JBGS 10-Q
JBG SMITH Properties (JBGS)
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
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 | $ | | $ | | ||
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 |
| ( |
| ( | ||
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, | ||||||
| 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)
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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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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 |
| — |
| — |
| ( |
| — |
| |
| — |
| ( | ||||||
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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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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Total other comprehensive income |
| — |
| — |
| — |
| — |
| |
| — |
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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 |
| |
| ( | ||
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 | $ | | $ | | ||
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 | $ | | $ | | ||
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").
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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,
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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 |
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| |
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Other |
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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) |
|
| |
| | |||
Mortgage loans |
| |
| | ||||
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 |
| |
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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
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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. |
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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
25
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 $
26
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,
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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.
39
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.
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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. |
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| (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.
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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 |
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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) |
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