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
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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.
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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.
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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.
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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.
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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.
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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.
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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%
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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:
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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.
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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
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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
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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
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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.
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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.
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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
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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.
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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.
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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
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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
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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
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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
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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
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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;
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•
•
•
•
•
•
•
•
•
•
•
•
•
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:
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• 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
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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
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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
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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:
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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:
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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.
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Activity subsequent to December 31, 2023 included:
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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.
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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.
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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
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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
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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
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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.
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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
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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.
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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.
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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
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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
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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."
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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.
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• 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.
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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
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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.
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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.
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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.
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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
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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
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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
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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
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•
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
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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
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