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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2021

OR

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

For the transition period from ___________ to ___________

Commission file number 001-37994

Graphic

JBG SMITH PROPERTIES

________________________________________________________________________________

(Exact name of Registrant as specified in its charter)

Maryland

81-4307010

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

4747 Bethesda Avenue Suite 200

Bethesda MD

20814

(Address of Principal Executive Offices)

(Zip Code)

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

_______________________________

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Shares, par value $0.01 per share

JBGS

New York Stock Exchange

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

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

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

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

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

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

As of April 30, 2021, JBG SMITH Properties had 131,499,149 common shares outstanding.

JBG SMITH PROPERTIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements

Page

Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2021 and December 31, 2020

3

Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2021 and 2020

4

Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2021 and 2020

5

Condensed Consolidated Statements of Equity (unaudited) for the three months ended March 31, 2021 and 2020

6

Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2021 and 2020

7

Notes to Condensed Consolidated Financial Statements (unaudited)

9

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

28

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

45

Item 4.

Controls and Procedures

46

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

46

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

46

Item 3.

Defaults Upon Senior Securities

47

Item 4.

Mine Safety Disclosures

47

Item 5.

Other Information

47

Item 6.

Exhibits

47

Signatures

50

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, 2021

    

December 31, 2020

ASSETS

 

  

 

  

Real estate, at cost:

 

  

 

  

Land and improvements

$

1,384,157

$

1,391,472

Buildings and improvements

 

4,309,606

 

4,341,103

Construction in progress, including land

 

285,206

 

268,056

 

5,978,969

 

6,000,631

Less accumulated depreciation

 

(1,249,613)

 

(1,232,690)

Real estate, net

 

4,729,356

 

4,767,941

Cash and cash equivalents

 

208,708

 

225,600

Restricted cash

 

39,839

 

37,736

Tenant and other receivables

 

45,567

 

55,903

Deferred rent receivable

 

177,043

 

170,547

Investments in unconsolidated real estate ventures

 

455,476

 

461,369

Other assets, net

 

289,452

 

286,575

Assets held for sale

 

73,876

 

73,876

TOTAL ASSETS

$

6,019,317

$

6,079,547

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

  

Liabilities:

 

  

 

  

Mortgages payable, net

$

1,591,883

$

1,593,738

Revolving credit facility

 

 

Unsecured term loans, net

 

398,151

 

397,979

Accounts payable and accrued expenses

 

95,813

 

103,102

Other liabilities, net

 

203,484

 

247,774

Liabilities related to assets held for sale

 

213

 

Total liabilities

 

2,289,544

 

2,342,593

Commitments and contingencies

 

  

 

  

Redeemable noncontrolling interests

 

552,927

 

530,748

Shareholders' equity:

 

  

 

  

Preferred shares, $0.01 par value - 200,000 shares authorized; none issued

 

 

Common shares, $0.01 par value - 500,000 shares authorized; 131,277 and 131,778 shares issued and outstanding as of March 31, 2021 and December 31, 2020

 

1,314

 

1,319

Additional paid-in capital

 

3,631,277

 

3,657,643

Accumulated deficit

 

(433,675)

 

(412,944)

Accumulated other comprehensive loss

 

(30,800)

 

(39,979)

Total shareholders' equity of JBG SMITH Properties

 

3,168,116

 

3,206,039

Noncontrolling interests

 

8,730

 

167

Total equity

 

3,176,846

 

3,206,206

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

$

6,019,317

$

6,079,547

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

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)

Three Months Ended March 31, 

    

2021

    

2020

REVENUE

  

 

  

Property rental

$

122,241

$

120,380

Third-party real estate services, including reimbursements

 

38,107

 

29,716

Other revenue

 

4,941

 

8,011

Total revenue

 

165,289

 

158,107

EXPENSES

 

 

  

Depreciation and amortization

 

64,726

 

48,489

Property operating

 

34,731

 

34,503

Real estate taxes

 

18,310

 

18,199

General and administrative:

 

 

  

Corporate and other

 

12,475

 

13,176

Third-party real estate services

 

28,936

 

28,814

Share-based compensation related to Formation Transaction and special equity awards

 

4,945

 

9,441

Transaction and other costs

 

3,690

 

5,309

Total expenses

 

167,813

 

157,931

OTHER INCOME (EXPENSE)

 

  

 

  

Loss from unconsolidated real estate ventures, net

 

(943)

 

(2,692)

Interest and other income, net

 

9

 

907

Interest expense

 

(16,296)

 

(12,005)

Gain on sale of real estate

 

 

59,477

Loss on extinguishment of debt

 

 

(33)

Total other income (expense)

 

(17,230)

 

45,654

INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT

 

(19,754)

 

45,830

Income tax (expense) benefit

 

(4,315)

 

2,345

NET INCOME (LOSS)

 

(24,069)

 

48,175

Net (income) loss attributable to redeemable noncontrolling interests

 

2,230

 

(5,250)

Net loss attributable to noncontrolling interests

 

1,108

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

$

(20,731)

$

42,925

EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED

$

(0.16)

$

0.32

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:

Basic

 

131,540

 

134,542

Diluted

 

131,540

 

135,429

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

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)

Three Months Ended March 31, 

    

2021

    

2020

NET INCOME (LOSS)

$

(24,069)

$

48,175

OTHER COMPREHENSIVE INCOME (LOSS):

 

  

 

  

Change in fair value of derivative financial instruments

 

6,411

 

(33,928)

Reclassification of net loss on derivative financial instruments from accumulated other comprehensive loss into interest expense

 

3,741

 

1,158

Other comprehensive income (loss)

 

10,152

 

(32,770)

COMPREHENSIVE INCOME (LOSS)

 

(13,917)

 

15,405

Net (income) loss attributable to redeemable noncontrolling interests

 

2,230

 

(5,250)

Net loss attributable to noncontrolling interests

1,108

Other comprehensive (income) loss attributable to redeemable noncontrolling interests

 

(973)

 

3,573

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES

$

(11,552)

$

13,728

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

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)

    

Accumulated 

Additional 

Other 

Common Shares

Paid-In 

Accumulated 

 

Comprehensive 

Noncontrolling 

Total 

Shares

Amount

Capital

Deficit

 

Loss

Interests

Equity

BALANCE AS OF DECEMBER 31, 2020

 

131,778

$

1,319

$

3,657,643

$

(412,944)

$

(39,979)

$

167

$

3,206,206

Net loss attributable to common shareholders and noncontrolling interests

 

 

 

 

(20,731)

 

 

(1,108)

 

(21,839)

Conversion of common limited partnership units to common shares

 

119

 

1

 

3,918

 

 

 

 

3,919

Common shares repurchased

(620)

(6)

(19,197)

(19,203)

Common shares issued pursuant to employee incentive compensation plan and Employee Share Purchase Plan ("ESPP")

249

249

Contributions from noncontrolling interests, net

 

 

 

 

 

 

9,671

 

9,671

Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation

 

 

 

(11,336)

 

 

(973)

 

 

(12,309)

Other comprehensive income

 

 

 

 

 

10,152

 

 

10,152

BALANCE AS OF MARCH 31, 2021

 

131,277

$

1,314

$

3,631,277

$

(433,675)

$

(30,800)

$

8,730

$

3,176,846

BALANCE AS OF DECEMBER 31, 2019

 

134,148

$

1,342

$

3,633,042

$

(231,164)

$

(16,744)

$

201

$

3,386,677

Net income attributable to common shareholders and noncontrolling interests

 

 

 

 

42,925

 

 

 

42,925

Conversion of common limited partnership units to common shares

 

787

 

8

 

31,118

 

 

 

 

31,126

Common shares repurchased

(1,418)

(14)

(41,163)

(41,177)

Common shares issued pursuant to ESPP

132

132

Contributions from noncontrolling interests

 

 

 

 

 

 

2

 

2

Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation

 

 

 

100,666

 

 

3,573

 

 

104,239

Other comprehensive loss

 

 

 

 

 

(32,770)

 

 

(32,770)

BALANCE AS OF MARCH 31, 2020

 

133,517

$

1,336

$

3,723,795

$

(188,239)

$

(45,941)

$

203

$

3,491,154

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

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Three Months Ended March 31, 

    

2021

    

2020

OPERATING ACTIVITIES:

 

  

 

  

Net income (loss)

$

(24,069)

$

48,175

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

  

 

  

Share-based compensation expense

 

13,236

 

17,362

Depreciation and amortization, including amortization of debt issuance costs

 

65,747

 

49,360

Deferred rent

 

(6,594)

 

(6,614)

Loss from unconsolidated real estate ventures, net

 

943

 

2,692

Amortization of market lease intangibles, net

 

(458)

 

(163)

Amortization of lease incentives

 

2,345

 

1,609

Loss on extinguishment of debt

 

 

33

Gain on sale of real estate

 

 

(59,477)

Losses on operating lease and other receivables

 

501

 

2,718

Return on capital from unconsolidated real estate ventures

 

5,952

 

532

Other non-cash items

 

(633)

 

(163)

Changes in operating assets and liabilities:

 

  

 

  

Tenant and other receivables

 

9,836

 

(4,210)

Other assets, net

 

2,115

 

(1,105)

Accounts payable and accrued expenses

 

(842)

 

(5,968)

Other liabilities, net

 

(1,577)

 

(2,865)

Net cash provided by operating activities

 

66,502

 

41,916

INVESTING ACTIVITIES:

 

  

 

  

Development costs, construction in progress and real estate additions

 

(28,499)

 

(107,013)

Proceeds from sale of real estate

 

 

154,493

Investments in unconsolidated real estate ventures

 

(1,016)

 

(3,563)

Net cash (used in) provided by investing activities

 

(29,515)

 

43,917

FINANCING ACTIVITIES:

 

  

 

  

Finance lease payments

 

 

(2,642)

Borrowings under mortgages payable

 

 

175,000

Borrowings under revolving credit facility

 

 

200,000

Repayments of mortgages payable

 

(2,234)

 

(2,221)

Repayments of revolving credit facility

 

 

(200,000)

Debt issuance costs

 

(4,587)

 

(9,278)

Common shares repurchased

(19,203)

(41,177)

Dividends paid to common shareholders

 

(29,650)

 

(30,184)

Distributions to redeemable noncontrolling interests

 

(5,785)

 

(3,828)

Contributions from noncontrolling interests

9,683

Net cash (used in) provided by financing activities

 

(51,776)

 

85,670

Net (decrease) increase in cash and cash equivalents and restricted cash

 

(14,789)

 

171,503

Cash and cash equivalents and restricted cash as of the beginning of the period

 

263,336

 

142,516

Cash and cash equivalents and restricted cash as of the end of the period

$

248,547

$

314,019

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AS OF END OF THE PERIOD:

 

  

Cash and cash equivalents

$

208,708

$

295,442

Restricted cash

 

39,839

 

18,577

Cash and cash equivalents and restricted cash

$

248,547

$

314,019

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

Three Months Ended March 31, 

    

2021

    

2020

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:

 

  

Cash paid for interest (net of capitalized interest of $1,710 and $5,268 in 2021 and 2020)

$

14,929

$

10,927

Accrued capital expenditures included in accounts payable and accrued expenses

 

38,668

 

76,418

Write-off of fully depreciated assets

 

39,920

 

7,111

Conversion of common limited partnership units to common shares

 

3,919

 

31,126

Recognition (derecognition) of operating lease right-of-use assets

(13,151)

Recognition (derecognition) of liabilities related to operating lease right-of-use assets

(13,151)

Recognition of finance lease right-of-use assets

 

 

42,354

Recognition of liabilities related to finance lease right-of-use assets

 

 

40,684

Cash paid for amounts included in the measurement of lease liabilities for operating leases

 

610

 

1,396

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

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JBG SMITH PROPERTIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.Organization and Basis of Presentation

Organization

JBG SMITH Properties ("JBG SMITH"), a Maryland real estate investment trust ("REIT"), owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail. JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in the Washington, D.C. metropolitan area that have high barriers to entry and vibrant urban amenities. Over half of our portfolio is in National Landing where we serve as the exclusive developer for Amazon.com, Inc.'s ("Amazon") new headquarters and where Virginia Tech's planned new $1 billion Innovation Campus is located. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, Amazon, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership. As of March 31, 2021, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 90.5% of its common limited partnership units ("OP Units"). JBG SMITH is hereinafter referred to as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures.

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

As of March 31, 2021, our Operating Portfolio consisted of 63 operating assets comprising 42 commercial assets totaling 13.3 million square feet (11.4 million square feet at our share) and 21 multifamily assets totaling 7,800 units (5,999 units at our share). Additionally, we have: (i) two under-construction multifamily assets totaling 1,130 units (969 units at our share); (ii) nine wholly owned near-term development assets totaling 4.8 million square feet of estimated potential development density; and (iii) 29 future development assets totaling 14.8 million square feet (12.0 million square feet at our share) of estimated potential development density.

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

Basis of Presentation

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

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

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

Income Taxes

We have elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from these activities.

2.Summary of Significant Accounting Policies

Significant Accounting Policies

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

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant of these estimates include: (i) the underlying cash flows and holding periods used in assessing impairment; (ii) the determination of useful lives for tangible and intangible assets; and (iii) the assessment of the collectability of receivables, including deferred rent receivables.

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

Due to the business disruptions and challenges caused by COVID-19, we have provided rent deferrals and other lease concessions to certain tenants. We have entered into agreements with certain tenants, many of which have been placed on

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the cash basis of accounting, resulting in the deferral to future periods or abatement of $1.9 million of rent that had been contractually due in the first quarter of 2021. We are in the process of negotiating additional rent deferrals and other lease concessions with some of our tenants, which have been considered when establishing credit losses against billed and deferred rent receivables. During 2020, we put substantially all co-working tenants and retailers except for grocers, pharmacies, essential businesses and certain national credit tenants on the cash basis of accounting.

Recent Accounting Pronouncements

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2020-04, Reference Rate Reform ("Topic 848"). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the three months ended March 31, 2021, no elections were made. During the year ended December 31, 2020, we elected to apply the hedge accounting expedients related to (i) the assertion that our hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future London Interbank Offered Rate ("LIBOR") indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves our past presentation of our derivatives. We will continue to evaluate the impact of the guidance and may apply other elections, as applicable.

3.Assets Held for Sale

As of March 31, 2021 and December 31, 2020, we had a real estate property that was classified as held for sale. The amounts included in "Assets held for sale" in our balance sheets primarily represent the carrying value of real estate. The following is a summary of assets held for sale:

Liabilities Related

Total

Assets Held

to Assets Held

Assets

    

Segment

    

Location

    

Square Feet (1)

    

for Sale

    

for Sale

(In thousands)

March 31, 2021

Pen Place (2)

Other

Arlington, Virginia

2,082

$

73,876

$

213

December 31, 2020

Pen Place (2)

Other

Arlington, Virginia

2,082

$

73,876

$

(1)Represents estimated or approved potential development density.
(2)In March 2019, we entered into an agreement for the sale of Pen Place to Amazon, which we expect to close in 2021.

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4.Investments in Unconsolidated Real Estate Ventures

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

Effective

Ownership

Real Estate Venture Partners

    

Interest (1)

    

March 31, 2021

    

December 31, 2020

(In thousands)

Prudential Global Investment Management

 

50.0%

$

212,796

$

216,939

Landmark

 

1.8% - 49.0%

 

65,313

 

66,724

CBREI Venture

 

5.0% - 64.0%

 

64,251

 

65,190

Canadian Pension Plan Investment Board ("CPPIB")

 

55.0%

 

47,072

 

47,522

Berkshire Group

 

50.0%

 

51,662

50,649

Brandywine Realty Trust

 

30.0%

 

13,751

 

13,710

Other

 

 

631

635

Total investments in unconsolidated real estate ventures (2)

$

455,476

$

461,369

(1)Reflects our effective ownership interests in the underlying real estate as of March 31, 2021. We have multiple investments with certain venture partners with varying ownership interests in the underlying real estate.
(2)As of March 31, 2021 and December 31, 2020, our total investments in unconsolidated real estate ventures are greater than the net book value of the underlying assets by $19.5 million and $18.9 million, resulting principally from capitalized interest, partially offset by our zero investment balance in the real estate venture with CPPIB that owns 1101 17th Street.

We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $5.9 million and $6.7 million for the three months ended March 31, 2021 and 2020 for such services.

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

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

Weighted

Average Effective

    

Interest Rate (1)

    

March 31, 2021

    

December 31, 2020

(In thousands)

Variable rate (2)

 

2.49%

$

865,653

$

863,617

Fixed rate (3) (4)

 

4.03%

 

331,768

 

323,050

Mortgages payable

 

1,197,421

 

1,186,667

Unamortized deferred financing costs

 

(6,766)

 

(7,479)

Mortgages payable, net (4)

$

1,190,655

$

1,179,188

(1)Weighted average effective interest rate as of March 31, 2021.
(2)Includes variable rate mortgages payable with interest rate cap agreements.
(3)Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements.
(4)See Note 17 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures.

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

    

March 31, 2021

    

December 31, 2020

 

(In thousands)

Combined balance sheet information:

Real estate, net

$

2,239,173

$

2,247,384

Other assets, net

 

273,121

 

270,516

Total assets

$

2,512,294

$

2,517,900

Mortgages payable, net

$

1,190,655

$

1,179,188

Other liabilities, net

 

139,098

 

140,304

Total liabilities

 

1,329,753

 

1,319,492

Total equity

 

1,182,541

 

1,198,408

Total liabilities and equity

$

2,512,294

$

2,517,900

Three Months Ended March 31, 

    

2021

    

2020

 

(In thousands)

Combined income statement information:

Total revenue

$

48,217

$

69,579

Operating income (loss)

 

1,714

 

(482)

Net loss

 

(6,526)

 

(18,165)

5.Variable Interest Entities

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

Unconsolidated VIEs

As of March 31, 2021 and December 31, 2020, we had interests in entities deemed to be VIEs. Although we are engaged to act as the managing partner in charge of day-to-day operations of these investees, we are not the primary beneficiary of these VIEs, as we do not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's performance. We account for our investment in these entities under the equity method. As of March 31, 2021 and December 31, 2020, the net carrying amounts of our investment in these entities were $116.3 million and $116.2 million, which are included in "Investments in unconsolidated real estate ventures" in our balance sheets. Our equity in the income of unconsolidated VIEs is included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. Our maximum loss exposure in these entities is limited to our investments, construction commitments and debt guarantees. See Note 17 for additional information.

Consolidated VIEs

JBG SMITH LP is our most significant consolidated VIE. We hold 90.5% of the limited partnership interest in JBG SMITH LP, act as the general partner and exercise full responsibility, discretion and control over its day-to-day management. The noncontrolling interests of JBG SMITH LP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest limited partners (including by such a limited partner unilaterally). Because the noncontrolling interest holders do not have these rights, JBG SMITH LP is a VIE. As general partner, we have the power to direct the activities of JBG SMITH LP that most

13

significantly affect its performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP. Accordingly, we are the primary beneficiary of JBG SMITH LP and consolidate it in our financial statements. Because we conduct our business and hold our assets and liabilities through JBG SMITH LP, its total assets and liabilities comprise substantially all of our consolidated assets and liabilities.

Through the structure of the 1900 Crystal Drive transaction we executed in March 2021, we have the ability to facilitate an exchange out of an asset into 1900 Crystal Drive. We leased the land underlying 1900 Crystal Drive located in National Landing to a lessee, which plans to construct an 808-unit multifamily asset comprising two towers with ground floor retail. The ground lessee has engaged us to be the development manager for the construction of 1900 Crystal Drive, and separately, we are the lessee in a master lease of the asset. We have an option to acquire the asset until a specified period after completion. In March 2021, the ground lessee entered into a mortgage loan collateralized by the leasehold interest with a maximum principal balance of $227.0 million and an interest rate of LIBOR plus 3.0% per annum. As of March 31, 2021, no proceeds had been received from the mortgage loan. In connection with the mortgage loan, we have guaranteed the completion of the asset and provided certain carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy). The ground lessee is obligated to invest $17.5 million of equity funding, and we are obligated to provide the additional project funding through a mezzanine loan to the ground lessee. As of March 31, 2021, the balance of the ground lessee’s equity contribution was $9.7 million. We determined that 1900 Crystal Drive is a VIE and that we are the primary beneficiary of the VIE. Accordingly, we consolidated the VIE with the lessee's ownership interest shown as "Noncontrolling interests" in our balance sheet as of March 31, 2021. The ground lease, the mezzanine loan and the master lease described above are eliminated in consolidation. As of March 31, 2021, the VIE had total assets and liabilities totaling $5.7 million and $585,000. The assets can only be used to settle the obligations of the VIE, and the liabilities include third-party liabilities of the VIE for which the creditors or beneficial interest holders do not have recourse against us.

6.Other Assets, Net

The following is a summary of other assets, net:

    

March 31, 2021

    

December 31, 2020

(In thousands)

Deferred leasing costs, net

$

121,817

$

117,141

Lease intangible assets, net

 

13,037

 

15,565

Management and leasing contracts, net

24,036

25,512

Other identified intangible assets

17,500

17,500

Wireless spectrum licenses (1)

25,275

Operating lease right-of-use assets

 

3,470

 

3,542

Finance lease right-of-use assets

41,889

41,996

Prepaid expenses

 

12,210

 

14,000

Deferred financing costs, net

 

10,826

 

6,656

Deposits (1)

 

3,488

 

28,560

Other

 

15,904

 

16,103

Total other assets, net

$

289,452

$

286,575

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

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7.Debt

Mortgages Payable

The following is a summary of mortgages payable:

Weighted Average

Effective

    

Interest Rate (1)

    

March 31, 2021

    

December 31, 2020

(In thousands)

Variable rate (2)

 

2.15%

$

677,246

$

678,346

Fixed rate (3)

 

4.32%

 

924,389

 

925,523

Mortgages payable

 

1,601,635

 

1,603,869

Unamortized deferred financing costs and premium/ discount, net (4)

 

(9,752)

 

(10,131)

Mortgages payable, net

$

1,591,883

$

1,593,738

(1)Weighted average effective interest rate as of March 31, 2021.
(2)Includes variable rate mortgages payable with interest rate cap agreements.
(3)Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements.
(4)As of March 31, 2021, net deferred financing costs related to an unfunded mortgage loan totaling $4.6 million were included in "Other assets, net."

As of March 31, 2021 and December 31, 2020, the net carrying value of real estate collateralizing our mortgages payable totaled $1.8 billion. Our mortgages payable contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. Certain mortgages payable are recourse to us. See Note 17 for additional information.

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

Credit Facility

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

Effective

    

Interest Rate (1)

    

March 31, 2021

    

December 31, 2020

(In thousands)

Revolving credit facility (2) (3) (4)

 

1.16%

$

$

Tranche A-1 Term Loan (5)

 

2.59%

$

200,000

$

200,000

Tranche A-2 Term Loan (6)

 

2.49%

 

200,000

 

200,000

Unsecured term loans

 

  

 

400,000

 

400,000

Unamortized deferred financing costs, net

 

  

 

(1,849)

 

(2,021)

Unsecured term loans, net

 

  

$

398,151

$

397,979

(1)Effective interest rate as of March 31, 2021.
(2)As of March 31, 2021 and December 31, 2020, letters of credit with an aggregate face amount of $1.5 million were outstanding under our revolving credit facility.
(3)As of March 31, 2021 and December 31, 2020, net deferred financing costs related to our revolving credit facility totaling $6.2 million and $6.7 million were included in "Other assets, net."
(4)The interest rate for our revolving credit facility excludes a 0.15% facility fee.
(5)As of March 31, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.39%.

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(6)As of March 31, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.34%.

8.Other Liabilities, Net

The following is a summary of other liabilities, net:

    

March 31, 2021

    

December 31, 2020

(In thousands)

Lease intangible liabilities, net

9,526

10,300

Lease assumption liabilities

 

8,746

 

10,126

Lease incentive liabilities

 

15,369

 

13,913

Liabilities related to operating lease right-of-use assets

 

9,801

 

10,752

Liabilities related to finance lease right-of-use assets

 

40,390

 

40,221

Prepaid rent

 

20,293

 

19,809

Security deposits

 

13,386

 

13,654

Environmental liabilities

 

18,242

 

18,242

Deferred tax liability, net

 

5,995

 

2,509

Dividends payable

 

 

34,075

Derivative agreements, at fair value

 

34,181

 

44,222

Deferred purchase price (1)