JBG SMITH Properties 10-Q for FY2025 Q1
JBG SMITH Properties (JBGS)
About this 10-Q
JBG SMITH Properties filed this 10-Q on April 29, 2025, covering the quarter ended March 31, 2025 (FY2025 Q1).
Headline figures
Quarter ended March 31, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $120.69M
- down 16.9% from $145.18M a year earlier
- Net loss
- $45.72M
- compared with a net loss of $32.28M a year earlier
- Diluted EPS
- -$0.56
- compared with -$0.36 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from ___________ to ___________
Commission file number
________________________________________________________________________________
(Exact name of Registrant as specified in its charter)
Registrant's telephone number, including area code: (
_______________________________
Securities registered pursuant to Section 12(b) of the Act:
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.
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).
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.
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes
As of April 25, 2025, JBG SMITH Properties had
JBG SMITH PROPERTIES
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED MARCH 31, 2025
TABLE OF CONTENTS
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| | Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2025 and December 31, 2024 | 3 |
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| | 7 | |
| | Notes to Condensed Consolidated Financial Statements (unaudited) | 9 |
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| Management's Discussion and Analysis of Financial Condition and Results of Operations | 27 | |
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2
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
JBG SMITH PROPERTIES
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except par value amounts)
|
| March 31, 2025 |
| December 31, 2024 | ||
ASSETS |
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Real estate, at cost: |
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Land and improvements | | $ | | | $ | |
Buildings and improvements | |
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Construction in progress, including land | |
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Less: accumulated depreciation | |
| ( | |
| ( |
Real estate, net | |
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Cash and cash equivalents | |
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Restricted cash | |
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Tenant and other receivables | |
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Deferred rent receivable | |
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Investments in unconsolidated real estate ventures | |
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Deferred leasing costs, net | | | | | | |
Intangible assets, net | | | | | | |
Other assets, net | |
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Assets held for sale | |
| — | |
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TOTAL ASSETS | | $ | | | $ | |
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LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |
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Liabilities: | |
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Mortgage loans, net | | $ | | | $ | |
Revolving credit facility | |
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Term loans, net | |
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Accounts payable and accrued expenses | |
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Other liabilities, net | |
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Liabilities related to assets held for sale | |
| — | |
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Total liabilities | |
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Commitments and contingencies | |
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Redeemable noncontrolling interests | |
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Shareholders' equity: | |
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Preferred shares, $ | |
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Common shares, $ | |
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Additional paid-in capital | |
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Accumulated deficit | |
| ( | |
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Accumulated other comprehensive income | |
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Total equity | |
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TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | | $ | | | $ | |
See accompanying notes to the condensed consolidated financial statements (unaudited).
3
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
REVENUE | | |
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Property rental | | $ | | | $ | |
Third-party real estate services, including reimbursements | |
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Other revenue | |
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Total revenue | |
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EXPENSES | |
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Depreciation and amortization | |
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Property operating | |
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Real estate taxes | |
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General and administrative: | |
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Corporate and other | |
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Third-party real estate services | |
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Transaction and other costs | |
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Total expenses | |
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OTHER INCOME (EXPENSE) | |
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Income (loss) from unconsolidated real estate ventures, net | |
| ( | |
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Interest and other income, net | |
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Interest expense | |
| ( | |
| ( |
Gain on the sale of real estate, net | |
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Loss on the extinguishment of debt | |
| ( | |
| — |
Impairment loss | | | ( | | | ( |
Total other income (expense) | |
| ( | |
| ( |
LOSS BEFORE INCOME TAX BENEFIT | |
| ( | |
| ( |
Income tax benefit | |
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NET LOSS | |
| ( | |
| ( |
Net loss attributable to redeemable noncontrolling interests | |
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Net loss attributable to noncontrolling interests | |
| — | |
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NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | | $ | ( | | $ | ( |
LOSS PER COMMON SHARE - BASIC AND DILUTED | | $ | ( | | $ | ( |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | |
| | |
| |
See accompanying notes to the condensed consolidated financial statements (unaudited).
4
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
(In thousands)
| Three Months Ended March 31, | |||||
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| 2025 |
| 2024 | ||
NET LOSS | | $ | ( | | $ | ( |
OTHER COMPREHENSIVE INCOME (LOSS) | |
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Change in fair value of derivative financial instruments | |
| ( | |
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Reclassification of net income on derivative financial instruments from accumulated other comprehensive income into interest expense | |
| ( | |
| ( |
Total other comprehensive income (loss) | |
| ( | |
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COMPREHENSIVE LOSS | |
| ( | |
| ( |
Net loss attributable to redeemable noncontrolling interests | |
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Net loss attributable to noncontrolling interests | | | — | | | |
Other comprehensive (income) loss attributable to redeemable noncontrolling interests | |
| | |
| ( |
Other comprehensive income attributable to noncontrolling interests | | | — | | | ( |
COMPREHENSIVE LOSS ATTRIBUTABLE TO JBG SMITH PROPERTIES | | $ | ( | | $ | ( |
See accompanying notes to the condensed consolidated financial statements (unaudited).
5
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Equity
(Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | ||
| | | | | | | | | | | | | Accumulated | | | | | | ||
| | | | | | | Additional | | | | | Other | | | | | | |||
| | Common Shares | | Paid-In | | Accumulated |
| Comprehensive | | Noncontrolling | | Total | ||||||||
| | Shares | | Amount | | Capital | | Deficit |
| Income | | Interests | | Equity | ||||||
BALANCE AS OF DECEMBER 31, 2024 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | — | | $ | |
Net loss attributable to common shareholders |
| — | |
| — | |
| — | |
| ( | |
| — | |
| — | |
| ( |
Redemption of common limited partnership units ("OP Units") for common shares |
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| — | |
| — | |
| — | |
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Common shares repurchased | | ( | | | ( | | | ( | | | — | | | — | | | — | | | ( |
Common shares issued pursuant to employee incentive compensation plan and Employee Share Purchase Plan ("ESPP") | | | | | — | | | | | | — | | | — | | | — | | | |
Redeemable noncontrolling interests redemption value adjustment and total other comprehensive loss allocation |
| — | |
| — | |
| ( | |
| — | |
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| — | |
| ( |
Total other comprehensive loss |
| — | |
| — | |
| — | |
| — | |
| ( | |
| — | |
| ( |
BALANCE AS OF MARCH 31, 2025 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | — | | $ | |
| | | | | | | | | | | | | | | | | | | | |
BALANCE AS OF DECEMBER 31, 2023 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | |
Net loss attributable to common shareholders and noncontrolling interests |
| — | |
| — | |
| — | |
| ( | |
| — | |
| ( | |
| ( |
Redemption of OP Units for common shares |
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| — | |
| — | |
| — | |
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Common shares repurchased | | ( | | | ( | | | ( | | | — | | | — | | | — | | | ( |
Common shares issued pursuant to employee incentive compensation plan and ESPP | | | | | — | | | | | | — | | | — | | | — | | | |
Dividends declared on common shares ($ | | — | | | — | | | — | | | ( | | | — | | | — | | | ( |
Distributions to noncontrolling interests, net |
| — | |
| — | |
| — | |
| — | |
| — | |
| ( | |
| ( |
Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation |
| — | |
| — | |
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| ( | |
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Total other comprehensive income |
| — | |
| — | |
| — | |
| — | |
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| — | |
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Other comprehensive income attributable to noncontrolling interests | | — | | | — | | | — | | | — | | | ( | | | | | | — |
BALANCE AS OF MARCH 31, 2024 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | | | $ | |
See accompanying notes to the condensed consolidated financial statements (unaudited).
6
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
OPERATING ACTIVITIES |
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Net loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash provided by operating activities: | |
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Share-based compensation expense | |
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Depreciation and amortization expense, including amortization of deferred financing costs | |
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Deferred rent | |
| ( | |
| ( |
(Income) loss from unconsolidated real estate ventures, net | |
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| ( |
Amortization of market lease intangibles, net | |
| ( | |
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Amortization of lease incentives | |
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Loss on the extinguishment of debt | |
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| — |
Impairment loss | | | | | | |
Gain on the sale of real estate, net | |
| ( | |
| ( |
Loss on operating lease and other receivables | |
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(Income) loss from investments, net | | | | | | ( |
Return on capital from unconsolidated real estate ventures | |
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Other non-cash items | |
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Changes in operating assets and liabilities: | |
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Tenant and other receivables | |
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Other assets, net | |
| ( | |
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Accounts payable and accrued expenses | |
| ( | |
| ( |
Other liabilities, net | |
| ( | |
| ( |
Net cash provided by operating activities | |
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INVESTING ACTIVITIES | |
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Development costs, construction in progress and real estate additions | |
| ( | |
| ( |
Proceeds from the sale of real estate | |
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Proceeds from derivative financial instruments | | | | | | |
Distributions of capital from unconsolidated real estate ventures and other investments | |
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Investments in unconsolidated real estate ventures and other investments | |
| ( | |
| ( |
Net cash provided by investing activities | |
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FINANCING ACTIVITIES | |
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Borrowings under mortgage loans | |
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Borrowings under revolving credit facility | |
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Repayments of mortgage loans | |
| ( | |
| ( |
Repayments of revolving credit facility | |
| ( | |
| ( |
Payments on derivative financial instruments | | | ( | | | ( |
Debt issuance and modification costs | |
| ( | |
| ( |
Proceeds from common shares issued pursuant to ESPP | |
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Common shares repurchased | | | ( | | | ( |
Dividends paid to common shareholders | |
| ( | |
| ( |
Distributions to redeemable noncontrolling interests | |
| ( | |
| ( |
Distributions to noncontrolling interests | | | — | | | ( |
Net cash used in financing activities | |
| ( | |
| ( |
7
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
Net increase (decrease) in cash and cash equivalents, and restricted cash | | $ | ( | | $ | |
Cash and cash equivalents, and restricted cash, beginning of period | |
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Cash and cash equivalents, and restricted cash, end of period | | $ | | | $ | |
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CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | |
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Cash and cash equivalents | | $ | | | $ | |
Restricted cash | |
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Cash and cash equivalents, and restricted cash | | $ | | | $ | |
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION | |
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Cash paid for interest (net of capitalized interest of $ | | $ | | | $ | |
Accrued capital expenditures included in accounts payable and accrued expenses | |
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Write-off of fully depreciated assets | |
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Redemption of OP Units for common shares | |
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Accrual for common shares repurchased pending settlement | | | | | | — |
Cash paid for amounts included in the measurement of lease liabilities for operating leases | |
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See accompanying notes to the condensed consolidated financial statements (unaudited).
8
JBG SMITH PROPERTIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1.Organization and Basis of Presentation
Organization
JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust, owns, operates and develops mixed-use properties concentrated in amenity-rich, Metro-served submarkets in and around Washington, D.C., most notably National Landing, that we believe have long-term growth potential and appeal to residential, office and retail tenants. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, highly amenitized, walkable neighborhoods throughout the Washington, D.C. metropolitan area. Approximately
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 March 31, 2025, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned
As of March 31, 2025, our Operating Portfolio consisted of
We derive our revenue primarily from leases with multifamily and commercial tenants. Revenue under our multifamily leases is generally due on a monthly basis with terms of approximately one year or less, and may include income from utility recoveries, parking and other miscellaneous items. Our commercial leases 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 real estate services business provides fee-based real estate services.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these condensed consolidated financial statements do not contain certain information required in annual financial statements and notes as required under GAAP. In our opinion, all adjustments considered necessary for a fair presentation have been included, and all such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated. The results of operations for the three months ended March 31, 2025 and 2024 are not necessarily indicative of the results that may be expected for a full year. These condensed consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission ("SEC") on February 18, 2025 ("Annual Report").
9
The accompanying condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH LP. See Note 5 for additional 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 condensed consolidated financial statements.
References to our financial statements refer to our unaudited condensed consolidated financial statements as of March 31, 2025 and December 31, 2024, and for the three months ended March 31, 2025 and 2024. References to our balance sheets refer to our condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024. References to our statements of operations refer to our condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024. References to our statements of comprehensive loss refer to our condensed consolidated statements of comprehensive loss for the three months ended March 31, 2025 and 2024.
Income Taxes
We have elected to be taxed as a real estate investment trust ("REIT") under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from those activities.
2.Summary of Significant Accounting Policies
Significant Accounting Policies
There were no material changes to our significant accounting policies disclosed in our Annual Report.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
Recent Accounting Pronouncements
Standards Not Yet Adopted
Expense Disaggregation Disclosures
In November 2024, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses." ASU 2024-03 requires expanded interim and annual disclosures of certain expense information in the notes to the financial statements. The guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance can be applied on a prospective or retrospective basis. We are currently evaluating the potential impact of adopting this new guidance on our financial statement disclosures.
Income Taxes
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures." ASU 2023-09 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). ASU 2023-09 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,
10
2024. 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 financial statement disclosures.
3.Dispositions
Dispositions
The following is a summary of activity for the three months ended March 31, 2025:
| | | | | | | | | | | | ||
| | | | | | Gross | | Cash | | on the Sale | |||
| | | | | | Sales | | Proceeds | | of Real | |||
Date Disposed |
| Assets |
| Segment |
| Price |
| from Sale |
| Estate | |||
| | | | | | (In thousands) | |||||||
February 19, 2025 | | 8001 Woodmont (1) | | Multifamily | | $ | | | $ | | | $ | ( |
| | Other (2) | | | | | | | | | | | |
| | | | | | | | | | | | $ | |
| (1) | In connection with the sale, we repaid the related $ |
| (2) | Related to prior year dispositions. |
4.Investments in Unconsolidated Real Estate Ventures
The following is a summary of the composition of our investments in unconsolidated real estate ventures:
| | | | | | | | |
|
| Effective | | | | | | |
| | Ownership | | | ||||
Real Estate Venture |
| Interest (1) |
| March 31, 2025 |
| December 31, 2024 | ||
| | | | (In thousands) | ||||
J.P. Morgan Global Alternatives ("J.P. Morgan") (2) | | | $ | | | $ | | |
4747 Bethesda Venture | | | | | | | | |
Brandywine Realty Trust |
| |
| | |
| | |
Other |
| | |
| | | | |
Total investments in unconsolidated real estate ventures (3) (4) | | | | $ | | | $ | |
| (1) | Reflects our effective ownership interests as of March 31, 2025. We have multiple investments with certain venture partners in the underlying real estate. |
| (2) | J.P. Morgan is the advisor for an institutional investor. |
| (3) | Excludes |
| (4) | As of March 31, 2025 and December 31, 2024, our total investments in unconsolidated real estate ventures were greater than our share of the net book value of the underlying assets by $ |
We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $
11
The following is a summary of the debt of our unconsolidated real estate ventures:
| | Weighted | | | | | | |
| | Average Effective | | | ||||
|
| Interest Rate (1) |
| March 31, 2025 |
| December 31, 2024 | ||
| | | | (In thousands) | ||||
Variable rate (2) |
| | $ | | | $ | | |
Fixed rate (3) |
| |
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Mortgage loans | | | |
| | |
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Unamortized deferred financing costs and premium / discount, net | | | |
| ( | |
| ( |
Mortgage loans, net (4) | | | | $ | | | $ | |
| (1) | Weighted average effective interest rate as of March 31, 2025. |
| (2) | Includes variable rate mortgage loans with interest rate cap agreements. |
| (3) | Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements. |
| (4) | See Note 17 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures. |
The following is a summary of financial information for our unconsolidated real estate ventures:
|
| March 31, 2025 |
| December 31, 2024 | ||
|
| (In thousands) | ||||
Combined balance sheet information: (1) | | | | | | |
Real estate, net | | $ | | | $ | |
Other assets, net | |
| | |
| |
Total assets | | $ | | | $ | |
| | | | | | |
Mortgage loans, net | | $ | | | $ | |
Other liabilities, net | |
| | |
| |
Total liabilities | |
| | |
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Total equity | |
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Total liabilities and equity | | $ | | | $ | |
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
|
| (In thousands) | ||||
Combined income statement information: (1) | | | | | | |
Total revenue | | $ | | | $ | |
Operating income (2) | |
| | |
| |
Net income (loss) (2) | |
| ( | |
| |
| (1) | Excludes amounts related to the Fortress Assets. Excludes combined balance sheet information and combined income statement information for all the periods presented related to The Foundry and the L'Enfant Plaza assets as we discontinued applying the equity method of accounting after September 30, 2023 and September 30, 2022. In April 2024, the lender foreclosed on the mortgage loan secured by The Foundry and took possession of the property. In October 2024, the lender foreclosed on the mortgage loan secured by the L’Enfant Plaza assets and took possession of the properties. |
| (2) | Includes the gain on the sale of Central Place Tower of $ |
5.Variable Interest Entities
We hold various interests in entities deemed to be VIEs, which we evaluate at acquisition, formation, after a change in the ownership agreement, after a change in the entity's economics or after any other reconsideration event to determine if the VIE should be consolidated in our financial statements or should no longer be considered a VIE. An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk or conducts substantially all its operations on behalf of an investor with disproportionately few voting rights. We will consolidate a VIE if we are the primary beneficiary
12
of the VIE, which entails having the power to direct the activities that most significantly impact the VIE’s economic performance. Certain criteria we assess in determining whether we are the primary beneficiary of the VIE include our influence over significant business activities, our voting rights and any noncontrolling interest kick-out or participating rights.
Unconsolidated VIEs
As of March 31, 2025 and December 31, 2024, 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 March 31, 2025 and December 31, 2024, the net carrying amounts of our investment in these entities were $
Consolidated VIEs
JBG SMITH LP is our only consolidated VIE. We hold
6.Other Assets, Net
The following is a summary of other assets, net:
|
| March 31, 2025 |
| December 31, 2024 | ||
| | (In thousands) | ||||
Prepaid expenses | | $ | | | $ | |
Derivative financial instruments, at fair value | | | | | | |
Deferred financing costs, net | |
| | |
| |
Operating lease right-of-use assets | | | | | | |
Investments in funds (1) | | | | | | |
Other investments (2) | | | | | | |
Other | |
| | |
| |
Total other assets, net | | $ | | | $ | |
| (1) | Consists of investments in real estate-focused technology companies, which are recorded at their fair value based on their reported net asset value. During the three months ended March 31, 2025 and 2024, unrealized gains (losses) related to these investments were ($ |
| (2) | Primarily consists of equity investments that are carried at cost. |
13
7.Debt
Mortgage Loans
The following is a summary of mortgage loans:
| | Weighted Average | | | | | | |
| | Effective | | | ||||
|
| Interest Rate (1) |
| March 31, 2025 |
| December 31, 2024 | ||
| | | (In thousands) | |||||
Variable rate (2) |
| | $ | | | $ | | |
Fixed rate (3) |
| |
| | |
| | |
Mortgage loans | | | |
| | |
| |
Unamortized deferred financing costs and premium / discount, net | | | |
| ( | |
| ( |
Mortgage loans, net | | | | $ | | | $ | |
| (1) | Weighted average effective interest rate as of March 31, 2025. |
| (2) | Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was |
| (3) | Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements. |
As of March 31, 2025 and December 31, 2024, the net carrying value of real estate collateralizing our mortgage loans totaled $
In February 2025, in connection with the sale of 8001 Woodmont, we repaid the related $
As of March 31, 2025 and December 31, 2024, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $
Revolving Credit Facility and Term Loans
As of March 31, 2025 and December 31, 2024, our unsecured revolving credit facility and term loans totaling $
The agreements for our unsecured revolving credit facility and term loans include customary restrictive covenants, that, among other things, restrict our ability to incur additional indebtedness, to engage in material asset sales, mergers, consolidations and acquisitions, and to make capital expenditures, and also include requirements to maintain financial ratios. Our ability to borrow is subject to compliance with these covenants, and failure to comply with our covenants could cause a default, and we may then be required to repay such debt.
14
The following is a summary of amounts outstanding under the revolving credit facility and term loans:
| | Effective | | | ||||
|
| Interest Rate (1) | | March 31, 2025 |
| December 31, 2024 | ||
| | | | (In thousands) | ||||
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 |
|
| | $ | | | $ | |
| (1) | Effective interest rate as of March 31, 2025. The interest rate for our revolving credit facility excludes a |
| (2) | As of March 31, 2025, daily SOFR was |
| (3) | As of March 31, 2025 and December 31, 2024, excludes $ |
| (4) | The interest rate swaps fix SOFR at a weighted average interest rate of |
| (5) | The interest rate swaps fix SOFR at a weighted average interest rate of |
| (6) | The interest rate swap fixes SOFR at an interest rate of |
8.Other Liabilities, Net
The following is a summary of other liabilities, net:
|
| March 31, 2025 |
| December 31, 2024 | ||
| | (In thousands) | ||||
Lease intangible liabilities, net | | $ | | | $ | |
Lease incentive liabilities | |
| | |
| |
|
| | |
| | |
Prepaid rent | |
| | |
| |
Security deposits | |
| | |
| |
Environmental liabilities | |
| | |
| |
Deferred tax liability, net | |
| | |
| |
Dividends payable | |
| — | |
| |
Derivative financial instruments, at fair value | |
| | |
| |
Other (1) | |
| | |
| |
Total other liabilities, net | | $ | | | $ | |
(1) | Amount as of March 31, 2025 is primarily related to accrual for common shares repurchased pending settlement. |
9.Redeemable Noncontrolling Interests
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 three months ended March 31, 2025 and 2024, unitholders redeemed
15
"Additional paid-in capital" in our balance sheets. Redemption value per OP Unit is equivalent to the market value of one common share at the end of the period.
The following is a summary of the activity of redeemable noncontrolling interests:
| Three Months Ended March 31, | ||||
| 2025 | | 2024 | ||
| (In thousands) | ||||
Balance, beginning of period | $ | | | $ | |
Redemptions |
| ( | |
| ( |
LTIP Units issued in lieu of cash compensation (1) |
| | |
| |
Net loss |
| ( | |
| ( |
Other comprehensive income (loss) |
| ( | |
| |
Distributions |
| — | |
| ( |
Share-based compensation expense |
| | |
| |
Adjustment to redemption value |
| | |
| ( |
Balance, end of period | $ | | | $ | |
| (1) | See Note 11 for additional information. |
10.Property Rental Revenue
The following is a summary of property rental revenue from our non-cancellable leases:
| Three Months Ended March 31, | ||||
| 2025 |
| 2024 | ||
| (In thousands) | ||||
Fixed | $ | | | $ | |
Variable | | | | | |
Property rental revenue | $ | | | $ | |
11.Share-Based Payments
LTIP Units and Time-Based LTIP Units
In January 2025, we granted to certain employees
In January 2025, we granted
The aggregate grant-date fair value of the Time-Based LTIP Units and the LTIP Units granted during the three months ended March 31, 2025 was $
Expected volatility |
| |
Risk-free interest rate |
| |
Post-grant restriction periods |
|
In April 2025, as part of their annual compensation, we granted to non-employee trustees a total of
16
Appreciation-Only LTIP Units ("AO LTIP Units")
In January 2025, we granted to certain employees
The aggregate grant-date fair value of the AO LTIP Units granted during the three months ended March 31, 2025 was $
Expected volatility |
| |
Dividend yield |
| |
Risk-free interest rate |
|
Performance-Based LTIP Units
In January 2025, we issued
Restricted Share Units ("RSUs")
In January 2025, we granted to certain non-executive employees
The aggregate grant-date fair value of the Time-Based RSUs granted during the three months ended March 31, 2025 was $
ESPP
Pursuant to the ESPP, employees purchased
Expected volatility |
| |
Dividend yield |
| |
Risk-free interest rate |
| |
Expected life | |
17
Share-Based Compensation Expense
The following is a summary of share-based compensation expense:
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
|
| (In thousands) | ||||
Time-Based LTIP Units | | $ | | | $ | |
AO LTIP Units and Performance-Based LTIP Units | |
| | |
| |
Other equity awards (1) | |
| | |
| |
Total share-based compensation expense | |
| | |
| |
Less: amount capitalized | |
| ( | |
| ( |
Share-based compensation expense | | $ | | | $ | |
| (1) | Primarily comprising compensation expense for: (i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonuses earned, (ii) RSUs and (iii) shares issued under our ESPP. |
As of March 31, 2025, we had $
12.Transaction and Other Costs
The following is a summary of transaction and other costs:
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
|
| (In thousands) | ||||
Completed, potential and pursued transaction expenses (1) | | $ | | | $ | |
Severance and other costs | |
| | |
| |
Demolition costs | | | | | | — |
Transaction and other costs | | $ | | | $ | |
| (1) | Primarily consists of dead deal costs and legal costs related to pursued transactions. |
13.Interest Expense
The following is a summary of interest expense:
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
|
| (In thousands) | ||||
Interest expense before capitalized interest | | $ | | | $ | |
Amortization of deferred financing costs | |
| | |
| |
Net unrealized (gain) loss on non-designated derivatives | |
| ( | |
| |
Capitalized interest | |
| ( | |
| ( |
Interest expense | | $ | | | $ | |
14.Shareholders' Equity and Loss Per Common Share
Common Shares Repurchased
Our Board of Trustees previously authorized the repurchase of up to $
18
million common shares for $
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 or 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.
The following is a summary of the calculation of basic and diluted loss per common share and a reconciliation of net loss to the amounts of net loss available to common shareholders used in calculating basic and diluted loss per common share:
| | Three Months Ended March 31, | ||||
| | 2025 |
| 2024 | ||
| | (In thousands, except per share amounts) | ||||
Net loss | | $ | ( | | $ | ( |
Net loss attributable to redeemable noncontrolling interests | |
| | |
| |
Net loss attributable to noncontrolling interests | |
| — | |
| |
Net loss attributable to common shareholders | | | ( | | | ( |
Distributions to participating securities | |
| — | |
| ( |
Net loss available to common shareholders - basic and diluted | | $ | ( | | $ | ( |
| | | | | | |
Weighted average number of common shares outstanding - basic and diluted | |
| | |
| |
| | | | | | |
Loss per common share - basic and diluted | | $ | ( | | $ | ( |
The effect of the redemption of OP Units, Time-Based LTIP Units, fully vested LTIP Units and special equity awards that were outstanding as of March 31, 2025 and 2024 is excluded in the computation of diluted 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 loss per share). Since OP Units, Time-Based LTIP Units, LTIP Units and special equity awards, 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 loss available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted loss per common share. AO LTIP Units, Performance-Based LTIP Units, formation awards and RSUs, which totaled
Dividends Declared in April 2025
On
15.Fair Value Measurements
Fair Value Measurements on a Recurring Basis
To manage or hedge our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments.
19
As of March 31, 2025 and December 31, 2024, 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 $
Accounting Standards Codification 820 ("Topic 820"), Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:
Level 1 — quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities;
Level 2 — observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and
Level 3 — unobservable inputs that are used when little or no market data is available.
The fair values of the derivative financial instruments are based on the estimated amounts we would receive or pay to terminate the contracts at the reporting date and are determined using interest rate pricing models and observable inputs. The derivative financial instruments are classified within Level 2 of the valuation hierarchy.
The following is a summary of assets and liabilities measured at fair value on a recurring basis:
| | Fair Value Measurements | ||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
| | (In thousands) | ||||||||||
March 31, 2025 |
| | | | | | | | | | | |
Derivative financial instruments designated as effective hedges: | |
|
|
| |
| |
|
|
| |
|
| $ | | | | — | | $ | | | | — | |
| | | |
| — | | | | |
| — | |
Non-designated derivatives: | |
|
| |
|
| |
|
| |
|
|
|
| | |
| — | |
| | |
| — | |
|
| | |
| — | |
| | |
| — | |
| | | | | | | | | | | ||
December 31, 2024 | |
|
|
| |
| |
|
|
| |
|
Derivative financial instruments designated as effective hedges: | |
|
|
| |
| |
|
|
| |
|
| $ | | | | — | | $ | | | | — | |
| | | |
| — | | | | |
| — | |
Non-designated derivatives: | |
|
| |
|
| |
|
| |
|
|
|
| | |
| — | |
| | |
| — | |
|
| | |
| — | |
| | |
| — | |
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 March 31, 2025 and December 31, 2024, 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 statements of comprehensive loss for the three months ended March 31, 2025 and 2024 were attributable to the net change in unrealized gains (losses) related to effective derivative financial instruments that were outstanding during those periods, none of which
20
were reported in our statements of operations as the derivative financial instruments were documented and qualified as hedging instruments. Realized and unrealized gains (losses) related to non-designated hedges are included in "Interest expense" in our 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 three months ended March 31, 2025, this assessment resulted in the impairment of a development parcel, which had an estimated fair value of $
Financial Assets and Liabilities Not Measured at Fair Value
As of March 31, 2025 and December 31, 2024, all financial assets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:
| | March 31, 2025 | | December 31, 2024 | ||||||||
|
| Carrying |
| |
| Carrying |
| | ||||
| | Amount (1) | | Fair Value | | Amount (1) | | Fair Value | ||||
|
| (In thousands) | ||||||||||
Financial liabilities: |
| |
|
| |
|
| |
|
| |
|
Mortgage loans | | $ | | | $ | | | $ | | | $ | |
Revolving credit facility | |
| | |
| | |
| | |
| |
Term loans | |
| | |
| | |
| | |
| |
| (1) | The carrying amount consists of principal only. |
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.
16.Segment Information
We own, operate and develop mixed-use properties concentrated in and around Washington, D.C. We derive our revenue primarily from leases with multifamily and commercial tenants. In addition, our third-party real estate services business provides fee-based real estate services. Our operating segments are aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, our
The CODM measures and evaluates the performance of our operating segments based on only the following measures at our share pertaining to each of our segments:
| ● | NOI (multifamily and commercial) - which includes our proportionate share of revenue and expenses attributable to real estate ventures. NOI includes property rental revenue and other property revenue, and deducts property expenses. NOI excludes deferred rent, commercial lease termination revenue, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. |
| ● | Net third-party real estate services, excluding reimbursements - which includes revenue streams generated by this segment, excluding reimbursement revenue, as well as the expenses attributable to this segment at our proportionate share, calculated by excluding real estate services revenue from our interests in real estate ventures. |
21
The CODM uses these measures predominantly in the annual budget and forecasting process as well as in his review of our quarterly financial results when making decisions about the allocation of operating and capital resources to each segment. We have included disclosure of NOI and the results of our third-party real estate services business at our share to align with our internal reporting and the information used by our CODM.
The following is a summary of NOI at our share for our multifamily and commercial segments, including a reconciliation to our total NOI at our share:
| | Three Months Ended March 31, 2025 | |||||||
|
| Multifamily |
| Commercial |
| Total | |||
|
| (In thousands, at our share) | |||||||
Property rental revenue | | $ | | | $ | | | $ | |
Other property revenue | | | | | | | | | |
Total property revenue | |
| | |
| | |
| |
Property expense: | |
| | |
|
| |
|
|
Real estate taxes | |
| | |
| | |
| |
Payroll | | | | | | | | | |
Utilities | | | | | | | | | |
Repairs and maintenance | | | | | | | | | |
Other property operating | | | | | | | | | |
Total property expense | |
| | |
| | |
| |
NOI from reportable segments | | $ | | | $ | | | | |
Other NOI (1) | | | | | | | | | ( |
NOI | | | | | | | | $ | |
| Three Months Ended March 31, 2024 | ||||||||
|
| Multifamily |
| Commercial |
| Total | |||
| | (In thousands, at our share) | |||||||
Property rental revenue | | $ | | | $ | | | $ | |
Other property revenue | | | | | | | | | |
Total property revenue | |
| | |
| | |
| |
Property expense: | |
|
| |
|
| |
|
|
Real estate taxes | |
| | |
| | |
| |
Payroll | | | | | | | | | |
Utilities | | | | | | | | | |
Repairs and maintenance | | | | | | | | | |
Other property operating | | | | | | | | | |
Total property expense | |
| | |
| | |
| |
NOI from reportable segments | | $ | | | $ | | | | |
Other NOI (1) | | | | | | | | | ( |
NOI | | | | | | | | $ | |
| (1) | Includes activity related to development assets and land assets for which we are the ground lessor. |
22
The following is a summary of our third-party real estate services business at our share:
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
|
| (In thousands, at our share) | ||||
Property management fees | | $ | | | $ | |
Asset management fees | |
| | |
| |
Development fees | |
| | |
| |
Leasing fees | |
| | |
| |
Construction management fees | |
| | |
| |
Other service revenue | |
| | |
| |
Third-party real estate services revenue, excluding reimbursements | |
| | |
| |
Third-party real estate services expenses, excluding reimbursements | | | | | | |
Net third-party real estate services, excluding reimbursements | | $ | ( | | $ | ( |
The following is a reconciliation of revenue at our share to total revenue per the statements of operations:
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
|
| (In thousands) | ||||
Total property revenue at our share | | $ | | | $ | |
Third-party real estate services revenue, excluding reimbursements, at our share | | | | | | |
Reimbursement revenue (1) | | | | | | |
Our share of revenue attributable to unconsolidated real estate ventures | |
| ( | |
| ( |
Other property revenue | | | | | | |
Other adjustments (2) | |
| ( | |
| |
Total revenue per statements of operations | | $ | | | $ | |
| | | | | | |
| (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 |
| (2) | Adjustment to include deferred rent, above/below market lease amortization, commercial lease termination revenue and lease incentive amortization. |
23
The following is the reconciliation of NOI at our share to loss before income tax benefit:
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
|
| (In thousands) | ||||
NOI at our share | | $ | | | $ | |
Net third-party real estate services, excluding reimbursements, at our share | | | ( | | | ( |
Add: | |
|
| |
|
|
Income (loss) from unconsolidated real estate ventures, net | |
| ( | |
| |
Interest and other income, net | |
| | |
| |
Gain on the sale of real estate, net | |
| | |
| |
Less: | |
|
| |
|
|
Depreciation and amortization expense | |
| | |
| |
General and administrative expense: corporate and other | |
| | |
| |
Transaction and other costs | |
| | |
| |
Interest expense | |
| | |
| |
Loss on the extinguishment of debt | |
| | |
| — |
Impairment loss | | | | | | |
Adjustments: | | | | | | |
Our share of net third-party real estate services attributable to unconsolidated real estate ventures | | | ( | | | ( |
NOI attributable to unconsolidated real estate ventures at our share | |
| ( | |
| ( |
Non-cash rent adjustments (1) | |
| ( | |
| |
Other adjustments (2) | |
| ( | |
| |
Total adjustments | |
| ( | |
| |
Loss before income tax benefit | | $ | ( | | $ | ( |
| (1) | Adjustment to include deferred rent, above/below market lease amortization and lease incentive amortization. |
| (2) | Adjustment to include payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue, related party management fees, corporate entity activity and inter-segment activity. |
17.Commitments and Contingencies
Insurance
We maintain general liability insurance with limits of $
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 March 31, 2025, we had
24
which we anticipate will be primarily expended over the next . These capital expenditures are generally due as the work is performed, and we expect to finance them primarily with debt proceeds.
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. These environmental assessments generally have included a historical review, a public records review, a visual inspection of the site and surrounding assets, visual or historical evidence of underground storage tanks and other features, and the preparation and issuance of a written report. Soil, soil vapor and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any conditions identified by the initial assessment that could reasonably be expected to pose a material concern to the property or result in us incurring material environmental liabilities as a result of redevelopment. The tests may not, however, have included extensive sampling or subsurface investigations. In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated appropriate actions. The environmental assessments have not revealed any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. Environmental liabilities totaled $
Legal Proceedings
In November 2023, the District of Columbia filed a lawsuit in the Superior Court of the District of Columbia against RealPage, Inc., a provider of revenue management systems, numerous multifamily rental companies, and
There are various other legal actions arising in the ordinary course of business. In our opinion, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
Other
As of March 31, 2025, we had committed tenant-related obligations totaling $
From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings, or (iii) provide guarantees to lenders and other third parties for the completion and stabilization of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees. At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable. As of March 31, 2025, we had
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As of March 31, 2025, we had additional capital commitments totaling $
Additionally, with respect to borrowings of our consolidated entities, we may agree to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion and stabilization of development projects. As of March 31, 2025, we had
18.Transactions with Related Parties
Our third-party real estate services business provides fee-based real estate services to third parties, including the JBG Legacy Funds. In connection with the contribution to us of certain assets formerly owned by the JBG Legacy Funds, 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.
LEO Impact Capital, our investment management platform dedicated to acquiring, financing and operating multifamily housing in high impact neighborhoods to preserve affordability for middle-income residents, manages the Washington Housing Initiative ("WHI") Impact Pool. The WHI Impact Pool completed fundraising in 2020 with capital commitments totaling $
The third-party real estate services revenue, including expense reimbursements, from the JBG Legacy Funds and the WHI Impact Pool and its affiliates was $
We lease our corporate offices from an unconsolidated real estate venture, in which we have a
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 $
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission on February 18, 2025 ("Annual Report") and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q and our Annual Report.
For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
Organization and Basis of Presentation
JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust, owns, operates and develops mixed-use properties concentrated in amenity-rich, Metro-served submarkets in and around Washington, D.C., most notably National Landing, that we believe have long-term growth potential and appeal to residential, office and retail tenants. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, highly amenitized, walkable neighborhoods throughout the Washington, D.C. metropolitan area. Approximately 75.0% of our holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon.com, Inc.'s ("Amazon") headquarters; Virginia Tech's $1 billion Innovation Campus; proximity to the Pentagon; and our placemaking initiatives and public infrastructure improvements. In addition, our third-party real estate services business provides fee-based real estate services to third parties, including the legacy funds formerly organized by The JBG Companies.
Substantially all our assets are held by, and our operations are conducted through JBG SMITH Properties LP, our operating partnership. JBG SMITH is referred to herein as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures, but exclude our 10.0% subordinated interest in one commercial building and our 33.5% subordinated interest in four commercial buildings (the "Fortress Assets"), as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures; these interests and debt are excluded because our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures, and we have not guaranteed their obligations or otherwise committed to providing financial support.
References to our financial statements refer to our unaudited condensed consolidated financial statements as of March 31, 2025 and December 31, 2024, and for the three months ended March 31, 2025 and 2024. References to our balance sheets refer to our condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024. References to our statements of operations refer to our condensed consolidated statements of operations for the three months ended March 31, 2025 and 2024. References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024.
The accompanying financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial
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statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
We have elected to be taxed as a real estate investment trust ("REIT") under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from those activities.
Our three operating and reportable segments are multifamily, commercial and third-party real estate services.
Our revenues and expenses are, to some extent, subject to seasonality during the year, which impacts quarterly net earnings, cash flows and funds from operations; this seasonality affects the sequential comparison of our results in individual quarters over time. For instance, we have historically experienced higher utility costs in the first and third quarters of the year.
We compete with many property owners and developers. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our assets at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.
Overview
As of March 31, 2025, our Operating Portfolio consisted of 37 operating assets comprising 15 multifamily assets totaling 6,459 units (6,459 units at our share), 20 commercial assets totaling 6.5 million square feet (6.1 million square feet at our share) and two wholly owned land assets for which we are the ground lessor. Additionally, we have one under-construction multifamily asset with 775 units (775 units at our share) and 19 assets in the development pipeline totaling 11.0 million square feet (8.9 million square feet at our share) of estimated potential development density.
We continue to implement our comprehensive plan to reposition our holdings in National Landing by executing a broad array of placemaking strategies. Our placemaking includes the delivery of new multifamily assets, the delivery of redeveloped and new office assets subject to demand therefor, amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces. In keeping with our dedication to placemaking, each new project is intended to contribute to an authentic and distinct neighborhood by creating a vibrant street environment with robust retail offerings and other amenities, including improved public spaces. In 2024, we delivered The Grace and Reva with 808 multifamily units and approximately 38,000 square feet of retail space. In the first quarter of 2025, we completed construction on The Zoe (2001 South Bell Street), a 420-unit multifamily tower, and we have fully leased the approximately 8,000 square feet of ground floor retail. We expect to deliver Valen (2000 South Bell Street), a 355-unit multifamily tower adjacent to The Zoe, later this year. Additionally, in 2024, we started construction on a new office amenity hub at 2011 Crystal Drive that, along with a repositioning of the asset itself, brings a large-scale externally managed meeting and conference facility, two elevated food and beverage offerings, and an activated public lobby.
Outlook
A fundamental component of our strategy to maximize long-term net asset value ("NAV") per share is thoughtful capital allocation. While there is continued uncertainty as to how the current political environment will impact us and the Washington, D.C. metropolitan area, we remain focused on our long-term strategy and intend to continue seeking new investments that offer the most accretive returns and that align with our strategy and competitive advantages. We anticipate that new investments will primarily be financed through asset recycling, either in advance or retrospectively. These new investments may include share repurchases and other opportunistic investments in partnership with third-party capital. The latter may allow us to capitalize on distressed pricing in the office market, to monetize our land bank, and to generate additional fee and carried interest revenue. We intend to continue to opportunistically sell or recapitalize assets (which may be multifamily, commercial and/or retail assets) as well as land sites where a ground lease or joint venture execution may
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represent the most attractive path to maximizing value. In a climate where office valuations are near cyclical lows with limited liquidity, the most efficiently priced source of capital will likely come from our multifamily assets. To that end, we are currently marketing for sale select multifamily and land assets in both Washington, D.C. and Northern Virginia. Recycling these assets will also further advance our strategy to concentrate our portfolio in National Landing. As long as we believe our share price does not reflect the underlying, intrinsic value of our business, as we do now, we expect to continue repurchasing shares through our share repurchase plan (which had a capacity of $684.1 million as of March 31, 2025) and to fund such repurchases through such asset sales or recapitalizations.
Our in-service multifamily portfolio, which refers to operating assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of March 31, 2025, was 94.3% occupied as of March 31, 2025, a decrease of 50 basis points as compared to December 31, 2024. During the first quarter of 2025, we increased effective rents, which represent the average change in rental rates versus expiring rental rates net of concessions, by 1.5% for new leases and 5.6% upon renewal while achieving a 55.5% renewal rate across our portfolio. Our recently delivered assets, The Grace and Reva, began leasing in January 2024 with move-ins commencing in February 2024 and delivery of all remaining units in the second quarter of 2024, with 74.6% leased as of March 31, 2025. We expect that interest expense will increase as we deliver The Zoe and Valen and cease capitalizing the related interest.
Our office portfolio occupancy was 76.4% as of March 31, 2025, a decrease of 10 basis points as compared to December 31, 2024. The office market continues to experience headwinds, including an increased focus on the reduction of government spending, which could impact U.S. federal government leasing practices and companies dependent on the federal government with many deals paused as tenants wait for more certainty regarding federal government staffing and spending changes. Our efforts to re-lease certain spaces will be targeted toward buildings with long-term viability where we can concentrate occupancy. We took approximately 618,000 office square feet out of service in 2024 at 1800 South Bell Street, 2100 Crystal Drive and 2200 Crystal Drive. Additionally, during the first quarter of 2025, we took 197,124 square feet out of service at 1901 South Bell Street, a commercial asset, and expect to take the remainder of the asset out of service as tenants vacate. With the objective of ultimately reducing our competitive office inventory in National Landing, we expect to help foster a healthier long-term office market while repurposing older, underutilized buildings for redevelopment or conversion to multifamily housing, hospitality or other complimentary uses that will support a vibrant mixed-use environment.
We continue to advance the design and entitlement of our 11.0 million square feet (8.9 million square feet at our share) of estimated potential development density in our development pipeline and intend to look to source joint venture capital as a means of funding these developments as market conditions permit.
Operating Results
Key highlights for the three months ended March 31, 2025 included:
| ● | net loss attributable to common shareholders of $45.7 million, or $0.56 per diluted common share, for the three months ended March 31, 2025 compared to $32.3 million, or $0.36 per diluted common share, for the three months ended March 31, 2024; |
| ● | third-party real estate services revenue, including reimbursements, of $14.9 million and $17.9 million for the three months ended March 31, 2025 and 2024; |
| ● | in-service operating multifamily portfolio leased and occupied percentages (1) at our share of 95.7% and 94.3% as of March 31, 2025 as compared to 96.2% and 94.8% as of December 31, 2024, and 95.9% and 94.3% as of March 31, 2024; |
| ● | operating commercial portfolio leased and occupied percentages at our share of 78.3% and 76.4% as of March 31, 2025 compared to 78.6% and 76.5% as of December 31, 2024, and 84.6% and 83.1% as of March 31, 2024; |
| ● | the leasing of 71,000 square feet at our share, at an initial rent (2) of $52.43 per square foot and a GAAP-basis weighted average rent per square foot (3) of $52.27 for the three months ended March 31, 2025; and |
| ● | a decrease in same store (4) net operating income ("NOI") of 5.5% to $63.1 million for the three months ended March 31, 2025 compared to $66.8 million for the three months ended March 31, 2024. |
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| (1) | 2221 S. Clark Street - Residential and 900 W Street are excluded from leased and occupied percentages as they are operated as short-term rental properties. |
| (2) | Represents the cash basis weighted average starting rent per square foot at our share, which excludes free rent, fixed escalations and percentage rent. |
| (3) | Represents the weighted average rent per square foot recognized over the term of the respective leases, including the effect of free rent and fixed escalations, but excluding the effect of percentage rent. |
| (4) | Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. |
Additionally, investing and financing activity during the three months ended March 31, 2025 included:
| ● | the sale of 8001 Woodmont. See Note 3 to the financial statements for additional information; |
| ● | the refinancing of the RiverHouse Apartments mortgage loan. See Note 7 to the financial statements for additional information; |
| ● | the net borrowing of $77.0 million under our revolving credit facility; |
| ● | the payment of dividends totaling $14.8 million and distributions to redeemable noncontrolling interests of $2.8 million; |
| ● | the repurchase and retirement of 12.2 million of our common shares for $187.5 million, a weighted average purchase price per share of $15.43; and |
| ● | the investment of $29.1 million in development costs, construction in progress and real estate additions. |
Activity subsequent to March 31, 2025 included:
| ● | the declaration of a quarterly dividend of $0.175 per common share, payable on May 22, 2025 to shareholders of record as of May 8, 2025. |
Critical Accounting Estimates
Our Annual Report contains a description of our critical accounting estimates, including asset acquisitions, real estate, investments in real estate ventures and revenue recognition. There have been no significant changes to our policies during the three months ended March 31, 2025.
Recent Accounting Pronouncements
See Note 2 to the financial statements for a description of recent accounting pronouncements.
Results of Operations
During the three months ended March 31, 2025, we sold 8001 Woodmont. In 2024, we sold North End Retail, Fort Totten Square and 2101 L Street. We collectively refer to these assets as the "Disposed Properties" in the discussion below. In 2024, we took 1800 South Bell Street, 2100 Crystal Drive and 2200 Crystal Drive out of service, and during the first quarter of 2025, we took 197,124 square feet out of service at 1901 South Bell Street. In 2024, we began leasing The Grace and Reva, and we began leasing The Zoe, one of the two multifamily towers at 2000/2001 South Bell Street, during the first quarter of 2025.
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Comparison of the Three Months Ended March 31, 2025 to 2024
The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended March 31, 2025 compared to the same period in 2024:
| | Three Months Ended March 31, | |||||||
|
| 2025 |
| 2024 |
| % Change |
| ||
| (Dollars in thousands) |
| |||||||
Property rental revenue | | $ | 101,499 | | $ | 122,636 |
| (17.2) | % |
Third-party real estate services revenue, including reimbursements | |
| 14,914 | |
| 17,868 |
| (16.5) | % |
Depreciation and amortization expense | |
| 47,587 | |
| 56,855 |
| (16.3) | % |
Property operating expense | |
| 33,437 | |
| 35,279 |
| (5.2) | % |
Real estate taxes expense | |
| 12,172 | |
| 13,795 |
| (11.8) | % |
General and administrative expense: | | | | | | | | | |
Corporate and other | |
| 15,557 | |
| 14,973 |
| 3.9 | % |
Third-party real estate services | |
| 16,071 | |
| 22,327 |
| (28.0) | % |
Interest expense | |
| 35,200 | |
| 30,160 |
| 16.7 | % |
Loss on the extinguishment of debt | | | 4,636 | | | — | | * | |
Impairment loss | | | 8,483 | | | 17,211 | | (50.7) | % |
* Not meaningful.
Property rental revenue decreased by approximately $21.1 million, or 17.2%, to $101.5 million in 2025 from $122.6 million in 2024. The decrease was primarily due to a $25.0 million decrease in revenue from our commercial assets, partially offset by a $3.0 million increase in revenue from our multifamily assets. The decrease in revenue from our commercial assets was primarily due to a $9.4 million decrease in lease termination revenue, a $4.4 million decrease related to the commercial Disposed Properties, a $4.0 million decrease related to 2100 Crystal Drive and 2200 Crystal Drive, which were taken out of service in 2024, and lower occupancy across the portfolio. The increase in revenue from our multifamily assets was primarily due to a $5.6 million increase related to the continued lease up of The Grace and Reva, and higher rents across the portfolio, partially offset by a $4.2 million decrease related to the multifamily Disposed Properties.
Third-party real estate services revenue, including reimbursements, decreased by approximately $3.0 million, or 16.5%, to $14.9 million in 2025 from $17.9 million in 2024. The decrease was primarily due to a $1.4 million decrease in reimbursement revenue, an $824,000 decrease in property management fees and a $481,000 decrease in leasing fees.
Depreciation and amortization expense decreased by approximately $9.3 million, or 16.3%, to $47.6 million in 2025 from $56.9 million in 2024. The decrease was primarily due to an $8.4 million decrease related to 2100 Crystal Drive and Crystal Drive Retail due to the acceleration of depreciation of certain assets in 2024 and a $4.5 million decrease related to Disposed Properties. The decrease in depreciation and amortization expense was partially offset by a $4.0 million increase related to The Grace and Reva, which we began leasing during the first quarter of 2024, and 2000/2001 South Bell Street, which we began leasing during the first quarter of 2025.
Property operating expense decreased by approximately $1.8 million, or 5.2%, to $33.4 million in 2025 from $35.3 million in 2024. The decrease was primarily due to a $1.5 million decrease in property operating expense from our commercial assets and a $1.3 million decrease in other property operating expense, partially offset by a $1.0 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 $1.3 million decrease related to the commercial Disposed Properties. The decrease in other property operating expense was primarily due to a $1.6 million decrease in insurance claims covered by our captive insurance subsidiary. The increase in property operating expense from our multifamily assets was primarily due to a $1.1 million increase related to The Grace and Reva and 2000/2001 South Bell, and higher operating expenses primarily related to onsite personnel and utilities, partially offset by a $1.4 million decrease related to the multifamily Disposed Properties.
Real estate taxes expense decreased by approximately $1.6 million, or 11.8%, to $12.2 million in 2025 from $13.8 million in 2024. The decrease was primarily due to a $1.5 million decrease related to the Disposed Properties.
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General and administrative expense: corporate and other increased by approximately $584,000, or 3.9%, to $15.6 million in 2025 from $15.0 million in 2024. The increase was primarily due to an increase in professional fees and other overhead expenses, partially offset by lower compensation expenses.
General and administrative expense: third-party real estate services decreased by approximately $6.3 million, or 28.0%, to $16.1 million in 2025 from $22.3 million in 2024. The decrease was primarily due to lower compensation expenses and lower third-party reimbursable expenses.
Interest expense increased by approximately $5.0 million, or 16.7%, to $35.2 million in 2025 from $30.2 million in 2024. The increase was primarily due to (i) a $3.5 million increase due to higher interest expense on our term loans and a higher outstanding balance on our revolving credit facility, (ii) a $2.5 million increase due to the expiration of interest rate swaps related to the RiverHouse Apartments mortgage loan, which was refinanced in March 2025 with a fixed interest rate mortgage loan, (iii) a $2.2 million decrease in capitalized interest as we placed The Grace and Reva into service and began placing 2000/2001 South Bell Street into service, and (iv) a $1.7 million increase in outstanding debt related to draws on the mortgage loan related to 2000/2001 South Bell Street. The increase in interest expense was partially offset by (v) a $1.8 million decrease related to the Disposed Properties, (vi) a $1.6 million decrease related to mortgage loans collateralized by 201 12th Street S., 200 12th Street S. and 251 18th Street S., which were repaid during 2024, and (vii) a $1.6 million decrease related to lower rates on variable rate mortgage loans.
Loss on the extinguishment of debt of $4.6 million in 2025 was due to the refinancing of the RiverHouse Apartments mortgage loan.
Impairment loss of $8.5 million and $17.2 million in 2025 and 2024 were related to a development parcel, which was written down to its estimated fair value.
Funds from Operations ("FFO")
FFO is a non-GAAP financial measure computed in accordance with the definition established by the National Association of Real Estate Investment Trusts ("Nareit") in the Nareit FFO White Paper - 2018 Restatement. Nareit defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization expense related to real estate, gains (losses) from the sale of certain real estate assets, gains (losses) from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures.
We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions and other non-comparable income and expenses. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP), as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures used by other companies.
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The following is the reconciliation of net loss attributable to common shareholders, the most directly comparable GAAP measure, to FFO:
| Three Months Ended March 31, | ||||
| 2025 |
| 2024 | ||
| (In thousands) | ||||
Net loss attributable to common shareholders | $ | (45,720) | | $ | (32,276) |
Net loss attributable to redeemable noncontrolling interests |
| (7,978) | |
| (4,534) |
Net loss attributable to noncontrolling interests |
| — | |
| (5,380) |
Net loss |
| (53,698) | |
| (42,190) |
Gain on the sale of real estate, net of tax |
| (537) | |
| (1,409) |
Gain on the sale of unconsolidated real estate assets |
| — | |
| (480) |
Real estate depreciation and amortization |
| 45,961 | |
| 55,187 |
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures |
| 779 | |
| 1,491 |
FFO attributable to common limited partnership units ("OP Units") |
| (7,495) | |
| 12,599 |
FFO attributable to redeemable noncontrolling interests |
| 1,265 | |
| (1,921) |
FFO attributable to common shareholders | $ | (6,230) | | $ | 10,678 |
NOI and Same Store NOI
NOI and same store NOI are non-GAAP financial measures management uses to assess an asset's performance. The most directly comparable GAAP measure is net income (loss) attributable to common shareholders. We use NOI internally as a performance measure and believe NOI and same store NOI provide useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable. NOI and same store NOI exclude deferred rent, commercial lease termination revenue, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI, which includes our proportionate share of revenue and expenses attributable to real estate ventures, as a supplemental performance measure and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.
Information provided on a same store basis includes the results of properties that are owned, operated and in-service for the entirety of both periods being compared, which excludes disposed properties or properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. During the three months ended March 31, 2025, our same store pool decreased to 35 properties from 36 properties due to the sale of 8001 Woodmont. While there is judgment surrounding changes in designations, a property is removed from the same store pool when the property is considered to be under-construction because it is undergoing significant redevelopment or renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property NOI. A development property or under-construction property is moved to the same store pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period. Acquisitions are moved into the same store pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.
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Same store NOI decreased $3.7 million, or 5.5%, to $63.1 million for the three months ended March 31, 2025 from $66.8 million for the same period in 2024.The decrease was substantially attributable to (i) lower occupancy and higher utilities expense, partially offset by lower real estate taxes in our commercial portfolio and (ii) higher operating expenses, offset by higher rents in our multifamily portfolio.
The following is the reconciliation of net loss attributable to common shareholders to NOI at our share and same store NOI at our share. To conform to the current period presentation, we have included certain other property revenue in the calculation of NOI for the three months ended March 31, 2024 to align with our internal reporting.
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
| | (Dollars in thousands) | ||||
Net loss attributable to common shareholders | | $ | (45,720) | | $ | (32,276) |
Net loss attributable to redeemable noncontrolling interests | |
| (7,978) | |
| (4,534) |
Net loss attributable to noncontrolling interests | | | — | | | (5,380) |
Net loss | | | (53,698) | | | (42,190) |
Add: | | |
| | |
|
Depreciation and amortization expense | |
| 47,587 | |
| 56,855 |
General and administrative expense: | | |
| | |
|
Corporate and other | |
| 15,557 | |
| 14,973 |
Third-party real estate services | |
| 16,071 | |
| 22,327 |
Transaction and other costs | |
| 1,911 | |
| 1,514 |
Interest expense | |
| 35,200 | |
| 30,160 |
Loss on the extinguishment of debt | |
| 4,636 | |
| — |
Impairment loss | | | 8,483 | | | 17,211 |
Income tax benefit | |
| (200) | |
| (1,468) |
Less: | | | | | | |
Third-party real estate services, including reimbursements revenue | |
| 14,914 | |
| 17,868 |
Income (loss) from unconsolidated real estate ventures, net | |
| (592) | |
| 975 |
Interest and other income, net | |
| 525 | |
| 2,100 |
Gain on the sale of real estate, net | |
| 537 | |
| 197 |
Adjustments: | | | | | | |
NOI attributable to unconsolidated real estate ventures at our share | |
| 990 | |
| 3,046 |
Non-cash rent adjustments (1) | |
| 2,439 | |
| (1,430) |
Other adjustments (2) | |
| 1,693 | |
| (6,023) |
Total adjustments | |
| 5,122 | |
| (4,407) |
NOI at our share | |
| 65,285 | |
| 73,835 |
Less: out-of-service NOI loss (3) (4) | |
| (2,237) | |
| (3,032) |
Operating Portfolio NOI (4) | |
| 67,522 | |
| 76,867 |
Non-same store NOI (4) (5) | |
| 4,445 | |
| 10,092 |
Same store NOI (4) (6) | | $ | 63,077 | | $ | 66,775 |
| | | | | | |
Change in same store NOI | |
| (5.5%) | | | |
Number of properties in same store pool | |
| 35 | | | |
| (1) | Adjustment to exclude deferred rent, above/below market lease amortization and lease incentive amortization. |
| (2) | Adjustment to exclude commercial lease termination revenue, related party management fees, corporate entity activity and inter-segment activity. |
| (3) | Includes the results of our under-construction asset and assets in the development pipeline. |
| (4) | Represents amounts at our share. |
| (5) | Includes the results of properties that were not in-service for the entirety of both periods being compared, including disposed properties, and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. |
| (6) | Includes the results of the properties that are owned, operated and in-service for the entirety of both periods being compared. |
Reportable Segments
Our three operating and reportable segments are multifamily, commercial, and third-party real estate services. We measure and evaluate the performance of our operating segments, with the exception of the third-party real estate services business,
34
based on NOI at our share, which includes our proportionate share of revenue and expenses attributable to real estate ventures.
The following is a summary of NOI at our share for our multifamily and commercial segments:
| | Three Months Ended March 31, 2025 | | Three Months Ended March 31, 2024 | ||||||||
|
| Multifamily |
| Commercial |
| Multifamily |
| Commercial | ||||
|
| (In thousands, at our share) | ||||||||||
Property rental revenue | | $ | 54,602 | | $ | 49,757 | | $ | 51,731 | | $ | 63,346 |
Other property revenue | | | 621 | | | 3,736 | | | 716 | | | 4,092 |
Total property revenue | |
| 55,223 | |
| 53,493 | |
| 52,447 | |
| 67,438 |
Property expense: | |
| | |
|
| |
|
| |
|
|
Real estate taxes | |
| 5,571 | |
| 5,592 | |
| 5,402 | |
| 7,989 |
Payroll | | | 3,742 | | | 3,007 | | | 4,182 | | | 3,508 |
Utilities | | | 3,918 | | | 3,402 | | | 3,546 | | | 3,669 |
Repairs and maintenance | | | 5,437 | | | 4,472 | | | 4,363 | | | 5,248 |
Other property operating | | | 3,045 | | | 4,148 | | | 2,367 | | | 4,071 |
Total property expense | |
| 21,713 | |
| 20,621 | |
| 19,860 | |
| 24,485 |
NOI from reportable segments | | $ | 33,510 | | $ | 32,872 | | $ | 32,587 | | $ | 42,953 |
Comparison of the Three Months Ended March 31, 2025 to 2024
Multifamily: Property revenue increased by $2.8 million, or 5.3%, to $55.2 million in 2025 from $52.4 million in 2024. NOI increased by $923,000, or 2.8%, to $33.5 million in 2025 from $32.6 million in 2024. The increases in property revenue at our share and NOI at our share were primarily due to The Grace and Reva, which we began leasing during the first quarter of 2024, and higher rents across the portfolio, partially offset by a decrease related to the multifamily Disposed Properties.
Commercial: Property revenue decreased by $13.9 million, or 20.7%, to $53.5 million in 2025 from $67.4 million in 2024. NOI decreased by $10.1 million, or 23.5%, to $32.9 million in 2025 from $43.0 million in 2024. The decreases in property revenue at our share and NOI at our share were primarily due to the commercial Disposed Properties, properties taken out of service and lower occupancy across the portfolio.
With respect to the third-party real estate services business, we review revenue streams generated by this segment, excluding reimbursement revenue, as well as the expenses attributable to this segment at our proportionate share, calculated by excluding real estate services revenue from our interests in real estate ventures. The following is a summary of our third-party real estate services business at our share:
| | Three Months Ended March 31, | ||||
| 2025 |
| 2024 | |||
| | (In thousands, at our share) | ||||
Property management fees | | $ | 3,361 | | $ | 4,115 |
Asset management fees | |
| 580 | |
| 924 |
Development fees | |
| 523 | |
| 238 |
Leasing fees | |
| 654 | |
| 1,120 |
Construction management fees | |
| 231 | |
| 384 |
Other service revenue | |
| 1,035 | |
| 1,001 |
Third-party real estate services revenue, excluding reimbursements | |
| 6,384 | |
| 7,782 |
Third-party real estate services expenses, excluding reimbursements | |
| 7,236 | |
| 12,136 |
Net third-party real estate services, excluding reimbursements | | $ | (852) | | $ | (4,354) |
Third-party real estate services revenue, excluding reimbursements, decreased by $1.4 million, or 18.0%, to $6.4 million in 2025 from $7.8 million in 2024. The decrease was primarily due to a $754,000 decrease in property management fees, a $466,000 decrease in leasing fees and a $344,000 decrease in asset management fees. Third-party real estate services expenses, excluding reimbursements, decreased by $4.9 million, or 40.4%, to $7.2 million in 2025 from $12.1 million in 2024. The decrease was primarily due to lower compensation expenses.
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Liquidity and Capital Resources
Property rental income is our primary source of operating cash flow and depends on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent. In addition, our third-party real estate services business provides fee-based real estate services. Our assets provide cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders, and distributions to holders of OP Units and long-term incentive partnership units ("LTIP Units"). Other sources of liquidity to fund cash requirements include proceeds from financings, recapitalizations, asset sales, and the issuance and sale of securities. We anticipate that cash flows from continuing operations and proceeds from financings, asset sales and recapitalizations, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, any dividends to shareholders, and distributions to holders of OP Units and LTIP Units.
Mortgage Loans
The following is a summary of mortgage loans:
| | Weighted Average | | | | | | |
| | Effective |
| | ||||
|
| Interest Rate (1) |
| March 31, 2025 |
| December 31, 2024 | ||
| | | | (In thousands) | ||||
Variable rate (2) |
| 5.55% | | $ | 535,457 | | $ | 587,254 |
Fixed rate (3) |
| 5.13% | |
| 1,107,376 | |
| 1,196,479 |
Mortgage loans |
| | |
| 1,642,833 | |
| 1,783,733 |
Unamortized deferred financing costs and premium/discount, net |
| | |
| (16,130) | |
| (16,560) |
Mortgage loans, net | | | | $ | 1,626,703 | | $ | 1,767,173 |
| (1) | Weighted average effective interest rate as of March 31, 2025. |
| (2) | Includes variable rate mortgage loans with interest rate cap agreements. For mortgage loans with interest rate caps, the weighted average interest rate cap strike was 3.11%, and the weighted average maturity date of the interest rate caps is in the first quarter of 2026. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of March 31, 2025, one-month term Secured Overnight Financing Rate ("SOFR") was 4.32%. |
| (3) | Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements. |
As of March 31, 2025 and December 31, 2024, the net carrying value of real estate collateralizing our mortgage loans totaled $1.8 billion and $2.1 billion. Our mortgage loans contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity.
In February 2025, in connection with the sale of 8001 Woodmont, we repaid the related $99.7 million mortgage loan. In March 2025, we entered into a five-year interest-only $258.9 million mortgage loan with a fixed interest rate of 5.03% collateralized by the Ashley and Potomac buildings at RiverHouse Apartments and repaid the outstanding $307.7 million mortgage loan that was collateralized by the Ashley, Potomac and James buildings.
As of March 31, 2025 and December 31, 2024, we had various interest rate swap and cap agreements on certain mortgage loans with an aggregate notional value of $886.7 million and $1.4 billion. See Note 15 to the financial statements for additional information.
Revolving Credit Facility and Term Loans
As of March 31, 2025 and December 31, 2024, our unsecured revolving credit facility and term loans totaling $1.5 billion consisted of a $750.0 million revolving credit facility maturing in June 2027, a $200.0 million term loan ("Tranche A-1 Term Loan") maturing in January 2026, a $400.0 million term loan ("Tranche A-2 Term Loan") maturing in January 2028 and a $120.0 million term loan ("2023 Term Loan") maturing in June 2028. The revolving credit facility has two six-month extension options, and the Tranche A-1 Term Loan has one remaining one-year extension option.
The agreements for our unsecured revolving credit facility and term loans include customary restrictive covenants, that, among other things, restrict our ability to incur additional indebtedness, to engage in material asset sales, mergers,
36
consolidations and acquisitions, and to make capital expenditures, and also include requirements to maintain financial ratios. Our ability to borrow is subject to compliance with these covenants, and failure to comply with our covenants could cause a default, and we may then be required to repay such debt.
The following is a summary of amounts outstanding under the revolving credit facility and term loans:
| | Effective | | | ||||
|
| Interest Rate (1) |
| March 31, 2025 |
| December 31, 2024 | ||
| | | | (In thousands) | ||||
Revolving credit facility (2) (3) |
| 5.90% | | $ | 162,000 | | $ | 85,000 |
| | | | | | | | |
Tranche A-1 Term Loan (4) |
| 5.34% | | $ | 200,000 | | $ | 200,000 |
Tranche A-2 Term Loan (5) |
| 4.20% | |
| 400,000 | |
| 400,000 |
2023 Term Loan (6) | | 5.41% | | | 120,000 | | | 120,000 |
Term loans |
| | |
| 720,000 | |
| 720,000 |
Unamortized deferred financing costs, net |
| | |
| (1,945) | |
| (2,147) |
Term loans, net | | | | $ | 718,055 | | $ | 717,853 |
| (1) | Effective interest rate as of March 31, 2025. The interest rate for our revolving credit facility excludes a 0.20% facility fee. |
| (2) | As of March 31, 2025, daily SOFR was 4.41%. As of March 31, 2025 and December 31, 2024, letters of credit with an aggregate face amount of $15.2 million were outstanding under our revolving credit facility. On April 1, 2025, the $15.2 million letter of credit was cancelled. |
| (3) | As of March 31, 2025 and December 31, 2024, excludes $6.6 million and $7.3 million of net deferred financing costs related to our revolving credit facility that were included in "Other assets, net" in our balance sheets. |
| (4) | The interest rate swaps fix SOFR at a weighted average interest rate of 4.00% through the extended maturity date of January 2027. |
| (5) | The interest rate swaps fix SOFR at a weighted average interest rate of 2.81% through the maturity date. |
| (6) | The interest rate swap fixes SOFR at an interest rate of 4.01% through the maturity date. |
Common Shares Repurchased
Our Board of Trustees previously authorized the repurchase of up to $1.5 billion of our outstanding common shares. In February 2025, our Board of Trustees increased our common share repurchase authorization to $2.0 billion. During the three months ended March 31, 2025, we repurchased and retired 12.2 million common shares for $187.5 million, a weighted average purchase price per share of $15.43. During the three months ended March 31, 2024, we repurchased and retired 3.0 million common shares for $49.4 million, a weighted average purchase price per share of $16.50. Since we began the share repurchase program through March 31, 2025, we have repurchased and retired 69.0 million common shares for $1.3 billion, a weighted average purchase price per share of $19.08.
Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice.
Material Cash Requirements
Our material cash requirements for the next 12 months and beyond are to fund:
| ● | normal recurring expenses; |
| ● | debt service and principal repayment obligations, including balloon payments on maturing mortgage loans — As of March 31, 2025, we had maturities totaling $338.0 million ($305.0 million related to our consolidated entities and $33.0 million related to an unconsolidated real estate venture at our share) scheduled to mature in 2025 and 2026; |
| ● | capital expenditures, including major renovations, tenant improvements and leasing costs — As of March 31, 2025, we had committed tenant-related obligations totaling $32.3 million ($32.2 million related to our consolidated entities and $78,000 related to our unconsolidated real estate ventures at our share); |
37
| ● | development expenditures — As of March 31, 2025, we had one asset under construction, 2000/2001 South Bell Street, and are building a new amenity hub at 2011 Crystal Drive that, based on our current plans and estimates, require an additional $61.2 million to complete, which we anticipate will be primarily expended over the next year; |
| ● | dividends to shareholders and distributions to holders of OP Units and LTIP Units — On April 24, 2025, our Board of Trustees declared a quarterly dividend of $0.175 per common share; |
| ● | possible common share repurchases; and |
| ● | possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests. |
We expect to satisfy these needs using one or more of the following:
| ● | cash and cash equivalents — As of March 31, 2025, we had cash and cash equivalents of $81.3 million; |
| ● | cash flows from operations; |
| ● | distributions from real estate ventures; |
| ● | borrowing capacity under our revolving credit facility — As of March 31, 2025, we had $572.8 million of undrawn capacity under our revolving credit facility; |
| ● | proceeds from financings, joint venture capital, asset sales and recapitalizations; and |
| ● | proceeds from the issuance of securities. |
During the three months ended March 31, 2025, there were no significant changes to the material cash requirements information presented in Item 7 of Part II of our Annual Report.
See additional information in the following pages under "Commitments and Contingencies."
Summary of Cash Flows
The following summary discussion of our cash flows is based on our statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows:
| | Three Months Ended March 31, | ||||
|
| 2025 |
| 2024 | ||
| | (In thousands) | ||||
Net cash provided by operating activities | | $ | 12,935 | | $ | 37,043 |
Net cash provided by investing activities | |
| 161,314 | |
| 123,602 |
Net cash used in financing activities | |
| (237,106) | |
| (100,820) |
Cash Flows for the Three Months Ended March 31, 2025
Cash and cash equivalents, and restricted cash decreased $62.9 million to $120.3 million as of March 31, 2025, compared to $183.2 million as of December 31, 2024. This decrease resulted from $237.1 million of net cash used in financing activities, partially offset by $161.3 million of net cash provided by investing activities and $12.9 million of net cash provided by operating activities. Our outstanding debt was $2.5 billion and $2.6 billion as of March 31, 2025 and December 31, 2024.
Net cash provided by operating activities of $12.9 million comprised: (i) $21.5 million of net income (before $75.7 million of non-cash items and a $537,000 gain on the sale of real estate) and (ii) $390,000 of return on capital from unconsolidated real estate ventures, partially offset by (iii) $9.0 million of net change in operating assets and liabilities. Non-cash income adjustments of $75.7 million primarily include depreciation and amortization expense, impairment loss, share-based compensation expense, loss on the extinguishment of debt and amortization of lease incentives.
Net cash provided by investing activities of $161.3 million primarily comprised: (i) $188.8 million of proceeds from the sale of real estate, partially offset by (ii) $29.1 million of development costs, construction in progress and real estate additions.
38
Net cash used in financing activities of $237.1 million primarily comprised: (i) $408.0 million of repayments of mortgage loans, (ii) $147.6 million of common shares repurchased, (iii) $120.0 million of repayments on the revolving credit facility, and (iv) $14.8 million of dividends paid to common shareholders, partially offset by (v) $265.2 million of borrowings under mortgage loans and (vi) $197.0 million of borrowings under the revolving credit facility.
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 March 31, 2025, we had investments in unconsolidated real estate ventures totaling $92.8 million. For these investments, we exercise significant influence over but do not control these entities and, therefore, account for these investments using the equity method of accounting. For a more complete description of our real estate ventures, see Note 4 to the financial statements.
From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with borrowings, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with borrowings or (iii) provide guarantees to lenders and other third parties for the completion and stabilization of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the real estate venture or us for their share of any payments made under certain of these guarantees. At times, we also have agreements with certain of our outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable. As of March 31, 2025, we had no principal payment guarantees related to our unconsolidated real estate ventures.
As of March 31, 2025, we had additional capital commitments totaling $8.0 million related to our investments in real estate-focused technology companies.
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.
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Construction Commitments
As of March 31, 2025, we had one asset under construction, 2000/2001 South Bell Street, and are building a new amenity hub at 2011 Crystal Drive that, based on our current plans and estimates, require an additional $61.2 million to complete, which we anticipate will be primarily expended over the next year. These capital expenditures are generally due as the work is performed, and we expect to finance them primarily with debt proceeds.
Legal Proceedings
In November 2023, the District of Columbia filed a lawsuit in the Superior Court of the District of Columbia against RealPage, Inc., a provider of revenue management systems, numerous multifamily rental companies, and 14 owners and/or operators of multifamily housing in the District of Columbia, including JBG Associates, L.L.C., one of our subsidiaries, alleging that the defendants violated the District of Columbia Antitrust Act by unlawfully agreeing to use RealPage, Inc. revenue management systems and sharing sensitive data. While we intend to vigorously defend against this lawsuit, given the current stage of the District of Columbia’s lawsuit, we are unable to predict the outcome or estimate the amount of loss, if any, that may result from the lawsuit. While we do not believe that these proceedings will have a material adverse effect on our financial condition, we cannot give assurance that the proceedings will not have a material effect on our results of operations or cash flows in the event of a negative outcome.
There are various other legal actions arising in the ordinary course of business. In our opinion, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
Other
As of March 31, 2025, we had committed tenant-related obligations totaling $32.3 million ($32.2 million related to our consolidated entities and $78,000 related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.
With respect to borrowings of our consolidated entities, we may agree to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion and stabilization of development projects. As of March 31, 2025, we had no debt principal payment guarantees related to our consolidated real estate assets.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, a current or former owner or operator of real estate may be liable for conducting or paying for the costs of the investigation, removal or remediation of certain hazardous or toxic substances or petroleum products on, under or from that real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence or release of hazardous or toxic substances or petroleum products, and the liability may be joint and several. The costs of investigation, remediation or removal of these substances may be substantial and could exceed the value of the property, and the presence of these substances, or the failure to promptly remediate these substances, may adversely affect the owner's ability to sell, operate, or develop the real estate or to borrow using the real estate as collateral. In connection with the ownership and operation of our current and former assets, we may be potentially liable for these costs. The operations of current and former tenants at our assets have involved, or may have involved, the presence or use of hazardous substances or petroleum products or the generation of hazardous wastes, and indemnities in our lease agreements may not fully protect us from liability, if, for example, a tenant responsible for environmental noncompliance or contamination becomes insolvent. The release of these hazardous substances and wastes and petroleum products could result in us incurring liabilities to investigate or remediate any resulting contamination. The presence of contamination or the failure to remediate contamination at our properties may (i) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or property damage), (ii) subject our properties to liens in favor of the government for damages and costs the government incurs in connection with the contamination, (iii) impose restrictions on the manner in which a property may be used or businesses may be operated, or (iv) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. In addition, our assets are exposed to the risk of contamination originating from other sources. While a property
40
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 conditions identified by the initial assessment that could reasonably be expected to pose a material concern to the property or result in us incurring material environmental liabilities as a result of redevelopment. The tests may not, however, have included extensive sampling or subsurface investigations. In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated appropriate actions. The environmental assessments have not revealed any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us. As disclosed in Note 17 to the financial statements, environmental liabilities totaled $17.5 million as of March 31, 2025 and December 31, 2024, and are included in "Other liabilities, net" in our balance sheets.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. The following is a summary of our annual exposure to a change in interest rates:
|
| March 31, 2025 | | December 31, 2024 |
| |||||||||||
|
| | |
| Weighted |
| | | |
| | |
| Weighted |
| |
| | | | | Average | | | Annual | | | | | Average |
| ||
| | | | | Effective | | | Effect of 1% | | | | | Effective |
| ||
| | | | | Interest | | | Change in | | | | | Interest |
| ||
| | Balance | | Rate | |
| Base Rates | | Balance | | Rate |
| ||||
| | (Dollars in thousands) |
| |||||||||||||
Debt (contractual balances): | | | | | | | | | | | | | | | | |
Mortgage loans: | | |
|
| |
|
| | |
|
| |
|
|
| |
Variable rate (1) | | $ | 535,457 |
| | 5.55% | | | $ | 3,224 | | $ | 587,254 |
| 5.58% | |
Fixed rate (2) | |
| 1,107,376 |
| | 5.13% | | |
| — | |
| 1,196,479 |
| 4.79% | |
| | $ | 1,642,833 | | | | | | $ | 3,224 | | $ | 1,783,733 | | | |
Revolving credit facility and term loans: | | | | | | | | | | | | | | | | |
Revolving credit facility (3) | | $ | 162,000 | |
| 5.90% | | | $ | 1,643 | | $ | 85,000 |
| 5.98% | |
Tranche A-1 Term Loan (4) | |
| 200,000 | |
| 5.34% | | |
| — | |
| 200,000 |
| 5.34% | |
Tranche A-2 Term Loan (4) | |
| 400,000 | |
| 4.20% | | |
| — | |
| 400,000 |
| 4.20% | |
2023 Term Loan (4) | | | 120,000 | | | 5.41% | | | | — | | | 120,000 | | 5.41% | |
| | $ | 882,000 | | | | | | $ | 1,643 | | $ | 805,000 | | | |
Pro rata share of debt of unconsolidated real estate ventures (contractual balances): | | | | | | | | | | | | | | | | |
Variable rate (1) | | $ | 35,000 | |
| 5.67% | | | $ | 355 | | $ | 35,000 |
| 5.68% | |
Fixed rate (2) | |
| 33,000 | |
| 4.13% | | |
| — | |
| 33,000 |
| 4.13% | |
| | $ | 68,000 | | | | | | $ | 355 | | $ | 68,000 | | | |
41
| (1) | Includes variable rate mortgage loans with interest rate cap agreements. The interest rate cap strike is exclusive of the credit spreads associated with the mortgage loans. As of March 31, 2025, one-month term SOFR was 4.32%. The impact of these interest rate caps is reflected in our calculation of the annual effect of a 1% change in base rates, as applicable. |
| (2) | Includes variable rate mortgage loans with interest rates fixed by interest rate swap agreements. |
| (3) | As of March 31, 2025, daily SOFR was 4.41%. The interest rate for our revolving credit facility excludes a 0.20% facility fee. |
| (4) | As of March 31, 2025 and December 31, 2024, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps fix SOFR at a weighted average interest rate of 4.00% for the Tranche A-1 Term Loan, 2.81% for the Tranche A-2 Term Loan and 4.01% for the 2023 Term Loan. See Note 7 to the financial statements for additional information. |
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 March 31, 2025 and December 31, 2024, the estimated fair value of our consolidated debt was $2.5 billion and $2.6 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 balance sheets and is subsequently reclassified into "Interest expense" in our statements of operations in the period that the hedged forecasted transactions affect earnings. Our 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 March 31, 2025 and December 31, 2024, we had interest rate swap and cap agreements with an aggregate notional value of $1.4 billion and $2.0 billion, which were designated as effective hedges. The fair value of our interest rate swaps and caps designated as effective hedges primarily consisted of assets totaling $14.5 million and $23.4 million as of March 31, 2025 and December 31, 2024, included in "Other assets, net" in our balance sheets, and liabilities totaling $4.3 million and $90,000 as of March 31, 2025 and December 31, 2024, included in "Other liabilities, net" in our balance sheets.
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 (losses) recorded in "Interest expense" in our statements of operations. As of March 31, 2025 and December 31, 2024, we had various interest rate cap agreements with an aggregate notional value of $167.5 million, which were non-designated derivatives. The fair value of our interest rate cap agreements, which were non-designated derivatives, consisted of assets totaling $1.4 million and $2.3 million as of March 31, 2025 and December 31, 2024, included in "Other assets, net" in our balance sheets, and liabilities totaling $1.4 million and $2.3 million as of March 31, 2025 and December 31, 2024, included in "Other liabilities, net" in our balance sheets.
42
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2025, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In November 2023, the District of Columbia filed a lawsuit in the Superior Court of the District of Columbia against RealPage, Inc., a provider of revenue management systems, numerous multifamily rental companies, and 14 owners and/or operators of multifamily housing in the District of Columbia, including JBG Associates, L.L.C., one of our subsidiaries, alleging that the defendants violated the District of Columbia Antitrust Act by unlawfully agreeing to use RealPage, Inc. revenue management systems and sharing sensitive data. While we intend to vigorously defend against this lawsuit, given the current stage of the District of Columbia’s lawsuit, we are unable to predict the outcome or estimate the amount of loss, if any, that may result from the lawsuit. While we do not believe that these proceedings will have a material adverse effect on our financial condition, we cannot give assurance that the proceedings will not have a material effect on our results of operations or cash flows in the event of a negative outcome.
There are various other legal actions arising in the ordinary course of business. In our opinion, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in our Annual Report.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
| (a) | Not applicable. |
| (b) | Not applicable. |
43
| (c) | Purchases of equity securities by the issuer and affiliated purchasers: |
Period | | Total Number Of Common Shares Purchased | | Average Price Paid Per Common Share | | Total Number Of Common Shares Purchased As Part Of Publicly Announced Plans Or Programs | | Approximate Dollar Value Of Common Shares That May Yet Be Purchased Under the Plan Or Programs | ||
January 1, 2025 - January 31, 2025 | | 1,414,534 | | $ | 15.17 | | 1,414,534 | | $ | 350,135,006 |
February 1, 2025 - February 28, 2025 | | 2,042,798 | | | 15.25 | | 2,042,798 | | | 818,975,748 |
March 1, 2025 - March 31, 2025 | | 8,696,653 | | | 15.51 | | 8,696,653 | | | 684,098,177 |
Total for the three months ended March 31, 2025 | | 12,153,985 | | | 15.43 | | 12,153,985 | | | |
Program total since inception in March 2020 | | 68,955,331 | | | 19.08 | | 68,955,331 | | | |
In June 2022, our Board of Trustees 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. In February 2025, our Board of Trustees increased our common share repurchase authorization to $2.0 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.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Trading Arrangements
During the three months ended March 31, 2025, 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
2025 Annual Meeting Voting Results
On April 24, 2025, we held our 2025 Annual Meeting of Shareholders (the "Annual Meeting"). At the Annual Meeting, our shareholders voted on the (i) election of 10 trustees to our Board of Trustees (the "Board") to serve until our 2026 annual meeting of shareholders, (ii) approval, on a non-binding advisory basis, of the compensation of the named executive officers and (iii) ratification of the appointment of Deloitte & Touche LLP ("Deloitte") as our independent registered public accounting firm for the fiscal year ending December 31, 2025. The proposals are described in detail in our Proxy Statement for the Annual Meeting, which was filed with the SEC on March 12, 2025. The final voting results for each proposal are set forth below.
44
Proposal 1: Election of Trustees
At the Annual Meeting, our shareholders elected 10 trustees to our Board to serve until the 2026 annual meeting of shareholders and until their respective successors have been duly elected and qualified. The table below sets forth the voting results for each trustee nominee:
Nominee |
| Votes For | | Votes Against |
| Abstentions |
| Broker Non-Votes |
Phyllis R. Caldwell | | 62,583,890 | | 227,903 | | 1,760,061 | | 6,295,715 |
Scott A. Estes |
| 62,755,239 | | 74,259 | | 1,742,356 | | 6,295,715 |
Alan S. Forman |
| 58,686,339 | | 4,143,166 | | 1,742,349 | | 6,295,715 |
Michael J. Glosserman |
| 62,783,511 | | 45,246 | | 1,743,097 | | 6,295,715 |
W. Matthew Kelly | | 62,791,506 | | 37,741 | | 1,742,607 | | 6,295,715 |
Alisa M. Mall |
| 59,648,562 | | 3,180,692 | | 1,742,600 | | 6,295,715 |
Carol A. Melton | | 62,591,070 | | 219,661 | | 1,761,123 | | 6,295,715 |
William J. Mulrow | | 61,724,644 | | 1,103,556 | | 1,743,654 | | 6,295,715 |
D. Ellen Shuman | | 59,647,139 | | 3,182,141 | | 1,742,574 | | 6,295,715 |
Robert A. Stewart | | 62,565,227 | | 234,648 | | 1,771,979 | | 6,295,715 |
Proposal 2: Advisory Vote on Executive Compensation
At the Annual Meeting, our shareholders voted affirmatively on a non-binding resolution to approve the compensation of our named executive officers. The table below sets forth the voting results for this proposal:
Votes For |
| Votes Against |
| Abstentions |
| Broker Non-Votes | |
50,415,694 |
| 12,363,750 |
| 1,792,410 |
| 6,295,715 | |
Proposal 3: Ratification of the Appointment of Independent Registered Public Accounting Firm
At the Annual Meeting, our shareholders ratified the appointment of Deloitte to serve as our independent registered public accounting firm for the fiscal year ending December 31, 2025. The table below sets forth the voting results for this proposal:
Votes For |
| Votes Against |
| Abstentions |
67,927,870 |
| 1,166,652 |
| 1,773,047 |
45
ITEM 6. EXHIBITS
(a) Exhibit Index
Exhibits | Description |
|---|---|
3.1 | |
3.2 | |
3.3 | |
3.4 | |
10.1**† | |
10.2**† | Form of 2025 JBG SMITH Properties Performance LTIP Unit Agreement. |
31.1** | |
31.2** | |
32.1** | |
101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
101.SCH | Inline XBRL Taxonomy Extension Schema |
101.CAL | Inline XBRL Extension Calculation Linkbase |
101.LAB | Inline XBRL Extension Labels Linkbase |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
46
47
Exhibit 10.1
FORM OF JBG SMITH PROPERTIES
2017 OMNIBUS SHARE PLAN
APPRECIATION-ONLY LTIP UNIT AGREEMENT
This APPRECIATION-ONLY LTIP UNIT AGREEMENT (the “Award Agreement”) is made as of the Grant Date set forth on Schedule A hereto between JBG SMITH Properties, a Maryland real estate investment trust (the “Company”), its subsidiary JBG SMITH Properties LP, a Delaware limited partnership (the “Partnership”), and the employee of the Company or one of its affiliates listed on Schedule A (the “Employee”).
RECITALS
A.The Employee is an employee of the Company or of a subsidiary of the Company and provides services to the Partnership (and/or its subsidiaries), through which the Company conducts substantially all of its operations.
B.In accordance with the JBG SMITH Properties 2017 Omnibus Share Plan, as it may be amended from time to time (the “Plan”), the Company desires to provide the Employee with an opportunity to acquire Appreciation-Only LTIP Units (as defined in that certain Second Amended and Restated Limited Partnership Agreement, dated December 17, 2020 of the Partnership, as amended from time to time (the “Partnership Agreement”)) having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein, in the Plan and in the Partnership Agreement, and thereby provide additional incentive for the Employee to promote the progress and success of the business of the Company, the Partnership and its subsidiaries.
C.Schedule A hereto sets forth certain significant details of the Appreciation-Only LTIP Unit grant herein and is incorporated herein by reference. Capitalized terms used herein and not otherwise defined have the meanings provided in the Partnership Agreement and on Schedule A.
NOW, THEREFORE, the Company, the Partnership and the Employee hereby agree as follows:
AGREEMENT
The Employee shall have the right to vote the AO LTIP Units if and when voting is allowed under the Partnership Agreement, regardless of whether the applicable Vesting Period has expired.
-2-
For purposes of this Award Agreement, the following terms will have the
-3-
meaning given to them by any employment agreement between the Employee and the Company, and if there is no such agreement, the meanings below:
“Cause” means the Employee’s: (a) conviction of, or plea of guilty or nolo contendere to, a felony, (b) willful and continued failure to use reasonable efforts to perform in all material respects his employment duties (other than such failure resulting from the Employee’s incapacity due to physical or mental illness) that the Employee fails to remedy within 30 days after written notice is delivered by the Company to the Employee that specifically identifies in reasonable detail the manner in which the Company believes the Employee has not used reasonable efforts to perform in all material respects his duties hereunder, or (c) willful misconduct that is materially economically injurious to the Company. For purposes of this paragraph, no act, or failure to act, by the Employee will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company.
“Disability” means a termination of employment by the Company or an affiliate as a result of the Employee having been substantially unable to perform his duties for a continuous period of 180 days due to incapacity caused by physical or mental illness and within 30 days after receiving written Notice of such termination of employment after such 180-day period, the Employee shall not have returned to the substantial performance of his duties on a full-time basis.
“Good Reason” means (a) a material reduction by the Company in the Employee’s base salary, (b) a material diminution in the Employee’s position, authority, duties or responsibilities, (c) a relocation of the Employee’s location of employment to a location outside of the Washington D.C. metropolitan area, or (d) a material breach of the Agreement; provided, in each of clauses (a) and (b), in connection with or after a Change in Control any reduction or any diminution (regardless of materiality) shall be deemed to satisfy such clauses, and in each of clauses (a) through (d), that the Employee terminates employment within 90 days after the Employee has actual knowledge of the occurrence, without the written consent of Employee, of one of the foregoing events that has not been cured within 30 days after written notice thereof has been given by the Employee to the Company setting forth in reasonable detail the basis of the event (provided such notice must be given to the Company within 30 days of the Employee becoming aware of such condition).
“Retirement” means the termination of employment of the Employee after the Employee has met all of the following conditions: (a) the Employee has attained at least age 50, (b) the Employee has completed at least ten (10) years of service with the Company and its affiliates (including any predecessors thereto), (c) the sum of his or her age and years of service with the Company and its affiliates (including any predecessors thereto) equals or exceeds seventy (70) and (d) the Employee has provided at least six (6) months’ notice of his or her termination of employment to the Company or its applicable affiliate.
“Service Agreement” means, as of a particular date, any employment, consulting or similar service agreement then in effect between the Employee, on the one hand, and the Employer, on the other hand, as amended or supplemented through such date.
-4-
-5-
-6-
-7-
[signature page follows]
-8-
IN WITNESS WHEREOF, this Award Agreement has been executed by the parties hereto as of the date and year first above written.
| JBG SMITH PROPERTIES, a Maryland real estate investment trust | ||
| | ||
| | ||
| By: | | |
| | Name: | Steven Museles |
| | Title: | Chief Legal Officer and Secretary |
| JBG SMITH PROPERTIES LP, a Delaware limited partnership By:JBG SMITH Properties GP LLC, a Delaware limited liability company, its general partner | |||
| | |||
| | |||
| By: | | ||
| | Name: | Steven Museles | |
| | Title: | Chief Legal Officer and Secretary | |
| EMPLOYEE | |||
| | |||
| | |||
| Name: | | ||
| | | | |
| | | | |
-9-
EXHIBIT A
FORM OF LIMITED PARTNER SIGNATURE PAGE
The Employee, desiring to become one of the within named Limited Partners of JBG SMITH Properties LP, hereby accepts all of the terms and conditions of (including, without limitation, the provisions related to powers of attorney), and becomes a party to, the Second Amended and Restated Limited Partnership Agreement, dated December 17, 2020, of JBG SMITH Properties LP, as amended (the “Partnership Agreement”). The Employee agrees that this signature page may be attached to any counterpart of the Partnership Agreement and further agrees as follows (where the term “Limited Partner” refers to the Employee). Capitalized terms used but not defined herein have the meaning ascribed thereto in the Partnership Agreement.
| | Signature Line for Limited Partner: |
| | |
| | |
| Name: | |
| Date: | , 2025 |
| | Address of Limited Partner: |
| | |
| | |
| | |
| | |
EXHIBIT B
EMPLOYEE’S COVENANTS, REPRESENTATIONS AND WARRANTIES
The Employee hereby represents, warrants and covenants as follows:
The Employee also acknowledges that any delivery of the Background Documents and other information relating to the Company and the Partnership prior to the determination by the Partnership of the suitability of the Employee as a holder of AO LTIP Units shall not constitute an offer of AO LTIP Units until such determination of suitability shall be made.
EXHIBIT C
ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B) OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:
1. | The name, address and taxpayer identification number of the undersigned are: |
Name: [__________] (the “Taxpayer”)
Address:
Social Security No./Taxpayer Identification No.:
2. | Description of property with respect to which the election is being made: |
The election is being made with respect to AO LTIP Units in JBG SMITH Properties LP (the “Partnership”).
3. | The date on which the AO LTIP Units were transferred is January __, 2025. The taxable year to which this election relates is calendar year 2025. |
4. | Nature of restrictions to which the AO LTIP Units are subject: |
(a) | With limited exceptions, until the AO LTIP Units vest, the Taxpayer may not transfer in any manner any portion of the AO LTIP Units without the consent of the Partnership. |
(b) | The Taxpayer’s AO LTIP Units vest in accordance with the vesting provisions described in the Schedule attached hereto. Unvested AO LTIP Units are forfeited in accordance with the vesting provisions described in the Schedule attached hereto. |
5. | The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction as defined in Treasury Regulations Section 1.83-3(h)) of the AO LTIP Units with respect to which this election is being made was $0 per AO LTIP Unit. |
6. | The amount paid by the Taxpayer for the AO LTIP Units was $0 per AO LTIP Unit. |
7. | A copy of this statement has been furnished to the Partnership and JBG SMITH Properties. |
Dated: | | |
Name: _______________________ | | |
SCHEDULE TO EXHIBIT C
Vesting Provisions of AO LTIP Units
The AO LTIP Units are subject to a combination of time and performance-based vesting, based on relative total shareholder return, over a period commencing on the day after the Grant Date and ending on the fourth anniversary of the Grant Date, provided that the Taxpayer remains an employee of JBG SMITH Properties or its affiliates through the vesting period, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with JBG SMITH Properties (or its affiliate) under specified circumstances. Unvested AO LTIP Units are subject to forfeiture in the event of failure to vest based on the passage of time and continued employment.
| JBG SMITH PROPERTIES, a Maryland real estate investment trust | |
| | |
| | |
| By: | |
| | Name: Steven Museles |
| | Title: Chief Legal Officer and Secretary |
| | |
| | |
| | |
| Employee | |
SCHEDULE A TO AWARD AGREEMENT
(Terms being defined are in quotation marks.)
Date of Award Agreement: | January __, 2025 |
Name of Employee: | |
Maximum Number of AO LTIP Units Subject to Grant: Target Number of AO LTIP Units Subject to Grant | |
“Grant Date”: | January __, 2025 |
“Formation Unit Participation Threshold”: | $[__], which amount represents the greater of (x) the Value (as defined in the Partnership Agreement) of a Common Share on the Grant Date, and (y) 110% of the Fair Market Value of a Common Share on the Grant Date, provided, however, that (i) only if the Formation Unit Participation Threshold is determined pursuant to clause (y) and (ii) a Change in Control occurs prior to the fifth (5th) anniversary of the Grant Date, then the Formation Unit Participation Threshold shall equal the sum of 100% of the Fair Market Value of a Common Share on the Grant Date, plus 2% of the Fair Market Value of a Common Share on the Grant Date for each full year (and a proportional amount for each partial year) that has elapsed since the Grant Date (the “CIC Adjusted Threshold”), provided, further, that the CIC Adjusted Threshold shall in no event be less than the amount set forth in clause (x). |
“Formation Unit Fraction”: | 10% |
“Vesting Amount”: 50% of the AO LTIP Units that become Earned AO LTIP Units | “Vesting Dates”/“Vesting Period”: 1. The third anniversary of the Grant Date |
50% of the AO LTIP Units that become Earned AO LTIP Units) | 2. The fourth anniversary of the Grant Date |
“Earned AO LTIP Units”: The number of AO LTIP Units that will become Earned AO LTIP Units will be determined by the Committee as soon as practicable following the expiration of the Calculation Period based on the Company’s Relative Total Shareholder Return as follows: ● If the Company’s Relative Total Shareholder Return is at or above the 25th percentile and at or below the 75th percentile, the number of AO LTIP Units that will become Earned AO LTIP Units is the Target Number. ● If the Company’s Relative Total Shareholder Return is below the 25th percentile, the number of AO LTIP Units that will become Earned AO LTIP Units will be determined by reducing the Target Number of AO LTIP Units by 25%. ● If the Company’s Relative Total Shareholder Return is above the 75th percentile, the number of AO LTIP Units that will become Earned AO LTIP Units will be determined by increasing the Target Number of AO LTIP Units by 25%. For purposes of calculating the Earned AO LTIP Units, the following definitions shall apply: “Baseline Value” for each of the Company and the Peer Companies means the dollar amount representing the average of the Fair Market Value of one share of common stock of such company over the five consecutive trading days ending on, and including, the first day of the Calculation Period. “Calculation Period” means the period commencing on the Grant Date and ending on the third anniversary of the Grant Date. “Common Share Price” means, with respect to the Company and each of the Peer Companies, as of a particular date, the average of the Fair Market Value of one share of common stock of such company over all trading days beginning immediately after the first day of the Calculation Period and ending on, and including, such date (or, if such date is not a trading day, the most recent trading day immediately preceding such date); provided, however, that if such date is the date upon which a Transactional Change of Control occurs, the Common Share Price of a share of common stock as of such date shall be equal to the fair value, as determined by the Committee, of the total consideration paid or payable in the transaction resulting in the Transactional Change of Control for one Share, while the Common Share Price as determined in accordance with the remainder of this definition will be used to determine the Common Share Price for the rest of the Peer Companies. “Fair Market Value” of a security means, as of any given date, the closing sale price reported for such security on the principal stock exchange or, if applicable, any other national exchange on which the security is traded or admitted to trading on such date on which a sale was reported. If there are no market quotations for such date, the determination shall be made by reference to the last day preceding such date for which | |
there are market quotations. “Peer Companies” means the companies in the FTSE NAREIT Equity Office Index with a market capitalization at the beginning of the Calculation Period greater than $400 million, but excluding Alexandria Real Estate Equities. “Relative Total Shareholder Return” means the Company’s Total Shareholder Return over the Calculation Period relative to the Total Shareholder Return of the Peer Companies over the Calculation Period expressed as a percentile calculated by dividing the number of such Peer Companies with a Total Shareholder Return less than the Company’s Total Shareholder Return by the total number of such Peer Companies. “Total Shareholder Return” means, for each of the Company and the Peer Companies, with respect to the Calculation Period, the total return (expressed as a percentage) that would have been realized by a shareholder who (a) bought one share of common stock of such company at the Baseline Value on the first day of the Calculation Period, (b) reinvested each dividend and other distribution declared during such Calculation Period with respect to such share (and any other shares, or fractions thereof, previously received upon reinvestment of dividends or other distributions or on account of stock dividends), without deduction for any taxes with respect to such dividends or other distributions or any charges in connection with such reinvestment, in additional shares at a price per share equal to (i) the Fair Market Value on the trading day immediately preceding the ex-dividend date for such dividend or other distribution less (ii) the amount of such dividend or other distribution, and (c) sold such shares on the last day of the Calculation Period at the Common Share Price, without deduction for any taxes with respect to any gain on such sale or any charges in connection with such sale. As set forth in, and pursuant to, Section 9 of this Agreement, appropriate adjustments to the Total Shareholder Return shall be made to take into account all stock dividends, stock splits, reverse stock splits and the other events set forth in Section 9 that occur during the Calculation Period. “Transactional Change of Control” means a Change of Control resulting from any person or group making a tender offer for the Shares, a merger or consolidation where the Company is not the acquirer or surviving entity or consisting of a sale, lease, exchange or other transfer to an unrelated party of all or substantially all of the assets of the Company. |
Exhibit 10.2
FORM OF JBG SMITH PROPERTIES
2017 OMNIBUS SHARE PLAN
PERFORMANCE LTIP UNIT AGREEMENT
Name of Employee: | (the “Employee”) |
No. of LTIP Units Awarded: |
|
Grant Date: | January 2, 2025 |
RECITALS
A.The Employee is an employee of JBG SMITH Properties, a Maryland real estate investment trust (the “Company”) or of a Subsidiary of the Company and provides services to JBG SMITH Properties LP, a Delaware limited partnership (the “Partnership”) (and/or its Subsidiaries), through which the Company conducts substantially all of its operations.
B.In accordance with the JBG SMITH Properties 2017 Omnibus Share Plan, as it may be amended from time to time (the “Plan”), the Company desires to provide the Employee with an opportunity to acquire LTIP Units (as defined in that certain Second Amended and Restated Limited Partnership Agreement, dated December 17, 2020 of the Partnership, as amended from time to time (the “Partnership Agreement”)) having the rights, voting powers, restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth herein, in the Plan and in the Partnership Agreement, and thereby provide additional incentive for the Employee to promote the progress and success of the business of the Company, the Partnership and its Subsidiaries. Upon the close of business on the Grant Date pursuant to this Performance LTIP Unit Agreement (this “Agreement”), the Employee shall receive the number of LTIP Units specified above (the “Award LTIP Units”), subject to the restrictions and conditions set forth herein, in the Plan and in the Partnership Agreement.
C.The exact number of LTIP Units earned under this award (the “Award”) shall be determined following the conclusion of the Performance Period based on the Company’s Net Operating Income performance as provided herein. Any LTIP Units not earned following the conclusion of the Performance Period will be forfeited and any additional LTIP Units owed to the Employee shall be issued as soon as reasonably practical following the end of the Performance Period.
NOW, THEREFORE, the Company, the Partnership and the Employee hereby agree as follows:
1.Definitions. Capitalized terms used herein without definitions shall have the meanings given to those terms in the Partnership Agreement. In addition, as used herein:
“Board” means the Board of Trustees of the Company.
“Cause” has the meaning given to it in the Employee’s Service Agreement, and, if there is no such agreement, means the Employee’s: (i) conviction of, or plea of guilty or nolo contendere to, a felony, (ii) willful and continued failure to use reasonable best efforts to substantially perform his duties (other than such failure resulting from the Employee’s
incapacity due to physical or mental illness) that the Employee fails to remedy within 30 days after written notice is delivered by the Company to the Employee that specifically identifies in reasonable detail the manner in which the Company believes the Employee has not used reasonable efforts to perform in all material respects his duties hereunder, or (iii) willful misconduct (including, but not limited to, a willful breach of the provisions of any agreement with the Company with respect to confidentiality, ownership of documents, non-competition or non-solicitation) that is materially economically injurious to the Company or its affiliates. For purposes of this paragraph, no act, or failure to act, by the Employee will be considered “willful” unless committed in bad faith and without a reasonable belief that the act or omission was in the best interests of the Company.
“Change of Control” has the meaning given to it in the Plan.
“Committee” means the Compensation Committee of the Board.
“Common Units” means Common Partnership Units issued by the Partnership.
“Continuous Service” means the continuous service to the Employer, without interruption or termination, in any capacity of employee, or, with the written consent of the Committee, consultant. Continuous Service shall not be considered interrupted in the case of: (a) any approved leave of absence; (b) transfers among the Employers, or any successor, in any capacity of employee, or with the written consent of the Committee, as a member of the Board or a consultant; or (c) any change in status as long as the individual remains in the service of the Employer in any capacity of employee or (if the Committee specifically agrees in writing that the Continuous Service is not uninterrupted) as a member of the Board or a consultant. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave.
“Disability” has the meaning given to it in the Employee’s Service Agreement, and, if there is no such agreement, means, if, as a result of the Employee’s incapacity due to physical or mental illness, the Employee shall have been substantially unable to perform his duties for a continuous period of 180 days, and within 30 days after written notice of termination is given after such 180-day period, the Employee shall not have returned to the substantial performance of his duties on a full-time basis, the employment of the Employee is terminated by the Company.
“Distribution Participation Date” shall have the meaning set forth in the Partnership Agreement and in Section 5(b) hereof.
“Effective Date” means January 2, 2025.
“Employer” means either the Company, the Partnership or any of their Subsidiaries that employ the Employee.
“Good Reason” has the meaning given to it in the Employee’s Service Agreement, and, if there is no such agreement, means (a) a reduction by the Company in the Employee’s base salary, (b) a material diminution in the Employee’s position, authority, duties or responsibilities, (c) a relocation of the Employee’s location of employment to a location outside of the Washington D.C. metropolitan area, or (d) the Company’s material breach of the Agreement, provided, in each case, that the Employee terminates employment within 90 days after the Employee has actual knowledge of the occurrence, without the written consent of the Employee, of one of the foregoing events that has not
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been cured within 30 days after written notice thereof has been given by the Employee to the Company setting forth in reasonable detail the basis of the event (provided such notice must be given to the Company within 30 days of the Employee becoming aware of such condition).
“LTIP Unit Initial Sharing Percentage” shall have the meaning set forth in Section 5(c) hereof.
“Net Operating Income” or “NOI” is a non-GAAP financial measure management uses to assess an asset's performance. 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, commercial lease termination revenue, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles.
“Partial Service Factor” means a factor carried out to the sixth decimal to be used in calculating the number of LTIP Units earned pursuant to Section 3 hereof in the event of a Qualified Termination of the Employee’s Continuous Service prior to the Valuation Date, determined by dividing (a) the number of calendar days that have elapsed since the Effective Date to and including the date of the Employee’s Qualified Termination by (b) the number of calendar days from the Effective Date to and including the Valuation Date.
“Performance Period” means the period beginning on the Effective Date and ending on December 31, 2027.
“Retirement” means the termination of employment of the Employee after the Employee has met all of the following conditions: (a) the Employee has attained at least age 50, (b) the Employee has completed at least ten (10) years of service with the Company and its affiliates (including any predecessors thereto), (c) the sum of his or her age and years of service with the Company and its affiliates (including any predecessors thereto) equals or exceeds seventy (70) and (d) the Employee has provided at least six (6) months’ notice of his or her termination of employment to the Company or its applicable affiliate.
“Securities Act” means the Securities Act of 1933, as amended.
“Service Agreement” means, as of a particular date, any employment, consulting or similar service agreement then in effect between the Employee, on the one hand, and the Employer, on the other hand, as amended or supplemented through such date.
“Valuation Date” means the earlier of (a) the last day of the Performance Period, or (b) the date upon which a Change of Control shall occur.
2.Effectiveness of Award. The Employee shall be admitted as a partner of the Partnership with beneficial ownership of the Award LTIP Units as of the Grant Date by (i) signing and delivering to the Partnership a copy of this Agreement and (ii) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A). Upon execution of this Agreement by the Employee, the Partnership and the Company, the books and records of the
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Partnership shall reflect the issuance to the Employee of the Award LTIP Units. Thereupon, the Employee shall have all the rights of a Limited Partner of the Partnership with respect to a number of LTIP Units equal to the Award LTIP Units, as set forth in the Partnership Agreement, subject, however, to the restrictions and conditions specified in Section 3 below.
3.Vesting and Earning of Award LTIP Units.
(a)This Award is subject to service and performance vesting during the Performance Period. The Award LTIP Units will be subject to forfeiture based on the Company’s Net Operating Income during the Performance Period as set forth in this Section 3.
(b)The Award LTIP Units will be earned based on the Company’s achievement of Net Operating Income relative to a target established by the Committee for each year of the Performance Period. No later than the date each calendar year when the Company files its report on Form 10-K for the fiscal year most recently ended, the Committee shall establish the threshold, target and maximum Net Operating Income performance level metrics for such calendar year. The achievement of this metric shall be determined on an annual basis and the average of the three years shall be used in the final determination of the number of Award LTIP Units that vest pursuant to this Agreement.
(c)The following is an example of a sample Net Operating Income performance metric for a calendar year during the Performance Period:
NOI relative to Company’s Target NOI Expectations |
| Percentage Earned1 |
|---|---|---|
Less than threshold | | 0% |
$xxxx (“threshold”) | | 25% |
$xxxx (“target”) | | 50% |
$xxxx (“maximum”) | | 100% |
For results between threshold and target, or between target and maximum, the percentage of the target Award earned shall be determined using linear interpolation as between those tiers, respectively.
(d)As soon as practicable following the Valuation Date, the Committee shall:
(i)determine the number of LTIP Units earned by the Employee.
(ii)determine the number of additional LTIP Units that would have accumulated if the Employee had received all distributions paid by the Partnership with respect to earned LTIP Units determined pursuant to clause (i) (reduced by the distributions actually paid with respect to the Award LTIP Units) and such distributions had been invested in Common Units at a price equal to the fair market value of one
1 | Represents for each year a maximum of 1/3 of the number of Award LTIP Units. |
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Common Unit on the ex-dividend date (together with the earned LTIP Units determined pursuant to clause (i), the “Earned LTIP Unit Equivalent”). Notwithstanding the foregoing, the Committee retains the discretion to pay out the value of the distributions determined pursuant to the preceding sentence in cash. In that event, the Earned LTIP Unit Equivalent shall refer to the earned LTIP Units determined pursuant to clause (i) only.
If the Earned LTIP Unit Equivalent is smaller than the number of Award LTIP Units previously issued to the Employee, then the Employee, as of the Valuation Date, shall forfeit a number of Award LTIP Units equal to the difference without payment of any consideration by the Partnership; thereafter the term Award LTIP Units will refer only to the Award LTIP Units that were not so forfeited and neither the Employee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in the LTIP Units that were so forfeited. If the Earned LTIP Unit Equivalent is greater than the number of Award LTIP Units previously issued to the Employee, then, upon the performance of the calculations set forth in this Section 3(d): (A) the Company shall cause the Partnership to issue to the Employee, as of the Valuation Date, a number of additional LTIP Units equal to the difference; (B) such additional LTIP Units shall be added to the Award LTIP Units previously issued, if any, and thereby become part of this Award (provided that such additional LTIP Units shall be treated as being issued as of the date they are actually issued for purposes of determining their holding period under the Partnership Agreement); (C) the Company and the Partnership shall take such corporate and partnership action as is necessary to accomplish the grant of such additional LTIP Units; and (D) thereafter the term Award LTIP Units will refer collectively to the Award LTIP Units, if any, issued prior to such additional grant plus such additional LTIP Units; provided that such issuance will be subject to the Employee confirming the truth and accuracy of the representations set forth in Exhibit B and executing and delivering such documents, comparable to the documents executed and delivered in connection with this Agreement, as the Company and/or the Partnership reasonably request in order to comply with all applicable legal requirements, including, without limitation, federal and state securities laws. If the Earned LTIP Unit Equivalent is the same as the number of Award LTIP Units previously issued to the Employee, then there will be no change to the number of Award LTIP Units under this Award pursuant to this Section 3.
(e)If any of the Award LTIP Units have been earned based on performance as provided herein, the following shall apply:
(i)If the Valuation Date occurs other than as a result of a Change of Control, 100% of the Earned LTIP Unit Equivalent shall become vested on the date the Committee determines the Earned LTIP Unit Equivalent, in which case, such date shall be the “Vesting Date,” provided that the Continuous Service of the Employee continues through such date except as provided in Section 4 hereof, as applicable; and
(ii)If the Valuation Date is the date upon which a Change of Control shall occur, then the provisions of Section 3 shall apply to determine the Earned LTIP Unit Equivalent except that the number of LTIP Units earned will be determined based on performance for completed years and based on pro-rated performance through the date of a Change in Control for incomplete years, as determined by the Committee in its sole discretion, provided that no Partial Service Factor adjustment shall be applied to the Earned LTIP Unit Equivalent. The Earned LTIP Unit Equivalent determined in connection with a Change in Control shall be converted into time-vesting LTIP Units that shall vest at the end of the originally scheduled Performance Period, which date, in such case, shall be
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the “Vesting Date,” provided that, notwithstanding anything in the Plan to the contrary, if the Earned LTIP Unit Equivalents are not continued, assumed or substituted in connection with such Change in Control, and the Employee remains in employment as of immediately prior to the consummation of such Change in Control, then the Earned LTIP Unit Equivalents shall vest and become non-forfeitable as of immediately prior to the consummation of the Change in Control, which, in such case shall be the “Vesting Date.” The Earned LTIP Unit Equivalents shall be considered “assumed” or “substituted” for purposes of the preceding sentence only if each of the following requirements is satisfied, as determined by the Committee, as constituted immediately before the Change in Control, in its sole discretion: (i) the contractual obligations represented by the Earned LTIP Unit Equivalents are expressly assumed (and not simply by operation of law) by the successor entity or its parent in connection with the Change in Control with appropriate adjustments to the number and type of securities of the successor entity or its parent subject to the converted or substituted award and which at least preserves the compensation element of the Earned LTIP Unit Equivalent existing at the time of the Change in Control; (ii) in the case of a substituted award, it must be of the same type of award and have the same tax consequences to the Employee as the Earned LTIP Unit Equivalent; (iii) the vesting terms of the converted or substituted award (including with respect to accelerated vesting upon certain terminations of employment) must be substantially identical to the terms of the Earned LTIP Unit Equivalent; (iv) the converted or substituted award must be convertible or redeemable into another security that is itself convertible or redeemable into shares of a publicly traded company, each in a manner substantially identical to the corresponding terms of the Earned LTIP Unit Equivalent; and (v) all the other terms and conditions of the converted or substituted award must be no less favorable to the Employee than the terms of the Earned LTIP Unit Equivalent (including the provisions that would apply in the event of a subsequent Change in Control).
(f)Any Award LTIP Units that do not become vested pursuant to Section 3 or Section 4 hereof shall, without payment of any consideration by the Partnership, automatically and without notice be forfeited and be and become null and void, and neither the Employee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Award LTIP Units.
4.Termination of Employee’s Service Relationship; Death and Disability.
(a)If the Employee is a party to a Service Agreement that addresses treatment of the Award LTIP Units on a termination of employment and ceases to be an employee of the Company or any of its affiliates, the provisions of such Service Agreement that apply to the Award LTIP Unit will govern. If the Employee is not a party to a Service Agreement that addresses treatment of the Award LTIP Unit on a termination of employment, Sections 4(b) through 4(d) hereof shall govern the treatment of the Employee’s Award LTIP Units exclusively. In the event an entity ceases to be a Subsidiary or affiliate of the Company or the Partnership, such action shall be deemed to be a termination of employment of all employees of that entity for purposes of this Agreement, provided that the Committee or the Board, in its sole and absolute discretion, may make provision in such circumstances for lapse of forfeiture restrictions and/or accelerated vesting of some or all of the Employee’s remaining unvested Award LTIP Units that have not previously been forfeited, effective immediately prior to such event.
(b)Except as otherwise provided in any Service Agreement between the Employee and the Company or its affiliate, in the event of a termination of the Employee’s
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Continuous Service by (A) the Employer without Cause, (B) the Employee for Good Reason, (C) the Employee’s Retirement, (D) the Employee’s death, or (E) the Employee’s Disability, in each case prior to the Vesting Date (each, a “Qualified Termination”), the Employee will not forfeit the Award LTIP Units upon such termination, but the following provisions of this Section 4(b) shall modify the determination and vesting of the Earned LTIP Unit Equivalent for the Employee:
(i)the calculations provided in Section 3 hereof shall be performed as of the Valuation Date as if the Qualified Termination had not occurred;
(ii)other than in the case of the Employee’s Retirement (in which case no Partial Service Factor adjustment shall apply, and the Employee will be entitled to the number of Earned LTIP Unit Equivalents as if Employee remained employed through the Valuation Date and Vesting Date thereof), the Earned LTIP Unit Equivalent calculated pursuant to Section 3 shall be multiplied by the Partial Service Factor (with the resulting number being rounded to the nearest whole LTIP Unit or, in the case of 0.5 of a unit, up to the next whole unit), and such adjusted number of LTIP Units shall be deemed the Employee’s Earned LTIP Unit Equivalent for all purposes under this Agreement; and
(iii)the Employee’s Earned LTIP Unit Equivalent, as adjusted pursuant to Section 4(b)(ii) above, as applicable, shall no longer be subject to forfeiture but will be subject to Section 3(e) hereof; provided that, except in the case of death or Disability, the Employee will not have the right to Transfer (as defined in Section 17 hereof) his or her Award LTIP Units or request redemption of his or her Common Units under the Partnership Agreement until such dates as of which his or her Earned LTIP Unit Equivalent, as adjusted pursuant to Section 4(b)(ii) above, as applicable, would have become earned and vested pursuant to Section 3(d) absent a Qualified Termination. For the avoidance of doubt, the purpose of this Section 4(b)(iii) is to prevent a situation where Employees who have had a Qualified Termination would be able to realize the value of their Award LTIP Units or Common Units (through Transfer or redemption) before other Employees whose Continuous Service continues through the applicable vesting dates set forth in Section 3(e) hereof.
(c)In the event of a termination of the Employee’s Continuous Service other than a Qualified Termination, all Award LTIP Units except for those that, as of the date at such termination had become vested shall, without payment of any consideration by the Partnership, automatically and without notice terminate, be forfeited and be and become null and void, and neither the Employee nor any of his or her successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such Award LTIP Units.
5.Distribution Participation Date and LTIP Unit Initial Sharing Percentage.
(a)The holder of the Award LTIP Units shall be entitled to receive distributions and allocations with respect to such Award LTIP Units to the extent provided for in the Partnership Agreement, including Exhibit E thereof, as modified hereby.
(b)The Distribution Participation Date with respect to such Earned Award LTIP Units shall be the Valuation Date. Accordingly, for the avoidance of doubt, from the Grant Date until the Distribution Participation Date, the holder of the Award LTIP Units shall only be entitled to certain distributions and allocations described in, and pursuant to, Sections 2.A. and 3 of Exhibit E to the Partnership Agreement with respect to an Award
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LTIP Unit in an amount equal to the product of the LTIP Unit Initial Sharing Percentage for such Award LTIP Unit and the amount otherwise distributable or allocable with respect to such Award LTIP Unit.
(c)The LTIP Unit Initial Sharing Percentage shall be ten percent (10%). For the avoidance of doubt, after the Valuation Date, Award LTIP Units, both vested and (until and unless forfeited pursuant to Section 3(f) or Section 4(c)) unvested, shall be entitled to receive the same distributions payable with respect to Common Units if the payment date for such distributions is after the Distribution Participation Date, even though the record date for such distributions is before the Distribution Participation Date.
(d)All distributions paid with respect to Award LTIP Units, both before and after the Distribution Participation Date, shall be fully vested and non-forfeitable when paid, whether or not the underlying LTIP Units have been earned based on performance or have become vested based on the passage of time as provided in Section 3 or Section 4 hereof.
6.Certificates. Each certificate, if any, issued in respect of the Award LTIP Units awarded under this Agreement shall be registered in the Employee’s name and held by the Company until the expiration of the applicable vesting period. If certificates representing the Award LTIP Units are issued by the Partnership, at the expiration of the vesting period, the Company shall deliver to the Employee (or, if applicable, to the Employee’s legal representatives, beneficiaries or heirs) certificates representing the number of LTIP Units that vested upon the expiration of such vesting period. The Employee agrees that any resale of the LTIP Units received upon the expiration of the applicable vesting period (or Shares received upon redemption of or in exchange for LTIP Units or Common Units into which LTIP Units may have been converted) shall be subject to the terms of Section 17 and shall not occur during the “blackout periods” forbidding sales of Company securities, as set forth in the then-applicable Company employee manual or insider trading policy. In addition, any resale shall be made in compliance with the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), or an applicable exemption therefrom, including, without limitation, the exemption provided by Rule 144 promulgated thereunder (or any successor rule).
7.Tax Withholding. The Company or its applicable affiliate has the right, to the extent applicable, to withhold from cash compensation payable to the Employee all applicable income and employment taxes due and owing at the time the applicable portion of the Award LTIP Units becomes includible in the Employee’s income (the “Withholding Amount”), and/or to delay delivery of Award LTIP Units until appropriate arrangements have been made for payment of such withholding. In the alternative, the Company has the right to retain and cancel, or sell or otherwise dispose of, such number of Award LTIP Units as have a market value (determined as of the date the applicable Award LTIP Units vest) approximately equal to the Withholding Amount, with any excess proceeds being paid to Employee.
8.Certain Adjustments. The Award LTIP Units shall be subject to adjustment as provided in the Partnership Agreement, and except as otherwise provided therein, if (a) the Company shall at any time be involved in a merger, consolidation, dissolution, liquidation, reorganization, exchange of shares, sale of all or substantially all of the assets or stock of the Company, spin-off of a Subsidiary, business unit or other transaction similar thereto, (b) any stock dividend, stock split, reverse stock split, stock combination, reclassification, recapitalization, significant repurchases of stock, or other similar change in the capital structure of the Company, or any extraordinary dividend or other
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distribution to holders of Shares or Common Units other than regular dividends shall occur, or (c) any other event shall occur that in each case in the good faith judgment of the Committee necessitates action by way of appropriate equitable adjustment in the terms of this Agreement, the Plan or the LTIP Units, then the Committee shall take such action as it deems necessary to maintain the Employee’s rights hereunder so that they are substantially proportionate to the rights existing under this Agreement and the terms of the LTIP Units prior to such event, including, without limitation: (i) adjustments in the LTIP Units, (ii) adjustments to the applicable performance metrics; and (iii) substitution of other awards under the Plan or otherwise. In the event of any change in the outstanding Shares (or corresponding change in the Conversion Factor applicable to Common Units) by reason of any share dividend or split, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other corporate change, or any distribution to common shareholders of the Company other than regular dividends, any Common Units, shares or other securities received by the Employee with respect to the applicable Award LTIP Units for which the vesting period shall not have expired will be subject to the same restrictions as the Award LTIP Units with respect to an equivalent number of shares or securities and shall be deposited with the Company.
9.Incorporation of Plan; Interpretation by Administrator. This Agreement is subject to the terms, conditions, limitations and definitions contained in the Plan, to the extent not inconsistent with the terms of this Agreement. In the event of any discrepancy or inconsistency between this Agreement and the Plan, the terms and conditions of this Agreement shall control. The Administrator may make such rules and regulations and establish such procedures for the administration of this Agreement, which are consistent with the terms of this Agreement, as it deems appropriate.
10.Amendment; Modification. This Agreement may only be modified or amended in a writing signed by the parties hereto, provided that the Employee acknowledges that the Plan may be amended or discontinued in accordance with the provisions thereof and that this Agreement may be amended or canceled by the Administrator, on behalf of the Company and the Partnership, in each case for the purpose of satisfying changes in law or for any other lawful purpose, so long as no such action shall adversely affect the Employee’s rights under this Agreement without the Employee’s written consent. No promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, with respect to the subject matter hereof, have been made by the parties which are not set forth expressly in this Agreement. The failure of the Employee or the Company or the Partnership to insist upon strict compliance with any provision of this Agreement, or to assert any right the Employee or the Company or the Partnership, respectively, may have under this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
11.Complete Agreement. Other than as specifically stated herein or as otherwise set forth in any employment, change in control or other agreement or arrangement to which the Employee is a party which specifically refers to the Award LTIP Units or to the treatment of compensatory equity held by the Employee generally, this Agreement (together with those agreements and documents expressly referred to herein, for the purposes referred to herein) embody the complete and entire agreement and understanding between the parties with respect to the subject matter hereof, and supersede any and all prior promises, assurances, commitments, agreements, undertakings or representations, whether oral, written, electronic or otherwise, and whether express or implied, which may relate to the subject matter hereof in any way.
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12.No Right to Employment. Nothing herein contained shall affect the right of the Company or any affiliate to terminate the Employee’s services, responsibilities and duties at any time for any reason whatsoever.
13.No Limit on Other Compensation Arrangements. Nothing contained in this Agreement shall preclude the Company from adopting or continuing in effect other or additional compensation plans, agreements or arrangements, and any such plans, agreements and arrangements may be either generally applicable or applicable only in specific cases or to specific persons.
14.Notice. Any notice to be given to the Company shall be addressed to the Chief Legal Officer, JBG SMITH Properties, 4747 Bethesda Avenue, Suite 200, Bethesda, Maryland 20814, and any notice to be given the Employee shall be addressed to the Employee at the Employee’s address as it appears on the employment records of the Company, or at such other address as the Company or the Employee may hereafter designate in writing to the other.
15.Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without references to principles of conflict of laws.
16.Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and any successors to the Company and any successors to the Employee by will or the laws of descent and distribution, but this Agreement shall not otherwise be assignable or otherwise subject to hypothecation by the Employee.
17.Transfer; Conversion; Redemption. None of the Award LTIP Units shall be sold, assigned, transferred, pledged or otherwise disposed of or encumbered (whether voluntarily or involuntarily or by judgment, levy, attachment, garnishment or other legal or equitable proceeding) (each such action, a “Transfer”), or redeemed or converted in accordance with the Partnership Agreement (a) prior to vesting, and (b) unless such Transfer is in compliance with all applicable securities laws (including, without limitation, the Securities Act), and such Transfer is in accordance with the applicable terms and conditions of the Partnership Agreement. Any attempted Transfer of LTIP Units not in accordance with the terms and conditions of this Section 17 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any LTIP Units as a result of any such Transfer, and shall otherwise refuse to recognize any such Transfer.
18.Severability. If, for any reason, any provision of this Agreement is held invalid, such invalidity shall not affect any other provision of this Agreement not so held invalid, and each such other provision shall to the full extent consistent with law continue in full force and effect. If any provision of this Agreement shall be held invalid in part, such invalidity shall in no way affect the rest of such provision not held so invalid, and the rest of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect.
19.Headings. The headings of paragraphs hereof are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement.
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20.Counterparts. This Agreement may be executed in multiple counterparts with the same effect as if each of the signing parties had signed the same document. All counterparts shall be construed together and constitute the same instrument.
21.Conflict With Employment Agreement. If (and only if) the Employee and the Company or its affiliates have entered into an employment agreement, in the event of any conflict between any of the provisions of this Agreement and any such employment agreement, the provisions of such employment agreement will govern. As further provided in Section 12, nothing herein shall imply that any employment agreement exists between the Employee and the Company or its affiliates.
22.Status as a Partner. As of the Grant Date, the Employee shall be admitted as a partner of the Partnership with beneficial ownership of the number of LTIP Units issued to the Employee as of such date pursuant to this Agreement by: (A) signing and delivering to the Partnership a copy of this Agreement; and (B) signing, as a Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A).
23.Status of LTIP Units under the Plan. The LTIP Units are both issued as equity securities of the Partnership and granted as awards under the Plan. The Company will have the right at its option, as set forth in the Partnership Agreement, to issue Shares in exchange for Common Units into which LTIP Units may have been converted pursuant to the Partnership Agreement, subject to certain limitations set forth in the Partnership Agreement, and such Shares, if issued, will be issued under the Plan. The Employee must be eligible to receive the LTIP Units in compliance with applicable federal and state securities laws and to that effect is required to complete, execute and deliver certain covenants, representations and warranties (attached as Exhibit B). The Employee acknowledges that the Employee will have no right to approve or disapprove such determination by the Company.
24.Investment Representations; Registration. The Employee hereby makes the covenants, representations and warranties as set forth on Exhibit B attached hereto. All of such covenants, warranties and representations shall survive the execution and delivery of this LTIP Unit Agreement by the Employee. The Employee shall promptly notify the Partnership upon discovering that any of the representations or warranties set forth on Exhibit B was false when made or have, as a result of changes in circumstances, become false. The Partnership will have no obligation to register under the Securities Act any LTIP Units or any other securities issued pursuant to this Agreement or upon conversion or exchange of LTIP Units.
25.Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the Company and its agents may process any and all personal or professional data, including but not limited to Social Security or other identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or this Agreement (the “Relevant Information”). By entering into this Agreement, the Employee (i) authorizes the Company to collect, process, register and transfer to its agents all Relevant Information; and (ii) authorizes the Company and its agents to store and transmit such information in electronic form. The Employee shall have access to, and the right to change, the Relevant Information. Relevant Information will only be used in accordance with applicable law and to the extent necessary to administer the Plan and
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this Agreement, and the Company and its agents will keep the Relevant Information confidential except as specifically authorized under this paragraph.
26.Electronic Delivery of Documents. By accepting this Agreement, the Employee (i) consents to the electronic delivery of this Agreement, all information with respect to the Plan and any reports of the Company provided generally to the Company’s stockholders; (ii) acknowledges that he or she may receive from the Company a paper copy of any documents delivered electronically at no cost to the Employee by contacting the Company by telephone or in writing; (iii) further acknowledges that he or she may revoke his or her consent to electronic delivery of documents at any time by notifying the Company of such revoked consent by telephone, postal service or electronic mail; and (iv) further acknowledges that he or she is not required to consent to electronic delivery of documents.
27.Section 83(b) Election. In connection with this Agreement, the Employee hereby agrees to make an election to include in gross income in the year of transfer the fair market value of the applicable Award LTIP Units over the amount paid for them pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”), substantially in the form attached hereto as Exhibit C and to supply the necessary information in accordance with the regulations promulgated thereunder.
28.Acknowledgement. The Employee hereby acknowledges and agrees that this Agreement and the LTIP Units issued hereunder shall constitute satisfaction in full of all obligations of the Company and the Partnership, if any, to grant to the Employee LTIP Units pursuant to the terms of any written employment agreement or letter or other written offer or description of employment with the Company and/or the Partnership executed prior to or coincident with the date hereof.
[signature page follows]
12
IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto as of the date and year first above written.
| | JBG SMITH PROPERTIES | |||
| | | |||
| | By: | | ||
| | | Name: | Steven Museles | |
| | | Title: | Chief Legal Officer and Secretary | |
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| | JBG SMITH PROPERTIES LP | |||
| | | |||
| | By: | | ||
| | | Name: | Steven Museles | |
| | | Title: | Chief Legal Officer and Secretary | |
| | | |||
| | EMPLOYEE | |||
| | | |||
| | Name: | | ||
| | | [Employee Name] | ||
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EXHIBIT A
FORM OF LIMITED PARTNER SIGNATURE PAGE
The Employee, desiring to become one of the within named Limited Partners of JBG SMITH Properties LP, hereby accepts all of the terms and conditions of (including, without limitation, the provisions related to powers of attorney), and becomes a party to, the Second Amended and Restated Limited Partnership Agreement, dated December 17, 2020, of JBG SMITH Properties LP, as amended (the “Partnership Agreement”). The Employee agrees that this signature page may be attached to any counterpart of the Partnership Agreement and further agrees as follows (where the term “Limited Partner” refers to the Employee): Capitalized terms used but not defined herein have the meaning ascribed thereto in the Partnership Agreement.
1.The Limited Partner hereby confirms that it has reviewed the terms of the Partnership Agreement and affirms and agrees that it is bound by each of the terms and conditions of the Partnership Agreement, including, without limitation, the provisions thereof relating to limitations and restrictions on the transfer of Partnership Units.
2.The Limited Partner hereby confirms that it is acquiring the Partnership Units for its own account as principal, for investment and not with a view to resale or distribution, and that the Partnership Units may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the Partnership (which it has no obligation to file) or that is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Partnership Units as to which evidence of such registration or exemption from registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration. If the General Partner delivers to the Limited Partner common Shares of beneficial interest of the General Partner (“Common Shares”) upon redemption of any Partnership Units, the Common Shares will be acquired for the Limited Partner’s own account as principal, for investment and not with a view to resale or distribution, and the Common Shares may not be transferred or otherwise disposed of by the Limited Partner otherwise than in a transaction pursuant to a registration statement filed by the General Partner with respect to such Common Shares (which it has no obligation under the Partnership Agreement to file) or that is exempt from the registration requirements of the Securities Act and all applicable state and foreign securities laws, and the General Partner may refuse to transfer any Common Shares as to which evidence of such registration or exemption from such registration satisfactory to the General Partner is not provided to it, which evidence may include the requirement of a legal opinion regarding the exemption from such registration.
3.The Limited Partner hereby affirms that it has appointed the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, in accordance with Section 2.4 of the Partnership Agreement, which section is hereby incorporated by reference. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination
of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.
4.The Limited Partner hereby confirms that, notwithstanding any provisions of the Partnership Agreement to the contrary, the LTIP Units shall not be redeemable by the Limited Partner pursuant to Section 8.6 of the Partnership Agreement.
5.(a)The Limited Partner hereby irrevocably consents in advance to any amendment to the Partnership Agreement, as may be recommended by the General Partner, intended to avoid the Partnership being treated as a publicly-traded partnership within the meaning of Section 7704 of the Internal Revenue Code, including, without limitation, (x) any amendment to the provisions of Section 8.6 of the Partnership Agreement intended to increase the waiting period between the delivery of a Notice of Redemption and the Specified Redemption Date and/or the Valuation Date to up to sixty (60) days or (y) any other amendment to the Partnership Agreement intended to make the redemption and transfer provisions, with respect to certain redemptions and transfers, more similar to the provisions described in Treasury Regulations Section 1.7704-1(f).
(b)The Limited Partner hereby appoints the General Partner, any Liquidator and authorized officers and attorneys-in-fact of each, and each of those acting singly, in each case with full power of substitution, as its true and lawful agent and attorney-in-fact, with full power and authority in its name, place and stead, to execute and deliver any amendment referred to in the foregoing paragraph 5(a) on the Limited Partner’s behalf. The foregoing power of attorney is hereby declared to be irrevocable and a power coupled with an interest, and it shall survive and not be affected by the death, incompetency, dissolution, disability, incapacity, bankruptcy or termination of the Limited Partner and shall extend to the Limited Partner’s heirs, executors, administrators, legal representatives, successors and assigns.
6.The Limited Partner agrees that it will not transfer any interest in the Partnership Units (x) through (i) a national, non-U.S., regional, local or other securities exchange, (ii) PORTAL or (iii) an over-the-counter market (including an interdealer quotation system that regularly disseminates firm buy or sell quotations by identified brokers or dealers by electronic means or otherwise) or (y) to or through (a) a person, such as a broker or dealer, that makes a market in, or regularly quotes prices for, interests in the Partnership, (b) a person that regularly makes available to the public (including customers or subscribers) bid or offer quotes with respect to any interests in the Partnership and stands ready to effect transactions at the quoted prices for itself or on behalf of others or (c) another readily available, regular and ongoing opportunity to sell or exchange the interest through a public means of obtaining or providing information of offers to buy, sell or exchange the interest.
7.The Limited Partner acknowledges that the General Partner shall be a third-party beneficiary of the representations, covenants and agreements set forth in Sections 4 and 6 hereof. The Limited Partner agrees that it will transfer, whether by assignment or otherwise, Partnership Units only to the General Partner or to transferees that provide the Partnership and the General Partner with the representations and covenants set forth in Sections 4 and 6 hereof.
8.This acceptance shall be construed and enforced in accordance with and governed by the laws of the State of Delaware, without regard to the principles of conflicts of law.
| | Signature Line for Limited Partner: |
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| Name: | |
| Date: | January [ ], 2025 |
| | Address of Limited Partner: |
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EXHIBIT B
EMPLOYEE’S COVENANTS, REPRESENTATIONS AND WARRANTIES
The Employee hereby represents, warrants and covenants as follows:
(a)The Employee has received and had an opportunity to review the following documents (the “Background Documents”):
(i)The Company’s latest Annual Report to Shareholders;
(ii)The Company’s Proxy Statement for its most recent Annual Meeting of Shareholders;
(iii)The Company’s Report on Form 10-K for the fiscal year most recently ended;
(iv)The Company’s Form 10-Q for the most recently ended quarter if one has been filed by the Company with the Securities and Exchange Commission since the filing of the Form 10-K described in clause (iii) above;
(v)Each of the Company’s Current Report(s) on Form 8-K, if any, filed since the later of the Form 10-K described in clause (iii) above and the Form 10-Q described in clause (iv) above;
(vi)The Partnership Agreement; and
(vii)The Plan.
The Employee also acknowledges that any delivery of the Background Documents and other information relating to the Company and the Partnership prior to the determination by the Partnership of the suitability of the Employee as a holder of Award LTIP Units shall not constitute an offer of Award LTIP Units until such determination of suitability shall be made.
(b)The Employee hereby represents and warrants that:
(i)The Employee either (A) is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”), or (B) by reason of the business and financial experience of the Employee, together with the business and financial experience of those persons, if any, retained by the Employee to represent or advise him with respect to the grant to him of LTIP Units, the potential conversion of LTIP Units into Common Partnership Units of the Partnership (“Common Units”) and the potential redemption of such Common Units for the Company’s common Shares (“REIT Shares”), has such knowledge, sophistication and experience in financial and business matters and in making investment decisions of this type that the Employee (I) is capable of evaluating the merits and risks of an investment in the Partnership and potential investment in the Company and of making an informed investment decision, (II) is capable of protecting his own interest or has engaged representatives or advisors to assist him in protecting his interests, and (III) is capable of bearing the economic risk of such investment.
(ii)The Employee understands that (A) the Employee is responsible for consulting his own tax advisors with respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which the Employee is or by reason of the award of LTIP Units may become subject, to his particular situation; (B) the Employee has not received or relied upon business or tax advice from the Company, the Partnership or any of their respective employees, agents, consultants or advisors, in their capacity as such; (C) the Employee provides services to the Partnership on a regular basis and in such capacity has access to such information, and has such experience of and involvement in the business and operations of the Partnership, as the Employee believes to be necessary and appropriate to make an informed decision to accept this award of LTIP Units; and (D) an investment in the Partnership and/or the Company involves substantial risks. The Employee has been given the opportunity to make a thorough investigation of matters relevant to the LTIP Units and has been furnished with, and has reviewed and understands, materials relating to the Partnership and the Company and their respective activities (including, but not limited to, the Background Documents). The Employee has been afforded the opportunity to obtain any additional information (including any exhibits to the Background Documents) deemed necessary by the Employee to verify the accuracy of information conveyed to the Employee. The Employee confirms that all documents, records, and books pertaining to his receipt of LTIP Units which were requested by the Employee have been made available or delivered to the Employee. The Employee has had an opportunity to ask questions of and receive answers from the Partnership and the Company, or from a person or persons acting on their behalf, concerning the terms and conditions of the LTIP Units. The Employee has relied upon, and is making its decision solely upon, the Background Documents and other written information provided to the Employee by the Partnership or the Company.
(iii)The LTIP Units to be issued, the Common Units issuable upon conversion of the LTIP Units and any REIT Shares issued in connection with the redemption of any such Common Units will be acquired for the account of the Employee for investment only and not with a current view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the grant of any participation therein, without prejudice, however, to the Employee’s right (subject to the terms of the LTIP Units, the Plan and this Agreement) at all times to sell or otherwise dispose of all or any part of his LTIP Units, Common Units or REIT Shares in compliance with the Securities Act, and applicable state securities laws, and subject, nevertheless, to the disposition of his assets being at all times within his control.
(iv)The Employee acknowledges that (A) neither the LTIP Units to be issued, nor the Common Units issuable upon conversion of the LTIP Units, have been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws and, if such LTIP Units or Common Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Partnership and the Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the Employee contained herein, (C) such LTIP Units or Common Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such LTIP Units and Common Units and (E) neither the Partnership nor the Company has any obligation or intention to register such LTIP Units or the Common Units issuable upon conversion of the LTIP Units under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws, except that, upon the
redemption of the Common Units for REIT Shares, the Company may issue such REIT Shares under the Plan and pursuant to a Registration Statement on Form S-8 under the Securities Act, to the extent that (I) the Employee is eligible to receive such REIT Shares under the Plan at the time of such issuance, (II) the Company has filed a Form S-8 Registration Statement with the Securities and Exchange Commission registering the issuance of such REIT Shares and (III) such Form S-8 is effective at the time of the issuance of such REIT Shares. The Employee hereby acknowledges that because of the restrictions on transfer or assignment of such LTIP Units acquired hereby and the Common Units issuable upon conversion of the LTIP Units which are set forth in the Partnership Agreement or this Agreement, the Employee may have to bear the economic risk of his ownership of the LTIP Units acquired hereby and the Common Units issuable upon conversion of the LTIP Units for an indefinite period of time.
(v)The Employee has determined that the LTIP Units are a suitable investment for the Employee.
(vi)No representations or warranties have been made to the Employee by the Partnership or the Company, or any officer, director, shareholder, agent or affiliate of any of them, and the Employee has received no information relating to an investment in the Partnership or the LTIP Units except the information specified in paragraph (a) above.
(c)So long as the Employee holds any LTIP Units, the Employee shall disclose to the Partnership in writing such information as may be reasonably requested with respect to ownership of LTIP Units as the Partnership may deem reasonably necessary to ascertain and to establish compliance with provisions of the Code applicable to the Partnership or to comply with requirements of any other appropriate taxing authority.
(d)The Employee hereby agrees to make an election under Section 83(b) of the Code with respect to the LTIP Units awarded hereunder, and has delivered with this Agreement a completed, executed copy of the election form attached hereto as Exhibit C. The Employee agrees to file the election (or to permit the Partnership to file such election on the Employee’s behalf) within thirty (30) days after the award of the LTIP Units hereunder with the IRS Service Center at which such Employee files his personal income tax returns.
(e)The address set forth on the signature page of this Agreement is the address of the Employee’s principal residence, and the Employee has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state in which such residence is sited.
EXHIBIT C
ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B) OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:
1. | The name, address and taxpayer identification number of the undersigned are: |
Name: [Employee Name] (the “Taxpayer”)
Address:
Social Security No./Taxpayer Identification No.:
2. | Description of property with respect to which the election is being made: |
The election is being made with respect to LTIP Units in JBG SMITH Properties LP (the “Partnership”).
3. | The date on which the LTIP Units were transferred is January 2, 2025. The taxable year to which this election relates is calendar year 2025. |
4. | Nature of restrictions to which the LTIP Units are subject: |
(a) | With limited exceptions, until the LTIP Units vest, the Taxpayer may not transfer in any manner any portion of the LTIP Units without the consent of the Partnership. |
(b) | The Taxpayer’s LTIP Units vest in accordance with the vesting provisions described in the Schedule attached hereto. Unvested LTIP Units are forfeited in accordance with the vesting provisions described in the Schedule attached hereto. |
5. | The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction as defined in Treasury Regulations Section 1.83-3(h)) of the LTIP Units with respect to which this election is being made was $0 per LTIP Unit. |
6. | The amount paid by the Taxpayer for the LTIP Units was $0 per LTIP Unit. |
7. | A copy of this statement has been furnished to the Partnership and JBG SMITH Properties. |
Dated: | | |
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| Name: | |
SCHEDULE TO EXHIBIT C
Vesting Provisions of LTIP Units
The LTIP Units are subject to performance-based vesting criteria, based on certain net operating income thresholds, and time-based vesting criteria, provided that the Taxpayer remains an employee of JBG SMITH Properties or its affiliate through the relevant vesting period, subject to acceleration in the event of certain extraordinary transactions or termination of the Taxpayer’s service relationship with JBG SMITH Properties (or its affiliate) under specified circumstances. Unvested LTIP Units are subject to forfeiture in the event of failure to vest based on the failure to satisfy the applicable performance goals and continued employment.
| JBG SMITH Properties, a Maryland real estate investment trust | |
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| By: | |
| | Name: Steven Museles |
| | Title: Chief Legal Officer and Secretary |
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| Employee | |
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, W. Matthew Kelly, certify that:
1. | I have reviewed this quarterly report on Form 10-Q 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. |
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CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, M. Moina Banerjee, certify that:
1. | I have reviewed this quarterly report on Form 10-Q 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. |
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CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of JBG SMITH Properties (the “Company”) on Form 10-Q for the period ended March 31, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, W. Matthew Kelly, Chief Executive Officer of the Company, and I, M. Moina Banerjee, Chief Financial Officer of the Company, certify, to our knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 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. |