortization Lease intangible liabilities, net Lease assumption liabilities Lease incentive liabilities Liabilities related to operating lease right-of-use assets (1) Prepaid rent Security deposits Environmental liabilities Deferred tax liability, net Dividends payable Derivative financial instruments, at fair value Deferred purchase price related to the acquisition of a development parcel Other Total other liabilities, net December 31, 2023 2022 (In thousands) 5,978 (2,482) 3,496 25 7,546 64,501 11,881 12,133 17,568 3,326 — 14,444 — 3,949 138,869 $ $ 33,246 (25,971) 7,275 2,647 11,539 5,308 15,923 13,963 17,990 4,903 29,621 — 19,447 4,094 132,710 $ $ (1) Includes our corporate office lease at 4747 Bethesda Avenue as of December 31, 2023. Amortization expense included in "Property rental revenue" in our consolidated statements of operations related to lease intangible liabilities for each of the three years in the period ended December 31, 2023 was $1.7 million, $1.9 million and $2.2 million. 95 The following is a summary of the estimated amortization of lease intangible liabilities for the next five years and thereafter as of December 31, 2023: Year ending December 31, 2024 2025 2026 2027 2028 Thereafter Total 12. Income Taxes Amount (In thousands) 455 $ 455 381 264 255 1,686 3,496 $ We have elected to be taxed as a REIT, and accordingly, we have incurred no federal income tax expense related to our REIT subsidiaries except for our TRSs. Our consolidated financial statements include the operations of our TRSs, which are subject to federal, state and local income taxes on their taxable income. As a REIT, we may also be subject to federal excise taxes if we engage in certain types of transactions. Continued qualification as a REIT depends on our ability to satisfy the REIT distribution tests, stock ownership requirements and various other qualification tests. The net basis of our assets and liabilities for tax reporting purposes is approximately $422.1 million higher than the amounts reported in our consolidated balance sheet as of December 31, 2023. The following is a summary of our income tax (expense) benefit: 2023 Year Ended December 31, 2022 (In thousands) (1,701) 437 (1,264) 296 $ (1,282) $ 1,578 $ $ 2021 (709) (2,832) (3,541) Current tax expense Deferred tax (expense) benefit Income tax (expense) benefit $ $ 96 As of December 31, 2023 and 2022, we have a net deferred tax liability of $3.3 million and $4.9 million primarily related to basis differences in management, leasing and other investment, partially offset by deferred tax assets associated with tax versus book differences and related general and administrative expenses. We are subject to federal, state and local income tax examinations by taxing authorities for the tax years ending in 2019 through 2022. Deferred tax assets: Accrued bonus NOL Deferred revenue Charitable contributions Other Total deferred tax assets Valuation allowance Total deferred tax assets, net of valuation allowance Deferred tax liabilities: Basis difference - intangible assets Basis difference - real estate Basis difference - investments Other Total deferred tax liabilities Net deferred tax liability December 31, 2023 2022 (In thousands) $ $ 474 — 503 748 171 1,896 (748) 1,148 (2,739) (344) (1,348) (43) (4,474) (3,326) $ $ 474 159 1,266 500 307 2,706 (500) 2,206 (3,835) (1,722) (1,517) (35) (7,109) (4,903) During the year ended December 31, 2023, our Board of Trustees declared cash dividends totaling $0.675 of which $0.135 was taxable as ordinary income for federal income tax purposes and $0.540 were capital gain distributions. During the year ended December 31, 2022, our Board of Trustees declared cash dividends totaling $0.90 of which $0.025 was taxable as ordinary income for federal income tax purposes and $0.875 were capital gain distributions. During the year ended December 31, 2021, our Board of Trustees declared cash dividends totaling $0.90 of which $0.252 was taxable as ordinary income for federal income tax purposes and $0.648 were capital gain distributions. 13. 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. Vested LTIP Units are redeemable into OP Units. During the years ended December 31, 2023 and 2022, unitholders redeemed 2.8 million and 701,222 OP Units, which we elected to redeem for an equivalent number of our common shares. As of December 31, 2023, outstanding OP Units and redeemable LTIP Units totaled 13.1 million, representing a 12.2% ownership interest in JBG SMITH LP. Our OP Units and certain vested 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" in our consolidated balance sheets. Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period. In 2024, as of the date of this filing, unitholders redeemed 351,105 OP Units and LTIP Units, which we elected to redeem for an equivalent number of our common shares. Consolidated Real Estate Venture We were a partner in a consolidated real estate venture that owned a multifamily asset, The Wren, located in Washington, D.C. As of December 31, 2022, we held a 99.7% ownership interest in the real estate venture, which reflects the redemption of a 3.7% interest in October 2022, and in February 2023, another partner redeemed its 0.3% interest, increasing our ownership interest to 100.0%. 97 The following is a summary of the activity of redeemable noncontrolling interests: Year Ended December 31, 2023 Consolidated Real Estate SMITH LP Venture JBG Total 2022 Consolidated Real Estate SMITH LP Venture JBG Total $ 480,663 (44,620) $ 647 (647) $ 481,310 (45,267) $ 513,268 $ (16,704) 9,457 (9,531) $ 522,725 (26,235) (In thousands) 5,213 (10,596) (4,486) (11,351) 29,018 (3,104) $ 440,737 $ 5,213 — (10,596) — (4,486) — (11,351) — 29,018 — — (3,104) — $ 440,737 6,584 13,212 8,411 (16,172) 38,384 (66,320) $ 480,663 $ — 32 — (267) — 956 647 6,584 13,244 8,411 (16,439) 38,384 (65,364) $ 481,310 Balance, beginning of period Redemptions LTIP Units issued in lieu of cash compensation(1) Net income (loss) Other comprehensive income (loss) Distributions Share-based compensation expense Adjustment to redemption value Balance, end of period (1) See Note 15 for additional information. 14. Property Rental Revenue The following is a summary of property rental revenue from our non-cancellable leases: Fixed Variable Property rental revenue $ $ 2023 Year Ended December 31, 2022 (In thousands) $ 436,933 46,226 483,159 $ 447,007 $ 44,731 491,738 $ 2021 456,393 43,193 499,586 As of December 31, 2023, the amounts that are contractually due from lease payments under our operating leases on an annual basis for the next five years and thereafter are as follows: Year ending December 31, 2024 2025 2026 2027 2028 Thereafter 15. Share-Based Payments and Employee Benefits OP UNITS $ Amount (In thousands) 299,178 187,723 180,271 172,746 155,596 1,882,367 Certain OP Units issued in the Combination to the former owners of JBG/Operating Partners, L.P. were subject to post- combination that vested over a period of 60 months based on continued employment. Compensation expense for these OP Units was recognized over the graded vesting period through July 2022. The total-grant date fair value of the OP Units that vested for the years ended December 31, 2022 and 2021 was $14.7 million and $36.0 million. 98 JBG SMITH 2017 Omnibus Share Plan On June 23, 2017, our Board of Trustees adopted the JBG SMITH 2017 Omnibus Share Plan (the "Plan"), effective as of July 17, 2017, and authorized the reservation of 10.3 million of our common shares pursuant to the Plan. In April 2021, our shareholders approved an amendment to the Plan to increase the common shares reserved under the Plan by 8.0 million. As of December 31, 2023, there were 5.8 million common shares available for issuance under the Plan. Formation Awards The formation awards issued in the Combination ("Formation Awards") were structured in the form of profits interests in JBG SMITH LP that provided for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the volume-weighted average price of a common share at the time the formation unit was granted. The Formation Awards, subject to certain conditions, generally vested 25% on each of the third and fourth anniversaries and 50% on the fifth anniversary of the date granted, subject to continued employment. Compensation expense for these awards was recognized over a five-year period through July 2022. The value of vested Formation Awards is realized through conversion of the award into a number of LTIP Units, and subsequent conversion into a number of OP Units determined based on the difference between the volume-weighted average price of a common share at the time the Formation Award was granted and the value of a common share on the conversion date. The conversion ratio between Formation Awards and LTIP Units, which starts at zero, is the quotient of: (i) the excess of the value of a common share on the conversion date above the per share value at the time the Formation Award was granted over (ii) the value of a common share as of the date of conversion. Formation Awards have a finite 10-year term over which their value is allowed to increase and during which they may be converted into LTIP Units (and in turn, OP Units). Holders of Formation Awards will not receive distributions or allocations of net income (net loss) prior to conversion to LTIP Units. The total-grant date fair value of the Formation Awards that vested for the years ended December 31, 2022 and 2021 was $8.9 million and $6.0 million. Time-Based LTIP Units, LTIP Units and Special Time-Based LTIP Units During each of the three years in the period ended December 31, 2023, we granted to certain employees 979,138, 644,995 and 498,955 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") and a weighted average grant- date fair value of $17.56, $27.39 and $29.21 per unit that primarily vest ratably over four years subject to continued employment. Compensation expense for these units is primarily being recognized over a four-year period. In July 2021, we granted to certain employees as part of a long-term retention incentive award 608,325 Time-Based LTIP Units with a 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. Additionally, in January 2022, we granted to certain employees 15,790 LTIP Units with a grant-date fair value of $28.39 per unit that vest over the same period. Compensation expense for these units is being recognized over a seven-year period. During each of the three years in the period ended December 31, 2023, we granted 280,342, 252,206 and 163,065 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonuses related to prior service as LTIP Units. The LTIP Units had a grant-date fair value of $15.90, $22.19 and $29.54 per unit. During each of the three years in the period ended December 31, 2023, as part of their annual compensation, we granted to non-employee trustees a total of 155,523, 95,084 and 71,792 fully vested LTIP Units with a grant-date fair value of $11.30, $20.90 and $26.31. The LTIP Units may not be sold while a trustee is serving on the Board of Trustees. The aggregate grant-date fair value of the Time-Based LTIP Units and LTIP Units granted (collectively "Granted LTIPs") for each of the three years in the period ended December 31, 2023 was $23.4 million, $25.7 million and $40.6 million. Holders of the Granted LTIPs and the Time-Based LTIP Units issued in 2018 related to our successful pursuit of Amazon's new headquarters ("Special Time-Based LTIP Units") have the right to convert vested units into OP Units, which are then 99 subsequently exchangeable for our common shares. Granted LTIPs and Special Time-Based LTIP Units do not have redemption rights, but any OP Units into which units are converted are entitled to redemption rights. Granted LTIPs and Special Time-Based LTIP Units, generally, vote with the OP Units and do not have any separate voting rights except in connection with actions that would materially and adversely affect the rights of the Granted LTIPs and Special Time- Based LTIP Units. The Granted LTIPs 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 based on the following significant assumptions: Expected volatility Risk-free interest rate Post-grant restriction periods 26.0% to 31.0% 30.0% to 41.0% 0.4% to 2.9% 2 to 6 years 3.4% to 4.9% 2 to 6 years The following is a summary of the Granted LTIPs and Special Time-Based LTIP Units activity: Year Ended December 31, 2022 2023 2021 34.0% to 39.0% 0.1% to 0.4% 2 to 3 years Unvested as of December 31, 2022 Granted Vested Forfeited Unvested as of December 31, 2023 Weighted Unvested Shares 1,827,563 $ 1,415,003 (1,131,006) (245,848) 1,865,712 Average Grant- Date Fair Value 31.01 16.54 24.74 25.10 24.62 The total-grant date fair value of the Granted LTIPs and Special Time-Based LTIP Units that vested for each of the three years in the period ended December 31, 2023 was $28.0 million, $27.2 million and $19.1 million. Appreciation-Only LTIP Units ("AO LTIP Units") During the years ended December 31, 2023 and 2022, we granted to certain employees 1.7 million and 1.5 million performance-based AO LTIP Units with a weighted average grant-date fair value of $3.73 and $4.44 per unit. The AO LTIP Units are structured in the form of profits interests that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the participation threshold of $20.83 and $32.30 for the years ended December 31, 2023 and 2022. The AO LTIP Units are subject to a total shareholder return ("TSR") modifier whereby the number of AO LTIP Units that will ultimately be earned will be increased or reduced by as much as 25%. The AO LTIP Units have a three-year performance period with 50% of the AO LTIP Units earned vesting at the end of the three-year performance period and the remaining 50% vesting on the fourth anniversary of the grant date, subject to continued employment. The AO LTIP Units expire on the tenth anniversary of their grant date. The aggregate grant-date fair value of the AO LTIP Units granted for the years ended December 31, 2023 and 2022 was $6.4 million and $6.6 million, valued using Monte Carlo simulations based on the following significant assumptions: Expected volatility Dividend yield Risk-free interest rate Year Ended December 31, 2023 30.0% 3.2% 4.1% 2022 27.0% 2.7% 1.6% 100 The following is a summary of the AO LTIP Units activity: Weighted Unvested as of December 31, 2022 Granted Forfeited Unvested as of December 31, 2023 Performance-Based LTIP Units Shares Unvested Average Grant- Date Fair Value 4.44 3.73 3.74 4.07 1,481,593 $ 1,710,246 (91,889) 3,099,950 During the year ended December 31, 2021, we granted to certain employees 627,874 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") and a weighted average grant-date fair value of $15.14 per unit. Performance-Based LTIP Units are performance-based equity compensation pursuant to which participants have the opportunity to earn LTIP Units based on the relative performance of the TSR of our common shares compared to the companies in the FTSE Nareit Equity Office Index, over the defined performance period beginning on the grant date, inclusive of dividends and stock price appreciation. 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 TSR at the end of the three-year performance period, but achieve at least the threshold level of 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 July 2021, we granted to certain employees as part of a long-term retention incentive award 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, 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. Additionally, in January 2022, we granted to certain employees 21,705 Performance-Based LTIP Units with a grant-date fair value of $17.68 per unit that vest over the same period. 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 for the years ended December 31, 2022 and 2021 was $384,000 and $29.0 million, valued using Monte Carlo simulations based on the following significant assumptions: Expected volatility Dividend yield Risk-free interest rate Year Ended December 31, 2022 28.0% 2.7% 1.5% 2021 31.0% to 34.0% 2.6% 0.2% to 1.0% 101 The following is a summary of the Performance-Based LTIP Units activity: Weighted Unvested as of December 31, 2022 Forfeited (1) Unvested as of December 31, 2023 Shares Unvested Average Grant- Date Fair Value 19.33 17.23 22.58 1,957,748 $ (1,191,918) 765,830 (1) Includes 554,093 Performance-Based LTIP Units, which were forfeited in December 2023 as the performance measures were not met. The total-grant date fair value of the Performance-Based LTIP Units that vested for the years ended December 31, 2022 and 2021 was $4.2 million and $5.1 million. RSUs During each of the three years in the period ended December 31, 2023, we granted to certain non-executive employees 78,681, 39,536 and 22,194 RSUs with time-based vesting requirements ("Time-Based RSUs") and a weighted average grant-date fair value of $18.94, $29.36 and $31.52 per unit. During the year ended December 31, 2021, we granted to certain non-executive employees 13,516 RSUs with performance-based vesting requirements ("Performance-Based RSUs") and 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 primarily consistent to those of the Time- Based LTIP Units and Performance-Based LTIP Units granted in during each of the three years in the period ended December 31, 2023. The aggregate grant-date fair value of the RSUs granted during each of the three years in the period ended December 31, 2023 was $1.5 million, $1.2 million and $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. The following is a summary of the RSUs activity: Time-Based RSUs Performance-Based RSUs Weighted Weighted Unvested as of December 31, 2022 Granted Vested Forfeited Unvested as of December 31, 2023 Shares Unvested Average Grant- Unvested Average Grant- Shares Date Fair Value 15.16 13,516 $ — — — — 15.16 (13,516) — — Date Fair Value 30.04 18.94 24.24 23.39 22.46 48,514 78,681 (45,019) (11,426) 70,750 $ The aggregate total-grant date fair value of the RSUs that vested for the years ended December 31, 2023 and 2022 was $1.1 million and $271,000. ESPP The ESPP authorized the issuance of up to 2.1 million common shares. The ESPP provides eligible employees an option to contribute up to $25,000 in any calendar year, through payroll deductions, toward the purchase of our common shares at a discount of 15.0% of the closing price of a common share on relevant determination dates. As of December 31, 2023, there were 1.7 million common shares available for issuance under the ESPP. 102 Pursuant to the ESPP, employees purchased 84,673, 79,040 and 64,321 common shares for $1.1 million, $1.5 million and $1.6 million during each of the three years in the period ended December 31, 2023, valued using the Black Scholes model based on the following significant assumptions: Expected volatility Dividend yield Risk-free interest rate Expected life Share-Based Compensation Expense 30.0% to 37.0% 23.0% to 30.0% 1.6% to 4.1% 0.2% to 2.4% 6 months 2.4% to 6.3% 4.7% to 5.4% 6 months Year Ended December 31, 2022 2023 2021 22.0% to 39.0% 1.5% to 3.1% 0.1% 6 months The following is a summary of share-based compensation expense: 2023 Time-Based LTIP Units AO LTIP Units and Performance-Based LTIP Units LTIP Units Other equity awards (1) Share-based compensation expense - other Formation Awards, OP Units and LTIP Units (2) Special Time-Based LTIP Units and Special Performance-Based LTIP Units (3) Share-based compensation related to Formation Transaction and special equity awards (4) Total share-based compensation expense Less: amount capitalized Share-based compensation expense $ $ Year Ended December 31, 2022 (In thousands) $ 16,822 10,647 1,000 5,394 33,863 108 441 19,378 $ 12,615 1,000 6,610 39,603 2,156 3,235 549 34,412 (2,312) 32,100 $ 5,391 44,994 (3,722) 41,272 $ 2021 16,705 13,101 1,091 7,355 38,252 10,801 5,524 16,325 54,577 (3,026) 51,551 (1) Primarily comprising compensation expense for: (i) fully vested LTIP Units issued to certain employees in lieu of all or a portion (2) of any cash bonuses earned, (ii) RSUs and (iii) shares issued under our ESPP. Includes share-based compensation expense for Formation Awards, LTIP Units and OP Units issued in the Formation Transaction, which fully vested in July 2022. (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 consolidated statements of operations. As of December 31, 2023, we had $27.3 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 2.9 years. Employee Benefits We have a 401(k) defined contribution plan covering substantially all of our officers and employees which permits participants to defer compensation up to the maximum amount permitted by law. We provide a discretionary matching contribution. Employer contributions vest after one year of service. Our contributions for each of the three years in the period ended December 31, 2023 were $2.3 million, $2.4 million and $2.4 million. 2024 Grants In 2024, we granted 1.9 million AO LTIP Units, 974,140 Time-Based LTIP Units and 74,842 Time-Based RSUs to certain employees with an estimated total grant-date fair value of $23.9 million. Additionally, we granted 209,047 fully vested 103 LTIP Units, with a total grant-date fair value of $3.0 million, to certain employees who elected to receive all or a portion of their cash bonus earned, related to 2023 service, as LTIP Units. 16. Transaction and Other Costs The following is a summary of transaction and other costs: 2023 Completed, potential and pursued transaction expenses (1) Severance and other costs Demolition costs Transaction and other costs $ $ (1) Includes legal and other costs related to pursued transactions and dead deal costs. 17. Interest Expense The following is a summary of interest expense: Interest expense before capitalized interest Amortization of deferred financing costs Interest expense related to finance lease right-of-use assets Net (gain) loss on non-designated derivatives: Net unrealized (gain) loss Net realized loss Capitalized interest Interest expense $ $ 18. Shareholders' Equity and Earnings (Loss) Per Common Share Common Shares Repurchased Year Ended December 31, 2022 (In thousands) $ 1,625 4,491 2,621 8,737 $ 2,660 $ 2,038 813 5,511 $ Year Ended December 31, 2022 (In thousands) $ 87,246 $ 4,532 2,091 2023 117,811 9,779 — 7,822 — (26,752) 108,660 $ (7,355) 304 (10,888) 75,930 $ 2021 5,818 1,038 3,573 10,429 2021 68,485 4,291 2,261 (342) — (6,734) 67,961 Our Board of Trustees previously authorized the repurchase of up to $1.0 billion of our outstanding common shares, and in May 2023, increased the common share repurchase authorization to $1.5 billion. During the year ended December 31, 2023, we repurchased and retired 22.6 million common shares for $335.3 million, a weighted average purchase price per share of $14.83. During the year ended December 31, 2022, we repurchased and retired 14.2 million common shares for $361.0 million, a weighted average purchase price per share of $25.49. During the year ended December 31, 2021, we repurchased and retired 5.4 million common shares for $157.7 million, a weighted average purchase price per share of $29.34. Since we began the share repurchase program through December 31, 2023, we have repurchased and retired 45.9 million common shares for $958.8 million, a weighted average purchase price per share of $20.88. During the first quarter of 2024, through the date of this filing, we repurchased and retired 2.7 million common shares for $45.4 million, a weighted average purchase price per share of $16.52, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended. 104 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 net income (loss) to the amounts of net income (loss) available to common shareholders used in calculating basic and diluted earnings (loss) per common share: Net income (loss) Net (income) loss attributable to redeemable noncontrolling interests Net (income) loss attributable to noncontrolling interests Net income (loss) attributable to common shareholders Distributions to participating securities Net income (loss) available to common shareholders - basic and diluted Weighted average number of common shares outstanding - basic and diluted Earnings (loss) per common share - basic and diluted Year Ended December 31, 2023 2021 2022 (In thousands, except per share amounts) (91,709) 10,596 1,135 (79,978) (2,054) (82,032) $ $ 98,986 $ (13,244) (371) 85,371 (1,860) 83,511 $ (89,725) 8,728 1,740 (79,257) (2,854) (82,111) 105,095 119,005 130,839 (0.78) $ 0.70 $ (0.63) $ $ $ The effect of the redemption of OP Units, Time-Based LTIP Units, fully vested LTIP Units and Special Time-Based LTIP Units that were outstanding as of the end of each period is excluded in the computation of diluted earnings (loss) 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 (loss) per share). Since OP Units, Time-Based LTIP Units, LTIP Units and Special 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 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 (loss) per common share. AO LTIP Units, Performance-Based LTIP Units, Formation Awards and RSUs, which totaled 6.8 million, 5.9 million and 4.5 million for each of the three years in the period ended December 31, 2023, were excluded from the calculation of diluted earnings (loss) per common share as they were antidilutive, but potentially could be dilutive in the future. Dividends Declared in February 2024 On February 14, 2024, our Board of Trustees declared a quarterly dividend of $0.175 per common share, payable on March 15, 2024 to shareholders of record as of March 1, 2024. 19. 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. As of December 31, 2023 and 2022, 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 gain on our derivative financial instruments designated as effective hedges was $22.7 million and $55.0 million as of December 31, 2023 and 2022 and was recorded in "Accumulated other comprehensive income" in our consolidated balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $24.2 million of the net unrealized gain as a decrease to interest expense. 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. 105  The following is a summary of assets and liabilities measured at fair value on a recurring basis: December 31, 2023 Derivative financial instruments designated as effective hedges: Classified as assets in "Other assets, net" Classified as liabilities in "Other liabilities, net" Non-designated derivatives: Classified as assets in "Other assets, net" Classified as liabilities in "Other liabilities, net" December 31, 2022 Derivative financial instruments designated as effective hedges: Classified as assets in "Other assets, net" Non-designated derivatives: Classified as assets in "Other assets, net" Fair Value Measurements Total Level 1 Level 2 Level 3 (In thousands) $ 35,632 7,936 — $ — 35,632 7,936 6,709 6,508 — — 6,709 6,508 $ 53,515 — $ 53,515 8,107 — 8,107 — — — — — — 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, 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 December 31, 2023 and 2022, 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 (losses) included in "Other comprehensive income (loss)" in our consolidated statements of comprehensive income (loss) for each of the three years in the period ended December 31, 2023 were attributable to the net change in unrealized gains (losses) related to effective interest rate swaps that were outstanding during those periods, none of which were reported in our consolidated statements of operations as the interest rate swaps were documented and qualified as hedging instruments. Realized and unrealized gains related to non-designated derivatives are included in "Interest expense" in our consolidated statements of operations. Fair Value Measurements on a Nonrecurring Basis Our real estate assets are reviewed for impairment whenever there are changes in circumstances or indicators that the carrying amount of the assets may not be recoverable. During the year ended December 31, 2023, this assessment resulted in the impairment of three commercial assets and one development parcel. Our estimate of the fair value of 2101 L Street of $121.3 million was determined using a discounted cash flow model and was classified as Level 3 in the fair value hierarchy, which considers, among other things, the anticipated holding period, current market conditions and utilizes unobservable quantitative inputs, including capitalization and discount rates. Our estimate of the fair value of 2100 Crystal Drive, 2200 Crystal Drive and a development parcel totaling $56.4 million was based on a market approach and classified as Level 2 in the fair value hierarchy. The development parcel was sold in December 2023. The impairment loss totaled $90.2 million, which was included in "Impairment loss" in our consolidated statement of operations for the year ended December 31, 2023. There were no assets measured at fair value on a nonrecurring basis as of December 31, 2022. During the year ended December 31, 2021, this assessment resulted in the impairment of 7200 Wisconsin Avenue, RTC- West and a development parcel, which were written down to their estimated aggregate fair value of $309.0 million and were classified as Level 2 in the fair value hierarchy. Our estimates of the fair values were based on expected sales prices 106 as determined by contracts that were under negotiation as of December 31, 2021, after adjusting for estimated selling costs. The assets were sold to an unconsolidated real estate venture in April 2022. The impairment loss totaled $25.1 million, which was included in "Impairment loss" in our consolidated statement of operations for the year ended December 31, 2021. Financial Assets and Liabilities Not Measured at Fair Value As of December 31, 2023 and 2022, all financial instruments and liabilities were reflected in our consolidated balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following: Financial liabilities: Mortgage loans Revolving credit facility Term loans (1) The carrying amount consists of principal only. December 31, 2023 December 31, 2022 Carrying Amount (1) Fair Value Carrying Amount (1) Fair Value (In thousands) $ $ 1,798,225 62,000 720,000 1,753,251 62,000 715,950 $ 1,901,875 $ — 550,000 1,830,651 — 551,369 The fair values of the mortgage loans, revolving credit facility and term loans were determined using Level 2 inputs of the fair value hierarchy. The fair value of our mortgage loans 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 revolving credit facility and 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. 20. 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 CODM, makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (multifamily, commercial and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services. The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the 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 consolidated statements of operations. 107 The following represents the components of revenue from our third-party asset management and real estate services business: Property management fees Asset management fees Development fees Leasing fees Construction management fees Other service revenue Third-party real estate services revenue, excluding reimbursements Reimbursement revenue (1) Third-party real estate services revenue, including reimbursements Third-party real estate services expenses Third-party real estate services revenue less expenses $ $ 2023 Year Ended December 31, 2022 (In thousands) $ 19,930 5,030 10,253 5,592 1,383 5,316 47,504 44,547 92,051 88,948 3,103 $ 19,589 $ 6,191 8,325 6,017 522 5,706 46,350 42,672 89,022 94,529 (5,507) $ 2021 19,427 8,468 25,493 5,833 512 6,146 65,879 48,124 114,003 107,159 6,844 (1) 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 $8.1 million and $13.7 million as of December 31, 2023 and 2022, which are classified in "Intangible assets, net" in our consolidated 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: 2023 Year Ended December 31, 2022 (In thousands) 2021 $ (79,978) $ 85,371 $ (79,257) 210,195 213,771 236,303 54,838 88,948 549 8,737 108,660 450 90,226 (296) (10,596) (1,135) 92,051 10,902 (26,999) 15,781 79,335 299,528 58,280 94,529 5,391 5,511 75,930 3,073 — 1,264 13,244 371 89,022 7,421 (17,429) 18,617 161,894 297,210 $ $ 53,819 107,159 16,325 10,429 67,961 — 25,144 3,541 (8,728) (1,740) 114,003 7,671 (2,070) 8,835 11,290 291,227 Net income (loss) attributable to common shareholders Add: Depreciation and amortization expense General and administrative expense: Corporate and other Third-party real estate services Share-based compensation related to Formation Transaction and special equity awards Transaction and other costs Interest expense Loss on the extinguishment of debt Impairment loss Income tax expense (benefit) Net income (loss) attributable to redeemable noncontrolling interests Net income (loss) attributable to noncontrolling interests Less: Third-party real estate services, including reimbursements revenue Other revenue Loss from unconsolidated real estate ventures, net Interest and other income, net Gain on the sale of real estate, net Consolidated NOI $ 108 The following is a summary of NOI and certain balance sheet data by segment. Items classified in the Other column include development assets, corporate entities, land assets for which we are the ground lessor and the elimination of inter-segment activity. Property rental revenue Parking revenue Total property revenue Property expense: Property operating Real estate taxes Total property expense Consolidated NOI Property rental revenue Parking revenue Total property revenue Property expense: Property operating Real estate taxes Total property expense Consolidated NOI Property rental revenue Parking revenue Total property revenue Property expense: Property operating Real estate taxes Total property expense Consolidated NOI December 31, 2023 Real estate, at cost Investments in unconsolidated real estate ventures Total assets December 31, 2022 Real estate, at cost Investments in unconsolidated real estate ventures Total assets Year Ended December 31, 2023 Multifamily Commercial Other Total (In thousands) $ $ 206,705 1,047 207,752 72,264 21,961 94,225 113,527 $ 262,826 $ 16,844 279,670 75,254 33,546 108,800 170,870 $ $ 13,628 $ 195 13,823 (3,469) 2,161 (1,308) 15,131 $ 483,159 18,086 501,245 144,049 57,668 201,717 299,528 Year Ended December 31, 2022 Multifamily Commercial Other Total $ $ 180,068 857 180,925 62,017 20,580 82,597 98,328 (In thousands) $ 301,955 $ 16,530 318,485 86,223 37,950 124,173 194,312 $ $ 9,715 $ 256 9,971 1,764 3,637 5,401 4,570 $ 491,738 17,643 509,381 150,004 62,167 212,171 297,210 Year Ended December 31, 2021 Multifamily Commercial Other Total $ $ 139,918 415 140,333 52,527 20,207 72,734 67,599 (In thousands) $ 352,180 $ 12,441 364,621 7,488 $ 246 7,734 102,967 45,701 148,668 215,953 $ (4,856) 4,915 59 7,675 $ $ 499,586 13,102 512,688 150,638 70,823 221,461 291,227 Multifamily Commercial Other Total (In thousands) $ 3,154,116 — 2,559,395 $ 2,357,713 $ 176,786 2,683,947 363,333 $ 5,875,162 264,281 87,495 5,518,515 275,173 $ 2,986,907 304 2,483,902 $ 2,754,832 $ 218,723 2,829,576 416,343 $ 6,158,082 299,881 80,854 5,903,438 589,960 109 21. 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 $1.0 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both conventional terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per occurrence. These policies are partially reinsured by third-party insurance providers. We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material. Our debt, consisting of mortgage loans secured by our properties, a revolving credit facility and term loans, contains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at a reasonable cost in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect our ability to finance or refinance our properties. Construction Commitments As of December 31, 2023, we had assets under construction that, based on our current plans and estimates, require an additional $177.1 million to complete, which we anticipate will be primarily expended over the next two years. These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset sales and recapitalizations, 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 subject and surrounding assets. The environmental assessments have not revealed any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. Environmental liabilities totaled $17.6 million and $18.0 million as of December 31, 2023 and 2022, and are included in "Other liabilities, net" in our consolidated balance sheets. Operating and Finance Leases As of December 31, 2023, we are obligated under non-cancellable operating leases, including ground leases on certain of our properties with terms extending through the year 2037. As of December 31, 2023, our operating lease liabilities were calculated based on the weighted average discount rates of 5.6% and had a weighted average remaining lease term of 13.5 years. 110 As of December 31, 2023, future minimum lease payments under our non-cancellable operating leases are as follows: Year ending December 31, 2024 2025 2026 2027 2028 Thereafter Total future minimum lease payments Imputed interest Total liabilities related to lease right-of-use assets Amount (In thousands) $ $ 6,539 6,737 6,942 7,154 5,934 60,542 93,848 (29,347) 64,501 During the year ended December 31, 2023, we incurred $5.4 million of fixed operating lease expenses, and $180,000 of variable operating lease expenses. In April 2022, we sold the finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2 to an unconsolidated real estate venture. During the year ended December 31, 2022, we incurred $601,000 and $2.6 million of fixed operating and finance lease expenses, and $97,000 of variable operating lease expenses. During the year ended December 31, 2021, we incurred $731,000 and $2.8 million of fixed operating and finance lease expenses, and $2.6 million of variable operating lease expenses. Other As of December 31, 2023, we had committed tenant-related obligations totaling $46.8 million ($46.0 million related to our consolidated entities and $828,000 related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions. 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. During the year ended December 31, 2023, we recognized a $6.0 million gain from the settlement of litigation, which was included in "Interest and other income, net" in our consolidated statement of operations. 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. As of December 31, 2023, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures and other investments totaling $61.3 million. As of December 31, 2023, 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 111 lenders, tenants and other third parties for the completion of development projects. As of December 31, 2023, the aggregate amount of principal payment guarantees was $8.3 million for our consolidated entities. In connection with the Formation Transaction, we have an agreement with Vornado regarding tax matters (the "Tax Matters Agreement") that provides special rules that allocate tax liabilities if the distribution of JBG SMITH shares by Vornado, together with certain related transactions, is determined not to be tax-free. Under the Tax Matters Agreement, we may be required to indemnify Vornado against any taxes and related amounts and costs resulting from a violation by us of the Tax Matters Agreement. 22. Transactions with Related Parties Our third-party asset management and real estate services business provides fee-based real estate services to the JBG Legacy Funds, other third parties and the WHI Impact Pool. In connection with the contribution to us of certain 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 team 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. As of December 31, 2023, the WHI Impact Pool completed fundraising in 2020 with capital commitments totaling $114.4 million, which included a commitment from us of $11.2 million. As of December 31, 2023, our remaining commitment was $3.5 million. The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool was $21.3 million, $20.0 million and $22.6 million for each of the three years in the period ended December 31, 2023. As of December 31, 2023 and 2022, we had receivables from the JBG Legacy Funds and the WHI Impact Pool totaling $3.5 million and $4.5 million for such services. Commencing in March 2023, in connection with the sale of an 80.0% interest in 4747 Bethesda Avenue, we leased our corporate offices from an unconsolidated real estate venture and incurred $5.0 million of rent expense for the year ended December 31, 2023, which was included in "General and administrative expense" in our consolidated statement of operations. We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $922,000 and $1.3 million for the years ended December 31, 2022 and 2021. 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 $9.3 million, $10.7 million and $18.6 million for each of the three years in the period ended December 31, 2023, which was included in "Property operating expenses" in our consolidated statements of operations. 112 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures As required by Rule 13a-15(b) under the Exchange Act, 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 December 31, 2023, our disclosure controls and procedures were effective. Management's Report on Internal Control over Financial Reporting Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Our internal control over financial reporting includes policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of our assets that could have a material effect on our consolidated financial statements. As of December 31, 2023, management conducted an assessment of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management has concluded that our internal control over financial reporting was effective as of December 31, 2023. Deloitte & Touche LLP, an independent registered public accounting firm, has audited our consolidated financial statements and has issued a report on the effectiveness of our internal control over financial reporting, which is included herein. Changes in Internal Control over Financial Reporting There have been no changes in our internal control over financial reporting during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 113 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Trustees of JBG SMITH Properties Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting of JBG SMITH Properties and subsidiaries (the "Company") as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2023, of the Company and our report dated February 20, 2024, expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Deloitte & Touche LLP McLean, Virginia February 20, 2024 114 ITEM 9B. OTHER INFORMATION TRADING ARRANGEMENTS During the three months ended December 31, 2023, none of our officers or trustees adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement." AMENDMENT TO EMPLOYMENT AGREEMENTS On February 14, 2024, the Company’s Compensation Committee approved, and the Company entered into, amendments to the employment agreements between the Company and each of Ms. Banerjee, Messrs. Museles, Reynolds and Xanders which changed the severance amount upon a qualifying change in control termination (as defined in each such employment agreement) from two times the sum of the executive’s current base salary and target annual bonus, to three times the sum of the executive’s current base salary and target annual bonus. The foregoing summary of the amendments is qualified in its entirety by each of the amendments, copies of which are filed as Exhibits 10.57, 10.58, 10.54 and 10.59 to this Annual Report on Form 10-K and incorporated by reference herein. MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES The following discussion summarizes our taxation and the material U.S. federal income tax consequences to holders of our common shares, preferred shares and depositary shares (together with common shares and preferred shares, the "shares") as well as our warrants and rights (together with the shares, the "securities") and is provided for general information only. This is not tax advice. The tax treatment of our shareholders will vary depending upon the holder's particular situation, and this discussion does not deal with all aspects of taxation that may be relevant to particular shareholders in light of their personal investment or tax circumstances. This section also does not deal with all aspects of taxation that may be relevant to certain types of shareholders to which special provisions of the U.S. federal income tax laws apply, including: • • • • • • • • • • dealers in securities or currencies; traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; banks; life insurance companies; tax-exempt organizations; certain insurance companies; persons liable for the alternative minimum tax; persons that hold shares that are a hedge, that are hedged against interest rate or currency risks or that are part of a straddle or conversion transaction; persons that purchase or sell shares as part of a wash sale for tax purposes; persons who do not hold our shares as capital assets; and • U.S. shareholders whose functional currency is not the U.S. dollar. This summary is based on the Internal Revenue Code of 1986 (the "Code"), its legislative history, existing and proposed regulations under the Code, published rulings and court decisions. This summary describes the provisions of these sources of law only as they are currently in effect. All of these sources of law may change at any time, and any change in the law may apply retroactively. 115 If a partnership holds our shares, the U.S. federal income tax treatment of a partner generally depends on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding our shares should consult its tax advisor with regard to the U.S. federal income tax treatment of an investment in our shares. We urge you to consult with your tax advisors regarding the federal, state, local and foreign tax consequences to you of acquiring, owning and selling our shares, in light of your particular circumstances. Taxation of JBG SMITH as a REIT We elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year that ended December 31, 2017 (our first taxable year). We believe that we are organized and operate in such a manner as to qualify for taxation as a REIT under the applicable provisions of the Code. We conduct our business as an umbrella partnership REIT, pursuant to which substantially all of our assets are held by our operating partnership, JBG SMITH LP. We are the sole general partner of JBG SMITH LP and we own 87.8% of its outstanding OP Units. JBG SMITH LP owns, directly or indirectly, majority interests in several subsidiary REITs and minority interests in certain other subsidiary REITs through its interests in certain joint ventures. Our subsidiary REITs are subject to the same REIT qualification requirements and other limitations described herein that apply to us (and in certain cases, are subject to more stringent REIT qualification requirements). When we offer our shares, we will request an opinion of Hogan Lovells US LLP, our REIT tax counsel, to the effect that we have been organized and have operated in conformity with the requirements for qualification and taxation as a REIT, effective for each of our taxable years ended December 31, 2017, through and including our immediately preceding calendar year, and that our current organization and current and intended method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the Code for the taxable year in which the offering occurs and thereafter. It must be emphasized that the opinion of Hogan Lovells US LLP, described in the preceding paragraph, regarding our status as a REIT, will rely, without independent investigation or verification, on various assumptions relating to our organization and operation and on prior opinions provided by Sullivan & Cromwell LLP and Hogan Lovells US LLP, as described below under "Failure to Qualify as a REIT," as to the qualification and taxation of Vornado, each REIT that was contributed by VRLP to JBG SMITH LP and each REIT that was contributed to JBG SMITH LP by JBG, as a REIT, and will be conditioned upon fact-based representations and covenants made by our management regarding our organization, assets and income, and the present and future conduct of our business operations. While we intend to continue to operate so that we continue to qualify to be taxed as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given by Hogan Lovells US LLP or by us that we will qualify to be taxed as a REIT for any particular year. Any such opinion will be expressed as of the date issued. In connection with such opinion, Hogan Lovells US LLP will have no obligation to advise us or our shareholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. You should be aware that opinions of counsel are not binding on the IRS, and no assurance can be given that the IRS will not challenge the conclusions set forth in any such opinion. Hogan Lovells US LLP's opinion would not foreclose the possibility that we may have to use one or more of the REIT savings provisions discussed below, which could require us to pay an excise or penalty tax (which could be significant in amount) in order to maintain our REIT qualification. Our qualification and taxation as a REIT depend on our ability to meet, on a continuing basis, through actual operating results, distribution levels and diversity of share ownership, various qualification requirements imposed upon REITs by the Code, the compliance with which will not be monitored by Hogan Lovells US LLP. Our ability to qualify to be taxed as a REIT also requires that we satisfy certain tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT. As noted above, we have elected, and believe we have been organized and have operated in such a manner as to qualify, to be taxed as a REIT for U.S. federal income tax purposes, from and after our taxable year that ended December 31, 2017 116 (our first taxable year). The material qualification requirements are summarized below under "-Requirements for Qualification." While we believe that we operate so that we qualify to be taxed as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we will be able to operate in accordance with the REIT requirements in the future. Please refer to "-Failure to Qualify as a REIT." The discussion in this section "-Taxation of JBG SMITH as a REIT" assumes that we will qualify as a REIT. As a REIT, we generally do not have to pay federal corporate income taxes on our net income that we currently distribute to our shareholders. This treatment substantially eliminates the "double taxation" at the corporate and shareholder levels that generally results from investment in a regular corporation. Our dividends, however, typically are not eligible for (i) the reduced rates of tax applicable to dividends received by noncorporate shareholders, except in limited circumstances, and (ii) the corporate dividends received deduction. For taxable years beginning before January 1, 2026, however, U.S. shareholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations. Our capital gain dividends and qualified dividend income generally are subject to a maximum 23.8% rate (which rate takes into account the maximum capital gain rate of 20% and the 3.8% Medicare tax on net investment income, described below under "-Net Investment Income Tax"). See "-Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders-Taxation of Dividends." Any net operating losses, foreign tax credits and other tax attributes generated or incurred by us generally do not pass through to our shareholders, subject to special rules for certain items such as the capital gain that we recognize. See "- Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders-Taxation of Dividends." Although we generally do not pay federal corporate income tax on our net income that we currently distribute to our shareholders, we will have to pay U.S. federal income tax as follows: • First, we will have to pay tax at regular corporate rates on any undistributed REIT taxable income, including undistributed net capital gains. • Second, if we elect to treat property that we acquire in connection with certain leasehold terminations or a foreclosure of a mortgage loan as "foreclosure property," we may thereby avoid (i) the 100% prohibited transactions tax on gain from a resale of that property (if the sale otherwise would constitute a prohibited transaction); and (ii) the inclusion of any income from such property as non-qualifying income for purposes of the REIT gross income tests discussed below. Income from the sale or operation of the property may be subject to U.S. federal corporate income tax at the highest applicable rate (currently 21%). • Third, if we have net income from "prohibited transactions," as defined in the Code, we will have to pay a 100% tax on that income. Prohibited transactions are, in general, certain sales or other dispositions of property, other than foreclosure property, held primarily for sale to customers in the ordinary course of business. • Fourth, if we should fail to satisfy the 75% gross income test or the 95% gross income test, as discussed below under "-Requirements for Qualification-Income Tests," but have nonetheless maintained our qualification as a REIT because we have satisfied some other requirements, we will have to pay a 100% tax on an amount equal to (a) the gross income attributable to the greater of (i) 75% of our gross income over the amount of gross income that is qualifying income for purposes of the 75% test, and (ii) 95% of our gross income over the amount of gross income that is qualifying income for purposes of the 95% test, multiplied by (b) a fraction intended to reflect our profitability. • Fifth, if we should fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for that year, (2) 95% of our REIT capital gain net income for that year and (3) any undistributed taxable income from prior periods, we would have to pay a 4% excise tax on the excess of that required distribution over the sum of the amounts actually distributed and retained amounts on which income tax is paid at the corporate level. • Sixth, if we acquire any asset from a C corporation in certain transactions in which we succeed to the basis of the asset or any other property in the hands of the C corporation as the basis of the asset in our hands, and we recognize gain on the disposition of that asset during the five-year period beginning on the date on which we acquired that 117 asset, then we will have to pay tax on the built-in gain at the highest regular corporate rate. A C corporation means generally a corporation that has to pay full corporate-level tax. • Seventh, if we derive "excess inclusion income" from a residual interest in a REMIC or certain interests in a TMP we could be subject to corporate level federal income tax at a 21% rate to the extent that such income is allocable to certain types of tax-exempt shareholders that are not subject to unrelated business income tax, such as government entities. • Eighth, if we receive non-arm's-length income from a TRS, or as a result of services provided by a TRS to our tenants or to us, we will be subject to a 100% tax on the amount of our non-arm's-length income. • Ninth, if we fail to satisfy a REIT asset test, as described below, due to reasonable cause and we nonetheless maintain our REIT qualification because of specified cure provisions, we will generally be required to pay a tax equal to the greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail such test. • Tenth, if we fail to satisfy any provision of the Code that would result in our failure to qualify as a REIT (other than a violation of the REIT gross income tests or a violation of the asset tests described below) and the violation is due to reasonable cause, we may retain our REIT qualification but will be required to pay a penalty of $50,000 for each such failure. • Eleventh, we have a number of TRSs, the net income of which will be subject to U.S. federal, state and local corporate income tax at normal rates. Notwithstanding our qualification as a REIT, we and our subsidiaries also may be subject to a variety of other taxes, including payroll taxes, property and other taxes on our assets, operations and net worth. We also could be subject to tax in other situations and on transactions not presently contemplated. Requirements for Qualification The Code defines a REIT as a corporation, trust or association: • which is managed by one or more directors or trustees; • • • • • the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; that would otherwise be taxable as a domestic corporation, but for Sections 856 through 859 of the Code; that is neither a financial institution nor an insurance company to which certain provisions of the Code apply; the beneficial ownership of which is held by 100 or more persons (except with respect to the first taxable year for which an election to be taxed as a REIT is made); during the last half of each taxable year, not more than 50% in value of the outstanding shares of which is owned, directly or constructively, by five or fewer individuals, as defined in the Code to include certain entities (the "not closely held requirement") (except with respect to the first taxable year for which an election to be taxed as a REIT is made); and • that meets certain other tests, including tests described below regarding the nature of its income and assets. The Code provides that the conditions described in the first through fourth bullet points above must be met during the entire taxable year and that the condition described in the fifth bullet point above must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. We satisfy the conditions described in the first through sixth bullet points of the preceding paragraph. Our declaration of trust provides for restrictions regarding the ownership and transfer of our shares of beneficial interest, which restrictions are intended to assist us in continuing to satisfy the share ownership requirements described in the fifth and sixth bullet points of the preceding paragraph. The ownership and transfer restrictions pertaining to our common shares are described in this 118 prospectus under the heading "Description of Shares of Beneficial Interest-Common Shares-Restrictions on Ownership of Common Shares." Ownership of Subsidiary Entities Ownership of Partnerships, Limited Liability Companies and Qualified REIT Subsidiaries If we are a partner in an entity that is treated as a partnership for U.S. federal income tax purposes, Treasury regulations under Section 856 of the Code provide that for purposes of the gross income and asset tests applicable to REITs that are described below, we will be deemed to own our proportionate share of the assets of the partnership and will be deemed to be entitled to the income of the partnership attributable to that share. In addition, the character of the assets and gross income of the partnership will retain the same character in our hands for purposes of Section 856 of the Code, including for purposes of satisfying the gross income tests and the asset tests. As the sole general partner of our operating partnership, JBG SMITH LP, we have direct control over it and indirect control over the subsidiaries in which JBG SMITH LP or a subsidiary has a controlling interest. We currently intend to operate these entities in a manner consistent with the requirements for our qualification as a REIT. If we are or become a limited partner or non-managing member in any partnership or limited liability company and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity (including possibly by transferring the interest to one of our TRSs). In addition, it is possible that a partnership or limited liability company could take an action that could cause us to fail a gross income or asset test, and that we would not become aware of such action in time for us to dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case, we could fail to qualify as a REIT unless we were entitled to relief as described below in "-Failure to Qualify as a REIT." In addition, actions taken by partnerships in which we own an interest can affect the determination of whether we have net income from prohibited transactions. See the fourth bullet in the list under "-Taxation of JBG SMITH as a REIT" for a brief description of prohibited transactions. Under the Bipartisan Budget Act of 2015, liability is imposed on a partnership (rather than its partners) for adjustments to reported partnership taxable income resulting from audits or other tax proceedings. The liability can include an imputed underpayment of tax, calculated by using the highest marginal U.S. federal income tax rate, as well as interest and penalties on such imputed underpayment of tax. Using certain rules, partnerships may be able to transfer these liabilities to their partners. In the event any adjustments are imposed by the IRS on the taxable income reported by JBG SMITH LP or any of our other subsidiary partnerships, we intend to use the audit rules to the extent possible to allow us to transfer any liability with respect to such adjustments to the partners of JBG SMITH LP (which would include us) or the partners of any other subsidiary partnership who should properly bear such liability. However, there is no assurance that we will qualify under those rules or that we will have the authority to use those rules under the operating agreements for certain of our subsidiary partnerships. If we own a corporate subsidiary that is a QRS, the QRS generally is disregarded for U.S. federal income tax purposes, and its assets, liabilities and items of income, deduction and credit are treated as assets, liabilities and items of income, deduction and credit of ours, including for purposes of the gross income and asset tests that apply to us as a REIT. A QRS is any corporation other than a TRS that is wholly owned by us. Other entities that are wholly owned by us, including single member limited liability companies that have not elected to be taxed as corporations for U.S. federal income tax purposes, also generally are disregarded as separate entities for U.S. federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with any partnerships in which we hold an equity interest, are sometimes referred to herein as "pass-through subsidiaries." If a disregarded subsidiary ceases to be wholly owned by us (for example, if any equity interest in the subsidiary is acquired by a person other than us or another disregarded subsidiary of ours), the subsidiary's separate existence no longer would be disregarded for U.S. federal income tax purposes. Instead, the subsidiary would have multiple owners and would be treated either as a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our ability to satisfy the various asset and gross income requirements applicable to REITs, including the requirement that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation unless it is a TRS, a QRS or another REIT. See "-Income Tests" and "-Asset Tests." 119 Ownership of Subsidiary REITs JBG SMITH LP owns, directly or indirectly, majority interests in several subsidiary REITs and minority interests in certain other subsidiary REITs through our interests in certain joint ventures. We believe that these subsidiary REITs are organized and operate in a manner that permits them to qualify for taxation as a REIT for U.S. federal income tax purposes. However, if any of these subsidiary REITs were to fail to qualify as a REIT, then (i) the subsidiary REIT would become subject to regular U.S. corporate income tax, as described herein, see "-Failure to Qualify as a REIT" below, and (ii) our equity interest in such subsidiary REIT would cease to be a qualifying real estate asset for purposes of the 75% asset test and could become subject to the 5% asset test, the 10% voting share asset test, and the 10% value asset test generally applicable to our ownership in corporations other than REITs, QRSs and TRSs. See "-Asset Tests" below. If a subsidiary REIT were to fail to qualify as a REIT and if we were not able to treat the subsidiary REIT as a TRS of ours pursuant to certain prophylactic elections we have made, it is possible that we would not meet the 10% voting share test and the 10% value test with respect to our indirect interest in such entity, in which event we would fail to qualify as a REIT unless we could avail ourselves of certain relief provisions. Taxable REIT Subsidiaries JBG SMITH LP owns a number of TRSs. A TRS is any corporation in which a REIT directly or indirectly owns stock, provided that the REIT and that corporation make a joint election to treat that corporation as a TRS. The election can be revoked at any time as long as the REIT and the TRS revoke such election jointly. In addition, if a TRS holds, directly or indirectly, more than 35% of the securities of any other corporation other than a REIT (by vote or by value), then that other corporation is also treated as a TRS. A corporation can be a TRS with respect to more than one REIT. A TRS is subject to U.S. federal income tax at regular corporate rates (currently a maximum rate of 21%), and may also be subject to state and local taxation. Any dividends paid or deemed paid by any one of our TRSs will also be taxable, either (1) to us to the extent the dividend is retained by us, or (2) to our shareholders to the extent the dividends received from the TRS are paid to our shareholders. We may hold more than 10% of the stock of a TRS without jeopardizing our qualification as a REIT notwithstanding the rule described below under "-Asset Tests" that generally precludes ownership of more than 10% of any issuer's securities. However, as noted below, for us to qualify as a REIT, the securities of all the TRSs in which we have invested either directly or indirectly may not represent more than 20% of the total value of our assets. Other than certain activities related to operating or managing a lodging or health care facility, a TRS may generally engage in any business, including the provision of customary or non-customary services to tenants of the parent REIT. Income Tests To maintain our qualification as a REIT, we annually must satisfy two gross income requirements. • First, we must derive at least 75% of our gross income, excluding gross income from prohibited transactions, for each taxable year directly or indirectly from investments relating to real property, mortgages on real property or investments in REIT equity securities, including "rents from real property," as defined in the Code, or from certain types of temporary investments. Rents from real property generally include our expenses that are paid or reimbursed by tenants. • Second, at least 95% of our gross income, excluding gross income from prohibited transactions, for each taxable year must be derived from real property investments as described in the preceding bullet point, dividends, interest and gain from the sale or disposition of stock or securities, or from any combination of these types of sources. Rents that we receive will qualify as rents from real property in satisfying the gross income requirements for a REIT described above only if the rents satisfy several conditions. • First, the amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from rents from real property solely because it is based on a fixed percentage or percentages of receipts or sales. 120 • Second, the Code provides that rents received from a tenant will not qualify as rents from real property in satisfying the gross income tests if the REIT, directly or under the applicable attribution rules, owns a 10% or greater interest in that tenant; except that rents received from a TRS under certain circumstances qualify as rents from real property even if we own more than a 10% interest in the subsidiary. We refer to a tenant in which we own a 10% or greater interest as a "related party tenant." • Third, if rent attributable to personal property leased in connection with a lease of real property is greater than 15% of the total rent received under the lease, then the portion of rent attributable to the personal property will not qualify as rents from real property. • Finally, for rents received to qualify as rents from real property, the REIT generally must not operate or manage the property or furnish or render services to the tenants of the property, other than through an independent contractor from whom the REIT derives no revenue or through a TRS. However, we may directly perform certain services that landlords usually or customarily render when renting space for occupancy only or that are not considered rendered to the occupant of the property. We expect that we will not derive material rents from related party tenants. We also expect that we will not derive material rental income attributable to personal property, except where the personal property is leased in connection with the lease of real property and the amount of which is less than 15% of the total rent received under the lease. We directly perform services for some of our tenants. We do not believe that the provision of these services will cause our gross income attributable to these tenants to fail to be treated as rents from real property. If we were to directly provide services to a tenant that are other than those that landlords usually or customarily provide when renting space for occupancy only, amounts received or accrued by us for any of these services will not be treated as rents from real property for purposes of the REIT gross income tests. However, the amounts received or accrued for these services will not cause other amounts received with respect to the property to fail to be treated as rents from real property unless the amounts treated as received in respect of the services, together with amounts received for certain management services, exceed 1% of all amounts received or accrued by us during the taxable year with respect to the property. If the sum of the amounts received in respect of the services to tenants and management services described in the preceding sentence exceeds the 1% threshold, then all amounts received or accrued by us with respect to the property will not qualify as rents from real property, even if we only provide the impermissible services to some, but not all, of the tenants of the property. The term "interest" generally does not include any amount received or accrued, directly or indirectly, if the determination of that amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term "interest" solely because it is based on a fixed percentage or percentages of receipts or sales. From time to time, we may enter into hedging transactions with respect to one or more of our assets or liabilities. Our hedging activities may include entering into interest rate swaps, caps and floors, options to purchase these items, and futures and forward contracts. Except to the extent provided by Treasury regulations, any income we derive from a hedging transaction that is clearly identified as such as specified in the Code, including gain from the sale or disposition of such a transaction, will not constitute gross income for purposes of the 75% or 95% gross income tests, and therefore will be excluded for purposes of these tests, but only to the extent that the transaction hedges indebtedness incurred or to be incurred by us to acquire or carry real estate. The term "hedging transaction," as used above, generally means any transaction we enter into in the normal course of our business primarily to manage risk of interest rate or price changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, by us. "Hedging transaction" also includes any transaction entered into primarily to manage the risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% gross income test (or any property which generates such income or gain), including gain from the termination of such a transaction. Gross income also excludes income from clearly identified hedging transactions that are entered into with respect to previously acquired hedging transactions that a REIT entered into to manage interest rate or currency fluctuation risks when the previously hedged indebtedness is extinguished or property is disposed of. We intend to structure any hedging transactions in a manner that does not jeopardize our status as a REIT. 121 Interest income and gain from the sale of a debt instrument not secured by real property or an interest in real property, including "nonqualified" debt instruments issued by a "publicly offered REIT," are not treated as qualifying income for purposes of the 75% gross income test (even though such instruments are treated as "real estate assets," as discussed below) but are treated as qualifying income for purposes of the 95% gross income test. A "publicly offered REIT" means a REIT that is required to file annual and periodic reports with the SEC under the Exchange Act. As a general matter, certain foreign currency gains will be excluded from gross income for purposes of one or both of the gross income tests, as follows. "Real estate foreign exchange gain" will be excluded from gross income for purposes of both the 75% and 95% gross income test. Real estate foreign exchange gain generally includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 75% gross income test, foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under) obligations secured by mortgages on real property or on interests in real property and certain foreign currency gain attributable to certain qualified business units of a REIT. "Passive foreign exchange gain" will be excluded from gross income for purposes of the 95% gross income test. Passive foreign exchange gain generally includes real estate foreign exchange gain as described above, and also includes foreign currency gain attributable to any item of income or gain that is qualifying income for purposes of the 95% gross income test and foreign currency gain attributable to the acquisition or ownership of (or becoming or being the obligor under) obligations that would not fall within the scope of the definition of real estate foreign exchange gain. If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for that year if we satisfy the requirements of other provisions of the Code that allow relief from disqualification as a REIT. These relief provisions will generally be available if: • Our failure to meet the income tests was due to reasonable cause and not due to willful neglect; and • We file a schedule of each item of income in excess of the limitations described above in accordance with regulations to be prescribed by the IRS. We might not be entitled to the benefit of these relief provisions, however, and, even if these relief provisions apply, we would have to pay a tax on the excess income. The tax will be a 100% tax on an amount equal to (a) the gross income attributable to the greater of (i) 75% of our gross income over the amount of gross income that is qualifying income for purposes of the 75% test, and (ii) 95% of our gross income over the amount of gross income that is qualifying income for purposes of the 95% test, multiplied by (b) a fraction intended to reflect our profitability. Asset Tests At the close of each quarter of our taxable year, we must also satisfy four tests relating to the nature of our assets. • First, at least 75% of the value of our total assets must be represented by real estate assets, including (a) real estate assets held by our QRSs, our allocable share of real estate assets held by partnerships in which we own an interest and stock issued by another REIT, (b) for a period of one year from the date of our receipt of proceeds of an offering of our shares of beneficial interest or publicly offered debt with a term of at least five years, stock or debt instruments purchased with these proceeds, (c) cash, cash items and government securities, and (d) certain debt instruments of "publicly offered REITs" (as defined above), interests in real property or interests in mortgages on real property (including a mortgage secured by both real property and personal property, provided that the fair market value of the personal property does not exceed 15% of the total fair market value of all property securing such mortgage), and personal property to the extent that rents attributable to the property are treated as rents from real property under the applicable Code section. • Second, not more than 25% of our total assets may be represented by securities other than those in the 75% asset class (except that not more than 25% of the REIT's total assets may be represented by "nonqualified" debt instruments issued by publicly offered REITs). For this purpose, a "nonqualified" debt instrument issued by a 122 publicly offered REIT is any real estate asset that would cease to be a real estate asset if the definition of a real estate asset was applied without regard to the reference to debt instruments issued by publicly offered REITs. • Third, not more than 20% of our total assets may constitute securities issued by TRSs and, of the investments included in the 25% asset class, the value of any one issuer's securities, other than equity securities issued by another REIT or securities issued by a TRS, owned by us may not exceed 5% of the value of our total assets. • Fourth, we may not own more than 10% of the vote or value of the outstanding securities of any one issuer, except for issuers that are REITs, QRSs or TRSs, or certain securities that qualify under a safe harbor provision of the Code (such as so-called "straight-debt" securities). Solely for the purposes of the 10% value test described above, the determination of our interest in the assets of any partnership or limited liability company in which we own an interest will be based on our capital interest in any securities issued by the partnership or limited liability company, excluding for this purpose certain securities described in the Code. If the IRS successfully challenges the partnership status of any of the partnerships in which we maintain a more than 10% vote or value interest, and the partnership is reclassified as a corporation or a publicly traded partnership taxable as a corporation, we could lose our REIT status. In addition, in the case of such a successful challenge, we could lose our REIT status if such recharacterization results in us otherwise failing one of the asset tests described above. Certain relief provisions may be available to us if we fail to satisfy the asset tests described above after a 30-day cure period. Under these provisions, we will be deemed to have met the 5% and 10% REIT asset tests if the value of our nonqualifying assets (i) does not exceed the lesser of (a) 1% of the total value of our assets at the end of the applicable quarter and (b) $10,000,000, and (ii) we dispose of the nonqualifying assets within (a) six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered or (b) the period of time prescribed by Treasury regulations to be issued. For violations due to reasonable cause and not willful neglect that are not described in the preceding sentence, we may avoid disqualification as a REIT under any of the asset tests, after the 30-day cure period, by taking steps including (i) the disposition of the nonqualifying assets to meet the asset test within (a) six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered or (b) the period of time prescribed by Treasury regulations to be issued, (ii) paying a tax equal to the greater of (a) $50,000 or (b) the highest corporate tax rate multiplied by the net income generated by the nonqualifying assets, and (iii) disclosing certain information to the IRS. Annual Distribution Requirements. To qualify as a REIT, we are required to distribute, on an annual basis, dividends, other than capital gain dividends, to our shareholders in an amount at least equal to (1) the sum of (a) 90% of our " REIT taxable income," computed without regard to the dividends paid deduction and our net capital gain, and (b) 90% of the net after-tax income, if any, from foreclosure property minus (2) the sum of certain items of non-cash income. In addition, if we acquire an asset from a C corporation in a carryover basis transaction and dispose of such asset during the five-year period beginning on the date on which we acquired that asset, we may be required to distribute at least 90% of the after-tax built-in gain, if any, recognized on the disposition of the asset. These distributions must be paid in the taxable year to which they relate or may be paid in the following taxable year if the distributions are declared before we timely file our tax return for the year to which they relate and are paid on or before the first regular dividend payment after the declaration. A special rule applies that permits distributions that are declared in October, November or December as of a record date in such month and actually paid in January of the following year to be treated as if they were paid on December 31 of the year declared. To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will have to pay tax on the undistributed amounts at regular ordinary and capital gain corporate tax rates. Furthermore, if we fail to distribute during each calendar year at least the sum of (a) 85% of our ordinary income for that year, (b) 95% of our capital gain net income for that year, and (c) any undistributed taxable income from prior periods, we will have to pay a 4% excise tax on the excess of the required distribution over the sum of the amounts actually distributed and retained amounts on which income tax is paid at the corporate level. 123 In order for distributions to be counted as satisfying the annual distribution requirement for REITs, and to provide REITs with a REIT-level dividends paid deduction, the distributions must not be "preferential dividends." A distribution is not a preferential dividend if the distribution is (1) pro rata among all outstanding shares of stock within a particular class and (2) in accordance with the preferences among different classes of stock as set forth in the REIT's organizational documents. This requirement does not apply to publicly offered REITs, including us, but continues to apply to our subsidiary REITs. We intend to satisfy the annual distribution requirements. The calculation of REIT taxable income includes deductions for noncash charges, such as depreciation. Accordingly, we anticipate that we generally will have sufficient cash or liquid assets to enable us to satisfy the distribution requirements described above. However, from time to time, we may not have sufficient cash or other liquid assets to meet these distribution requirements due to timing differences between the actual receipt of income and the actual payment of deductible expenses, and the inclusion of income and deduction of expenses for purposes of determining our annual taxable income. Further, under Section 451 of the Code, subject to certain exceptions, we must accrue income for U.S. federal income tax purposes no later than the time at which such income is taken into account in our consolidated financial statements, which could create additional differences between REIT taxable income and the receipt of cash attributable to such income. In addition, we may decide to retain our cash, rather than distribute it, to repay debt, acquire assets, or for other reasons. If these timing differences occur, we may borrow funds to pay dividends or we may pay dividends through the distribution of other property (including our shares) in order to meet the distribution requirements, while preserving our cash. Alternatively, subject to certain conditions and limitations, we may declare a taxable dividend payable in cash or shares at the election of each shareholder, where the aggregate amount of cash to be distributed with respect to such dividend may be subject to limitation. In such case, for U.S. federal income tax purposes, shareholders receiving such dividends will be required to include the full amount (both the cash and share component) of the dividend as ordinary taxable income to the extent of our current and accumulated earnings and profits. Under certain circumstances, we may be able to rectify a failure to meet the distribution requirement for a year by paying "deficiency dividends" to shareholders in a later year, which may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends; however, we will be required to pay interest based upon the amount of any deduction taken for deficiency dividends. Interest Deduction Limitation Section 163(j) of the Code limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of "adjusted taxable income," subject to certain exceptions. Any amount paid or accrued in excess of the limitation is carried forward and may be deducted in a subsequent year, again subject to the 30% limitation. Adjusted taxable income is determined without regard to certain deductions, including those for net interest expense, and net operating loss carryforwards. Beginning with our federal income tax return for the taxable year ended December 31, 2018, we made a timely election (which is irrevocable), such that the 30% limitation does not apply. This election is available for a trade or business involving real property development, redevelopment, construction, reconstruction, rental, operation, acquisition, conversion, disposition, management, leasing or brokerage, within the meaning of Section 469(c)(7)(C) of the Code. As a result of this election, depreciable real property (including certain improvements) held by the relevant trade or business must be depreciated under the alternative depreciation system under the Code, which generally is less favorable than the generally applicable system of depreciation under the Code. If it was subsequently determined that this election was not in fact available with respect to all or certain of our business activities, the new interest deduction limitation could result in us having more REIT taxable income and, thus, increase the amount of distributions we must make in order to comply with the REIT requirements and avoid incurring corporate level income tax. Failure to Qualify as a REIT If we would otherwise fail to qualify as a REIT because of a violation of one of the requirements described above, our qualification as a REIT will not be terminated if the violation is due to reasonable cause and not willful neglect and we pay a penalty tax of $50,000 for the violation. The immediately preceding sentence does not apply to a violation of the income tests described above or a violation of the asset tests described above, each of which has a specific relief provision that is described above. 124 If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions described above do not apply, we would be subject to tax on our taxable income at regular corporate tax rates. We cannot deduct distributions to holders of our shares in any year in which we are not a REIT, nor would we be required to make distributions in such a year. We would possibly also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non- REIT corporations, including the nondeductible 1% excise tax on certain stock repurchases. As a result, we anticipate that our failure to qualify as a REIT would reduce the funds available for distribution by us to our shareholders. In addition, if we fail to qualify as a REIT, all distributions to our shareholders will be taxable as regular corporate dividends to such shareholders to the extent of current and accumulated earnings and profits (as determined for U.S. federal income tax purposes). Such dividends paid to U.S. holders of our shares that are individuals, trusts and estates may be taxable at the preferential income tax rates (i.e., the 23.8% maximum U.S. federal rate for capital gain, which rate takes into account the maximum capital gain rate of 20% and the 3.8% Medicare tax on net investment income, described below under "-Net Investment Income Tax") for qualified dividends. Such dividends, however, would not be eligible for the 20% deduction on "qualified" REIT dividends allowed by Section 199A of the Code generally available to U.S. holders of our shares that are individuals, trusts or estates for taxable years beginning before January 1, 2026. In addition, in a case where we did not qualify to be taxed as a REIT, corporate distributees may be eligible for the dividends received deduction, subject to the limitations of the Code. Unless we are entitled to relief under specific statutory provisions, we also will be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which we lose our qualification. It is not possible to state whether, in all circumstances, we will be entitled to this statutory relief. In addition, if either Vornado or JBG SMITH were to fail to qualify as a REIT immediately after the Separation in July 2017, then, in our 2017 taxable year, we would have to recognize corporate-level gain on our assets that were acquired in so-called "conversion transactions." (Out of an abundance of caution, we are assuming that the "immediately after" requirement would be applied looking at the two years following the Separation). For more information, please review the risk factor entitled "Unless Vornado and JBG SMITH are both REITs immediately after the distribution of JBG SMITH by Vornado and at all times during the two years thereafter, JBG SMITH could be required to recognize certain corporate- level gains for tax purposes" in our Annual Report on Form 10-K for the year ended December 31, 2018, which is incorporated by reference herein. In connection with the distribution of JBG SMITH by Vornado and the combination, we received an opinion of Sullivan & Cromwell LLP and an opinion of Hogan Lovells US LLP to the effect that we were organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and that our proposed method of operation enabled us to meet the requirements for qualification and taxation as a REIT commencing with our taxable year ended December 31, 2017. In addition, we received an opinion of Hogan Lovells US LLP with respect to each REIT that was contributed to JBG SMITH LP by JBG in the combination, and we and JBG received an opinion of Sullivan & Cromwell LLP with respect to each REIT that was contributed by VRLP to JBG SMITH LP, in each case to the effect that each such REIT had been organized and had operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and that its actual method of operation enabled such REIT to meet up to the date of the distribution, and its proposed method of operation would enable such REIT to continue to meet following the date of the distribution, the requirements for qualification and taxation as a REIT under the Code. Taxation of U.S. Shareholders Taxation of Taxable U.S. Shareholders As used in this section, the term "U.S. shareholder" means a holder of our shares who, for U.S. federal income tax purposes, is: • • • • a citizen or resident of the United States; a domestic corporation; an estate whose income is subject to U.S. federal income taxation regardless of its source; or a trust if a United States court can exercise primary supervision over the trust's administration and one or more United States persons have authority to control all substantial decisions of the trust. 125 Taxation of Dividends. As long as we qualify as a REIT, distributions made by us out of our current or accumulated earnings and profits, and not designated by us as capital gain dividends, will constitute dividends that are taxable to our taxable U.S. shareholders as ordinary income. Noncorporate U.S. shareholders will generally not be entitled to the preferential tax rate (currently 23.8%, inclusive of the 3.8% net investment income tax) applicable to certain types of dividends that give rise to "qualified dividend income," except with respect to the portion of any distribution (a) that represents income from dividends we received from a corporation in which we own shares to the extent that such dividends would be eligible for the lower rate on dividends if paid by the corporation to its individual shareholders, (b) that is equal to the sum of our REIT taxable income (taking into account the dividends paid deduction available to us) and certain net built-in gain with respect to property acquired from a C corporation in certain transactions in which we must adopt the basis of the asset in the hands of the C corporation for our previous taxable year and less any taxes paid by us during our previous taxable year, or (c) that represents earnings and profits that were accumulated by us in a prior non-REIT taxable year, in each case, provided that certain holding period and other requirements are satisfied at both the REIT and individual shareholder level. For taxable years prior to January 1, 2026, our U.S. shareholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations, pursuant to the temporary 20% deduction allowed by Section 199A of the Code. Such noncorporate U.S. shareholders should consult their tax advisors to determine the impact of tax rates on dividends received from us. Our distributions will not be eligible for the dividends received deduction in the case of U.S. shareholders that are corporations. Our distributions that we properly designate as capital gain dividends will be taxable to U.S. shareholders as gain from the sale of a capital asset held for more than one year, to the extent that they do not exceed our actual net capital gain for the taxable year, without regard to the period for which a U.S. shareholder has held its shares. Thus, with certain limitations, capital gain dividends received by an individual U.S. shareholder may be eligible for preferential rates of taxation. U.S. shareholders that are corporations may, however, be required to treat up to 20% of certain capital gain dividends as ordinary income. The maximum amount of dividends that may be designated by us as capital gain dividends and as "qualified dividend income" with respect to any taxable year may not exceed the dividends paid by us with respect to such year, including dividends paid by us in the succeeding taxable year that relate back to the prior taxable year for purposes of determining our dividends paid deduction. Capital gains attributable to the sale of depreciable real property held for more than twelve months are subject to a 25% maximum U.S. federal income tax rate for taxpayers who are taxed as individuals, to the extent of previously claimed depreciation deductions. In addition, the IRS has been granted authority to prescribe regulations or other guidance requiring the proportionality of the designation for particular types of dividends (for example, capital gain dividends) among REIT shares. To the extent that we make ordinary distributions in excess of our current and accumulated earnings and profits, these distributions will be treated first as a tax-free return of capital to each U.S. shareholder. Thus, these distributions will reduce the adjusted basis which the U.S. shareholder has in its shares for tax purposes by the amount of the distribution, but not below zero. Distributions in excess of a U.S. shareholder's adjusted basis in its shares will be taxable as capital gain, provided that the shares have been held as a capital asset. For purposes of determining the portion of distributions on separate classes of shares that will be treated as dividends for federal income tax purposes, current and accumulated earnings and profits will be allocated first to distributions attributable to the priority rights of preferred shares before being allocated to other distributions. Dividends authorized by us in October, November or December of any year and payable to a shareholder of record on a specified date in any of those months will be treated as both paid by us and received by the shareholder on December 31 of that year, provided that we actually pay the dividend on or before January 31 of the following calendar year but only to the extent of earnings and profits in that year. Shareholders may not include in their own income tax returns any of our net operating losses or capital losses. We may make distributions to our shareholders that are paid in shares. These distributions would be intended to be treated as dividends for U.S. federal income tax purposes and a U.S. shareholder would, therefore, generally have taxable income 126 with respect to such distributions of shares and may have a tax liability on account of such distribution in excess of the cash (if any) that is received. U.S. shareholders holding shares at the close of our taxable year will be required to include, in computing their long-term capital gains for the taxable year in which the last day of our taxable year falls, the amount of our undistributed net capital gain that we designate in a written notice distributed to our shareholders. We may not designate amounts in excess of our undistributed net capital gain for the taxable year. Each U.S. shareholder required to include the designated amount in determining the shareholder's long-term capital gains will be deemed to have paid, in the taxable year of the inclusion, the tax paid by us in respect of the undistributed net capital gains. U.S. shareholders to whom these rules apply will be allowed a credit or a refund, as the case may be, for the tax they are deemed to have paid. U.S. shareholders will increase their basis in their shares by the difference between the amount of the includible gains and the tax deemed paid by the shareholder in respect of these gains. Distributions made by us and gain arising from a U.S. shareholder's sale or exchange of shares will not be treated as passive activity income. As a result, U.S. shareholders generally will not be able to apply any passive losses against that income or gain. Distributions to Holders of Depositary Shares. Owners of depositary shares will be treated for U.S. federal income tax purposes as if they were owners of the underlying preferred shares represented by such depositary shares. Accordingly, such owners will be entitled to take into account, for U.S. federal income tax purposes, income and deductions to which they would be entitled if they were direct holders of underlying preferred shares. In addition, (i) no gain or loss will be recognized for U.S. federal income tax purposes upon the withdrawal of certificates evidencing the underlying preferred shares in exchange for depositary receipts, (ii) the tax basis of each share of the underlying preferred shares to an exchanging owner of depositary shares will, upon such exchange, be the same as the aggregate tax basis of the depositary shares exchanged therefor, and (iii) the holding period for the underlying preferred shares in the hands of an exchanging owner of depositary shares will include the period during which such person owned such depositary shares. Sale or Exchange of Shares When a U.S. shareholder sells or otherwise disposes of shares, the shareholder will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between (a) the amount of cash and the fair market value of any property received on the sale or other disposition, and (b) the holder's adjusted basis in the shares for tax purposes. This gain or loss will be capital gain or loss if the U.S. shareholder has held the shares as a capital asset. The gain or loss will be long-term gain or loss if the U.S. shareholder has held the shares for more than one year. Long-term capital gain of an individual U.S. shareholder is generally taxed at preferential rates. In general, any loss recognized by a U.S. shareholder when the shareholder sells or otherwise disposes of our shares that the shareholder has held for nine months or less, after applying certain holding period rules, will be treated as a long-term capital loss, to the extent of distributions received by the shareholder from us which were required to be treated as long-term capital gains. The IRS has the authority to prescribe, but has not yet prescribed, Treasury Regulations that would apply a capital gain tax rate of 25% (which is higher than the long-term capital gain tax rate for noncorporate U.S. shareholders) to all or a portion of capital gain realized by a noncorporate U.S. shareholder on the sale of shares of our shares that would correspond to the U.S. shareholder's share of our "unrecaptured Section 1250 gain." U.S. shareholders should consult with their tax advisors with respect to their capital gain tax liability. Redemption of Preferred Shares and Depositary Shares. We do not currently have any preferred shares outstanding, but if we were to issue preferred shares in the future, the following would apply to a redemption of those preferred shares. Whenever we redeem any preferred shares held by the depositary, the depositary will redeem as of the same redemption date the number of depositary shares representing the preferred shares so redeemed. The treatment accorded to any redemption by us for cash (as distinguished from a sale, exchange or other disposition) of our preferred shares to a holder of such preferred shares can only be determined on the basis of the particular facts as to each holder at the time of 127 redemption. In general, a holder of our preferred shares will recognize capital gain or loss measured by the difference between the amount received by the holder of such shares upon the redemption and such holder's adjusted tax basis in the preferred shares redeemed (provided the preferred shares are held as a capital asset) if such redemption (i) is "not essentially equivalent to a dividend" with respect to the holder of the preferred shares under Section 302(b)(1) of the Code, (ii) is a "substantially disproportionate" redemption with respect to the shareholder under Section 302(b)(2) of the Code, or (iii) results in a "complete termination" of the holder's interest in all classes of our shares under Section 302(b)(3) of the Code. In applying these tests, there must be taken into account not only any series or class of the preferred shares being redeemed, but also such holder's ownership of other classes of our shares and any options (including stock purchase rights) to acquire any of the foregoing. The holder of our preferred shares also must take into account any such securities (including options) which are considered to be owned by such holder by reason of the constructive ownership rules set forth in Sections 318 and 302(c) of the Code. If the holder of preferred shares owns (actually or constructively) none of our voting shares, or owns an insubstantial amount of our voting shares, based upon current law, it is probable that the redemption of preferred shares from such a holder would be considered to be "not essentially equivalent to a dividend." However, whether a distribution is "not essentially equivalent to a dividend" depends on all of the facts and circumstances, and a holder of our preferred shares intending to rely on any of these tests at the time of redemption should consult its tax advisor to determine their application to its particular situation. Satisfaction of the "substantially disproportionate" and "complete termination" exceptions is dependent upon compliance with the respective objective tests set forth in Section 302(b)(2) and Section 302(b)(3) of the Code. A distribution to a holder of preferred shares will be "substantially disproportionate" if the percentage of our outstanding voting shares actually and constructively owned by the shareholder immediately following the redemption of preferred shares (treating preferred shares redeemed as not outstanding) is less than 80% of the percentage of our outstanding voting shares actually and constructively owned by the shareholder immediately before the redemption, and immediately following the redemption the shareholder actually and constructively owns less than 50% of the total combined voting power of the Company. Because the Company's preferred shares are nonvoting shares, a shareholder would have to reduce such holder's holdings (if any) in our classes of voting shares to satisfy this test. If the redemption does not meet any of the tests under Section 302 of the Code, then the redemption proceeds received from our preferred shares will be treated as a distribution on our shares as described under "-Taxation of U.S. Shareholders- Taxation of Taxable U.S. Shareholders-Taxation of Dividends.," and "-Taxation of Non-U.S. Shareholders." If the redemption of a holder's preferred shares is taxed as a dividend, the adjusted basis of such holder's redeemed preferred shares will be transferred to any other shares held by the holder. If the holder owns no other shares, under certain circumstances, such basis may be transferred to a related person, or it may be lost entirely. Backup Withholding and Information Reporting In general, information reporting requirements will apply to payments of dividends on and payments of the proceeds of the sale of our shares held by U.S. shareholders, unless an exception applies. The applicable withholding agent is required to withhold tax on such payments if (i) the payee fails to furnish a TIN to the payor or to establish an exemption from backup withholding, or (ii) the IRS notifies the payor that the TIN furnished by the payee is incorrect. In addition, the applicable withholding agent with respect to the dividends on our shares is required to withhold tax if (i) there has been a notified payee under-reporting with respect to interest, dividends or original issue discount described in Section 3406(c) of the Code, or (ii) there has been a failure of the payee to certify under the penalty of perjury that the payee is not subject to backup withholding under the Code. A U.S. shareholder that does not provide the applicable withholding agent with a correct TIN may also be subject to penalties imposed by the IRS. In addition, we may be required to withhold a portion of capital gain distributions to any U.S. shareholders who fail to certify their U.S. status to us. Some U.S. shareholders, including corporations, may be exempt from backup withholding. Any amounts withheld under the backup withholding rules from a payment to a U.S. shareholder will be allowed as a credit against the U.S. shareholder's U.S. federal income tax and may entitle the shareholder to a refund, provided that the required information is furnished to the IRS. The applicable withholding agent will be required to furnish annually to the IRS and to U.S. shareholders of our shares information relating to the amount of dividends paid on our shares, and that information reporting may also apply 128 to payments of proceeds from the sale of our shares. Some U.S. shareholders, including corporations, financial institutions and certain tax-exempt organizations, are generally not subject to information reporting. Net Investment Income Tax A U.S. shareholder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exempt from such tax, is subject to a 3.8% tax on the lesser of (1) the U.S. shareholder's "net investment income" (or "undistributed net investment income" in the case of an estate or trust) for the relevant taxable year and (2) the excess of the U.S. shareholder's modified adjusted gross income for the taxable year over a certain threshold (which in the case of individuals is between $125,000 and $250,000, depending on the individual's circumstances). A holder's net investment income generally includes its dividend income and its net gains from the disposition of REIT shares, unless such dividends or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive or trading activities). The temporary 20% deduction allowed by Section 199A of the Code with respect to ordinary REIT dividends received by noncorporate taxpayers is allowed only for purposes of Chapter 1 of the Code and, thus, apparently is not allowed as a deduction allocable to such dividends for purposes of determining the amount of net investment income subject to the 3.8% Medicare tax, which is imposed under Chapter 2A of the Code. If you are a U.S. shareholder that is an individual, estate or trust, you are urged to consult your tax advisors regarding the applicability of the Medicare tax to your income and gains in respect of your investment in our shares. Taxation of Tax-Exempt Shareholders The IRS has ruled that amounts distributed as dividends by a REIT generally do not constitute unrelated business taxable income when received by a tax-exempt entity. Based on that ruling, provided that a tax-exempt shareholder is not one of the types of entity described below and has not held its shares as "debt financed property" within the meaning of the Code, the dividend income from shares will not be unrelated business taxable income to a tax-exempt shareholder. Similarly, income from the sale of shares will not constitute unrelated business taxable income unless the tax-exempt shareholder has held the shares as "debt financed property" within the meaning of the Code or has used the shares in a trade or business. Notwithstanding the above paragraph, tax-exempt shareholders will be required to treat as unrelated business taxable income any dividends paid by us that are allocable to our "excess inclusion" income, if any. Income from an investment in our shares will constitute unrelated business taxable income for tax-exempt shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from U.S. federal income taxation under the applicable subsections of Section 501(c) of the Code, unless the organization is able to properly deduct amounts set aside or placed in reserve for certain purposes so as to offset the income generated by its shares. Prospective investors of the types described in the preceding sentence should consult their tax advisors concerning these "set aside" and reserve requirements. Notwithstanding the foregoing, however, a portion of the dividends paid by a "pension-held REIT" will be treated as unrelated business taxable income to any trust which: • • • is described in Section 401(a) of the Code; is tax-exempt under Section 501(a) of the Code; and holds more than 10% (by value) of the equity interests in the REIT. Tax-exempt pension, profit-sharing and stock bonus funds that are described in Section 401(a) of the Code are referred to below as "qualified trusts." A REIT is a "pension-held REIT" if: • it would not have qualified as a REIT but for the fact that Section 856(h)(3) of the Code provides that stock owned by qualified trusts will be treated, for purposes of the "not closely held" requirement, as owned by the beneficiaries of the trust (rather than by the trust itself); and 129 • either (a) at least one qualified trust holds more than 25% by value of the interests in the REIT or (b) one or more qualified trusts, each of which owns more than 10% by value of the interests in the REIT, hold in the aggregate more than 50% by value of the interests in the REIT. The percentage of any REIT dividend treated as unrelated business taxable income to a qualifying trust is equal to the ratio of (a) the gross income of the REIT from unrelated trades or businesses, determined as though the REIT were a qualified trust, less direct expenses related to this gross income, to (b) the total gross income of the REIT, less direct expenses related to the total gross income. A de minimis exception applies where this percentage is less than 5% for any year. We are not and do not expect to be classified as a pension-held REIT. The rules described above under the heading "U.S. Shareholders" concerning the inclusion of our designated undistributed net capital gains in the income of its shareholders will apply to tax-exempt entities. Thus, tax-exempt entities will be allowed a credit or refund of the tax deemed paid by these entities in respect of the includible gains. Taxation of Non-U.S. Shareholders The rules governing U.S. federal income taxation of nonresident alien individuals, foreign corporations, foreign partnerships and estates or trusts that in either case are not subject to U.S. federal income tax on a net income basis who own shares, which we call "non-U.S. shareholders," are complex. The following discussion is only a limited summary of these rules. Prospective non-U.S. shareholders should consult with their tax advisors to determine the impact of U.S. federal, state and local income tax laws with regard to an investment in our shares, including any reporting requirements. Ordinary Dividends Distributions, other than distributions that are treated as attributable to gain from sales or exchanges by us of U.S. real property interests, as discussed below, and other than distributions designated by us as capital gain dividends, will be treated as ordinary income to the extent that they are made out of our current or accumulated earnings and profits. A withholding tax equal to 30% of the gross amount of the distribution will ordinarily apply to distributions of this kind to non-U.S. shareholders, unless an applicable tax treaty reduces that tax. However, if income from the investment in the shares is (i) treated as effectively connected with the non-U.S. shareholder's conduct of a U.S. trade or business or is (ii) attributable to a permanent establishment that the non-U.S. shareholder maintains in the United States if that is required by an applicable income tax treaty as a condition for subjecting the non-U.S. shareholder to U.S. taxation on a net income basis, tax at graduated rates will generally apply to the non-U.S. shareholder in the same manner as U.S. shareholders are taxed with respect to dividends, and the 30% branch profits tax may also apply if the shareholder is a foreign corporation. We expect to withhold U.S. tax at the rate of 30% on the gross amount of any dividends, other than dividends treated as attributable to gain from sales or exchanges of U.S. real property interests and capital gain dividends, paid to a non-U.S. shareholder, unless (a) a lower treaty rate applies and the required form evidencing eligibility for that reduced rate is filed with us or the appropriate withholding agent or (b) the non-U.S. shareholder files an IRS Form W-8 ECI or a successor form with us or the appropriate withholding agent claiming that the distributions are effectively connected with the non- U.S. shareholder's conduct of a U.S. trade or business and in either case other applicable requirements were met. Distributions to a non-U.S. shareholder that are designated by us at the time of distribution as capital gain dividends that are not attributable to, or treated as not attributable to, the disposition by us of a U.S. real property interest generally will not be subject to U.S. federal income taxation, except as described below. If a non-U.S. shareholder receives an allocation of "excess inclusion income" with respect to a REMIC residual interest or an interest in a TMP owned by us, the non-U.S. shareholder will be subject to U.S. federal income tax withholding at the maximum rate of 30% with respect to such allocation, without reduction pursuant to any otherwise applicable income tax treaty. Return of Capital Distributions in excess of our current and accumulated earnings and profits that are not treated as attributable to the gain from our disposition of a U.S. real property interest, will not be taxable to a non-U.S. shareholder to the extent that they 130 do not exceed the adjusted basis of the non-U.S. shareholder's shares. Distributions of this kind will instead reduce the adjusted basis of the shares. To the extent that distributions of this kind exceed the adjusted basis of a non-U.S. shareholder's shares, they will give rise to tax liability if the non-U.S. shareholder otherwise would have to pay tax on any gain from the sale or disposition of its shares, as described below. If it cannot be determined at the time a distribution is made whether the distribution will be in excess of current and accumulated earnings and profits, withholding will apply to the distribution at the rate applicable to dividends. However, the non-U.S. shareholder may seek a refund of these amounts from the IRS if it is subsequently determined that the distribution was, in fact, in excess of our current accumulated earnings and profits. Also, we could potentially be required to withhold at least 15% of any distribution in excess of our current and accumulated earnings and profits, even if the non-U.S. shareholder is not liable for U.S. tax on the receipt of that distribution. However, a non-U.S. shareholder may seek a refund of these amounts from the IRS if the non-U.S. shareholder's tax liability with respect to the distribution is less than the amount withheld. Such withholding should generally not be required if a non- U.S. shareholder would not be taxed under the FIRPTA, upon a sale or exchange of shares. See the discussion below under "-Sales of Shares." Capital Gain Dividends Distributions that are attributable to gain from sales or exchanges by us of U.S. real property interests that are paid with respect to any class of stock that is regularly traded on an established securities market located in the United States and held by a non-U.S. shareholder who does not own more than 10% of such class of stock at any time during the one-year period ending on the date of distribution will be treated as a normal distribution by us, and such distributions will be taxed as described above in "-Ordinary Dividends." Distributions that are not described in the preceding paragraph and are attributable to gain from sales or exchanges by us of U.S. real property interests will be taxed to a non-U.S. shareholder under the provisions of FIRPTA. Under this statute, these distributions are taxed to a non-U.S. shareholder as if the gain were effectively connected with a U.S. business. Thus, non-U.S. shareholders will be taxed on the distributions at the normal capital gain rates applicable to U.S. shareholders, subject to any applicable alternative minimum tax. We are required by applicable Treasury regulations under this statute to withhold 21% of any distribution that we could designate as a capital gain dividend. However, if we designate as a capital gain dividend a distribution made before the day we actually effect the designation, then, although the distribution may be taxable to a non-U.S. shareholder, withholding does not apply to the distribution under this statute. Rather, we must effectuate the 21% withholding from distributions made on and after the date of the designation, until the distributions so withheld equal the amount of the prior distribution designated as a capital gain dividend. The non-U.S. shareholder may credit the amount withheld against its U.S. tax liability. Share Distributions We may make distributions to our shareholders that are paid in shares. These distributions will be intended to be treated as dividends for U.S. federal income tax purposes and, accordingly, will be treated in a manner consistent with the discussion above in "-Ordinary Dividends" and "Capital Gain Dividends." If we are required to withhold an amount in excess of any cash distributed along with the shares, we will retain and sell some of the shares that would otherwise be distributed in order to satisfy our withholding obligations. Sales of Shares Gain recognized by a non-U.S. shareholder upon a sale or exchange of our shares generally will not be taxed under FIRPTA if we are a "domestically controlled REIT," defined generally as a REIT less than 50% in value of whose stock is and was held directly or indirectly by foreign persons at all times during a specified testing period (for this purpose, if any class of a REIT's stock is regularly traded on an established securities market in the United States, a person holding less than 5% of such class during the testing period is presumed not to be a foreign person, unless we have actual knowledge otherwise). We believe that we are a domestically controlled REIT, but because our common shares are publicly traded, there can be no assurance that we in fact will qualify as a domestically-controlled REIT. Assuming that we continue to be a domestically controlled REIT, taxation under FIRPTA generally will not apply to the sale of shares. However, gain to which the FIRPTA 131 rules do not apply still will be taxable to a non-U.S. shareholder if investment in the shares is treated as effectively connected with the non-U.S. shareholder's U.S. trade or business or is attributable to a permanent establishment that the non-U.S. shareholder maintains in the United States if that is required by an applicable income tax treaty as a condition for subjecting the non-U.S. shareholder to U.S. taxation on a net income basis. In this case, the same treatment will apply to the non-U.S. shareholder as to U.S. shareholders with respect to the gain. In addition, gain to which FIRPTA does not apply will be taxable to a non-U.S. shareholder if the non-U.S. shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a "tax home" in the United States, or maintains an office or a fixed place of business in the United States to which the gain is attributable. In this case, a 30% tax will apply to the nonresident alien individual's capital gains. A similar rule will apply to capital gain dividends to which FIRPTA does not apply. If we do not qualify as a domestically controlled REIT, the tax consequences of a sale of shares by a non-U.S. shareholder will depend upon whether such shares are regularly traded on an established securities market and the amount of such shares that are held by the non-U.S. shareholder. Specifically, a non-U.S. shareholder that holds a class of shares that is traded on an established securities market will only be subject to FIRPTA in respect of a sale of such shares if the shareholder owned more than 10% of the shares of such class at any time during a specified period. A non-U.S. shareholder that holds a class of our shares that is not traded on an established securities market will only be subject to FIRPTA in respect of a sale of such shares if, on the date the shares were acquired by the shareholder, the shares had a fair market value greater than the fair market value on that date of 5% of the regularly traded class of our outstanding shares with the lowest fair market value. If a non-U.S. shareholder holds a class of our shares that is not regularly traded on an established securities market, and subsequently acquires additional interests of the same class, then all such interests must be aggregated and valued as of the date of the subsequent acquisition for purposes of the 5% test that is described in the preceding sentence. If tax under FIRPTA applies to the gain on the sale of shares, the same treatment would apply to the non-U.S. shareholder as to U.S. shareholders with respect to the gain, subject to any applicable alternative minimum tax. For purposes of determining the amount of shares owned by a shareholder, complex constructive ownership rules apply. You should consult your tax advisors regarding such rules in order to determine your ownership in the relevant period. Qualified Shareholders and Qualified Foreign Pension Funds Stock of a REIT will not be treated as a U.S. real property interest subject to FIRPTA if the stock is held directly (or indirectly through one or more partnerships) by a "qualified shareholder" or "qualified foreign pension fund." Similarly, any distribution made to a "qualified shareholder" or "qualified foreign pension fund" with respect to REIT stock will not be treated as gain from the sale or exchange of a U.S. real property interest to the extent the stock of the REIT held by such qualified shareholder or qualified foreign pension fund is not treated as a U.S. real property interest. A "qualified shareholder" generally means a foreign person which (i) (x) is eligible for certain income tax treaty benefits and the principal class of interests of which is listed and regularly traded on at least one recognized stock exchange or (y) a foreign limited partnership that has an agreement with the United States for the exchange of information with respect to taxes, has a class of limited partnership units that is regularly traded on the NYSE or the Nasdaq Stock Market, and such units' value is greater than 50% of the value of all the partnership's units; (ii) is a "qualified collective investment vehicle;" and (iii) maintains certain records with respect to certain of its owners. A "qualified collective investment vehicle" is a foreign person which (i) is entitled, under a comprehensive income tax treaty, to certain reduced withholding rates with respect to ordinary dividends paid by a REIT even if such person holds more than 10% of the stock of the REIT; (ii) (x) is a publicly traded partnership that is not treated as a corporation, (y) is a withholding foreign partnership for purposes of chapters 3, 4 and 61 of the Code, and (z) if the foreign partnership were a United States corporation, it would be a United States real property holding corporation, at any time during the five-year period ending on the date of disposition of, or distribution with respect to, such partnership's interest in a REIT; or (iii) is designated as a qualified collective investment vehicle by the Secretary of the Treasury and is either fiscally transparent within the meaning of Section 894 of the Code or is required to include dividends in its gross income, but is entitled to a deduction for distribution to a person holding interests (other than interests solely as a creditor) in such foreign person. Notwithstanding the foregoing, if a foreign investor in a qualified shareholder directly or indirectly, whether or not by reason of such investor's ownership interest in the qualified shareholder, holds more than 10% of the stock of the REIT, then a portion of the REIT stock held by the qualified shareholder (based on the foreign investor's percentage ownership 132 of the qualified shareholder) will be treated as a U.S. real property interest in the hands of the qualified shareholder and will be subject to FIRPTA. A "qualified foreign pension fund" is any trust, corporation, or other organization or arrangement (A) which is created or organized under the law of a country other than the United States, (B) which is established (i) by such country (or one or more political subdivisions thereof) to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees, as a result of services rendered by such employees to their employers or (ii) by one or more employers to provide retirement or pension benefits to participants or beneficiaries that are current or former employees (including self-employed individuals) or persons designated by such employees in consideration for services rendered by such employees to such employers, (C) which does not have a single participant or beneficiary with a right to more than 5% of its assets or income, (D) which is subject to government regulation and with respect to which annual information about its beneficiaries is provided, or is otherwise available, to the relevant tax authorities in the country in which it is established or operates, and (E) with respect to which, under the laws of the country in which it is established or operates, (i) contributions to such organization or arrangement that would otherwise be subject to tax under such laws are deductible or excluded from the gross income of such entity or arrangement or taxed at a reduced rate, or (ii) taxation of any investment income of such organization or arrangement is deferred or such income is excluded from the gross income of such entity or arrangement or is taxed at a reduced rate. Federal Estate Taxes Shares held by a non-U.S. shareholder at the time of death will be included in the shareholder's gross estate for U.S. federal estate tax purposes unless an applicable estate tax treaty provides otherwise. Backup Withholding and Information Reporting Generally, information reporting will apply to payments of interest and dividends on our shares, and backup withholding described above for a U.S. shareholder will apply, unless the payee certifies that it is not a U.S. person or otherwise establishes an exemption. The payment of the proceeds from the disposition of our shares to or through the U.S. office of a U.S. or foreign broker will be subject to information reporting and backup withholding as described above for U.S. shareholders unless the non- U.S. shareholder satisfies the requirements necessary to be an exempt non-U.S. shareholder or otherwise qualifies for an exemption. The proceeds of a disposition by a non-U.S. shareholder of our shares to or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, if the broker is a U.S. person, a controlled foreign corporation for U.S. federal income tax purposes, a foreign person 50% or more of whose gross income from all sources for specified periods is from activities that are effectively connected with a U.S. trade or business, a foreign partnership if partners who hold more than 50% of the interest in the partnership are U.S. persons, or a foreign partnership that is engaged in the conduct of a trade or business in the U.S., then information reporting generally will apply as though the payment was made through a U.S. office of a U.S. or foreign broker. Taxation of Holders of Our Warrants and Rights We do not currently have any warrants or rights outstanding, but if we were in the future, the follow treatment would apply to the holders of those warrants or rights. Warrants. Holders of our warrants will not generally recognize gain or loss upon the exercise of a warrant. A holder's basis in the common shares, preferred shares, or depositary shares representing preferred shares, as the case may be, received upon the exercise of the warrant will be equal to the sum of the holder's adjusted tax basis in the warrant and the exercise price paid. A holder's holding period in the common shares, preferred shares, or depositary shares representing preferred shares, as the case may be, received upon the exercise of the warrant will not include the period during which the warrant was held by the holder. Upon the expiration of a warrant, the holder will recognize a capital loss in an amount equal to the holder's adjusted tax basis in the warrant. Upon the sale or exchange of a warrant to a person other than us, a holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and the holder's adjusted tax basis in the warrant. Such gain or loss will be capital gain or loss and will be long-term capital gain 133 or loss if the warrant was held for more than one year. Upon the sale of the warrant to us, the IRS may argue that the holder should recognize ordinary income on the sale. Prospective holders of our warrants should consult their own tax advisors as to the consequences of a sale of a warrant to us. Rights. In the event of a rights offering, the tax consequences of the receipt, expiration, and exercise of the rights we issue will be addressed in detail in a prospectus supplement. Prospective holders of our rights should review the applicable prospectus supplement in connection with the ownership of any rights, and consult their own tax advisors as to the consequences of investing in the rights. Dividend Reinvestment and Share Purchase Plan General We offer shareholders and prospective shareholders the opportunity to participate in our Dividend Reinvestment and Share Purchase Plan, which is referred to herein as the "DRIP." Although we do not currently offer any discount in connection with the DRIP, nor do we plan to offer such a discount at present, we reserve the right to offer in the future a discount on shares purchased, not to exceed 5%, with reinvested dividends or cash distributions and shares purchased through the optional cash investment feature. This discussion assumes that we do not offer a discount in connection with the DRIP. If we were to offer a discount in connection with the DRIP the tax considerations described below would materially differ. In the event that we offer a discount in connection with the DRIP, shareholders are urged to consult with their tax advisors regarding the tax treatment to them of receiving a discount. Amounts Treated as a Distribution Generally, a DRIP participant will be treated as having received a distribution with respect to our shares for U.S. federal income tax purposes in an amount determined as described below. • A shareholder who participates in the dividend reinvestment feature of the DRIP and whose dividends are reinvested in our shares purchased from us will generally be treated for U.S. federal income tax purposes as having received the gross amount of any cash distributions which would have been paid by us to such a shareholder had they not elected to participate. The amount of the distribution deemed received will be reported on the Form 1099-DIV received by the shareholder. • A shareholder who participates in the dividend reinvestment feature of the DRIP and whose dividends are reinvested in our shares purchased in the open market, will generally be treated for U.S. federal income tax purposes as having received (and will receive a Form 1099-DIV reporting) the gross amount of any cash distributions which would have been paid by us to such a shareholder had they not elected to participate (plus any brokerage fees and any other expenses deducted from the amount of the distribution reinvested) on the date the dividends are reinvested. We will pay the annual maintenance cost for each shareholder's DRIP account. Consistent with the conclusion reached by the IRS in a private letter ruling issued to another REIT, we intend to take the position that the administrative costs do not constitute a distribution which is either taxable to a shareholder or which would reduce the shareholder's basis in their common shares. However, because the private letter ruling was not issued to us, we have no legal right to rely on its conclusions. Thus, it is possible that the IRS might view the shareholder's share of the administrative costs as constituting a taxable distribution to them and/or a distribution which reduces the basis in their shares. For this and other reasons, we may in the future take a different position with respect to these costs. In the situations described above, a shareholder will be treated as receiving a distribution from us even though no cash distribution is actually received. These distributions will be taxable in the same manner as all other distributions paid by us, as described above under "-Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders," "-Taxation of U.S. Shareholders -Taxation of Tax-Exempt Shareholders," or "-Taxation of Non-U.S. Shareholders," as applicable. 134 Basis and Holding Period in Shares Acquired Pursuant to the DRIP. The tax basis for our shares acquired by reinvesting cash distributions through the DRIP generally will equal the fair market value of our shares on the date of distribution (plus the amount of any brokerage fees paid by the shareholder). The holding period for our shares acquired by reinvesting cash distributions will begin on the day following the date of distribution. The tax basis in our shares acquired through an optional cash investment generally will equal the cost paid by the participant in acquiring our shares, including any brokerage fees paid by the shareholder. The holding period for our shares purchased through the optional cash investment feature of the DRIP generally will begin on the day our shares are purchased for the participant's account. Withdrawal of Shares from the DRIP. When a participant withdraws stock from the DRIP and receives whole shares, the participant will not realize any taxable income. However, if the participant receives cash for a fractional share, the participant will be required to recognize gain or loss with respect to that fractional share. Effect of Withholding Requirements. Withholding requirements generally applicable to distributions from us will apply to all amounts treated as distributions pursuant to the DRIP. See "-Backup Withholding and Information Reporting" for discussion of the withholding requirements that apply to other distributions that we pay. All withholding amounts will be withheld from distributions before the distributions are reinvested under the DRIP. Therefore, if a U.S. shareholder is subject to withholding, distributions which would otherwise be available for reinvestment under the DRIP will be reduced by the withholding amount. Withholdable Payments to Foreign Financial Entities and Other Foreign Entities Pursuant to Sections 1471 through 1474 of the Code, commonly known as FATCA, a 30% FATCA withholding may be imposed on U.S.-source dividends paid to you or to certain foreign financial institutions, investment funds and other non- U.S. persons receiving payments on your behalf if you or such persons fail to comply with information reporting requirements. Payments of dividends that you receive in respect of our shares could be affected by this withholding if you are subject to the FATCA information reporting requirements and fail to comply with them or if you hold shares through a non-U.S. person (e.g., a foreign bank or broker) that fails to comply with these requirements (even if payments to you would not otherwise have been subject to FATCA withholding). An intergovernmental agreement between the United States and an applicable non-U.S. government may modify these rules. You should consult your tax advisors regarding the relevant U.S. law and other official guidance on FATCA withholding. Other Tax Consequences State and Local Taxes State or local taxation may apply to us and our shareholders in various state or local jurisdictions, including those in which we or they transact business or reside. The state and local tax treatment of us and our shareholders may not conform to the U.S. federal income tax consequences discussed above. Consequently, prospective shareholders should consult their tax advisors regarding the effect of state and local tax laws on an investment in us. Legislative or Other Actions Affecting REITs The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. We cannot assure you that a change in law, including the possibility of major tax legislation, possibly with retroactive application, will not significantly alter the tax considerations (including applicable tax rates) on REITs or their shareholders that we describe herein, which could adversely affect an investment in our shares. Taxpayers should consult with their tax advisors regarding the effect of any future legislation, on their particular circumstances. 135 Tax Consequences of Exercising the OP Unit Redemption Right If you are a holder of OP Units, other than a holder to which special provisions of the U.S. federal income tax laws apply, as enumerated above, and you exercise your redemption right under the JBG SMITH LP partnership agreement, we may elect to exercise our right to acquire some or all of such OP Units in exchange for cash or our common shares (rather than having JBG SMITH LP satisfy your redemption right. However, we are under no obligation to exercise this right. If we do elect to acquire your OP Units in exchange for cash or our common shares, the transaction will be treated as a fully taxable sale of your OP Units to us. Your amount realized, taxable gain and the tax consequences of that gain are described under "- Disposition of OP Units" below. If we do not elect to acquire some or all of your OP Units in exchange for our common shares, JBG SMITH LP is required to redeem those OP Units for cash. Your amount realized, taxable gain and the tax consequences of that gain are described under "- Redemption of OP Units" below. In addition, you will need to take into account the state and local tax consequences that would apply to you on exercise of your redemption right. Redemption of OP Units If JBG SMITH LP redeems OP Units for cash contributed by us in order to effect the redemption, the redemption likely will be treated as a sale of the OP Units to us in a fully taxable transaction, with your taxable gain and the tax consequences of that gain determined as described under "- Disposition of OP Units" below. If your OP Units are redeemed for cash that is not contributed by us to effect the redemption, your tax treatment will depend upon whether or not the redemption results in a disposition of all of your OP Units. If all of your OP Units are redeemed, your taxable gain and the tax consequences of that gain will be determined as described under "- Disposition of OP Units" below. However, if less than all of your OP Units are redeemed, you will recognize taxable gain only if and to the extent that your amount realized, calculated as described below, on the redemption exceeds your adjusted tax basis in all of your OP Units immediately before the redemption (rather than just your adjusted tax basis in the OP Units redeemed), and you will not be allowed to recognize loss on the redemption. Disposition of OP Units If you sell, exchange or otherwise dispose of OP Units (including through the exercise of the OP Unit redemption right where the disposition is treated as a sale, as discussed above in "-Redemption of OP Units"), gain or loss from the disposition will be based on the difference between the amount realized on the disposition and the adjusted tax basis of the OP Units. The amount realized on the disposition of OP Units generally will equal the sum of: any cash received, the fair market value of any other property received (including the fair market value of any of our common shares received pursuant to the redemption) received, and the amount of liabilities of JBGS SMITH LP allocated to the OP Units. You will recognize gain on the disposition of OP Units to the extent that this amount realized exceeds your adjusted tax basis in the OP Units. Because the amount realized includes any amount attributable to the relief from liabilities of JBG SMITH LP attributable to the OP Units, you could have taxable income, or perhaps even a tax liability, in excess of the amount of cash and value of the property received upon the disposition of the OP Units. Generally, gain recognized on the disposition of OP Units will be capital gain. However, any portion of your amount realized that is attributable to "unrealized receivables" of JBG SMITH LP (as defined in Section 751 of the Code) will give rise to ordinary income. The amount of ordinary income recognized would be equal to the amount by which your share of "unrealized receivables" of JBG SMITH LP exceeds the portion of your adjusted tax basis that is attributable to those assets. Unrealized receivables include, to the extent not previously included in JBG SMITH LP's income, your allocable share of any rights held by JBG SMITH LP to payment for services rendered or to be rendered. Unrealized receivables also include amounts that would be subject to recapture as ordinary income if JBG SMITH LP were to sell its assets at their fair market value at the time of the sale of OP Units. In addition, a portion of the capital gain recognized on a sale or other disposition of OP Units may be subject to tax at a maximum rate of 25% to the extent attributable to accumulated depreciation on our "section 1250 property," or depreciable real property. If you are considering disposing of your OP Units (including through exercise of your redemption right), you should consult with your personal tax advisor regarding the tax consequences to you of the disposition in light of your particular 136 circumstances, particularly if any of your OP Units were converted from LTIP Units. If you are a holder of OP Units and you exercise your redemption right under the JBG SMITH LP partnership agreement, you will be required to reimburse the JBG SMITH LP for certain quarterly nonresident partner state income tax payments made on your behalf. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not Applicable. 137 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE The information required by Item 10 is incorporated herein by reference from our definitive Proxy Statement to be filed pursuant to Regulation 14A of the Exchange Act for our 2024 Annual Meeting of Shareholders to be held on April 25, 2024 (the "2024 Proxy Statement"). The 2024 Proxy Statement will be filed within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated herein by reference from our 2024 Proxy Statement. The 2024 Proxy Statement will be filed within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required by Item 12 is incorporated herein by reference from our 2024 Proxy Statement. The 2024 Proxy Statement will be filed within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required by Item 13 is incorporated herein by reference from our 2024 Proxy Statement. The 2024 Proxy Statement will be filed within 120 days after the end of our fiscal year ended December 31, 2023. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required by Item 14 is incorporated herein by reference from our 2024 Proxy Statement. The 2024 Proxy Statement will be filed within 120 days after the end of our fiscal year ended December 31, 2023. 138 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) The following consolidated information is included in this Form 10-K: (1) Consolidated Financial Statements Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets as of December 31, 2023 and 2022 Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Equity for the years ended December 31, 2023, 2022 and 2021 Consolidated Statements of Cash Flows for the years ended December 31, 2023, 2022 and 2021 Notes to Consolidated Financial Statements These consolidated financial statements are set forth in Item 8 of this report and are hereby incorporated by reference. (2) Financial Statement Schedules 9 Schedule III - Real Estate Investments and Accumulated Depreciation Page 140 Schedules other than the one listed above are omitted because they are not applicable or the information required is included in the consolidated financial statements or the notes thereto. 139  $ Description Multifamily Operating Assets Fort Totten Square WestEnd25 F1RST Residences 1221 Van Street North End Retail (5) RiverHouse Apartments The Bartlett 220 20th Street West Half The Wren 900 W Street 901 W Street The Batley 2221 S. Clark- Residential 8001 Woodmont Ave Atlantic Plumbing Commercial Operating Assets 2101 L Street 2121 Crystal Drive 2345 Crystal Drive 2231 Crystal Drive 1550 Crystal Drive 2011 Crystal Drive 2451 Crystal Drive 1235 S. Clark Street 241 18th Street S. 251 18th Street S. 1215 S. Clark Street 201 12th Street S. 800 North Glebe Road 2200 Crystal Drive 1225 S. Clark Street 1901 South Bell Street 2100 Crystal Drive 1800 South Bell Street (6) 200 12th Street S. Crystal City Shops at 2100 Crystal Drive Retail One Democracy Plaza 1770 Crystal Drive Ground Leases and Other 1700 M Street 1831/1861 Wiehle Avenue Under-Construction Assets 1900 Crystal Drive (7) 2000/2001 South Bell Street Development Pipeline Corporate Corporate $ SCHEDULE III JBG SMITH PROPERTIES REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 2023 (Dollars in thousands) Costs Gross Amounts at Which Carried Capitalized at Close of Period Subsequent Buildings and to Improvements Improvements Acquisition(2) Improvements (3) Improvements Initial Cost to Company Buildings and Land and Land and Total Accumulated Depreciation and Amortization Construction(4) Acquired Date of Date Encumbrances(1) 2017 2007 2019 2017 2017 2007 2007 2017 2017 2017 2017 2017 2021 2002 2022 2022 2003 2002 2002 2002 2002 2002 2002 2002 2002 2002 2002 2002 2017 2002 2002 2002 2002 2002 2002 2002 2004 2002 2002 2002, 2006 2017 2002 2002 2017 — $ 97,500 77,512 87,253 — 307,710 217,453 80,240 — 110,045 — — — — 101,720 — 120,307 — — — — — — 76,537 — 34,152 105,000 32,728 — — 85,000 — — — 16,439 — — — — — — 187,358 61,271 24,390 $ 67,049 31,064 27,386 5,847 118,421 41,687 8,434 45,668 14,306 21,685 25,992 44,315 6,185 28,621 50,287 32,815 21,503 23,126 20,611 22,182 18,940 11,669 15,826 13,867 12,305 13,636 8,432 28,168 10,136 11,176 11,669 7,957 9,072 8,016 4,059 5,241 — 10,771 34,178 39,529 16,811 7,300 $ 90,404 5,039 133,256 63,775 9,333 125,078 — 19,340 17,902 — 5,162 8,790 158,408 $ 2,009 115,308 1,034 27,952 (109) 101,369 228,710 103,748 164,575 140,978 39,214 65,715 403 $ 24,424 69,177 31,069 28,263 5,871 139,341 41,993 9,030 49,079 17,767 22,182 26,905 44,412 92,379 118,219 134,285 90,850 9,200 205,527 228,404 122,492 179,066 137,517 43,879 73,592 158,714 $ 116,803 $ 187,396 165,354 119,113 15,071 344,868 270,397 131,522 228,145 155,284 66,061 100,497 203,126 23,985 44,004 20,740 24,748 1,987 100,055 46,040 49,363 43,091 23,580 8,323 13,478 12,175 16,981 37,084 6,540 53,710 60,250 16,563 180,775 105,483 51,642 87,329 93,918 83,705 70,525 76,921 68,047 56,090 54,169 49,360 48,380 52,750 140,983 30,050 43,495 36,918 23,590 28,702 30,552 9,309 20,465 33,628 44,276 46,938 — (3,714) 567 16,727 62,516 62,152 32,476 185,485 55,542 53,057 36,146 64,746 60,206 55,905 31,264 1,865 (23,390) 38,712 19,034 (11,148) 9,989 21,349 (5,992) (1,230) (27,590) 72,722 (26,130) 3,677 28,641 50,307 29,834 24,613 24,260 21,969 42,560 19,897 12,573 16,733 24,076 15,572 14,401 9,106 28,168 3,680 11,810 12,325 4,650 9,299 8,473 2,940 5,375 71 14,385 54,986 43,206 177,041 106,030 71,350 146,735 154,936 114,823 235,632 131,506 120,200 91,329 108,706 106,299 103,520 83,340 142,848 13,116 81,573 55,296 15,749 205,682 156,337 101,184 171,348 179,196 136,792 278,192 151,403 132,773 108,062 132,782 121,871 117,921 92,446 171,016 16,796 93,383 67,621 20,399 38,464 47,763 51,444 4,436 19,101 5,967 113,384 59,917 7,376 24,476 6,038 127,769 — — 54,986 43,206 7,596 6,528 1,315 64,534 82,224 63,041 68,700 67,615 59,539 52,722 57,420 58,313 55,243 47,072 34,589 281 40,465 32,242 6,873 36,978 32,323 1,870 11,786 2,219 13,965 — — 2015 2009 2017 2018 2015 1960 2016 2009 2019 2020 2020 2020 2019 1964 2021 2016 1975 1985 1988 1987 1980, 2020 1984 1990 1981 1977 1975 1983 1987 2012 1968 1982 1968 1968 1969 1985 1968 2003 1987 1980, 2020 53,187 335,465 7,989 397,474 405,463 136 2023 — 144,471 15,189 90,356 136,785 113,231 250,016 8,805 194,793 — 210,898 210,898 — 25 782,000 2,580,225 $ — 1,124,803 $ — 2,298,649 18,163 $ 2,451,710 $ — 1,194,737 $ 18,163 4,680,425 18,163 4,657 $ 5,875,162 $ 1,338,403 140 Note: Depreciation of the buildings and improvements is calculated over lives ranging from the life of the lease to 40 years. The net basis of our assets and liabilities for tax reporting purposes is approximately $422.1 million higher than the amounts reported in our consolidated balance sheet as of December 31, 2023. (1) (2) (3) (4) (5) (6) (7) Represents the contractual debt obligations. Includes asset impairments recognized, amounts written off in connection with redevelopment activities and partial sale of assets. Land associated with buildings under construction was included in construction in progress which is reflected in the Building and Improvements column. Date of original construction, many assets have had substantial renovation or additional construction. See "Costs Capitalized Subsequent to Acquisition" column. In January 2024, we sold North End Retail for a gross sales price of $14.3 million. In the first quarter of 2024, 1800 South Bell Street was taken out of service. In December 2023, a portion of 1900 Crystal Drive was placed into service. The following is a reconciliation of real estate and accumulated depreciation: Real Estate: (1) Balance at beginning of the year Acquisitions Additions Assets sold or written‑off Real estate impaired (2) Balance at end of the year Accumulated Depreciation: Balance at beginning of the year Depreciation expense Accumulated depreciation on assets sold or written‑off Accumulated depreciation on real estate impaired (2) Balance at end of the year 2023 Year Ended December 31, 2022 2021 $ $ $ $ 6,158,082 — 347,757 (444,480) (186,197) 5,875,162 1,335,000 187,988 (88,614) (95,971) 1,338,403 $ $ $ $ 6,310,361 365,166 352,034 (869,479) — 6,158,082 1,368,012 184,678 (217,690) — 1,335,000 $ $ $ $ 6,074,516 202,565 165,930 (92,332) (40,318) 6,310,361 1,232,699 201,649 (51,162) (15,174) 1,368,012 (1) (2) Includes assets held for sale. In 2023, we determined that 2101 L Street, 2100 Crystal Drive, 2200 Crystal Drive and a development parcel were impaired and recorded an impairment loss totaling $90.2 million. In 2021, we determined that 7200 Wisconsin Avenue, RTC-West and a development parcel were impaired and recorded an impairment loss totaling $25.1 million. See Note 19 to the consolidated financial statements for additional information. 141 (3) Exhibit Index Exhibits 2.1 2.2 2.3 Description Master Transaction Agreement, dated as of October 31, 2016, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties, Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc. and JBG/Operating Partners set forth on Schedule A thereto, JBG SMITH Properties and JBG SMITH Properties LP (incorporated by reference to Exhibit 2.1 to our Registration Statement on Form 10, filed on June 12, 2017). Amendment to Master Transaction Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties, Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc. and JBG/Operating Partners set forth on Schedule A thereto, JBG SMITH Properties and JBG SMITH Properties LP (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, filed on July 21, 2017). Separation and Distribution Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP (incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K, filed on July 21, 2017). 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 Second Amended and Restated Bylaws of JBG SMITH Properties, effective August 3, 2023 (incorporated by reference to Exhibit 3.4 in our Quarterly Report on Form 10-Q, filed on August 8, 2023). 4.1** Description of Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934, as amended. 10.1 Second Amended and Restated Limited Partnership Agreement of JBG SMITH Properties LP, dated as of December 17, 2020 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on December 17, 2020). 10.2 Amendment No. 1 to Second Amended and Restated Limited Partnership Agreement of JBG SMITH Properties LP, dated as of April 29, 2021 (incorporated by reference to Exhibit 10.2 to our Registration Statement on Form S-3, filed on June 30, 2021). 10.3 10.4 10.5 Tax Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on July 21, 2017). Employee Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on July 21, 2017). Transition Services Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed on July 21, 2017). 142 Exhibits 10.6 10.7 10.8 10.9 10.10 10.11 Description Credit Agreement, dated as of January 14, 2022 by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on January 14, 2022). First Amendment to Credit Agreement, dated as of July 29, 2022, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.3 to our Quarterly Report on Form 10-Q, filed on August 2, 2022). Second Amendment to Credit Agreement, dated as of July 24, 2023, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on July 28, 2023). Credit Agreement, dated as of July 29, 2022, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed on August 2, 2022). First Amendment to Credit Agreement, dated as of July 24, 2023, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.2 to our Current Report on Form - K, filed on July 28, 2023). Amended and Restated Credit Agreement, dated as of June 29, 2023, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on June 29, 2023). 10.12† Form of JBG SMITH Properties Unit Issuance Agreement (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K, filed on July 21, 2017). 10.13† JBG SMITH Properties Non-Employee Trustee Unit Issuance Agreement, dated July 18, 2017, by and among, JBG SMITH Properties, JBG SMITH Properties LP, Michael J. Glosserman and Glosserman Family JBG Operating, L.L.C. (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K, filed on July 21, 2017). 10.14† Separation Agreement, dated as of July 31, 2020, by and between JBG SMITH Properties and Robert A. Stewart (incorporated by reference to Exhibit 10.1 to our Current Report on Form 10-Q, filed on November 3, 2020). 10.15† Form of Indemnification Agreement between JBG SMITH Properties and each of its trustees and executive officers (incorporated by reference to Exhibit 10.12 to our Current Report on Form 8-K, filed on July 21, 2017). 10.16† JBG SMITH Properties 2017 Employee Share Purchase Plan (incorporated by reference to Exhibit 10.9 to our Current Report on Form 8-K, filed on July 21, 2017). 143 Exhibits 10.17† Description Amendment No. 1 to the JBG SMITH Properties 2017 Employee Share Purchase Plan, effective January 1, 2018 (incorporated by reference to Exhibit 10.20 to our Annual Report on Form 10-K, filed on March 12, 2018). 10.18† JBG SMITH Properties 2017 Omnibus Share Plan (incorporated by reference to Exhibit 10.10 to our Current Report on Form 8-K, filed on July 21, 2017). 10.19† Form of JBG SMITH Properties Formation Unit Agreement (incorporated by reference to Exhibit 10.18 to our Registration Statement on Form 10, filed on June 12, 2017). 10.20† Form of JBG SMITH Properties Formation Unit Agreement for Non-Employee Trustees (incorporated by reference to Exhibit 10.19 to our Registration Statement on Form 10, filed on June 12, 2017). 10.21† Form of JBG SMITH Properties Restricted LTIP Unit Agreement (incorporated by reference to Exhibit 10.20 to our Registration Statement on Form 10, filed on June 12, 2017). 10.22† Form of JBG SMITH Properties Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.21 to our Registration Statement on Form 10, filed on June 12, 2017). 10.23† Form of Second Amended and Restated 2017 JBG SMITH Properties Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 10-Q, filed on August 4, 2020). 10.24† Form of 2018 Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.26 to our Annual Report on Form 10-K, filed on March 12, 2018). 10.25† 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). 10.26† Amended Form of July 2021 Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.2 to our Current Report on Form 10-Q, filed on November 2, 2021). 10.27† Form of JBG SMITH Properties Non-Employee Trustee Restricted LTIP Unit Agreement (incorporated by reference to Exhibit 10.22 to our Registration Statement on Form 10, filed on June 21, 2017). 10.28† Form of JBG SMITH Properties Non-Employee Trustee Restricted Stock Agreement (incorporated by reference to Exhibit 10.23 to our Registration Statement on Form 10, filed on June 21, 2017). 10.29† Form of JBG SMITH Properties Non-Employee Trustee Unit Issuance Agreement (incorporated by reference to Exhibit 10.24 to our Registration Statement on Form 10, filed on June 21, 2017). 10.30 Side Letter to Tax Matters Agreement, dated as of August 13, 2018, by and between Vornado Realty Trust and JBG SMITH Properties (incorporated by reference to Exhibit 10.1 to our Current Report on Form 10-Q filed on November 7, 2018). 10.31† Amendment No. 1 to the JBG SMITH Properties 2017 Omnibus Share Plan, effective February 18, 2020 (incorporated by reference to Exhibit 10.30 to our Annual Report on Form 10-K, filed on March 5, 2020). 10.32† Amendment No. 2 to the JBG SMITH Properties 2017 Employee Share Purchase Plan, effective May 1, 2019 (incorporated by reference to Exhibit 10.31 to our Annual Report on Form 10-K, filed on March 5, 2020). 144 Exhibits Description 10.33† Amendment No. 3 to the 2017 Employee Share Purchase Plan, effective July 20, 2020 (incorporated by reference to Exhibit 10.2 to our Current Report on Form 10-Q, filed on November 3, 2020). 10.34†** Amendment No. 4 to the 2017 Employee Share Purchase Plan, effective October 30, 2023. 10.35† Form of 2020 JBG SMITH Properties Restricted LTIP Unit Agreement (incorporated by reference to Exhibit 10.32 to our Annual Report on Form 10-K, filed on March 5, 2020). 10.36† Form of 2020 JBG SMITH Properties Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.33 to our Annual Report on Form 10-K, filed on March 5, 2020). 10.37† Form of Amended and Restated 2018 Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.30 to our Annual Report on Form 10-K, filed on March 5, 2020). 10.38† Second Amended and Restated Employment Agreement, dated as of February 18, 2021, by and between JBG SMITH Properties and W. Matthew Kelly (incorporated by reference to Exhibit 10.32 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.39† Second Amended and Restated Employment Agreement, dated as of February 18, 2021, by and between JBG SMITH Properties and Kevin P. Reynolds (incorporated by reference to Exhibit 10.34 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.40† Amended and Restated Employment Agreement, dated as of February 18, 2021, by and between JBG SMITH Properties and Madhumita Moina Banerjee (incorporated by reference to Exhibit 10.35 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.41† Amended and Restated Employment Agreement, dated as of February 18, 2021, by and between JBG SMITH Properties and Steven A. Museles (incorporated by reference to Exhibit 10.37 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.42† Employment Agreement, dated as of February 18, 2021, by and between JBG SMITH Properties and George Xanders (incorporated by reference to Exhibit 10.38 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.43† Amendment No. 2 to the JBG SMITH Properties 2017 Omnibus Share Plan, effective December 1, 2020 (incorporated by reference to Exhibit 10.39 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.44† Amendment No. 3 to the JBG SMITH Properties 2017 Omnibus Share Plan (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on April 30, 2021). 10.45† Form of JBG SMITH Properties Restricted Share Unit Award Agreement for Employees (incorporated by reference to Exhibit 10.40 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.46† Form of JBG SMITH Properties Restricted Share Unit Award Agreement for Consultants (incorporated by reference to Exhibit 10.41 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.47† 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). 145 Exhibits Description 10.48† 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). 10.49† Form of JBG SMITH Properties Performance Share Unit Award Agreement (incorporated by reference to Exhibit 10.42 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.50† Form of 2021 JBG SMITH Properties Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.43 to our Annual Report on Form 10-K, filed on February 23, 2021). 10.51† Form of AO LTIP Unit Agreement (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on January 5, 2022). 10.52†** Form of 2024 AO LTIP Unit Agreement. 10.53†** Form of Agreement Equity Award in Lieu of Annual Cash Bonus. 10.54†** First Amendment to Second Amended and Restated Employment Agreement, dated as of February 14, 2024, by and between JBG SMITH Properties and Kevin P. Reynolds. 10.55†** Employment Agreement, dated as of February 14, 2024, by and between JBG SMITH Properties and Evan Regan-Levine. 10.56†** Employment Agreement, dated as of February 14, 2024, by and between JBG SMITH Properties and David Ritchey. 10.57†** First Amendment to Amended and Restated Employment Agreement, dated as of February 14, 2024, by and between JBG SMITH Properties and Madhumita Moina Banerjee. 10.58†** First Amendment to Amended and Restated Employment Agreement, dated as of February 14, 2024, by and between JBG SMITH Properties and Steven A. Museles. 10.59†** First Amendment to Employment Agreement, dated as of February 14, 2024, by and between JBG SMITH Properties and George Xanders. 21.1** List of Subsidiaries of the Registrant. 23.1** Consent of Independent Registered Public Accounting Firm. 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. 97.1†** JBG SMITH Properties Incentive Compensation Recovery Policy. 101.INS Inline 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. 146 Exhibits Description 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. ITEM 16. FORM 10-K SUMMARY None. 147 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 20, 2024 JBG SMITH Properties /s/ M. Moina Banerjee M. Moina Banerjee Chief Financial Officer (Principal Financial Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated: NAME TITLE DATE /s/ Robert A. Stewart Robert Stewart /s/ W. Matthew Kelly W. Matthew Kelly /s/ M. Moina Banerjee M. Moina Banerjee /s/ Angela Valdes Angela Valdes /s/ Phyllis R. Caldwell Phyllis R. Caldwell /s/ Scott A. Estes Scott A. Estes /s/ Alan S. Forman Alan S. Forman /s/ Michael J. Glosserman Michael J. Glosserman /s/ Alisa M. Mall Alisa M. Mall /s/ Carol A. Melton Carol A. Melton /s/ William J. Mulrow William J. Mulrow /s/ D. Ellen Shuman D. Ellen Shuman Chairman of the Board February 20, 2024 February 20, 2024 February 20, 2024 February 20, 2024 February 20, 2024 February 21, 2023 February 20, 2024 February 20, 2024 February 20, 2024 February 20, 2024 February 20, 2024 February 20, 2024 Chief Executive Officer and Trustee (Principal Executive Officer) Chief Financial Officer (Principal Financial Officer) Chief Accounting Officer (Principal Accounting Officer) Trustee Trustee Trustee Trustee Trustee Trustee Trustee Trustee 148 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, W. Matthew Kelly, certify that: 1. I have reviewed this annual report on Form 10-K of JBG SMITH Properties; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: ’ a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and ’ d. Disclosed in this report any change in the registrant during the registrant report) that has materially affected, or is reasonably likely to materially affect, the registrant over financial reporting; and s most recent fiscal quarter (the registrant s internal control over financial reporting that occurred s fourth fiscal quarter in the case of an annual s internal control ’ ’ ’ ’ 5. The registrant s other certifying officer and I have disclosed, based on our most recent evaluation of internal s board of s auditors and the audit committee of the registrant control over financial reporting, to the registrant directors (or persons performing the equivalent functions): ’ ’ ’ a. All significant deficiencies and material weaknesses in the design or operation of internal control over s ability to record, process, financial reporting which are reasonably likely to adversely affect the registrant summarize and report financial information; and ’ b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant s internal control over financial reporting. February 20, 2024 ’ /s/ W. Matthew Kelly W. Matthew Kelly Chief Executive Officer (Principal Executive Officer) Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, M. Moina Banerjee, certify that: 1. I have reviewed this annual report on Form 10-K of JBG SMITH Properties; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. February 20, 2024 /s/ M. Moina Banerjee M. Moina Banerjee Chief Financial Officer (Principal Financial Officer) CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Exhibit 32.1 December 10-K for the period In connection with the Annual Report of JBG SMITH Properties (the ended I, W. Report Matthew Kelly, Chief Executive Officer of the Company, and I, M. Moina Banerjee, Chief Financial Officer of the 906 of the Company, certify, to our knowledge, pursuant to 18 U.S.C. Section Sarbanes-Oxley Act of 2002, that: as filed with the Securities and Exchange Commission on the date hereof (the 1350, as adopted pursuant to Section ) on Form Company 31, 2023 ), “ ” ” “ 1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. February 20, 2024 February 20, 2024 /s/ W. Matthew Kelly W. Matthew Kelly Chief Executive Officer /s/ M. Moina Banerjee M. Moina Banerjee Chief Financial Officer 2023 Annual Report Executive Officers W. Matthew Kelly Chief Executive Officer and Trustee M. Moina Banerjee Chief Financial Officer Kevin P. Reynolds Chief Development Officer George L. Xanders Chief Investment Officer Steven A. Museles Chief Legal Officer David Ritchey Chief Commercial Officer Evan Regan-Levine Chief Strategy Officer Board of Trustees Robert A. Stewart Independent Chairman of the Board of Trustees W. Matthew Kelly Chief Executive Officer and Trustee Scott A. Estes Independent Trustee William J. Mulrow Independent Trustee Alan S. Forman Independent Trustee Alisa M. Mall Independent Trustee D. Ellen Shuman Independent Trustee Phyllis R. Caldwell Independent Trustee Michael J. Glosserman Independent Trustee Carol A. Melton Independent Trustee 1900 Crystal Drive (under-construction multifamily asset) 3/5/24 16:59 3/5/24 16:59 4747 Bethesda Avenue, Suite 200 Bethesda, MD 20814JBGSMITH.com | 240.333.3600 | NYSE: JBGS

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