~~JBG SMITH PROPERTIES~~

~~Condensed Consolidated and Combined Statement of Equity~~

~~For the nine months ended September 30, 2017~~

~~(Unaudited)~~

~~(In thousands)~~

Common Shares
Additional
Paid-In
Capital
Accumulated Deficit
Former
Parent
Equity
Noncontrolling Interests in Consolidated Subsidiaries Total Equity
Shares Amount
BALANCE AT JANUARY 1, 2017 $ 2,121,689
$ 295
$ 2,121,984
Net income (loss) attributable to JBG SMITH
Properties —
$ —
$ —
$ (28,827 ) (29,024 )
⁽¹⁾
—
(57,851 )
Deferred compensation shares and options, net —
—
—
—
1,526
—
1,526
Contributions from former parent, net —
—
—
—
334,843
—
334,843
Issuance of common limited partnership units
   at the Separation
—
—
—
—
(96,632 ) —
(96,632 )
Issuance of common shares at the Separation 94,736
947
2,331,455
—
(2,332,402 ) —
—
Issuance of common shares in connection with the
   Combination
23,221
233
864,685
—
—
—
864,918
Noncontrolling interests acquired in connection
   with the Combination
—
—
—
—
—
3,987
3,987
Distributions to noncontrolling interests —
—
—
—
—
(14 ) (14 )
Contributions from noncontrolling interests —
—
—
—
—
134
134
Adjustment to record redeemable noncontrolling
   interest at redemption value
—
—
(97,084 ) —
—
—
(97,084 )
BALANCE AT SEPTEMBER 30, 2017 117,957
$ 1,180
$ 3,099,056
$ (28,827 ) $ —
$ 4,402
$ 3,075,811

JBG SMITH PROPERTIES Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
NET INCOME	$	10,532		$	26,382		$	35,452		$	45,619
OTHER COMPREHENSIVE INCOME (LOSS):
Change in fair value of derivative financial instruments	(7,014		)	5,142			(33,966		)	24,453
Reclassification of net (income) loss on derivative financial instruments from accumulated other comprehensive income (loss) into interest expense	(211		)	24			(2,001		)	1,473
Other comprehensive income (loss)	(7,225		)	5,166			(35,967		)	25,926
COMPREHENSIVE INCOME (LOSS)	3,307			31,548			(515		)	71,545
Net income attributable to redeemable noncontrolling interests	(1,172		)	(3,552		)	(4,271		)	(6,532		)
Other comprehensive (income) loss attributable to redeemable noncontrolling interests	803			(696		)	3,689			(3,406		)
Net loss attributable to noncontrolling interests	—			—			—			127
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES	$	2,938		$	27,300		$	(1,097	)	$	61,734

~~_______________~~


⁽¹⁾	~~Net loss earned from January 1, 2017 through July 17, 2017 is attributable to our former parent as it was the sole shareholder prior to July 17, 2017. See Note 1 for additional information.~~

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

JBG SMITH PROPERTIES
Condensed Consolidated and Combined Statements of Cash Flows
For the nine months ended September 30, 2017 and 2016
(Unaudited)
(In thousands)
Nine Months Ended September 30,
2017 2016
OPERATING ACTIVITIES:
Net (loss) income $ (60,332 ) $ 49,344
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Share-based compensation expense 17,164
3,486
Depreciation and amortization, including amortization of debt issuance costs 111,684
99,612
Deferred rent (9,249 ) (10,772 )
Loss from unconsolidated real estate ventures 1,365
952
Amortization of above- and below-market lease intangibles, net (872 ) (1,012 )
Return on capital from unconsolidated real estate ventures 1,149
1,020
Gain on bargain purchase (27,771 ) —
Loss on extinguishment of debt 689
—
Unrealized gain on interest rate swaps (467 ) —
Bad debt expense 1,808
618
Other non-cash items 6,466
3,592
Changes in operating assets and liabilities:
Tenant and other receivables (3,617 ) (2,177 )
Other assets, net (32,884 ) (19,762 )
Accounts payable and accrued expenses 19,077
(4,091 )
Other liabilities, net (817 ) (19,427 )
Net cash provided by operating activities 23,393
101,383
INVESTING ACTIVITIES:
Development costs, construction in progress and real estate additions (115,922 ) (185,439 )
Cash received in connection with the Combination 83,942
—
Restricted cash (798 ) 3,234
Investments in and advances to unconsolidated real estate ventures (1,441 ) (19,965 )
Repayment of notes receivable 50,934
—
Other investments (3,531 ) (1,935 )
Proceeds from repayment of receivable from former parent 75,000
—
Net cash provided by (used in) investing activities 88,184
(204,105 )
FINANCING ACTIVITIES:
Contributions from former parent, net 160,203
32,955
Repayment of borrowings from former parent (115,630 ) —
Capital lease payments (17,776 ) —
Proceeds from borrowings from former parent 4,000
39,000
Proceeds from borrowings 407,769
—
Repayments of borrowings (192,681 ) (8,871 )
Debt issuance costs (18,686 ) (37 )
Contributions from noncontrolling interests 134
—
Distributions to noncontrolling interests (14 ) (7 )
Net cash provided by financing activities 227,319
63,040
Net increase (decrease) in cash and cash equivalents 338,896
(39,682 )
Cash and cash equivalents at beginning of the period 29,000
74,966
Cash and cash equivalents at end of the period $ 367,896
$ 35,284



JBG SMITH PROPERTIES Condensed Consolidated Statements of Equity (Unaudited) (In thousands)

	Common Shares			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests in Consolidated Subsidiaries			Total Equity
	Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests in Consolidated Subsidiaries			Total Equity
BALANCE AS OF JULY 1, 2019	134,127	$	1,342	$	3,644,699		$	(184,373	)	$	(19,156	)		$	346		$	3,442,858
Net income attributable to common shareholders and noncontrolling interests	—	—		—			9,360			—				—			9,360
Common shares issued pursuant to Employee Share Purchase Plan ("ESPP")	—	—		80			—			—				—			80
Dividends declared on common shares ($0.225 per common share)	—	—		—			(30,179		)	—				—			(30,179		)
Distributions to noncontrolling interests	—	—		—			—			—				(16		)	(16		)
Redeemable noncontrolling interests redemption value adjustment and other comprehensive (income) loss allocation	—	—		(1,446		)	—			803				—			(643		)
Other comprehensive loss	—	—		—			—			(7,225		)		—			(7,225		)
BALANCE AS OF SEPTEMBER 30, 2019	134,127	$	1,342	$	3,643,333		$	(205,192	)	$	(25,578	)		$	330		$	3,414,235

BALANCE AS OF JULY 1, 2018	117,955	$	1,180	$	3,035,194		$	(105,962	)	$	19,662			$	3,592		$	2,953,666
Net income attributable to common shareholders and noncontrolling interests	—	—		—			22,830			—				—			22,830
Conversion of common limited partnership units to common shares	2,962	30		109,092			—			—				—			109,122
Dividends declared on common shares ($0.225 per common share)	—	—		—			(27,087		)	—				—			(27,087		)
Distributions to noncontrolling interests	—	—		—			—			—			—	(327		)	(327		)
Contributions from noncontrolling interests	—	—		—			—			—			—	250			250
Redeemable noncontrolling interests redemption value adjustment and other comprehensive (income) loss allocation	—	—		6,537			—			(696		)	—	—			5,841
Other comprehensive income	—	—		—			—			5,166				—			5,166
Other	—	—		76			—			—				—			76
BALANCE AS OF SEPTEMBER 30, 2018	120,917	$	1,210	$	3,150,899		$	(110,219	)	$	24,132			$	3,515		$	3,069,537

BALANCE AS OF JANUARY 1, 2019	120,937	$	1,210	$	3,155,256		$	(176,018	)	$	6,700			$	204		$	2,987,352
Net income attributable to common shareholders and noncontrolling interests	—	—		—			31,181			—				—			31,181
Common shares issued	11,500	115		472,665			—			—				—			472,780
Conversion of common limited partnership units to common shares	1,664	17		57,301			—			—				—			57,318
Common shares issued pursuant to ESPP	26	—		1,018			—			—				—			1,018
Dividends declared on common shares ($0.45 per common share)	—	—		—			(60,355		)	—				—			(60,355		)
Distributions to noncontrolling interests	—	—		—			—			—				(47		)	(47		)
Contributions from noncontrolling interests	—	—		—			—			—				173			173
Redeemable noncontrolling interests redemption value adjustment and other comprehensive (income) loss allocation	—	—		(42,907		)	—			3,689				—			(39,218		)
Other comprehensive loss	—	—		—			—			(35,967		)		—			(35,967		)
BALANCE AS OF SEPTEMBER 30, 2019	134,127	$	1,342	$	3,643,333		$	(205,192	)	$	(25,578	)		$	330		$	3,414,235

JBG SMITH PROPERTIES
Condensed Consolidated and Combined Statements of Cash Flows
For the nine months ended September 30, 2017 and 2016
(Unaudited)
(In thousands)

Nine Months Ended September 30,
2017 2016
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:⁽¹⁾

Transfer of mortgage payable to former parent $ —
$ 115,022
Cash paid for interest (net of capitalized interest of $2,285 and $3,690 in
2017 and 2016, respectively)
45,354
37,540
Accrued capital expenditures included in accounts payable and accrued expenses 17,633
15,206
Write-off of fully depreciated assets (24,909 ) (87,220 )
Cash payments for income taxes 3,681
1,087
Non-cash transactions related to the Formation Transaction:
Issuance of common limited partnership units at the Separation 96,632
—
Issuance of common shares at the Separation 2,332,402
—
Issuance of common shares in connection with the Combination 864,918
—
Issuance of common limited partnership units in connection with the Combination 359,967
—
Adjustment to record redeemable noncontrolling interest at redemption value 97,084
—
Contribution from former parent in connection with the Separation 174,639
—



JBG SMITH PROPERTIES Condensed Consolidated Statements of Equity (Unaudited) (In thousands)

	Common Shares			Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests in Consolidated Subsidiaries			Total Equity
	Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)				Noncontrolling Interests in Consolidated Subsidiaries			Total Equity
BALANCE AS OF JANUARY 1, 2018	117,955	$	1,180	$	3,063,625		$	(95,809	)	$	1,612			$	4,206		$	2,974,814
Net income (loss) attributable to common shareholders and noncontrolling interests	—	—		—			39,214			—				(127		)	39,087
Conversion of common limited partnership units to common shares	2,962	30		109,092			—			—				—			109,122
Dividends declared on common shares ($0.45 per common share)	—	—		—			(53,624		)	—				—			(53,624		)
Distributions to noncontrolling interests	—	—		—			—			—			—	(814		)	(814		)
Contributions from noncontrolling interests	—	—		—			—			—			—	250			250
Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation	—	—		(21,346		)	—			(3,406		)	—	—			(24,752		)
Other comprehensive income	—	—		—			—			25,926				—			25,926
Other	—	—		(472		)	—			—				—			(472		)
BALANCE AS OF SEPTEMBER 30, 2018	120,917	$	1,210	$	3,150,899		$	(110,219	)	$	24,132			$	3,515		$	3,069,537

⁽¹⁾ ~~See Note 3 for information about assets, liabilities and noncontrolling interests acquired in the Formation Transaction.~~

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

JBG SMITH PROPERTIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)

	Nine Months Ended September 30,
	2019			2018
OPERATING ACTIVITIES:
Net income	$	35,452		$	45,619
Adjustments to reconcile net income to net cash provided by operating activities:
Share-based compensation expense	47,432			39,690
Depreciation and amortization, including amortization of debt issuance costs	144,868			146,958
Deferred rent	(29,164		)	(7,880		)
Income from unconsolidated real estate ventures, net	(647		)	(15,418		)
Amortization of above- and below-market lease intangibles, net	(486		)	(58		)
Amortization of lease incentives	4,344			3,646
Reduction of gain on bargain purchase	—			7,606
Loss on extinguishment of debt	1,889			4,536
Gain on sale of real estate	(47,121		)	(45,789		)
Net unrealized loss (gain) on derivative financial instruments not designated as cash flow hedges	50			(1,264		)
Losses on operating lease receivables	1,281			2,591
Return on capital from unconsolidated real estate ventures	1,836			6,820
Other non-cash items	20			1,499
Changes in operating assets and liabilities:
Tenant and other receivables	(9,077		)	2,167
Other assets, net	(13,858		)	(18,637		)
Accounts payable and accrued expenses	(17,171		)	(23,875		)
Other liabilities, net	(7,009		)	(11,550		)
Net cash provided by operating activities	112,639			136,661
INVESTING ACTIVITIES:
Development costs, construction in progress and real estate additions	(294,355		)	(260,396		)
Deposits for real estate acquisitions	(9,125		)	—
Proceeds from sale of real estate	157,810			346,149
Acquisition of interests in unconsolidated real estate ventures, net of cash acquired	—			(386		)
Distributions of capital from unconsolidated real estate ventures	7,557			2,240
Distributions of capital from sales of unconsolidated real estate ventures	—			24,602
Investments in unconsolidated real estate ventures	(7,325		)	(22,663		)
Other	—			(665		)
Net cash (used in) provided by investing activities	(145,438		)	88,881
FINANCING ACTIVITIES:
Finance lease payments	(103		)	(82		)
Borrowings under mortgages payable	—			43,823
Borrowings under revolving credit facility	—			35,000
Borrowings under unsecured term loans	—			250,000
Repayments of mortgages payable	(482,810		)	(267,285		)
Repayments of revolving credit facility	—			(150,751		)
Debt issuance costs	(515		)	(372		)
Proceeds from the issuance of common stock, net of issuance costs	473,527			—
Dividends paid to common shareholders	(99,654		)	(80,166		)
Acquisition of ownership interest in consolidated real estate venture	—			(548		)
Distributions to redeemable noncontrolling interests	(13,564		)	(13,320		)
Contributions from noncontrolling interests	125			250
Distributions to noncontrolling interests	(19		)	(439		)
Net cash used in financing activities	(123,013		)	(183,890		)
Net (decrease) increase in cash and cash equivalents and restricted cash	(155,812		)	41,652
Cash and cash equivalents and restricted cash as of the beginning of the period	399,532			338,557
Cash and cash equivalents and restricted cash as of the end of the period	$	243,720		$	380,209

JBG SMITH PROPERTIES Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands)

	Nine Months Ended September 30,
	2019		2018

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AS OF END OF THE PERIOD:
Cash and cash equivalents	$	230,147	$	253,148
Restricted cash	13,573		127,061
Cash and cash equivalents and restricted cash	$	243,720	$	380,209

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:
Cash paid for interest (net of capitalized interest of $23,211 and $14,863 in 2019 and 2018)	$	38,563	$	48,835
Accrued capital expenditures included in accounts payable and accrued expenses	99,876		78,910
Write-off of fully depreciated assets	49,319		23,049
Deconsolidation of 1900 N Street	—		95,923
Conversion of common limited partnership units to common shares	57,318		109,208
Initial recognition of operating right-of-use assets	35,318		—
Initial recognition of lease liabilities related to operating right-of-use assets	37,922		—
Cash paid for amounts included in the measurement of lease liabilities for operating leases	4,629		—

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

JBG SMITH PROPERTIES

Notes to Condensed Consolidated ~~and Combined~~ Financial Statements

~~September 30, 2017~~

(Unaudited)

1. Organization and Basis of Presentation

Organization

JBG SMITH Properties ("JBG SMITH") was organized ~~by Vornado Realty Trust ("Vornado" or "former parent")~~ as a Maryland real estate investment trust ("REIT") on October 27, 2016 ~~(capitalized on November 22, 2016). JBG SMITH was formed~~ for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of ~~Vornado’s~~Vornado Realty Trust's ("Vornado") Washington, ~~DC segment, which operated as Vornado / Charles E. Smith, (the "Vornado Included Assets").~~D.C. segment. On July 18, 2017, JBG SMITH acquired the management business and certain assets and liabilities (the "JBG Assets") of The JBG Companies ("JBG") (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction." ~~Unless the context otherwise requires, all references~~JBG SMITH is hereinafter referred to as "we," "us," "our" or similar terms. References to "our share" refers to our ownership percentage of consolidated and ~~"our," refer to the Vornado Included Assets,~~unconsolidated assets in real estate ventures. Substantially all of our ~~predecessor~~assets are held by, and ~~accounting acquirer, for periods prior to the Separation and to JBG SMITH for periods from and after the Separation and Combination.~~

Prior to the Separation from Vornado, JBG SMITH was a wholly owned subsidiary of Vornado and had no material assets or operations. Pursuant to a separation agreement, on July 17, 2017, Vornado distributed 100% of the then outstanding common shares of JBG SMITH on a pro rata basis to the holders of its common shares. Prior to such distribution by Vornado, Vornado Realty L.P. ("VRLP"), Vornado's operating partnership, distributed common limited partnership units ("OP Units") inour operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership, on a pro rata basis to the holders of VRLP's common limited partnership units, consisting of Vornado and the other common limited partners of VRLP. Following such distribution by VRLP and prior to such distribution by Vornado, Vornado contributed to JBG SMITH all of the OP Units it received in exchange for common shares of JBG SMITH. Each Vornado common shareholder received one JBG SMITH common share for every two Vornado common shares held as of the close of business on July 7, 2017 (the "Record Date"). Vornado and each of the other limited partners of VRLP received one JBG SMITH LP OP Unit for every two common limited partnership units in VRLP held as of the close of business on the Record Date. Our operations are presented as if the transfer of the Vornado Included Assets had been consummated prior to all historical periods presented in the accompanying condensed consolidated and combined financial statements at the carrying amounts of such assets and liabilities reflected in Vornado’s books and records.

In connection with the Separation, JBG SMITH issued 94.7 million common shares and JBG SMITH LP issued 5.8 million OP Units to parties other than JBG SMITH. In connection with the Combination, JBG SMITH issued 23.3 million common shares and JBG SMITH LP issued 13.9 million OP Units to parties other than JBG SMITH.partnership. As of the completion of the Formation Transaction there were 118.0 million JBG SMITH common shares outstanding and 19.8 million JBG SMITH LP OP Units outstanding that were owned by parties other than JBG SMITH. As of July 18, 2017 and September 30, ~~2017,~~2019, we, as its sole general partner, controlled JBG SMITH LP and owned ~~85.6%~~89.8% of its common limited partnership units ("OP ~~Units.~~Units").

We own and operate a portfolio of high-quality ~~office~~commercial and multifamily assets, many of which are amenitized with ancillary retail. Our portfolio reflects our longstanding strategy of ~~concentrating~~owning and operating assets within Metro-served submarkets in ~~downtown~~the Washington, ~~DC and other leading urban-infill submarkets with proximity to downtown Washington, DC~~D.C. metropolitan area that have high barriers to entry and key urban amenities, including being within walking distance of a Metro station.

As of September 30, ~~2017,~~2019, our ~~portfolio comprised: (i) 69~~Operating Portfolio consists of 61 operating assets comprising ~~51 office~~45 commercial assets totaling ~~over 13.7~~approximately 12.7 million square feet ~~(11.8~~(11.0 million square feet at our share)~~, 14~~ and 16 multifamily assets totaling ~~6,016~~6,321 units ~~(4,232~~(4,537 units at our share). Additionally, we have (i) 8 assets under construction comprising 4 commercial assets totaling approximately 943,000 square feet (821,000 square feet at our share) and ~~four other~~4 multifamily assets totaling ~~approximately 765,000 square feet (348,000 square feet~~1,476 units (1,298 units at our share); and (ii) nine assets under construction comprising four office assets totaling approximately 1.3 million square feet (1.2 million square feet at our share), four multifamily assets totaling 1,334 units (1,149 units at our share) and one other asset totaling approximately 41,100 square feet (4,100 square feet at our share; (iii) one near-term development multifamily asset totaling 433 units (303 units at our share), and (iv) 4240 future development assets totaling approximately ~~21.3~~21.9 million square feet ~~(17.6~~(18.7 million square feet at our share) of estimated potential development density.

Our revenues are derived primarily from leases with ~~office~~commercial and multifamily tenants, ~~including~~which include fixed rents and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance. In addition, to our ~~portfolio, we have a~~ third-party asset management and real estate services business ~~that~~ provides fee-based real estate services to ~~our real estate ventures,~~third parties and the legacy funds (the "JBG Legacy Funds") formerly organized by ~~JBG ("JBG Legacy Funds") and other third parties.~~

~~Only the U.S. federal government accounted for 10% or more of our rental revenue for the three and nine months ended September 30, 2017 and 2016, as follows:~~

Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in thousands) 2017 2016 2017 2016
U.S. federal government $ 22,492
$ 27,594
$ 68,869
$ 74,939
Percentage of office segment revenue 22.6 % 30.5 % 25.3 % 28.5 %
Percentage of total rental revenue 17.8 % 24.3 % 20.0 % 22.9 %
JBG.

Basis of Presentation

The accompanying unaudited condensed consolidated ~~and combined~~ 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 unaudited condensed consolidated ~~and combined~~ 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 and nine months ended September 30, ~~2017~~2019 and ~~2016~~2018 are not necessarily indicative of the results that may be expected for a full year. These condensed consolidated ~~and combined~~ financial statements should be read in conjunction with our ~~Registration Statement~~Annual Report on Form ~~10, as amended,~~10-K for the year ended December 31, 2018, filed with the Securities and Exchange ~~Commission (the "SEC") and declared effective on June 26, 2017 as well as the final Information Statement filed with the SEC as Exhibit 99.1 to our Current Report on Form 8-K filed on June 27, 2017.~~Commission.

The accompanying condensed consolidated ~~and combined~~ financial statements include the accounts of JBG SMITH and our ~~wholly-owned~~wholly owned subsidiaries and those other entities, including JBG SMITH LP, in which we have a controlling financial interest, including where we have been determined to be athe primary beneficiary of a variable interest entity ("VIE"). See Note 65 for ~~more~~additional information on our ~~consolidated~~ VIEs. The portions of the equity and net ~~(loss)~~ income of consolidated subsidiaries that are not attributable to JBG SMITH are presented separately as amounts attributable to noncontrolling interests in ~~the~~our condensed consolidated ~~and combined~~ financial statements.

~~Combination~~

~~JBG SMITH and the Vornado Included Assets were under common control of Vornado for all periods prior~~References to the Separation at July 17, 2017. The transfer of the Vornado Included Assets from Vornado to JBG SMITH was completed prior to the Separation, at net book values (historical carrying amounts) carved out from Vornado’s books and records. For purposes of the formation of JBG SMITH, the Vornado Included Assets were designated as the predecessor and the accounting acquirer of JBG SMITH. Consequently, the financial statements ~~of JBG SMITH, as set forth herein, represent a continuation of the~~refer to our condensed consolidated financial ~~information of the Vornado Included Assets as the predecessor and accounting acquirer such that the historical financial information included herein~~statements as of ~~any date or~~September 30, 2019 and December 31, 2018, and for ~~any periods on or prior~~the three and nine months ended September 30, 2019 and 2018. References to the ~~completion of the Combination represents the pre-Combination financial information of the Vornado Included Assets. The financial statements reflect the common shares~~balance sheets refer to our condensed consolidated balance sheets as of ~~the date of the Separation as outstanding for all prior periods prior~~September 30, 2019 and December 31, 2018. References to ~~July 17, 2017. The acquisition of~~ the management business and certain assets and liabilities of JBG completed subsequently by JBG SMITH was accounted for as a business combination using the acquisition method whereby identifiable assets acquired and liabilities assumed are recorded at the acquisition-date fair values and income and cash flows from the operations were consolidated into the financial statements of ~~JBG SMITH commencing July 18, 2017.~~

~~The accompanying~~operations refer to our condensed consolidated ~~and combined~~ statements of operations for the three and nine months ended September 30, ~~2017 include~~2019 and 2018. References to the statements of comprehensive income (loss) refer to our condensed consolidated ~~accounts and the combined accounts~~statements of ~~the Vornado Included Assets. Accordingly, the results of operations~~

comprehensive income (loss) for the three and nine months ended September 30, ~~2017 reflect the aggregate operations~~2019 and changes in cash flows and equity on a combined basis for all periods prior to July 17, 2017 and on a consolidated basis for all periods subsequent to July 17, 2017. The accompanying condensed combined financial statements for the three and nine months ended September 30, 2016 include the Vornado Included Assets. Therefore, the discussion of our results of operations, cash flows and financial condition set forth in this report is not necessarily indicative of our future results of operations, cash flows or financial condition as an independent, publicly traded company.

2018. References to the ~~financial~~ statements refer to our condensed consolidated and combined financial statements as of September 30, 2017 and December 31, 2016, and for the three and nine months ended September 30, 2017 and 2016. References to the balance sheets refer to our condensed consolidated and combined balance sheets as of September 30, 2017 and December 31, 2016. References to the statement of operations refer to our condensed consolidated and combined statements of operations for the three

~~and nine months ended September 30, 2017 and 2016. References to the statement~~ of cash flows refer to our condensed consolidated ~~and combined~~ statements of cash flows for the nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018.

The historical financial results for the Vornado Included Assets reflect charges for certain corporate costs allocated by the former parent which we believe are reasonable. These charges were based on either actual costs incurred or a proportion of costs estimated to be applicable to the Vornado Included Assets based on an analysis of key metrics, including total revenues. Such costs do not necessarily reflect what the actual costs would have been if JBG SMITH had been operating as a separate standalone public company. These charges are discussed further in Note 17.

~~Recasting of 2016 Financial Information~~

The historical financial information of the Vornado Included Assets was recast to exclude Vornado's interest in Rosslyn Plaza as it was omitted from the Separation. Financial information disclosed herein as of any date or for any periods on or prior to the completion of the Separation represents such recast amounts.

Reclassifications

Certain prior period ~~data~~amounts have been reclassified to conform to the current period presentation as follows:

Reclassification of $4.0 million of investments to "Other assets" on our balance sheet as of December 31, 2016 as a result of the revision in the line item "Investments in and advances to unconsolidated real estate ventures" on our balance sheet to include only real estate investments.

~~Reclassification of $4.8~~parking income totaling $6.4 million and ~~$14.3~~$19.3 million ~~of expenses~~previously included in "Property rentals" for the three and nine months ended September 30, ~~2016, respectively,~~2018 to “General and administrative: third-party real estate services” from “Property operating expenses” as it relates to known expenses incurred to operate our third-party real estate services. Additionally, we reclassified $2.0"Other income" in the statements of operations.

Reclassification of tenant reimbursements totaling $9.7 million and ~~$6.0~~$28.7 million ~~of income~~ for the three and nine months ended September 30, ~~2016, respectively,~~2018 to ~~“Third-party real estate services, including reimbursements”~~"Property rentals" in the statements of operations.

Reclassification of $4.2 million and $12.5 million of expenses incurred in the operation and management of our properties that were previously included in "General and administrative expense: corporate and other" for the three and nine months ended September 30, 2018 to "Property operating expenses" in the statements of operations.

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 intend to adhere to these requirements and maintain our REIT status in future periods. We also participate in the activities conducted by subsidiary entities which 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 ~~“Other income” as it relates to revenue earned from our third-party business.~~these activities.

2. Summary of Significant Accounting Policies

~~Use~~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, 2018, except as follows related to our adoption of ~~Estimates~~Accounting Standards Update ("ASU") 2016-02, Leases ("Topic 842") as of January 1, 2019. Prior to the adoption of Topic 842, leases were accounted under Topic 840, Leases ("Topic 840").

Revenue Recognition

We have leases with various tenants across our portfolio of properties, which generate rental income and operating cash flows for our benefit. Through these leases, we provide tenants with the right to control the use of our real estate, which tenants agree to use and control. The ~~preparation~~right to control our real estate conveys to our tenants substantially all of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statementseconomic benefits and the ~~reported amounts of revenue~~right to direct how and ~~expenses during the reporting period. Actual results could differ from those estimates.~~

~~Business Combinations~~

~~We account~~ for business combinations, including the acquisition of real estate, using the acquisition method by recognizing and measuring the identifiable assets acquired, liabilities assumed, and any noncontrolling interests in the acquiree at their acquisition date fair values. As a result, upon the acquisition, we estimate the fair value of the acquired tangible assets (consisting of real estate, cash and cash equivalents, tenant and other receivables, investments in unconsolidated real estate ventures and other assets, as applicable), identified intangible assets and liabilities (consisting of the value of in-place leases, above- and below-market leases, options to enter into ground lease and management contracts, as applicable), assumed debt and other liabilities, and noncontrolling interests, as applicable, based on our evaluation of information and estimates available at that date. Based on these estimates, we allocate the purchase price to the identified assets acquired and liabilities assumed. Any excess of the purchase price over the estimated fair value of the net assets acquired is recorded as goodwill. Any excess of the fair value of assets acquired over the purchase price is recorded as a gain on bargain purchase. If, up to one year from the acquisition date, information regarding the fair value of the net assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made on a prospective basis to the purchase price allocation, which may include adjustments to identified assets, assumed liabilities, and goodwill or the gain on bargain purchase, as applicable. Transaction costs related to business combinations are expensed as incurred and included in "Transaction and other costs" in our statements of operations.

The fair values of tangible real estate assets are determined using the “as-if vacant” approach whereby we use discounted income, or cash flow models with inputs and assumptions that we believe are consistent with current market conditions for similar assets. The most significant assumptions in determining the allocation of the purchase price to tangible assets are the exit capitalization rate, discount rate, estimated market rents and hypothetical expected lease-up periods.

~~The fair values of identified intangible assets are determined based on the following:~~

The value allocable to the above- or below-market component of an acquired in-place lease is determined based upon the present value (using a discount rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuant to the lease over its remaining term and (ii) management’s estimate of the amounts that would be received using market rates over the remaining term of the lease. Amounts allocated to above- market leases are recorded as "Identified intangible assets" in "Other assets, net" in the balance sheets, and amounts allocated to below-market leases are recorded as "Lease intangible liabilities" in "Other liabilities, net" in the balance sheets. These intangibles are amortized to "Property rentals" in our statements of operations over the remaining terms of the respective leases.

Factors considered in determining the value allocable to in-place leases include estimates, during hypothetical lease-up periods, related to space that is actually leased at the time of acquisition. These estimates include (i) lost rent at market rates, (ii) fixed operating costs that will be recovered from tenants and (iii) theoretical leasing commissions required to execute similar leases. These intangible assets are recorded as "Identified intangible assets" in "Other assets, net" in the balance sheets and are amortized over the remaining term of the existing lease.

The fair value of the in-place property management, leasing, asset management, and development and construction management contracts is based on revenue and expense projections over the estimated life of each contract discounted using a market discount rate. These management contract intangibles are amortized over the weighted average life of the management contracts.

The fair value of investments in unconsolidated real estate ventures and related noncontrolling interests is based on the estimated fair values of the identified assets acquired and liabilities assumed of each entity.

The fair value of the mortgages payable assumed was determined using current market interest rates for comparable debt financings. The fair values of the interest rate swaps and caps are based on the estimated amounts we would receive or pay to terminate the contract at the reporting date and are determined using interest rate pricing models and observable inputs. The carrying value of cash, restricted cash, working capital balances, leasehold improvements and equipment, and other assets acquired and liabilities assumed approximates fair value.

The results of operations of acquisitions are included in our financial statements as of the dates they are acquired. The intangible assets and liabilities associated with acquisitions are included in "Other assets, net" and "Other liabilities, net", respectively, in our balance sheets.

~~Real Estate~~

Real estate is carried at cost, net of accumulated depreciation and amortization. Maintenance and repairs are expensed as incurred. As real estate is undergoing redevelopment activities, all property operating expenses directly associated with and attributable to the redevelopment, including interest expense, are capitalized to the extent that we believe such costs are recoverable through the value of the property. The capitalization period begins when redevelopment activities are underway and ends when the project is substantially complete. General and administrative costs are expensed as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. Depreciation is recognized on a straight‑line basis over estimated useful lives, which range from three to 40 years. Tenant allowances are amortized on a straight‑line basis over the lives of the related leases, which approximate the useful lives of the tenant improvements.

Construction in progress, including land, is carried at cost, and no depreciation is recorded. Real estate undergoing significant renovations and improvements is considered under development. All direct and indirect costs related to development activities are capitalized into "Construction in progress, including land" on our balance sheets, except for certain demolition costs, which are expensed as incurred. Costs incurred include pre-development expenditures directly related to a specific project, development and construction costs, interest, insurance and real estate taxes. Indirect development costs include employee salaries and benefits, travel and other related costs that are directly associated with the development real estate. Our method of calculating capitalized interest expense is based upon applying our weighted average borrowing rate to the actual accumulated expenditures if the property does not have property specific debt. The capitalization of such expenses ceases whenwhat purpose the real estate is ~~ready for its intended~~used throughout the period of use, ~~but no later than one-year from substantial completion~~thereby meeting the definition of ~~major construction activity. If we determine that~~ a ~~project is no longer viable, all pre-development project costs are immediately expensed. Similar costs related to properties not under development are expensed~~lease. Leases will be classified as ~~incurred.~~

~~Our assets and related intangible assets are individually reviewed for impairment whenever events~~either operating, sales-type or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment exists when the carrying amount of an asset exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Estimates

~~of future cash flows are~~direct finance leases based on our current plans, intended holding periods and available market information at the time the analyses are prepared. An impairment loss is recognized only if the carrying amount of the asset is not recoverable and is measured based on the excess of the property’s carrying amount over its estimated fair value. If our estimates of future cash flows, anticipated holding periods, or fair values change, based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our financial statements. Estimates of future cash flows are subjective and are based, in part, on assumptions regarding future occupancy, rental rates and capital requirements that could differ materially from actual results.

~~Real Estate Held for Sale~~

Real estate held for sale is recorded at the lower of the carrying amount or the expected sales price less costs to sell. Operations of real estate held for sale and real estate sold are reported in continuing operations if their disposition does not represent a strategic shift that has or will have a major effect on our operations and financial results.

The application of the accounting principles that govern the classification any of our real estate as held for sale requires management to make certain significant judgments. In evaluating whether real estate meets the held for sale criteria set forth by the Property, Plant and Equipment Topic of the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), we make a determination as to the point in time that it is probable that a sale will be consummated. Given the nature of all real estate sales contracts, it is not unusual for such contracts to allow potential buyers a period of time to evaluate the property prior to formal acceptance of the contract. In addition, certain other matters critical to the final sale, such as financing arrangements, often remain pending even upon contract acceptance. As a result, real estate under contract may not close within the expected time period or may not close at all. Therefore, any real estate categorized as held for sale represents only those properties that management has determined are probable to close within the requirements set forth in the Property, Plant and Equipment Topic of the FASB ASC.

~~We do not have any real estate classified as held for sale as of September 30, 2017 and December 31, 2016.~~

~~Cash and Cash Equivalents~~

Cash and cash equivalents consist of highly liquid investments with original maturities of three months or less and are carried at cost, which approximates fair value, due to their short‑term maturities.

~~Restricted Cash~~

Restricted cash consists primarily of security deposits held on behalf of our tenants, cash escrowed under loan agreements for debt service, real estate taxes, property insurance and capital improvements.

~~Allowance for Doubtful Accounts~~

We periodically evaluate the collectability of amounts due from tenants, including the receivable arising from deferred rent receivable, and maintain an allowance for doubtful accounts for the estimated losses resulting from the inability of tenants to make required payments under lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status in developing these estimates.

~~Investments in and Advances to Real Estate Ventures~~

~~We analyze our real estate ventures to determine~~ whether the ~~respective entities should be consolidated. If it~~lease is ~~determined that these investments do not require consolidation because the entities are not VIEs~~structured in accordance with the Consolidation Topic of the FASB ASC, we are not considered the primary beneficiary of the entities determined to be VIEs, we do not have voting control, and/or the limited partners (or non-managing members) have substantive participatory rights, then the selection of the accounting method used to account for our investments in unconsolidated real estate ventures is generally determined by our voting interests and the degree of influence we have over the entity. Management uses its judgment when determining if we are the primary beneficiary of, or have a controlling financial interest in, an entity in which we have a variable interest. Factors considered in determining whether we have the power to direct the activities that most significantly impact the entity’s economic performance include risk and reward sharing, experience and financial condition of the other partners, voting rights, involvement in day-to-day capital and operating decisions and the extent of our involvement in the entity.

We use the equity method of accounting for investments in unconsolidated real estate ventures when we own 20% or more of the voting interests and have significant influence but do not have a controlling financial interest, or if we own less than 20% of the voting interests but have determined that we have significant influence. Under the equity method, we record our investments in and advances to these entities in our balance sheets, and our proportionate share of earnings or losses earned by the real estate venture is recognized in "(Loss) income of unconsolidated real estate ventures" in the accompanying statements of operations. We earn revenues from the management services we provide to unconsolidated entities. These fees are determined in accordance with the terms specific to each arrangement and may include property and asset management fees or transactional fees for leasing,

acquisition, development and construction, financing, and legal services provided. We account for this revenue gross of our ownership interest in each respective real estate venture and recognize such revenue in "Third-party real estate services, including reimbursements" in our statements of operations. Our proportionate share of related expenses is recognized in "(Loss) income of unconsolidated real estate ventures" in our statements of operations. We may also earn incremental promote distributions if certain financial return benchmarks are achieved upon ultimate disposition of the underlying properties. Management fees are recognized when earned, and promote fees are recognized when certain earnings events have occurred, and the amount is determinable and collectible. Any promote fees are reflected in "(Loss) income from unconsolidated real estate ventures" in our statements of operations.

On a periodic basis, we evaluate our investments in unconsolidated entities for impairment. We assess whether there are any indicators, including underlying property operating performance and general market conditions, that the value of our investments in unconsolidated real estate ventures may be impaired. An investment in a real estate venture is considered impaired only if we determine that its fair value is less than the net carrying value of the investment in that real estate venture on an other-than-temporary basis. Cash flow projections for the investments consider property level factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. We consider various qualitative factors to determine if a decrease in the value of our investment is other-than-temporary. These factors include age of the venture, our intent and ability to retain our investment in the entity, financial condition and long-term prospects of the entity and relationships with our partners and banks. If we believe that the decline in the fair value of the investment is temporary, no impairment charge is recorded. If our analysis indicates that there is an other-than temporary impairment related to the investment in a particular real estate venture, the carrying value of the venture will be adjusted to an amount that reflects the estimated fair value of the investment.

~~Intangibles~~

Intangible assets consist of in-place leases, below-market ground rent obligations, above-market real estate leases, lease origination costs and options to enter into ground lease that were recorded in connection with the acquisition of properties. Intangible assets also include management and leasing contracts acquired as part of the Combination. Intangible liabilities consist of above-market ground rent obligations and below-market real estate leases that are also recorded in connection with the acquisition of properties. Both intangible assets and liabilities are amortized and accreted using the straight-line method over their applicable remaining useful life. When a lease or contract is terminated early, any remaining unamortized or unaccreted balances are charged to earnings. The useful lives of intangible assets are evaluated each reporting period with any changes in estimated useful lives being accounted for over the revised remaining useful life.

~~Deferred Costs~~

~~Deferred financing costs consist of loan issuance costs directly related to financing transactions that are deferred and amortized over the term of the related loan~~effect as a component of interest expense. Unamortized deferred financing costs related to our mortgages payable and unsecured term loan are presented as a direct deduction from the carrying amounts of the related debt instruments, while such costs related to our revolving credit facility are included in other assets.

Direct salaries, third-party fees and other costs incurred by us to originate a lease are capitalized in "Other assets, net" in the balance sheets and are amortized against the respective leases using the straight-line method over the term of the related leases.

~~Noncontrolling Interests~~

Redeemable noncontrolling interests consists of OP Units issued in conjunction with the Formation Transaction. The OP Units are redeemable for our common shares or cash beginning August 1, 2018, subject to certain limitations. Redeemable noncontrolling interests are generally redeemable at the option of the holder and are presented in the mezzanine section between total liabilities and shareholders' equity on the balance sheets. The carrying amount of redeemable noncontrolling interests is adjusted to its redemption value at the end of each reporting period, but no less than its initial carrying value, with such adjustments recognized in "Additional paid-in capital".

Noncontrolling interests in consolidated subsidiaries represents the portion of equity that we do not own in entities we consolidate, including interests in consolidated real estate ventures or VIEs in connection with property acquisitions. We identify our noncontrolling interests separately within the equity section on the balance sheets. See Note 10 for further information.

Amounts of consolidated net (loss) income attributable to redeemable noncontrolling interests and to the noncontrolling interests in consolidated subsidiaries are presented separately in the statements of operations.

~~Derivative Financial Instruments and Hedge Accounting~~

Derivative financial instruments are used at times to manage exposure to variable interest rate risk. Derivative financial instruments, consisting of interest rate swaps and caps, are considered economic hedges, but not designated as accounting hedges, and are

carried at their estimated fair value on a recurring basis. Realized and unrealized gains are recorded in "Interest and other (loss) income, net" in the statements of operations in the period in which the change occurs.

~~Fair Value of Assets and Liabilities~~

ASC 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). ASC 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

~~Level 1 — quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities;~~

~~Level 2 — observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and~~

~~Level 3 — unobservable inputs that are used when little or no market data is available.~~

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as consider counterparty credit risk in our assessment of fair value.

~~Revenue Recognition~~financed purchase.

Property rentals ~~income~~revenue includes base ~~rents that~~rent each tenant pays in accordance with the terms of its respective lease and is reported on a straight-line basis over the non-cancellable term of the lease, which includes the effects of periodic step-ups in rent and rent abatements under the ~~leases.~~lease. When a renewal option is included within the lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Further, property rentals revenue includes tenant reimbursements revenue from the recovery of all or a portion of the operating expenses and real estate taxes of the respective assets, which are accrued as variable lease payments in the same periods as the related expenses are incurred. We commence rental revenue recognition when the tenant takes possession of the leased space or controls the physical use of the leased space and when the leased space is substantially ready for its intended use. In circumstances where we provide a tenant improvement allowance for improvements that are owned by the tenant, we recognize the allowance as a reduction of property rentals revenue on a straight-line basis over the term of the lease. Differences between rental ~~income~~revenue recognized and amounts due under the respective lease agreements are recorded as an increase or decrease to ~~“Deferred~~"Deferred rent receivable, ~~net”~~net" on our balance sheets. Property rentals revenue also includes the amortization or accretion of acquired above-and below-market ~~leases, net.~~

~~Tenant reimbursements provide~~leases. We periodically evaluate the collectability of amounts due from tenants and recognize an adjustment to property rental revenue for the ~~recovery~~estimated losses resulting from the inability of ~~all or a portion~~tenants to make required payments under lease agreements. Any changes to the provision for lease revenue determined to be not probable of collection are included in "Property rentals" in our statements of operations. We exercise judgment in assessing the ~~operating expenses~~probability of collection and ~~real estate taxes of the respective assets. Tenant reimbursements are accrued~~consider payment history and current credit status in ~~the same periods as the related expenses are incurred.~~making this determination.

Third-party real estate services revenue, including reimbursements, is determined in accordance with the terms specific to each arrangement and ~~may include~~includes property and asset management fees orand transactional fees for leasing, acquisition, development and

construction, financing, and legal ~~services provided.~~services. These fees are determined in accordance with the terms specific to each arrangement and are recognized as the related services are ~~performed. Development and construction fees earned~~performed in accordance with ASU 2014-09, Revenue from ~~providing services to our unconsolidated real estate joint ventures are recorded on a percentage~~Contracts with Customers, ("Topic 606").

Use of ~~completion basis.~~Estimates

~~Third-Party Real Estate Services Expenses~~

Third-party real estate services expenses include the costs associated with the management services provided to our unconsolidated real estate joint ventures and other third parties. We allocate personnel and other overhead costs using the estimatesThe preparation of the ~~time spent performing services for our third-party business and other allocation methodologies.~~

~~Income Taxes~~

We intend to elect to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"), commencing with the filing of our tax return for the 2017 calendar year, effective for our tax year ending December 31, 2017. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. Prior to the Separation, the Vornado Included Assets historically operated under Vornado’s REIT structure. Since Vornado operates as a REIT and distributes 100% of taxable income to its shareholders, no provision for federal income taxes has been made in the accompanying financial statements ~~for~~in conformity with GAAP requires us to make estimates and assumptions that affect the ~~periods prior to the Separation. We intend to continue to adhere to these requirements and maintain our REIT status in future periods.~~

As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to shareholders. Future distributions will be declared and paid at the discretion of the Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Code, as amended, and such other factors as our Board of Trustees deems relevant.

We also participate in certain activities conducted by entities which elected to be treated as taxable REIT subsidiaries ("TRS") under the Code. As such, we are subject to federal, state, and local taxes on the income from these activities. Income taxes attributable to our TRSs are accounted for under the asset and liability method. Under the asset and liability method, deferred income taxes arise from temporary differences between the tax basisreported amounts of assets and liabilities and ~~their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.~~

~~ASC 740-10, Income Taxes, provides guidance for how uncertain tax positions should be recognized, measured, presented~~disclosure of contingent assets and ~~disclosed in the financial statements. ASC 740-10 requires the evaluation~~liabilities as of tax positions taken in the course of preparing our tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax benefits of positions not deemed to meet the more-likely-than-not threshold are recorded as a tax expense in the current year. As of September 30, 2017, and December 31, 2016, we determined that no liabilities are required in connection with uncertain tax positions.

~~(Loss) Earnings Per Share~~

Basic (loss) earnings per common share ("EPS") is computed by dividing net (loss) income attributable to common shareholders by the weighted average common shares outstanding during the period. Unvested and vested share-based payment awards that entitle holders to receive non-forfeitable dividends, which include OP Units, long-term incentive partnership units ("LTIP Units") and out-performance award units ("OPP Units"), are considered participating securities. Consequently, we are required to apply the two-class method of computing basic and diluted earnings 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. Diluted earnings per common share reflects the potential dilution of the assumed exchange of various units into common shares unvested share-based payment awards to the extent they are dilutive.

~~Share-Based Compensation~~

We granted OP Units, formation awards ("Formation Awards"), LTIP Units and OPP Units to our trustees, management and employees in connection with the Separation and Combination. The term and vesting of each award were determined by the compensation committee of our Board of Trustees (the “Compensation Committee”).

Fair value is determined, depending on the type of award, using the Monte Carlo method or post-vesting restriction periods, which is intended to estimate the fair value of the awards at the grant date using dividend yields and expected volatilities that are primarily based on available implied data and peer group companies' historical data. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. The shortcut method is used for determining the expected life used in the valuation method.

~~Compensation expense for the Formation Awards, LTIP Units, OPP Units and certain OP Units is based on the fair value of our common shares at~~ the date of the ~~grant~~financial statements and ~~is recognized ratably over~~ the ~~vesting~~reported amounts of revenue and expenses during the reporting period. ~~For grants with a graded vesting schedule that are only subject to service conditions, we have elected to recognize compensation expense on a straight-line basis.~~

~~We also elected to account~~The most significant of these estimates include: (i) the underlying cash flows used in assessing impairment and (ii) the determination of useful lives for ~~forfeitures as they occur, rather than estimate expected forfeitures. Distributions paid on unvested OP Units, LTIPs~~tangible and ~~OPPs are charged to “net income attributable to noncontrolling interests” in the statements of operations.~~intangible assets. Actual results could differ from these estimates.

Recent Accounting Pronouncements

~~The following table provides a brief description~~Adoption of ~~recent accounting pronouncements (Accounting Standards Update or "ASU")~~Topic 842

We enter into various lease agreements to make our properties available for use by ~~the FASB that could have a material effect on our financial statements:~~



~~Standard~~	~~Description~~	~~Date of Adoption~~	~~Effect on the Financial Statements or Other~~ ~~Significant Matters~~
~~Standards not yet adopted~~
~~ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~	The standard provides new guidance for the determination of eligibility for hedge accounting and effectiveness. It also amends the presentation and disclosure requirements. ASU 2017-12 requires a modified retrospective transition method which requires the recognition of the cumulative effect of the change on the opening balance of each affected component of equity in the statement of financial position as of the date of adoption.	~~January 2019~~	~~We are currently evaluating the overall impact of the adoption of ASU 2017-12. The adoption of this standard is not expected to have a material impact on our financial statements.~~
~~ASU 2017‑09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting~~	This standard clarifies which changes to the terms or conditions of a share-based payment award are subject to the guidance on modification accounting under ASC Topic 718. Entities would apply the modification accounting guidance unless the value, vesting requirements and classification of a share-based payment award are the same immediately before and after a change to the terms or conditions of the award.	~~January 2018~~	~~We are currently evaluating the overall impact of the adoption of ASU 2017-09. The adoption of this standard is not expected to have a material impact on our financial statements.~~
~~ASU 2017‑05, Other Income—Gains and Losses from the Derecognition~~ ~~of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for~~ ~~Partial Sales of Nonfinancial Assets~~	This standard clarifies the scope of recently established guidance on nonfinancial asset derecognition as well as the accounting for partial sales of nonfinancial assets. This update conforms the derecognition guidance on nonfinancial assets with the model for transactions in ASC 606.	~~January 2018~~	~~The adoption of this standard is not expected to have a material impact on our financial statements.~~
~~ASU 2016-15,~~ ~~Statement of Cash~~ ~~Flows (Topic 230):~~ ~~Classification of~~ ~~Certain Cash~~ ~~Receipts and Cash~~ ~~Payments and ASU~~ ~~2016-18, Statement~~ ~~of Cash Flows~~ ~~(Topic 230):~~ ~~Restricted Cash~~	These standards amend the existing guidance and address specific cash flow issues with the objective of reducing existing diversity in practice. ASU 2016-15 addresses eight specific cash flow issues and ASU 2016-18 specifically addresses presentation of restricted cash and restricted cash equivalents in the statements of cash flows. These standards require a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, entities may apply the amendments prospectively as of the earliest date practicable.	~~January 2018~~	~~Other than the revised statement of cash flows presentation of restricted cash, the adoption of these standards is not expected to have a material impact on our financial statements.~~



~~Standard~~	~~Description~~	~~Date of Adoption~~	~~Effect on the Financial Statements or Other~~ ~~Significant Matters~~
~~ASU 2016-02, Leases (Topic 842)~~	This standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase. Lessees are required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases. Lessees will recognize expense based on the effective interest method for finance leases or on a straight-line basis for operating leases.	~~January 2019~~	We are currently evaluating the overall impact of the adoption of ASU 2016-02 on our financial statements, including the timing of adopting this standard. ASU 2016-02 will more significantly impact the accounting for leases in which we are the lessee. We have ground leases for which we will be required to record a right-of-use asset and lease liability equal to the present value of the remaining minimum lease payments upon adoption of this standard. We also expect that this standard will have an impact on the presentation of certain lease and non‑lease components of revenue from leases with no material impact to total revenue. Under ASU 2016-02, initial direct costs for both lessees and lessors would include only those costs that are incremental to the arrangement and would not have been incurred if the lease had not been obtained. As a result, we may no longer be able to capitalize internal leasing costs and instead may be required to expense these costs as incurred.
~~ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as clarified and amended by ASU 2016-08, ASU 2016-10 and ASU 2016-12~~	This standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. It requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and also requires certain additional disclosures. This standard may be adopted either retrospectively or on a modified retrospective basis.	~~January 2018~~	We currently expect to utilize the modified retrospective method of adoption. We have commenced the execution of our project plan for adopting this standard, which consists of gathering and evaluating the inventory of our revenue streams. We expect this standard will have an impact on the presentation of certain lease and non-lease components of revenue from leases upon the adoption of ASU 2016‑02, Leases, with no material impact on total revenues. We expect this standard will have an impact on the timing of gains on certain sales of real estate. We are continuing to evaluate the impact of this standard on our financial statements.


3.	~~The Combination~~

~~On July 18, 2017, we completed the Combination and acquired the JBG Assets~~third parties in exchange for ~~approximately~~ ~~37.2 million~~ ~~common shares~~cash consideration or to obtain the right to use properties owned by third parties to administer our business operations. We account for these leases under Topic 842, which we adopted as of January 1, 2019 using a modified retrospective approach and ~~OP Units.~~by applying the several transitional practical expedients including the Comparatives Under 840 expedient, the Relief Package for existing leases and the Easement expedient for existing easements, but not the Hindsight expedient. The ~~Combination has been accounted for at fair value under~~Comparatives Under 840 expedient allows us not to recast our comparative periods in the ~~acquisition method~~period of ~~accounting. The following allocation~~adoption, and the Relief Package and Easement expedients allow us to maintain our historical accounting conclusions on current leases as of the ~~purchase price is based on preliminary estimates~~date of adoption with respect to whether a contract contains a lease, what a lease’s classification should be, what initial direct costs are capitalizable and ~~assumptions~~whether a land easement constituted a lease. We made a policy election to forgo recording right-of-use assets and ~~is subject to change based on a final determination~~the related lease liabilities for leases with initial terms of ~~the assets acquired and liabilities assumed (in thousands):~~

Fair value of purchase consideration:
Common shares and OP Units $ 1,224,886
Cash 20,573
Total consideration paid $ 1,245,459

Fair value of assets acquired and liabilities assumed:
Land and improvements $ 342,932
Building and improvements 623,889
Construction in progress, including land 632,664
Leasehold improvements and equipment 7,890
Cash 104,516
Restricted cash 13,460
Investments in and advances to unconsolidated real estate ventures 238,388
Identified intangible assets 146,600
Notes receivable ⁽¹⁾
50,934
Identified intangible liabilities (8,449 )
Mortgages payable assumed ⁽²⁾
(768,523 )
Capital lease obligations assumed ⁽³⁾
(33,543 )
Deferred tax liability ⁽⁴⁾
(21,476 )
Other liabilities acquired, net (52,065 )
Noncontrolling interests in consolidated subsidiaries (3,987 )
Net assets acquired 1,273,230
Gain on bargain purchase ⁽⁵⁾
27,771
Total consideration paid $ 1,245,459

~~____________________~~


⁽¹⁾	~~During the three months ended September 30, 2017, we received proceeds of $50.9 million from the repayment of the notes receivable acquired as part of the Combination.~~


⁽²⁾	~~Subject to various interest rate swap and cap agreements assumed in the Combination that are considered economic hedges, but not designated as accounting hedges.~~


⁽³⁾	As part of the Combination, two ground leases were assumed that were capital leases. On July 25, 2017, we purchased a land parcel located in Reston, Virginia associated with one of the ground leases for $19.5 million.


⁽⁴⁾	~~Related to the management and leasing contracts acquired in the Combination.~~

⁽⁵⁾

The Combination resulted in a gain on bargain purchase because the estimated fair value of the identifiable net assets acquired exceeded the purchase consideration by $27.8 million. The purchase consideration was based on the fair value of the common shares and OP Units issued in the Combination. We continue to reassess the recognition and measurement of identifiable assets and liabilities acquired and have preliminarily concluded that all acquired assets and liabilities were recognized and that the valuation procedures and resulting estimates of fair values were appropriate.

~~The fair value of the common shares and OP Units purchase consideration was determined as follows~~ (i~~n thousands, except exchange ratio and price per share/unit):~~

Outstanding common shares and common limited partnership units prior to the Combination 100,571
Exchange ratio ⁽¹⁾
2.71
Common shares and OP Units issued in consideration 37,164
Price per share/unit ⁽²⁾
$ 37.10
Fair value of common shares and OP Units issued in consideration $ 1,378,780
Fair value adjustment to OP Units due to transfer restrictions (43,303 )
Portion of consideration attributable to performance of future services ⁽³⁾
(110,591 )
Fair value of common shares and OP Units purchase consideration $ 1,224,886

~~____________________~~


⁽¹⁾	~~Represents the implied exchange ratio of one common share and OP Unit of JBG SMITH for 2.71 common shares and common limited partnership units prior to the Combination.~~


⁽²⁾	~~Represents the volume weighted average share price on July 18, 2017.~~

⁽³⁾

OP Unit consideration paid to certain of the owners of the JBG Assets which have an estimated fair value of $110.6 million is subject to post-combination employment with vesting over periods of either 12 or 60 months. In accordance with GAAP, consideration that is subject to future employment is not considered a component of the purchase price for the business combination and amortization is recognized as compensation expense over the period of employment and is included in "General and administrative expense: share-based compensation related to Formation Transaction" in the statements of operations.

The JBG Assets acquired comprise: (i) 30 operating assets comprising 19 office assets totaling approximately 3.6 million square feet (2.3 million square feet at our share), nine multifamily assets with 2,883 units (1,099 units at our share) and two other assets totaling approximately 490,000 square feet (73,000 square feet at our share); (ii) 11 office and multifamily assets under construction totaling over 2.5 million square feet (2.2 million square feet at our share); (iii) two near-term development office and multifamily assets totaling approximately 401,000 square feet (242,000 square feet at our share); (iv) 26 future development assets totaling approximately 11.7 million square feet (8.5 million square feet at our share) of estimated potential development density; and (v) JBG/Operating Partners, L.P., a real estate services company providing investment, development, asset management, property management, leasing, construction management and other services. JBG/Operating Partners, L.P. was owned by 20 unrelated individuals of which 19 became our employees, and three serve on our Board of Trustees.12 months or less.

The ~~fair values~~adoption of Topic 842 did not result in a material change to our recognition of property rental revenue and did not impact our opening accumulated deficit balance, but resulted in:

(i) the ~~depreciable tangible and identified intangible assets and liabilities, all~~inclusion of ~~which have definite lives and are amortized, are as follows:~~

Total Fair Value Weighted Average Amortization Period

Useful Life ⁽¹⁾
(In thousands) (In years)
Tangible assets:
Building and improvements $ 559,042
3 - 40 years
Tenant improvements 64,847
Shorter of useful life or remaining life of the respective lease
Total building and improvements $ 623,889

Leasehold improvements $ 4,422
Shorter of useful life or remaining life of the respective lease
Identified intangible assets:
In-place leases $ 59,351
6.4 Remaining life of the respective lease
Above-market real estate leases 11,700
6.3 Remaining life of the respective lease
Below-market ground leases 659
88.5 Remaining life of the respective lease
Option to enter into ground lease 17,090
N/A Remaining life of contract
Management and leasing contracts ⁽²⁾
57,800
7.4 Estimated remaining life of contracts, ranging between 3 - 8 years
Total identified intangible assets $ 146,600

Identified intangible liabilities:
Below-market real estate leases $ 8,449
10.2 Remaining life of the respective lease

~~____________________~~


⁽¹⁾	In determining these useful lives, we considered the length of time the asset had been in existence, the maintenance history, as well as anticipated future maintenance, and any contractual stipulations that might limit the useful life.


⁽²⁾	~~Includesin-place property management, leasing, asset management, and development and construction management contracts.~~

~~Transaction costs (such as advisory, legal, accounting, valuation and other professional fees) incurred to effect the Formation Transaction are included~~tenant reimbursements in ~~"Transaction and other costs"~~"Property rentals" in our statements of operations. WeSuch amounts were previously separately presented as "Tenant reimbursements" in the statements of operations;

(ii) the recognition, as of January 1, 2019, of right-of-use assets totaling $35.3 million in "Other assets, net" and lease liabilities totaling $37.9 million in "Other liabilities, net" in our accompanying balance sheet, associated with our corporate office lease and various ground leases for which we are the lessee. The initial right-of-use assets comprised $37.9 million of lease liabilities, $3.5 million of ground lease deferred rent payable reclassified from "Other liabilities, net" and $767,000 of identified net intangible assets and $140,000 of prepaid expenses both reclassified from "Other assets, net;"

(iii) the inclusion as a deduction to revenue, as of January 1, 2019, of the impact of previously recognized revenue deemed improbable of collection. Such amounts were previously recognized within "Property operating expense" in the statements of operations; and

(iv) the change, as of January 1, 2019, in our capitalization policy for direct leasing costs to include only incremental costs associated with successful leasing arrangements, which would not have been incurred if the leasing arrangements had not been obtained. As a result, we no longer capitalize internal leasing costs, which are now expensed ~~a total of $121.6 million transaction~~as incurred within "Corporate and other - general and administrative costs" in the statements of operations. Internal leasing costs ~~of which $104.1 million and $115.2 million were incurred during~~capitalized for the three and nine months ended September 30, ~~2017,~~2018 totaled $1.5 million and ~~$1.5~~$4.3 million ~~was incurred~~.

Lessor Accounting

Leases in which we are the lessor provide for ~~both~~ the ~~three~~payment of fixed base rents payable monthly as well as reimbursements of real estate taxes, insurance and ~~nine months ended~~maintenance costs. The reimbursement of real estate taxes, insurance and maintenance costs, which vary each period, are non-lease components that are not the predominant activity within the contract. We have elected a practical expedient which allows us to combine certain lease and non-lease components of our operating leases. Non-lease components are recognized together with fixed base rent in "Property rentals", as variable lease income in the same periods as the related expenses are incurred. Certain commercial leases may also provide for the payment by the lessee of additional rents based on a percentage of sales, which are recorded as variable lease income in the period the additional rents are earned.

The following is a summary of revenue from our non-cancellable leases included in the statements of operations:



	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
	(In thousands)
Property rentals:
Fixed	$	114,538	$	342,268
Variable	9,425		23,434
Total	$	123,963	$	365,702

As of September 30, ~~2016.~~ 2019, the undiscounted cash flows to be received from lease payments under our operating leases on an annual basis for the next five years and thereafter are as follows:



Year ending December 31,	Amount
	(In thousands)
2019 ⁽¹⁾	$	101,929
2020	367,750
2021	307,251
2022	273,711
2023	235,298
2024	208,243
Thereafter	1,109,914

______________


⁽¹⁾	Amount is for the remainder of 2019.

As of December 31, 2018, future base rental revenue under our non-cancellable operating leases, as determined under Topic 840, were as follows:



Year ending December 31,	Amount
	(In thousands)
2019	$	377,427
2020	321,205
2021	287,463
2022	256,352
2023	215,203
Thereafter	1,188,767

Lessee Accounting

We are obligated under non-cancellable operating leases, including ground leases on certain of our properties through 2061 and our corporate office leases. When a renewal option is included within a lease, we assess whether the option is reasonably certain of being exercised against relevant economic factors to determine whether the option period should be included as part of the lease term. Lease payments associated with renewal periods that we are reasonably certain will be exercised are included in the measurement of the corresponding lease liability and right-of-use asset. Rent expense for our operating leases is recognized on a straight-line basis over the expected lease term and is included in our statements of operations in either "Property operating expense" or "General and administrative expense" depending on the nature of the lease. Further, we are also obligated under a non-cancellable ground lease, which we classify as a finance lease. Because ownership of the land associated with this finance lease is reasonably certain to transfer to us upon the conclusion of the lease, we recorded $16.0 million to "Land and improvements" on our balance sheet when the lease commenced in 2017.

Certain lease agreements include variable lease payments that, in the future, will vary based on changes in inflationary measures, market rates or our share of expenditures of the leased premises. Such variable payments are recognized in rent expense in the period in which the variability is determined. Certain lease agreements may also include various non-lease components that primarily relate to property operating expenses associated with our office leases, which also vary each period. We have elected the practical expedient which allows us not to separate lease and non-lease components for our ground and office leases and recognize variable non-lease components in rent expense when incurred.

We discount our future lease payments for each lease to calculate the related lease liability using an estimated incremental borrowing rate computed based on observable corporate borrowing rates reflective of the general economic environment, taking into consideration our creditworthiness and various financing and asset specific considerations, adjusted to approximate a secured borrowing for the lease term.

As of September 30, 2019, the weighted average discount rate used in calculating lease liabilities for our active operating and finance leases were 5.3% and 5.8%, which have weighted average remaining lease terms of 20.7 years and 7.3 years.

As of September 30, 2019, future minimum lease payments under our non-cancellable operating and finance leases are as follows:



Year ending December 31,	Operating			Finance
	(In thousands)
2019 ⁽¹⁾	$	1,573		$	266
2020	6,272			1,073
2021	6,201			1,095
2022	5,257			1,117
2023	2,000			1,139
2024	2,061			1,162
Thereafter	36,579			15,977
Total future minimum lease payments	59,943			21,829
Imputed interest	(25,403		)	(6,228		)
Total ⁽²⁾	$	34,540		$	15,601

______________


⁽¹⁾	Amounts are for the remainder of 2019.


⁽²⁾	The total for operating leases of $34.5 million corresponds to lease liabilities related to operating right-of-use assets and the total for finance leases of $15.6 million represents our finance lease liability, both of which are included in "Other liabilities, net" as of September 30, 2019. See Note 8 for additional information.

As of December 31, 2018, future minimum rental payments under our non-cancellable operating leases, capital leases and lease assumption liabilities, as determined under Topic 840, were as follows:



Year ending December 31,	Amount
	(In thousands)
2019	$	13,991
2020	13,710
2021	13,395
2022	12,554
2023	9,489
Thereafter	55,780
Total	$	118,919

For the three and nine months ended September 30, ~~2017, transaction~~2019, we incurred $662,000 and ~~other costs include severance and transaction bonus expense of $34.3 million, investment banking fees of $33.6 million, legal fees of $13.1 million and accounting fees of $8.1 million.~~

The total revenue of the JBG Assets for the three and nine months ended September 30, 2017 included in our statements of operations from the acquisition date was $34.9 million. The net loss of the JBG Assets for the three and nine months ended September 30, 2017 included in our statements of operations from the acquisition date was $7.8 million.

The accompanying unaudited pro forma information for the three and nine months ended September 30, 2017 and 2016 is presented as if the Formation Transaction had occurred on January 1, 2016. This pro forma information is based upon the historical financial statements and should be read in conjunction with our consolidated and combined financial statements and notes thereto included in our Registration Statement on Form 10, as amended, filed with the SEC and declared effective on June 26, 2017. This unaudited pro forma information does not purport to represent what the actual results of our operations would have been, nor does it purport to predict the results of operations of future periods. The unaudited pro forma information for the three and nine months ended September 30, 2017 and 2016 was adjusted to exclude $27.8$1.9 million of ~~gain on bargain purchase. The unaudited pro forma information was adjusted to exclude transaction~~fixed operating and ~~other~~finance lease costs and $437,000 and $1.3 million of ~~$104.1 million and $115.2 million for the three and nine months ended September 30, 2017, respectively, and $1.5 million for the three and nine months ended September 30, 2016.~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands) (In thousands)
Unaudited pro forma information:
Total revenue $ 160,428
$ 170,498
$ 481,314
$ 492,874
Net income (loss) attributable to JBG SMITH
Properties
$ 2,283
$ 803
$ (13,741 ) $ (26,701 )
Earnings (loss) per common share:
Basic $ 0.02
$ 0.01
$ (0.13 ) $ (0.27 )
Diluted $ 0.02
$ 0.01
$ (0.13 ) $ (0.27 )

variable operating lease costs.

~~4. Tenant~~

3. Acquisition, Dispositions and ~~Other Receivables, Net~~Assets Held for Sale

Acquisition

We have agreed, subject to customary closing conditions, to acquire F1RST Residences, a 325-unit multifamily asset in the Ballpark submarket of Washington, D.C. with approximately 21,000 square feet of street level retail, for a purchase price of approximately $160.5 million. The multifamily portion of the building is 95.4% occupied as of September 30, 2019. We expect the transaction to close by the end of 2019. We intend to use F1RST Residences as a replacement property in a like-kind exchange for the expected proceeds from the sale of Metropolitan Park to Amazon.com, Inc. ("Amazon").

Dispositions

The following is a summary of ~~tenant and other receivables, net as of September 30, 2017 and December 31, 2016:~~

September 30,
2017 December 31,
2016
(In thousands)
Tenants $ 32,106
$ 26,278
Other 23,835
11,314
Allowance for doubtful accounts (5,467 ) (4,212 )
Total tenant and other receivables, net $ 50,474
$ 33,380

~~We incurred bad debt expense of approximately $1.1 million and $1.8 million during~~disposition activity for the ~~three and~~ nine months ended September 30, ~~2017, respectively, and $106,000 and $618,000 during the three and nine months ended~~2019:



Date Disposed	Assets	Segment	Location	Total Square Feet	Gross Sales Price		Cash Proceeds from Sale		Gain on Sale of Real Estate
					(In thousands)
February 4, 2019	Commerce Executive / Commerce Metro Land ^{(1) (2)}	Commercial / Other	Reston, Virginia	388,562	$	114,950	$	117,676	$	39,033
July 31, 2019	1600 K Street	Commercial	Washington, D.C.	82,653	43,000		40,134		8,088
Total				471,215	$	157,950	$	157,810	$	47,121

______________


⁽¹⁾	The sale also included approximately 894,000 square feet of estimated potential development density. The sale was part of a reverse like-kind exchange. See Note 5 for additional information.


⁽²⁾	Cash proceeds include the reimbursement of $4.0 million of tenant improvement costs and leasing commissions paid by us prior to the closing.

Assets Held for Sale

As of September 30, ~~2016, respectively, which is~~2019 and December 31, 2018, we had certain real estate properties that were classified as held for sale. The amounts included in ~~"Property operating expenses"~~ "Assets held for sale"in our balance sheetsprimarilyrepresent the ~~statement~~carrying value of ~~operations.~~real estate. The following is a summary of assets held for sale:



Assets	Segment	Location	Total Square Feet		Assets Held for Sale		Liabilities Related to Assets Held for Sale
				(In thousands)
September 30, 2019
Pen Place ⁽¹⁾	Other	Arlington, Virginia	—		$	74,107	$	—
Metropolitan Park ⁽¹⁾	Other	Arlington, Virginia	—		94,713		66
			—		$	168,820	$	66

December 31, 2018
Commerce Executive / Commerce Metro Land ⁽²⁾	Commercial	Reston, Virginia	388,562		$	78,981	$	3,717

_______________


⁽¹⁾	In March 2019, we entered into agreements for the sale of Pen Place and Metropolitan Park, future development assets having an aggregate estimated potential development density of up to approximately 4.1 million square feet, for approximately $293.9 million, subject to customary closing conditions.


⁽²⁾	As noted above, we sold Commerce Executive/Commerce Metro Land in February 2019.

4. Investments in ~~and Advances to~~ Unconsolidated Real Estate Ventures

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



Real Estate Venture Partners	Ownership Interest ⁽¹⁾	September 30, 2019		December 31, 2018
		(In thousands)
CPPIB	55.0%	$	101,465	$	97,521
Landmark	1.8% - 49.0%	78,979		84,320
CBREI Venture	5.0% - 64.0%	69,699		73,776
Berkshire Group	50.0%	45,974		43,937
Brandywine	30.0%	13,895		13,777
CIM Group and Pacific Life Insurance Company	16.7%	10,614		9,339
Other		294		208
Total investments in unconsolidated real estate ventures		$	320,920	$	322,878

_______________


⁽¹⁾	Ownership interests as of September 30, 2019. We have multiple investments with certain venture partners with varying ownership interests.

As of September 30, 2019 and ~~advances~~December 31, 2018, we had a 0 investment balance in the real estate venture that owns 1101 17th Street and suspended the equity method of accounting as of June 30, 2018. We will recognize as income any future distributions from the venture until our share of unrecorded earnings and contributions exceeds the cumulative excess distributions previously recognized in income. During the nine months ended September 30, 2019, we recognized income of $6.4 million related to distributions from this venture, which is included in "Income from unconsolidated real estate ventures, asnet" in our statement of operations. During the nine months ended September 30, ~~2017 and December 31, 2016:~~

Ownership
Interest ⁽¹⁾
Investment Balance
Real Estate Venture Partners ⁽¹⁾
September 30,
2017 September 30,
2017 December 31,
2016
(In thousands)
Landmark 1.8% - 59.0% $ 110,562
$ —
CBREI Venture 5.0% - 64.0% 85,386
—
Canadian Pension Plan Investment Board 55.0% 36,223
36,312
Brandywine 30.0% 13,753
—
Berkshire Group 50.0% 27,647
—
MRP Realty 70.0% 1,802
—
JP Morgan 5.0% 9,351
9,335
Other 242
129
Total investments in unconsolidated real estate ventures 284,966
45,776
Advances to unconsolidated real estate ventures 20
—
Total investments in and advances to unconsolidated real
estate ventures
$ 284,986
$ 45,776

~~_______________~~

⁽¹⁾~~We classify our investments in and advances to~~2018, we recognized the $5.4 million of negative investment balance as income within "Income from unconsolidated real estate ventures, net" in our statements of operations as a result of the venture refinancing a mortgage payable collateralized by the property and eliminating certain principal guaranty provisions that had been included in the prior loan. For the three and nine months ended September 30, 2018, we recognized income of $890,000 related to a distribution from 1101 17th Street, which is included in "Income from unconsolidated real estate ~~venture partner with which we may have multiple investments with varying ownership interests.~~ventures, net" in our statement of operations.

The following is a summary of the debt of our unconsolidated real estate ~~ventures as of September 30, 2017 and December 31, 2016:~~ventures:

Weighted Average Interest Rate Balance as of
September 30,
2017 September 30,
2017 December 31,
2016
(In thousands)
Variable rate ⁽¹⁾
4.08% $ 531,989
$ 31,000
Fixed rate ⁽²⁾
3.90% 643,801
273,000
Unconsolidated real estate ventures - mortgages payable 1,175,790
304,000
Unamortized deferred financing costs, net (860 ) (1,034 )
Unconsolidated real estate ventures - mortgages payable, net $ 1,174,930
$ 302,966



	Weighted Average Effective Interest Rate ⁽¹⁾	September 30, 2019			December 31, 2018
		(In thousands)
Variable rate ⁽²⁾	4.65%	$	627,787		$	461,704
Fixed rate ⁽³⁾	3.97%	548,591			665,662
Unconsolidated real estate ventures - mortgages payable		1,176,378			1,127,366
Unamortized deferred financing costs		(1,905		)	(1,998		)
Unconsolidated real estate ventures - mortgages payable, net ⁽⁴⁾		$	1,174,473		$	1,125,368

______________


⁽¹⁾	Weighted average effective interest rate as of September 30, 2019.


⁽²⁾	Includes variable rate mortgages payable with interest rate ~~caps.~~cap agreements.


⁽²⁾⁽³⁾	Includes variable rate mortgages payable with interest rates ~~effectively~~ fixed ~~pursuant to~~by interest rate ~~swaps.~~swap agreements.


⁽⁴⁾	See Note 15 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures.

The following is a summary of the financial information for our unconsolidated real estate ~~ventures, as of September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016:~~ventures:


	September 30, 2017		December 31, 2016		September 30, 2019		December 31, 2018
Combined balance sheet information:	(In thousands)				(In thousands)
Real estate, net					$	2,118,483	$	2,050,985
Other assets, net ⁽¹⁾					192,128		169,264
Total assets	$	3,446,348	$	598,239	$	2,310,611	$	2,220,249

Borrowings, net					$	1,174,473	$	1,125,368
Other liabilities, net ⁽¹⁾					138,737		94,845
Total liabilities	1,253,664		327,862		1,313,210		1,220,213
Noncontrolling interests	343		343
Total equity	2,192,341		270,034		997,401		1,000,036
Total liabilities and equity					$	2,310,611	$	2,220,249

______________


⁽¹⁾	On January 1, 2019, our unconsolidated real estate ventures adopted Topic 842, which required the ventures to record operating right-of-use assets totaling $52.4 million and related lease liabilities totaling $44.1 million.



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Combined income statement information:	(In thousands)
Total revenue	$	65,110		$	76,247		$	199,897		$	236,938
Operating income	10,925			6,861			21,034			23,719
Net loss	(3,602		)	(6,970		)	(20,289		)	(12,159		)

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
Combined income statement information: (In thousands)
Total revenue $ 46,830
$ 16,364
$ 83,387
$ 51,066
Net (loss) income (5,191 ) 2,607
(414 ) 5,083

6.5. 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 or after a change in the real estate venture's economics to determine if the VIEs should be consolidated in our financial statements or should no longer be considered a VIE. Certain criteria we assess in determining whether the VIEs should be consolidated relate to our at-risk equity, our control over significant business activities, our voting rights, the noncontrolling interest kick-out rights and whether we are the primary beneficiary of the VIE.

Unconsolidated VIEs

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, we ~~have~~had interests in ~~several investments that are~~entities deemed to be VIEs that are in the development stage and do not hold sufficient equity at risk or conduct substantially all their operations on behalf of ~~the~~an investor with disproportionately few voting rights. 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 September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, the net carrying amounts of our investment in these entities were ~~$203.0~~$235.1 million and ~~$42.4~~$232.8 million, ~~respectively.~~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 from unconsolidated real estate ventures, net" in our statements of operations. Our maximum loss exposure ~~to loss~~ in these entities is limited to our investments, construction commitments and debt guarantees. See Note 1615 for additional information.

Consolidated VIEs

JBG SMITH LP ~~our operating partnership,~~ is our most significant consolidated VIE. We hold the majority ~~membership~~limited partnership interest in the operating partnership, act as the general partner and exercise full responsibility, discretion and control over its day-to-day management.

The noncontrolling interests of the operating partnership do not have ~~either~~ substantive liquidation rights, or substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest ~~members~~limited

partners (including by such a ~~member~~limited partner unilaterally). Because the noncontrolling interest holders do not have these rights, the operating partnership is a VIE. As general partner, we have the power to direct the core activities of the operating partnership that most significantly affect its performance, and through our majority interest in the operating partnership have both the right to receive benefits from and the obligation to absorb losses of the operating partnership. Accordingly, we are the primary beneficiary of the operating partnership and consolidate the operating partnership in our financial statements. As we conduct our business and hold our assets and liabilities through the operating partnership, the total assets and liabilities of the operating partnership comprise substantially all of our consolidated assets and liabilities.

In conjunction with the acquisition of Potomac Yard Land Bay H located in Alexandria, Virginia in December 2018, we entered into a reverse like-kind exchange agreement with a third-party intermediary. Until the earlier of the termination of the exchange agreement or 180 days after the acquisition date, the third-party intermediary was the legal owner of the entity that owned this property. The agreement that governed the operations of this entity provided us with the power to direct the activities that most significantly impacted the entity's economic performance. This entity was deemed a VIE as of December 31, 2018 primarily because it may not have had sufficient equity at risk to finance its activities without additional subordinated financial support from other parties. We ~~also~~determined we were the primary beneficiary of the VIE as a result of having the power to direct the activities that most significantly impact its economic performance and the obligation to absorb losses, as well as the right to receive benefits, that could be potentially significant to the VIE. Accordingly, we consolidated the property and its operations as of the acquisition date. Legal ownership of this entity was transferred to us by the third-party intermediary after the sale of Commerce Executive/Commerce Metro Land in February 2019.

We consolidate ~~certain~~ VIEs ~~that have minimal noncontrolling interests (less than 5%).~~in which we control the most significant business activities. These entities are VIEs because they are in the development stage and do not hold sufficient equity at risk. We are the primary beneficiaries of these VIEs because the noncontrolling ~~interests~~interest holders do not have substantive kick-out or participating ~~rights. We consolidate these entities because~~rights, and we control all of ~~their~~the significant business activities.

As of September 30, ~~2017,~~2019, excluding the operating partnership, we consolidated 1 VIE with total assets and liabilities of ~~such consolidated VIEs,~~$122.1 million and $17.0 million. As of December 31, 2018, excluding the operating partnership, ~~were approximately $78.8~~we consolidated 2 VIEs with total assets and liabilities of $94.8 million and ~~$5.1 million, respectively.~~$43.4 million.

7.6. Other Assets, Net

The following is a summary of other assets, ~~net as of September 30, 2017 and December 31, 2016:~~

September 30,
2017 December 31,
2016
(In thousands)
Deferred leasing costs $ 168,344
$ 157,258
Accumulated amortization (66,403 ) (57,910 )
Deferred leasing costs, net 101,941
99,348
Prepaid expenses 21,942
2,199
Identified intangible assets, net 143,000
3,063
Other 21,508
8,345
Total other assets, net $ 288,391
$ 112,955

~~The following is a summary of the composition of identified intangible assets, net as of September 30, 2017 and December 31, 2016:~~

September 30,
2017 December 31,
2016
Identified intangible assets: (in thousands)
In-place leases $ 72,081
$ 12,777
Above-market real estate leases 12,473
773
Below-market ground leases 2,874
2,215
Option to enter into ground lease 17,090
—
Management and leasing contracts 57,800
—
Other 206
206
Total identified intangibles assets 162,524
15,971
Accumulated amortization:
In-place leases 15,187
10,871
Above-market real estate leases 1,082
612
Below-market ground leases 1,344
1,278
Management and leasing contracts 1,753
—
Other 158
147
Total accumulated amortization 19,524
12,908
Identified intangible assets, net $ 143,000
$ 3,063

~~The following is a summary of amortization expense included in the statements of operations related to identified intangible assets for the three and nine months ended September 30, 2017 and 2016:~~net:



	September 30, 2019		December 31, 2018
	(In thousands)
Deferred leasing costs, net	$	143,590	$	129,601
Lease intangible assets, net	24,084		34,390
Other identified intangible assets, net	50,395		55,469
Operating right-of-use assets, net ⁽¹⁾	31,795		—
Prepaid expenses	20,011		6,482
Deferred financing costs on credit facility, net	3,392		4,806
Deposits	12,135		3,633
Derivative agreements, at fair value	—		10,383
Other	16,358		20,230
Total other assets, net	$	301,760	$	264,994

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands)
In-place lease amortization ⁽¹⁾
$ 4,104
$ 233
$ 4,347
$ 336
Above-market real estate lease amortization ⁽²⁾
448
20
471
64
Below-market ground lease amortization ⁽³⁾
23
21
66
64
Management and leasing contract amortization ⁽¹⁾
1,753
—
1,753
—
Other amortization ⁽¹⁾
3
22
10
69
Total identified intangible asset amortization $ 6,331
$ 296
$ 6,647
$ 533
______________


⁽¹⁾	Related to our adoption of Topic 842 on January 1, 2019. See Note 2 for additional information.

⁽¹⁾ ~~Amounts are included in "Depreciation and amortization expenses" in our statements of operations.~~

⁽²⁾~~Amounts are included in "Property rentals revenue" in our statements of operations.~~

⁽³⁾ ~~Amounts are included in "Property operating expenses" in our statements of operations.~~

~~As of September 30, 2017, the estimated amortization of identified intangible assets is as follows for each of the five years commencing January 1, 2018:~~

Year ending December 31, Amount
(in thousands)
2018 $ 15,119
2019 12,032
2020 10,105
2021 6,664
2022 5,312

7. Debt

Mortgages Payable

The following is a summary of mortgages ~~payable as of September 30, 2017 and December 31, 2016:~~payable:

Weighted Average Interest Rate Balance as of
September 30,
2017 September 30,
2017 December 31,
2016
(In thousands)
Variable rate ⁽¹⁾
2.95% $ 1,152,106
$ 547,291
Fixed rate ⁽²⁾
4.79% 836,141
620,327
Mortgages payable ⁽³⁾
1,988,247
1,167,618
Unamortized deferred financing costs and premium/discount, net (10,573 ) (2,604 )
Mortgages payable, net $ 1,977,674
$ 1,165,014
Payable to former parent ⁽⁴⁾
— $ —
$ 283,232



	Weighted Average Effective Interest Rate ⁽¹⁾	September 30, 2019			December 31, 2018
		(In thousands)
Variable rate ⁽²⁾	3.67%	$	14,000		$	308,918
Fixed rate ⁽³⁾	4.20%	1,347,840			1,535,734
Mortgages payable		1,361,840			1,844,652
Unamortized deferred financing costs and premium/ discount, net		(3,269		)	(6,271		)
Mortgages payable, net		$	1,358,571		$	1,838,381

^{__________________________}


⁽¹⁾	~~Includes variable rate mortgages payable with~~Weighted average effective interest rate ~~caps.~~as of September 30, 2019.


⁽²⁾	Includes a variable rate mortgage payable with an interest rate cap agreement as of December 31, 2018.


⁽³⁾	Includes variable rate mortgages payable with interest rates ~~effectively~~ fixed ~~pursuant to~~by interest rate ~~swaps.~~


⁽³⁾	~~Includes mortgages payable assumed as part of the Combination. See Note 3 to the financial statements for additional information.~~

⁽⁴⁾

In June 2016, the mortgage loan for the Bowen Building was repaid with proceeds of a $115.6 million draw on our former parent's revolving credit facility collateralized by an interest in the property, and, accordingly, was reflected as a component of "Payable to former parent" on the combined balance sheets as of December 31, 2016. We repaid the loan with amounts drawn under our revolving credit facility collateralized by a mortgage on the property.swap agreements.

As of September 30, ~~2017,~~2019 and December 31, 2018, the net carrying value of real estate collateralizing our mortgages payable, excluding assets held for sale, totaled ~~$3.9~~$1.8 billion and $2.3 billion. Our ~~mortgage loans~~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. AsCertain of ~~September 30, 2017, we were in compliance with all debt covenants.~~

~~As part of the Combination, we assumed~~our mortgages payable ~~with an aggregate principal balance of $768.5 million.~~ are recourse to us. See Note 15 for additional information.

During the ~~three~~nine months ended September 30, ~~2017,~~2019, we repaid mortgages payable with an aggregate principal balance of ~~$181.7~~$475.1 million, which ~~includes mortgages payable totaling $63.7~~resulted in a loss on the extinguishment of debt of $1.9 million, ~~assumed in the Combination. We~~which is recognized ~~losses~~within "Loss on extinguishment of ~~debt~~debt" in ~~conjunction with these repayments~~the statement of ~~$689,000 for the three and nine months ended~~operations.

As of September 30, ~~2017.~~

2019 and December 31, 2018, we had various interest rate swap and cap agreements with an aggregate notional value of $1.1 billion and $1.3 billion on certain of our mortgages payable. See Note 13 for additional information.

Credit Facility

~~On July 18, 2017, we entered into~~We have a $1.4 billion credit facility, consisting of a $1.0 billion revolving credit facility maturing in July 2021, with ~~two~~2 six-month extension options, a delayed draw $200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023, and a delayed draw $200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024. ~~The interest rate for~~Effective as of July 17, 2019, the credit facility ~~varies based on a ratio~~was amended to extend the delayed draw period of our total outstanding indebtedness to a valuation of certain real property and assets and ranges (a) in the case of the revolving credit facility, from LIBOR plus 1.10% to LIBOR plus 1.50%, (b) in the case of the Tranche A-1 Term Loan ~~from LIBOR plus 1.20%~~ to ~~LIBOR plus 1.70%~~July 2020 and ~~(c) in~~to reduce the ~~case~~applicable interest rate of the Tranche A-2 Term Loan by 40 basis points, to LIBOR plus 1.15% from LIBOR plus 1.55%.

As of September 30, 2019 and December 31, 2018, we had interest rate swaps with an aggregate notional value of $100.0 million, which effectively convert the variable interest rate applicable to ~~LIBOR plus 2.35%.~~

~~On July 18, 2017, in connection with the Combination, we drew $115.8 million on the revolving credit facility and $50.0 million under the~~our Tranche A-1 Term ~~Loan. In connection~~Loan to a fixed interest rate. As of September 30, 2019, we had interest rate swaps with an aggregate notional value of $137.6 million, which effectively convert the ~~execution~~variable interest rate applicable to a portion of the ~~credit facility, we incurred $11.2 million in fees and expenses.~~outstanding balance of our Tranche A-2 Term Loan to a fixed interest rate.

The following is a summary of amounts outstanding under the credit ~~facility as of September 30, 2017:~~facility:

Interest Rate Balance as of
September 30,
2017 September 30,
2017
(In thousands)
Revolving credit facility ⁽¹⁾
2.34% $ 115,751

Tranche A-1 Term Loan 2.44% $ 50,000
Unamortized deferred financing costs, net (3,611 )
Unsecured term loan, net $ 46,389



	Interest Rate ⁽¹⁾	September 30, 2019			December 31, 2018
		(In thousands)
Revolving credit facility ^{(2) (3) (4)}	3.12%	$	—		$	—

Tranche A-1 Term Loan ⁽⁵⁾	3.32%	$	100,000		$	100,000
Tranche A-2 Term Loan ⁽⁵⁾	3.82%	200,000			200,000
Unsecured term loans		300,000			300,000
Unamortized deferred financing costs, net		(2,876		)	(2,871		)
Unsecured term loans, net		$	297,124		$	297,129

^{__________________________}


⁽¹⁾	Interest rate as of September 30, 2019.


⁽²⁾	As of September 30, ~~2017,~~2019 and December 31, 2018, letters of credit with an aggregate face amount of ~~$5.2~~$2.4 million and $5.7 million were provided under our revolving credit facility.


⁽³⁾	As of September 30, 2019 and December 31, 2018, net deferred financing costs related to our revolving credit facility totaling $3.4 million and $4.8 millionwere included in "Other assets, net."


⁽⁴⁾	The interest rate for the revolving credit facility excludes a 0.15% facility fee.


⁽⁵⁾	The interest rate includes the impact of interest rate swap agreements.

~~Principal Maturities~~

~~Principal maturities of debt outstanding as of September 30, 2017, including mortgages payable, the Tranche A-1 Term Loan and borrowings on the revolving credit facility, are as follows:~~

Year ending December 31, Amount
(In thousands)
2017 $ —
2018 376,019
2019 227,919
2020 215,096
2021 215,592
2022 327,500
Thereafter 791,872
Total $ 2,153,998

9.8. Other Liabilities, Net

The following is a summary of other liabilities, ~~net as of September 30, 2017 and December 31, 2016:~~net:



	September 30, 2019		December 31, 2018
	(In thousands)
Lease intangible liabilities, net	$	12,243	$	14,098
Prepaid rent	25,810		21,998
Lease assumption liabilities	21,856		23,105
Lease incentive liabilities	26,317		9,317
Lease liabilities related to operating right-of-use assets ⁽¹⁾	34,540		—
Finance lease liability	15,601		15,704
Security deposits	16,573		17,696
Environmental liabilities	17,898		17,898
Ground lease deferred rent payable ⁽²⁾	—		3,510
Deferred tax liability	6,250		6,878
Dividends payable	—		45,193
Derivative agreements, at fair value	27,577		1,723
Other	1,040		4,486
Total other liabilities, net	$	205,705	$	181,606

September 30,
2017 December 31,
2016
(In thousands)
Lease intangible liabilities $ 44,965
$ 36,515
Accumulated amortization (26,287 ) (24,945 )
Lease intangible liabilities, net 18,678
11,570
Prepaid rent 12,445
9,163
Lease assumptions liabilities and accrued tenant incentives 12,090
14,907
Capital lease obligation 15,976
—
Security deposits 13,795
10,324
Ground lease deferred rent payable 3,559
3,331
Deferred tax liability ⁽¹⁾
22,007
—
Other 2,224
192
Total other liabilities, net $ 100,774
$ 49,487
^{__________________________}


⁽¹⁾	AsRelated to our adoption of ~~September 30, 2017, the deferred tax liability of $22.0 million is related to the management and leasing contracts assumed in the Combination.~~Topic 842 on January 1, 2019. See Note 32 for additional information.


⁽²⁾	In connection with our adoption of Topic 842 on January 1, 2019, the ground lease deferred rent payable balance as of December 31, 2018 was included in the initial determination of the operating right-of-use assets. See Note 2 for additional information.

~~The following is a summary of amortization expense included in the statements of operations related to lease intangible liabilities:~~

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(in thousands)
Lease intangible liabilities amortization ⁽¹⁾
$ 633
$ 359
$ 1,343
$ 1,076

⁽¹⁾ ~~Amounts are included in "Property rentals" in our statements of operations.~~

~~As of September 30, 2017, the estimated amortization of lease intangible liabilities is as follows for each of the five years commencing January 1, 2018:~~

Year ending December 31, Amount
(in thousands)
2018 $ 2,765
2019 2,679
2020 2,392
2021 1,917
2022 1,798

~~10.~~

9. Redeemable Noncontrolling Interests

~~In conjunction with the Formation Transaction,~~ JBG SMITH LP ~~issued 19.8 million~~

A portion of the OP Units toheld by persons other than JBG SMITH ~~that are~~became redeemable for cash or, at our election, our common shares beginning on August 1, 2018, subject to certain limitations. ~~These~~During the nine months ended September 30, 2019, unitholders redeemed 1.7 million OP Units, ~~represent~~which we elected to redeem for an equivalent number of our common shares. As of September 30, 2019, outstanding OP Units totaled 15.2 million, representing a ~~14.4%~~10.2% ownership interest in JBG SMITH ~~LP as of September 30, 2017. The carrying amount of the~~LP. On our balance sheets, our vested or outstanding redeemable noncontrolling interests ~~is adjusted to its~~are presented at the higher of their redemption value at the end of each reporting period ~~but no less than its initial~~or their carrying value, with such adjustments recognized in "Additional paid-in ~~capital".~~capital." Redemption value per OP Unit is equivalent to the market value of one of our common

shares at the end of the ~~period multiplied by~~period.

Consolidated Real Estate Venture

We are a partner in a real estate venture that owns an under construction multifamily asset located at 965 Florida Avenue in Washington, D.C. Pursuant to the ~~number~~terms of ~~vested OP Units outstanding.~~ the real estate venture agreement, we will fund all capital contributions until our ownership interest reaches a maximum of 97.0%. Our partner can redeem its interest for cash two years after delivery, but no later than seven years subsequent to delivery. As of September 30, 2019, we held a 94.2% ownership interest in the real estate venture.

Below is a summary of the activity of redeemable noncontrolling ~~interests~~interests:



	Three Months Ended September 30,
	2019								2018
	JBG SMITH LP			Consolidated Real Estate Venture		Total			JBG SMITH LP			Consolidated Real Estate Venture		Total
	(In thousands)
Balance as of beginning of period	$	568,242		$	5,986	$	574,228		$	659,716		$	5,907	$	665,623
OP Unit redemptions	—			—		—			(109,208		)	—		(109,208		)
Net income attributable to redeemable noncontrolling interests	1,172			—		1,172			3,552			—		3,552
Other comprehensive income (loss)	(803		)	—		(803		)	696			—		696
Contributions (distributions)	(3,831		)	—		(3,831		)	(4,106		)	—		(4,106		)
Share-based compensation expense	14,320			—		14,320			12,298			—		12,298
Adjustment to redemption value	1,446			—		1,446			(6,537		)	—		(6,537		)
Balance as of end of period	$	580,546		$	5,986	$	586,532		$	556,411		$	5,907	$	562,318



	Nine Months Ended September 30,
	2019								2018
	JBG SMITH LP			Consolidated Real Estate Venture		Total			JBG SMITH LP			Consolidated Real Estate Venture			Total
	(In thousands)
Balance as of beginning of period	$	552,159		$	5,981	$	558,140		$	603,717		$	5,412		$	609,129
OP Unit redemptions	(57,318		)	—		(57,318		)	(109,208		)	—			(109,208		)
Long-term incentive partnership units ("LTIP Units") issued in lieu of cash bonuses ⁽¹⁾	3,954			—		3,954			—			—			—
Net income (loss) attributable to redeemable noncontrolling interests	4,266			5		4,271			6,537			(5		)	6,532
Other comprehensive income (loss)	(3,689		)	—		(3,689		)	3,406			—			3,406
Contributions (distributions)	(7,670		)	—		(7,670		)	(8,763		)	500			(8,263		)
Share-based compensation expense	45,937			—		45,937			39,376			—			39,376
Adjustment to redemption value	42,907			—		42,907			21,346			—			21,346
Balance as of end of period	$	580,546		$	5,986	$	586,532		$	556,411		$	5,907		$	562,318

^{__________________________}


⁽¹⁾	See Note 10 for additional information.

10. Share-Based Payments and Employee Benefits

LTIP and Time-Based LTIP Units

During the nine months ended September 30, ~~2017:~~

Nine Months Ended September 30,
2017
(In thousands)
Balance at January 1, 2017 ⁽¹⁾
$ —
OP Units issued at the Separation 96,632
OP Units issued in connection with the Combination ⁽²⁾
359,967
Net loss attributable to redeemable noncontrolling interests (2,481 )
Share-based compensation expense 15,799
Adjustment to redemption value 97,084
Balance as of September 30, 2017 $ 567,001

~~__________________~~


⁽¹⁾	~~We did not have any redeemable noncontrolling interests prior to the Separation on July 17, 2017.~~


⁽²⁾	Excludes certain OP Units issued as part of the Combination which have an estimated fair value of $110.6 million, that are subject to post-combination employment with vesting over periods of either 12 or 60 months. See Note 11 for further information.

~~11. Share-Based Payments and Employee Benefits~~

~~OP UNITS~~

Certain OP Units issued as part of the Combination which have an estimated fair value of $110.6 million, are subject to post-combination employment with vesting over periods of either 12 or 60 months. The fair value of these 3.3 million OP Units was estimated based on the post-vesting restriction periods of the units. The significant assumptions used to value the units include expected volatilities (18.0% to 27.0% ), risk-free interest rates (1.3% to 1.5%) and post-vesting restriction periods (1 year to 3 years). Compensation expense for these units is recognized over the graded vesting period. See Note 3 for additional information. As of September 30, 2017, none of these OP Units had vested or been forfeited.

~~JBG SMITH 2017 Omnibus Share Plan~~

On June 23, 2017, our Board of Trustees adopted the JBG SMITH 2017 Omnibus Share Plan (the "Plan"), effective as of July 17, 2017, and authorized the reservation of approximately 10.3 million of our common shares pursuant to the Plan. On July 10, 2017, our then sole-shareholder approved the Plan. As of September 30, 2017, there were 6.6 million common shares available for issuance under the Plan.

~~Formation Awards~~

~~Pursuant to the Plan, on July 18, 2017,~~2019, we granted approximately 2.7 million Formation Awards based on an aggregate notional value of approximately $100.0 million divided by the volume-weighted average price on July 18, 2017 of $37.10 per common share. The Formation Awards are structured in the form of profits interests in JBG SMITH LP that provide for a share of appreciation determined by the increase in the value of a common share at the time of conversion over the $37.10 volume-weighted average price of a common share at the time the formation unit was granted. The Formation Awards, subject to certain conditions, generally vest 25% on each of the third and fourth anniversaries and 50% on the fifth anniversary, of the closing of the Combination, subject to continued employment with JBG SMITH through each vesting date.

~~The value of vested Formation Awards is realized through conversion into a number of~~351,982 LTIP Units and subsequent conversion into a number of OP Units determined based on the difference between $37.10 and the value of a common share on the conversion date. The conversion ratio between Formation Awards and OP Units, which starts at zero, is the quotient of (i) the excess of the value of a common share on the conversion date above the per share value at the time the Formation Award was granted over (ii) the value of a common share as of the date of conversion. This is similar to a “cashless exercise” of stock options, whereby the holder receives a number of shares equal in value to the difference between the full value of the total number of shares for which the option is being exercised and the total exercise price. Like options, Formation Awards have a finite term over which their value is allowed to increase and during which they may be converted intowith time-based vesting requirements ("Time-Based LTIP ~~Units (and in turn, OP Units). Holders of Formation Awards will not receive distributions or allocations of net income or net loss prior to vesting and conversion to LTIP Units.~~

The fair value of the Formation Awards on the grant date was $23.7 million or $8.84 per unit estimated using Monte Carlo simulations. The significant assumptions used to value the awards include expected volatility (26.0%Units"), dividend yield (2.3%), risk-free interest rate (2.3%) and expected life (7 years). Compensation expense for these awards is being recognized over a five-year period. As of September 30, 2017, none of these Formation Awards had vested or been forfeited.

~~LTIP Units~~

On July 18, 2017, we granted a total of 47,166 fully vested LTIP Units to the seven non-employee trustees in the notional amount of $250,000 each. The LTIP Units may not be sold while such non-employee trustee is serving on the Board. On the same date, we also granted 59,927 LTIP units to a key employee 50%, which vested immediately and 50% of which vests in equal monthly installments from the 31st to 60th months following the grant date. These LTIP Units had an aggregate fair value of $3.5 million.

~~On August 1, 2017, we granted approximately 302,500 LTIP Units~~ to management and other employees ~~under our Plan. The LTIP units~~with a weighted average grant-date fair value of $34.26 per unit that vest inprimarily over four ~~equal installments on August 1 of each~~years, 25.0% per year, subject to continued employment. ~~These LTIP Units were valued at a weighted average grant-fair value of $33.71 per unit.~~ Compensation expense for these units is being recognized primarily over a four-year period. AsThe aggregate grant-date fair value of these Time-Based LTIP Units granted during the nine months ended September 30, ~~2017, none~~2019 was $12.1 million valued using Monte Carlo simulations.

During the nine months ended September 30, 2019, we granted 91,636 of fully vested LTIP Units, with a grant-date fair value of $34.21 per unit, to certain executives who elected to receive all or a portion of their cash bonus paid in 2019, related to 2018 service, as LTIP Units. Compensation expense totaling $3.1 million for these LTIP Units ~~had~~was recognized in 2018.

In May 2019, as part of their annual compensation, we granted a total of 50,159 fully vested ~~or been forfeited.~~

~~The~~LTIP Units to certain of our trustees with an aggregate grant-date fair value of ~~the LTIP Units was estimated based on the post-vesting restriction periods.~~ $1.8 million.

The significant assumptions used to value ~~the units include expected volatilities (17.0% to 19.0%), risk-free interest rates (1.3% to 1.5%)~~LTIP and ~~post-vesting restriction periods (2 years to 3 years). Net income and net loss is allocated to each LTIP Unit. LTIP Unit holders have the right to convert all or a portion of vested~~Time-Based LTIP Units ~~into OP Units, which are then subsequently exchangeable for our common shares.~~included:



Expected volatility	18.0% to 24.0%
Risk-free interest rate	2.3% to 2.6%
Post-grant restriction periods	2 to 3 years

Performance-Based LTIP Units ~~do not have redemption rights, but any OP Units into which~~

During the nine months ended September 30, 2019, we granted 478,411 LTIP Units ~~are converted are entitled to redemption rights.~~with performance-based vesting requirements ("Performance-Based LTIP ~~Units, generally, vote with the OP Units and do not have any separate voting rights except in connection with actions that would materially and adversely affect the rights of the LTIP Units.~~

~~OPP Units~~

~~On August 1, 2017, we granted approximately 605,100 OPP Units~~Units") to management and other employees ~~under the Plan. OPP~~with a weighted average grant-date fair value of $19.49 per unit. Our Performance-Based LTIP Units ~~are performance-based equity compensation pursuant to which participants~~ have the opportunity to earn OPP units based on the relative performance of the total shareholder return ("TSR") of our common shares compared to the companies in the FTSE NAREIT Equity Office Index, over thea three-year performance ~~period beginning on the August 1, 2017 grant date, inclusive of dividends and stock price appreciation. Fifty~~period. NaN percent of any ~~OPP~~Performance-Based LTIP Units that are earned vest at the end of the three-year performance period and the remaining 50% on the fourth anniversary of the date of grant, subject to continued employment. ~~Net income and net loss are allocated to each OPP Unit.~~

The aggregate grant-date fair value of the ~~OPP~~Performance-Based LTIP Units ongranted during the ~~date of grant~~nine months ended September 30, 2019 was ~~$9.7~~$9.3 million ~~or $15.95 per unit estimated~~ valued using Monte Carlo simulations. Compensation expense for the Performance-Based LTIP Units is being recognized over a four-year period. The significant assumptions used to value the ~~OPP~~Performance-Based LTIP Units ~~include expected volatility (18.0%), dividend yield (2.3%) and risk-free interest rates (1.5%). Compensation expense~~included:




Expected volatility	19.0% to 23.0%
Dividend yield	2.3% to 2.5%
Risk-free interest rate	2.3% to 2.6%

ESPP

Pursuant to the ESPP, employees purchased 25,575 common shares for ~~these units is being recognized over a four-year period. As of September 30, 2017, none of these OPP Units had vested or been forfeited.~~

~~Share-Based Compensation Expense~~

~~Share-based compensation expense for~~$747,000 during the nine months ended September 30, ~~2017~~2019. The significant assumptions used to value the ESPP common shares using the Black-Scholes model included expected volatility (28.0%), dividend yield (2.6%), risk-free interest rate (2.4%) and expected life (six months).

Share-Based Compensation Expense

Share-based compensation expense is summarized as ~~follows (in thousands):~~follows:

Formation Awards $ 3,963
LTIP Units that vested immediately 2,546
OP Units ⁽¹⁾
7,936
Share-based compensation related to Formation Transaction ⁽²⁾
14,445
LTIP Units that vest over four years 885
OPP Units 469
Other equity awards 1,526
Share-based compensation expense - other⁽³⁾
2,880
Total share-based compensation expense 17,325
Less amount capitalized (161 )
Net share-based compensation expense ⁽⁴⁾
$ 17,164



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)
Time-Based LTIP Units	$	2,755		$	2,520		$	8,529		$	7,772
Performance-Based LTIP Units	2,016			1,391			6,205			3,898
LTIP Units	—			—			1,000			794
Other equity awards ⁽¹⁾	1,403			989			3,443			2,693
Share-based compensation expense - other	6,174			4,900			19,177			15,157
Formation Awards	1,227			1,375			4,116			4,192
OP Units ⁽²⁾	6,747			6,943			21,491			22,512
LTIP Units ⁽²⁾	117			69			340			208
Special Performance-Based LTIP Units ⁽³⁾	654			—			1,938			—
Special Time-Based LTIP Units ⁽³⁾	804			—			2,318			—
Share-based compensation related to Formation Transaction and special equity awards ⁽⁴⁾	9,549			8,387			30,203			26,912
Total share-based compensation expense	15,723			13,287			49,380			42,069
Less amount capitalized	(406		)	(873		)	(1,948		)	(2,379		)
Share-based compensation expense	$	15,317		$	12,414		$	47,432		$	39,690

^{______________________________________________}


⁽¹⁾	Includes compensation expense for certain executives who have elected to receive all or a portion of any cash bonus that may be paid in the subsequent year related to past service in the form of fully vested LTIP Units and expense related to our employee share purchase plan.


⁽²⁾	Represents share-based compensation expense for LTIP Units and OP Units subject to ~~post-combination employment. See Note 3 for further information.~~post-Combination employment obligations.


⁽²⁾⁽³⁾	Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in Northern Virginia.


⁽⁴⁾	Included in "General and administrative expense: ~~share-based~~Share-based compensation related to Formation ~~Transaction"~~Transaction and special equity awards" in the accompanying statements of operations.


⁽³⁾	~~Included in "General and administrative expense" in the accompanying statements of operations.~~


⁽⁴⁾	~~Net share-based compensation expense for the three months ended September 30, 2017 was $16.0 million.~~

As of September 30, ~~2017,~~2019, we had ~~$141.4~~$94.7 million of total unrecognized compensation expense related to unvested share-based payment ~~arrangements (unvested OP Units, Formation Awards, LTIP Units and OPP Units).~~arrangements. This expense is expected to be recognized over a weighted average period of ~~3.4~~2.3 years.

~~Employee Benefits~~

~~We have~~

11. Interest Expense

The following is a ~~401(k) defined contribution plan (the “401(k) Plan”) covering substantially all~~summary of ~~our officers and employees which permits participants to defer compensation up to~~interest expense included in the maximum amount permitted by law. We provide a discretionary matching contribution. Employees’ contributions vest immediately and our matching contributions vest over five years. Our contributions to the 401(k) Plan for three months ended September 30, 2017 and 2016 were $401,000 and $868,000, respectively. Our contributions during the nine months ended September 30, 2017 and 2016 were $3.2 million and $3.1 million, respectively.statements of operations:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands)
Interest expense	$	18,141		$	23,465		$	61,449		$	69,024
Amortization of deferred financing costs	698			1,043			2,576			3,501
Net loss (gain) on derivative financial instruments not designated as cash flow hedges
Net unrealized	2			287			50			(1,264		)
Net realized	—			(135		)	—			(135		)
Capitalized interest	(8,258		)	(5,681		)	(23,211		)	(14,863		)
Interest expense	$	10,583		$	18,979		$	40,864		$	56,263

12. ~~(Loss)~~Shareholders' Equity and Earnings Per Common Share

Shareholders' Equity

In April 2019, we closed an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other offering expenses, of $472.8 million. We intend to use the balance sheet capacity generated by the net proceeds of the offering to fund development opportunities and for general corporate purposes.

Earnings Per Common Share

The following summarizes the calculation of basic and diluted ~~EPS~~earnings per common share and provides a reconciliation of the amounts of net ~~(loss)~~ income available to common shareholders ~~and shares of common stock~~ used in calculating basic and diluted ~~EPS for the three and nine months ended September 30, 2017 and 2016:~~earnings per common share:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands, except per share amounts)
Net (loss) income attributable to JBG SMITH Properties $ (69,831 ) $ 21,014
$ (57,851 ) $ 49,344

Weighted average shares outstanding — basic and diluted ⁽¹⁾
114,744
100,571
105,347
100,571

(Loss) earnings per share available to common shareholders:
Basic $ (0.61 ) $ 0.21
$ (0.55 ) $ 0.49
Diluted $ (0.61 ) $ 0.21
$ (0.55 ) $ 0.49



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands, except per share amounts)
Net income	$	10,532		$	26,382		$	35,452		$	45,619
Net income attributable to redeemable noncontrolling interests	(1,172		)	(3,552		)	(4,271		)	(6,532		)
Net loss attributable to noncontrolling interests	—			—			—			127
Net income attributable to common shareholders	9,360			22,830			31,181			39,214
Distributions to participating securities	(679		)	(153		)	(1,674		)	(527		)
Net income available to common shareholders — basic and diluted	$	8,681		$	22,677		$	29,507		$	38,687

Weighted average number of common shares outstanding — basic and diluted	134,127			119,835			129,527			118,588

Earnings per common share:
Basic	$	0.06		$	0.19		$	0.23		$	0.33
Diluted	$	0.06		$	0.19		$	0.23		$	0.33

~~_______________~~


⁽¹⁾	~~Reflects the weighted average common shares outstanding as of the date of the Separation in all periods prior to July 17, 2017.~~

The effect of the ~~conversion~~redemption of ~~13,408 and 4,518 weighted average vested~~ OP Units ~~for the three~~ and ~~nine months ended~~Time-Based LTIP Units that were outstanding as of September 30, ~~2017~~2019 and 2018 is excluded in the computation of ~~basic and~~ diluted ~~loss~~earnings per common share, as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed ~~conversion~~redemption of these units would have no ~~net~~ impact on the determination of

diluted earnings per share). ~~As vested~~Since OP Units and ~~outstanding OP~~Time-Based LTIP Units, which are held by a noncontrolling ~~interest,~~interests, are attributed gains and losses at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average OP Unit and Time-Based LTIP Unit impact are ~~attributable~~excluded from net income available to ~~them based on~~common shareholders and from the weighted average number of common shares outstanding ~~units and are thus excluded from the numerator~~ in calculating ~~basic~~diluted earnings per common share. Performance-Based LTIP Units, Special Performance-Based LTIP Units and ~~diluted loss per share. The number of securities that~~Formation Awards, which totaled 4.7 million for the three and nine months ended September 30, 2019 and 3.9 million and 3.8 million for the three and nine months ended September 30, 2018, were excluded from the calculation of diluted ~~(loss)~~ earnings per common share ~~because~~as they were antidilutive, ~~that~~but potentially could be dilutive in the ~~future are included in the following table:~~future.

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
OP Units 3,281
—
3,281
—
Formation Awards 2,681
—
2,681
—
LTIP Units 410
—
410
—
OPP Units 605
—
605
—

13. ~~Future Minimum Rental Income~~

We lease space to tenants under operating leases that expire at various dates through the year 2036. The leases provide for the payment of fixed base rents payable monthly in advance as well as reimbursements of real estate taxes, insurance and maintenance costs. Retail leases may also provide for the payment by the lessee of additional rents based on a percentage of their sales. As of September 30, 2017, future base rental revenue under these non-cancelable operating leases excluding extension options is as follows:

Year ending December 31, Amount
(In thousands)
2017 $ 133,025
2018 387,636
2019 310,230
2020 277,278
2021 234,005
2022 195,750
Thereafter 868,284

~~14.~~ Fair Value Measurements

Financial Assets and Liabilities Measured at Fair Value 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. We do not enter into derivative financial instruments for speculative purposes.

As of September 30, ~~2017,~~2019 and December 31, 2018, we had various derivative financial instruments consisting of interest rate swap and cap agreements ~~assumed in the Combination~~ that are measured at fair value on a recurring basis. ~~There were no interest rate swaps or caps prior to the Combination.~~ The net unrealized (loss) gain on our derivative financial instruments designated as cash flow hedges was $(27.7) million and $8.3 million as of September 30, 2019 and December 31, 2018 and was recorded in "Accumulated other comprehensive income (loss)" in our balance sheets, of which a portion was reclassified to "Redeemable noncontrolling interests." Within the next 12 months, we expect to reclassify $6.3 million as an increase to interest ~~rate swaps~~expense. The net unrealized (loss) gain on our derivative financial instruments not designated as cash flow hedges was $(2,000) and ~~caps was $467,000~~$(50,000) for ~~both~~ the three and nine months ended September 30, ~~2017~~2019 and ~~are included~~$(287,000) and $1.3 million for the three and nine months ended September 30, 2018, and is recorded in "Interest expense" in ~~the accompanying~~our statements of ~~operations.~~ operations and "Net unrealized gain on derivative financial instruments not designated as cash flow hedges" in our statements of cash flows.

Topic 820, Fair Value Measurement and Disclosures, 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 ~~interest rate swaps and caps~~derivative financial instruments are based on the estimated amounts we would receive or pay to terminate the ~~contract~~contracts at the reporting date and are determined using interest rate pricing models and observable inputs. The ~~interest rate swaps and caps~~derivative financial instruments are classified within Level 2 of the valuation hierarchy.

The following are assets and liabilities measured at fair value on a recurring ~~basis~~basis:



	Fair Value Measurements
	Total		Level 1		Level 2		Level 3
September 30, 2019	(In thousands)
Derivative financial instruments designated as cash flow hedges:
Classified as liabilities in "Other liabilities, net"	$	27,577	—		$	27,577	—

December 31, 2018
Derivative financial instruments designated as cash flow hedges:
Classified as assets in "Other assets, net"	$	7,913	$	—	$	7,913	$	—
Classified as liabilities in "Other liabilities, net"	1,723		—		1,723		—
Derivative financial instruments not designated as cash flow hedges:
Classified as assets in "Other assets, net"	2,470		—		2,470		—

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 under authoritative accounting guidance, 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 September 30, ~~2017:~~2019 and December 31, 2018, 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 and losses included in "Other comprehensive income (loss)'' in our statements of comprehensive income (loss) for the three and nine months ended September 30, 2019 and 2018 were attributable to the net change in unrealized gains or losses related to the interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.

Fair Value Measurements
Total Level 1 Level 2 Level 3
September 30, 2017 (In thousands)
Interest rate swaps and caps:
Classified as liabilities in "Other liabilities, net" $ 703
$ —
$ 703
$ —

Financial Assets and Liabilities Not Measured at Fair Value

As of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, all financial instruments and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:

September 30, 2017 December 31, 2016

     Carrying
      Amount ⁽¹⁾
Fair Value
     Carrying
      Amount ⁽¹⁾
Fair Value
(In thousands)
Financial liabilities:
Mortgages payable $ 1,988,247
$ 2,015,653
$ 1,167,618
$ 1,192,267



	September 30, 2019				December 31, 2018
	Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value
	(In thousands)
Financial liabilities:
Mortgages payable	$	1,361,840	$	1,404,849	$	1,844,652	$	1,870,078
Unsecured term loans	300,000		301,076		300,000		300,727

^{______________________________________}

⁽¹⁾The carrying amount consists of principal only.

The fair value of our mortgages payable is estimated by discounting the future contractual cash flows of these instruments using current risk-adjusted rates available to borrowers with similar credit ratings, which are provided by a third-party specialist. The fair value of the mortgages payable and unsecured term ~~loan~~loans was determined using Level 2 inputs of the fair value hierarchy.

The fair value of our unsecured term loan is calculated based on the net present value of payments over the term of the loan using estimated market rates for similar notes and remaining terms. The fair value of the unsecured term loan was determined using Level 2 inputs of the fair value hierarchy.

~~15.~~14. Segment Information

We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. As ~~a result~~ of ~~the Formation Transaction,~~December 31, 2018, we redefined our reportable segments to be aligned with our new method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ~~(“CODM”~~("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into ~~three~~3 reportable segments ~~(office,~~(commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services. ~~In connection therewith,~~To conform to the current period presentation, we have reclassified the prior period segment financial data ~~to conform~~for certain properties that had been classified as part of other to the ~~current period presentation.~~commercial and multifamily segments, and the elimination of intersegment activity has been included as part of other for the three and nine months ended September 30, 2018. The commercial segment was previously referred to as the office segment.

The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the net operating income ~~(“NOI”~~("NOI") of properties within each segment. NOI includes property rental ~~revenues~~revenue and ~~tenant reimbursements~~other property operating income, and deducts property operating expenses and real estate taxes.

With respect to the third-party asset management and real estate services business, the CODM reviews revenues streams generated by this segment ~~(third-party~~("Third-party real estate services, including ~~reimbursements)~~reimbursements"), as well as the expenses attributable to the segment ~~(general~~("General and administrative: third-party real estate ~~services)~~services"), which are disclosed separately in the statements of operations. Management company assets primarily consist of management and leasing contracts with a net book value of ~~$56.0~~$33.3 million and $38.6 million and are classified in "Other assets, net" in the balance ~~sheet~~sheets as of September 30, ~~2017.~~2019 and December 31, 2018. Consistent with ~~the~~internal reporting presented to our CODM ~~approach~~ and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.

The following table reflects the reconciliation of net ~~(loss)~~ income attributable to ~~JBG SMITH Properties~~common shareholders to ~~NOI for the three and nine months ended September 30, 2017 and 2016:~~consolidated NOI:


	Three Months Ended September 30,					Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016		2017			2016			2019			2018			2019			2018
	(In thousands)											(In thousands)
Net (loss) income attributable to JBG SMITH Properties	$	(69,831	)	$	21,014	$	(57,851	)	$	49,344
Net income attributable to common shareholders												$	9,360		$	22,830		$	31,181		$	39,214
Add:
Depreciation and amortization expense	43,951			31,377		109,726			98,291			46,862			46,603			141,576			143,880
General and administrative expense:
Corporate and other	10,593			10,913		35,536			36,040			11,015			8,201			34,888			25,218
Third-party real estate services	21,178			4,779		30,362			14,272			29,809			20,754			86,585			64,552
Share-based compensation related to Formation Transaction	14,445			—		14,445			—
Share-based compensation related to Formation Transaction and special equity awards												9,549			8,387			30,203			26,912
Transaction and other costs	104,095			1,528		115,173			1,528			2,059			4,126			9,928			12,134
Interest expense	15,309			13,028		43,813			38,662			10,583			18,979			40,864			56,263
Loss on extinguishment of debt	689			—		689			—			—			79			1,889			4,536
Income tax (benefit) expense	(1,034		)	302		(317		)	884
Reduction of gain on bargain purchase												—			—			—			7,606
Income tax expense (benefit)												432			(841		)	(689		)	(1,436		)
Net income attributable to redeemable noncontrolling interests												1,172			3,552			4,271			6,532
Less:
Third-party real estate services, including reimbursements	25,141			8,297		38,881			24,617			34,587			23,788			91,765			72,278
Other income	1,158			1,564		3,701			3,938
(Loss) income from unconsolidated real estate ventures	(1,679		)	584		(1,365		)	(952		)
Interest and other (loss) income, net	(379		)	749		1,366			2,292
Gain on bargain purchase	27,771			—		27,771			—
Net loss attributable to redeemable noncontrolling interests	8,160			—		2,481			—
NOI	$	79,223		$	71,747	$	218,741		$	209,126
Other income ⁽¹⁾												2,196			1,708			5,951			4,904
Income (loss) from unconsolidated real estate ventures, net												(1,144		)	13,484			647			15,418
Interest and other income (loss), net												(640		)	4,091			2,363			5,177
Gain on sale of real estate												8,088			11,938			47,121			45,789
Net loss attributable to noncontrolling interests												—			—			—			127
Consolidated NOI												$	77,754		$	77,661		$	232,849		$	241,718

^{__________________________}


⁽¹⁾	Excludes parking income of $6.3 million and $6.4 million for the three months ended September 30, 2019 and 2018, and $19.5 million and $19.3 million for the nine months ended September 30, 2019 and 2018.

Below is a summary of NOI by ~~segment for~~segment. Items classified in the ~~three~~Other column include future development assets, corporate entities and ~~nine months ended September 30, 2017 and 2016:~~

the elimination of intersegment activity.

Three Months Ended September 30, 2017
Office Multifamily Other Eliminations Total
(In thousands)
Rental revenue:
Property rentals $ 91,534
$ 23,397
$ 4,171
$ (2,644 ) $ 116,458
Tenant reimbursements 7,917
1,548
128
—
9,593
Total rental revenue 99,451
24,945
4,299
(2,644 ) 126,051
Rental expense: —

Property operating 27,000
6,796
3,502
(7,664 ) 29,634
Real estate taxes 13,038
2,952
1,204
—
17,194
Total rental expense 40,038
9,748
4,706
(7,664 ) 46,828
NOI $ 59,413
$ 15,197
$ (407 ) $ 5,020
$ 79,223



	Three Months Ended September 30, 2019
	Commercial		Multifamily		Other				Total
	(In thousands)
Property rentals revenue	$	94,678	$	28,946	$	339			$	123,963
Other property operating income	6,237		94		—				6,331
Total property revenue	100,915		29,040		339				130,294
Property expense:								—
Property operating	27,200		9,490		(890		)		35,800
Real estate taxes	12,004		3,552		1,184				16,740
Total property expense	39,204		13,042		294				52,540
Consolidated NOI	$	61,711	$	15,998	$	45			$	77,754

Three Months Ended September 30, 2016
Office Multifamily Other Eliminations Total
(In thousands)
Rental revenue:
Property rentals $ 81,575
$ 15,850
$ 4,898
$ 942
$ 103,265
Tenant reimbursements 8,977
876
378
—
10,231
Total rental revenue 90,552
16,726
5,276
942
113,496
Rental expense: —

Property operating 25,083
4,782
3,065
(5,643 ) 27,287
Real estate taxes 11,793
1,663
1,006
14,462
Total rental expense 36,876
6,445
4,071
(5,643 ) 41,749
NOI $ 53,676
$ 10,281
$ 1,205
$ 6,585
$ 71,747



	Three Months Ended September 30, 2018
	Commercial		Multifamily		Other			Total
	(In thousands)
Property rentals revenue	$	99,011	$	27,911	$	(342	)	$	126,580
Other property operating income	6,244		94		29			6,367
Total property revenue	105,255		28,005		(313		)	132,947
Property expense:
Property operating	29,815		8,248		318			38,381
Real estate taxes	12,479		3,558		868			16,905
Total property expense	42,294		11,806		1,186			55,286
Consolidated NOI	$	62,961	$	16,199	$	(1,499	)	$	77,661

Nine Months Ended September 30, 2017
Office Multifamily Other Eliminations Total
(In thousands)
Rental revenue:
Property rentals $ 249,532
$ 62,050
$ 9,623
$ (4,306 ) $ 316,899
Tenant reimbursements 22,738
3,772
651
—
27,161
Total rental revenue 272,270
65,822
10,274
(4,306 ) 344,060
Rental expense: —

Property operating 71,377
16,716
11,330
(22,082 ) 77,341
Real estate taxes 37,185
7,973
2,820
—
47,978
Total rental expense 108,562
24,689
14,150
(22,082 ) 125,319
NOI $ 163,708
$ 41,133
$ (3,876 ) $ 17,776
$ 218,741



	Nine Months Ended September 30, 2019
	Commercial		Multifamily		Other				Total
	(In thousands)
Property rentals revenue	$	285,551	$	86,069	$	(5,918	)		$	365,702
Other property operating income	19,212		263		—				19,475
Total property revenue	304,763		86,332		(5,918		)		385,177
Property expense:								—
Property operating	84,089		25,662		(9,664		)		100,087
Real estate taxes	37,257		11,243		3,741				52,241
Total property expense	121,346		36,905		(5,923		)		152,328
Consolidated NOI	$	183,417	$	49,427	$	5			$	232,849

Nine Months Ended September 30, 2016
Office Multifamily Other Eliminations Total
(In thousands)
Rental revenue:
Property rentals $ 237,826
$ 45,203
$ 18,621
$ (2,153 ) $ 299,497
Tenant reimbursements 24,807
2,422
1,199
—
28,428
Total rental revenue 262,633
47,625
19,820
(2,153 ) 327,925
Rental expenses: —

Property operating 69,740
12,594
14,934
(22,181 ) 75,087
Real estate taxes 34,855
5,063
3,794
—
43,712
Total rental expense 104,595
17,657
18,728
(22,181 ) 118,799
NOI $ 158,038
$ 29,968
$ 1,092
$ 20,028
$ 209,126



	Nine Months Ended September 30, 2018
	Commercial		Multifamily		Other			Total
	(In thousands)
Property rentals revenue	$	304,756	$	80,452	$	(809	)	$	384,399
Other property operating income	18,981		281		84			19,346
Total property revenue	323,737		80,733		(725		)	403,745
Property expense:
Property operating	85,862		23,247		(1,106		)	108,003
Real estate taxes	39,477		10,721		3,826			54,024
Total property expense	125,339		33,968		2,720			162,027
Consolidated NOI	$	198,398	$	46,765	$	(3,445	)	$	241,718

The following is a summary of certain balance sheet data by ~~segment as of September 30, 2017 and December 31, 2016:~~segment:

Office Multifamily Other Eliminations Total
September 30, 2017 (In thousands)
Real estate, at cost $ 3,867,513
$ 1,434,730
$ 540,287
$ —
$ 5,842,530
Investments in and advances to
unconsolidated real estate ventures
$ 126,620
$ 106,842
$ 51,524
$ —
$ 284,986
Total assets $ 3,338,100
$ 1,472,864
$ 1,204,063
$ —
$ 6,015,027
December 31, 2016
Real estate, at cost $ 2,798,946
$ 959,404
$ 397,041
$ —
$ 4,155,391
Investments in and advances to
unconsolidated real estate ventures $ 45,647
$ —
$ 129
$ —
$ 45,776
Total assets $ 2,388,396
$ 873,157
$ 399,087
$ —
$ 3,660,640



	Commercial		Multifamily		Other		Total
September 30, 2019	(In thousands)
Real estate, at cost	$	3,695,072	$	1,798,854	$	376,664	$	5,870,590
Investments in unconsolidated real estate ventures	174,486		108,625		37,809		320,920
Total assets ⁽¹⁾	3,512,802		1,663,800		845,662		6,022,264
December 31, 2018
Real estate, at cost	$	3,634,472	$	1,656,974	$	501,288	$	5,792,734
Investments in unconsolidated real estate ventures	177,173		109,232		36,473		322,878
Total assets⁽¹⁾	3,707,255		1,528,177		761,853		5,997,285

^{__________________________}


⁽¹⁾	Includes assets held for sale. See Note 3 for additional information.

~~16.~~15. Commitments and Contingencies

Insurance

We maintain general liability insurance with limits of $200.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $2.0 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 terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per ~~occurrence and in the aggregate, and $2.0 billion per occurrence and in the aggregate for nuclear, biological, chemical and radiological terrorism events, as defined~~occurrence. These policies are partially reinsured by the Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020. Insurance premiums are charged directly to each of the properties and are included in "Property operating expenses" in the statement of operations.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~~mortgages payable secured by our properties, a revolving credit facility and unsecured term loans, ~~contain~~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 reasonable costs in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect the ability to finance or refinance our properties.

Construction Commitments

As of September 30, ~~2017,~~2019, we have construction in progress that will require an additional ~~$707.8~~$283.8 million to complete ($~~611.1~~238.0 million related to our consolidated entities and ~~$96.7~~$45.7 million related to our unconsolidated real estate ventures at our share), based on our current plans and estimates, which we anticipate will be primarily expended over the next two to three years. These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset recapitalizations and sales, issuance and sale of equity securities and available cash.

Environmental Matters

Each of our properties has been subjected to varying degrees of environmental assessment at various times. The environmental assessments did not reveal any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of ~~operations.~~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 total $17.9 million as of September 30, 2019 and December 31, 2018, and primarily relate to a liability to remediate pre-existing environmental matters at Potomac Yard Land Bay H, which was acquired in December 2018.

Other

There are various legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.

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 (1) guarantee portions of the principal, interest and other amounts in connection with ~~their~~ borrowings, (2) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with ~~their~~ borrowings and (3) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside partners whereby the partners agree to reimburse the ~~joint~~real estate venture or us for their share of any payments made under ~~the guarantee.~~certain of these guarantees. Amounts that may be required to be paid in future periods in relation to budget overruns or operating losses that are also included in some of our guarantees are not estimable. Guarantees (excluding environmental) terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. At times, we have agreements with our outside partners whereby we agree to reimburse our partner for their share of any payments made by them under certain guarantees. As of September 30, ~~2017, the aggregate amount of our~~2019, we had 0 principal payment guarantees ~~was approximately $89.0 million for our consolidated entities and $63.8 million~~ for our unconsolidated real estate ventures.

We also may guarantee portions of the principal, interest and other amounts in connection with the borrowings of our consolidated entities. As of September 30, ~~2017,~~2019, the aggregate amount of principal payment guarantees was $8.3 million for our consolidated entities.

As of September 30, 2019, we expect to fund additional capital to certain of our unconsolidated investments totaling approximately ~~$50.6 million, , which~~$47.1 million.

In connection with the Formation Transaction, we ~~anticipate will~~have an agreement with Vornado regarding tax matters (the "Tax Matters Agreement") that provides special rules that allocate tax liabilities if the distribution of JBG SMITH shares by Vornado, together with certain related transactions, is determined not to be ~~primarily expended over~~tax-free. Under the ~~next two~~Tax Matters Agreement, we may be required to ~~three years.~~

~~We are obligated under non-cancelable operating leases, primarily for ground leases on certain~~indemnify Vornado against any taxes and related amounts and costs resulting from a violation by us of ~~our properties through 2112. As of September 30, 2017, future minimum rental payments under non-cancelable operating and capital leases are as follows:~~

Year ending December 31, Amount
(In thousands)
2017 $ 1,974
2018 8,391
2019 8,170
2020 7,825
2021 7,496
2022 6,580
Thereafter 874,467
Total $ 914,903

the Tax Matters Agreement.


~~17.~~16.	Transactions ~~With~~with Vornado and ~~JBG Legacy Funds~~Related Parties

Transactions with Vornado

As described in Note 1 and Note 3, the accompanying financial statements present the operations of the office and multifamily assets as carved-out from the financial statements of Vornado for all periods prior to July 17, 2017.

Certain centralized corporate costs borne by Vornado for management and other services including, but not limited to, accounting, reporting, legal, tax, information technology and human resources have been allocated to the assets in the consolidated and combined financial statements based on either actual costs incurred or a proportion of costs estimated to be applicable to the Vornado Included Assets based on key metrics including total revenue. The total amounts allocated during the three months ended September 30, 2017 and 2016 were $873,000 and $4.5 million, respectively. The total amounts allocated during the nine months ended September 30, 2017 and 2016 were $13.0 million and $15.2 million, respectively. These allocated amounts are included as a component of "General and administrative expense: corporate and other" expenses on the statements of operations and do not necessarily reflect what actual costs would have been if the Vornado Included Assets were a separate standalone public company.

~~Actual costs may be materially different. Allocated amounts for the three and nine months ended September 30, 2017 and 2016 are not necessarily indicative of allocated amounts for a full year.~~

In connection with the Formation Transaction, we entered into an agreement with Vornado under which Vornado ~~provides~~provided operational support for ~~an initial~~a period ~~of up to two years.~~that ended July 18, 2019. These services ~~include~~included information technology, financial reporting and payroll services. The charges for these services ~~are~~were based on an hourly or per transaction fee arrangement including reimbursement for overhead and out-of-pocket ~~expenses. The total charges~~expenses totaling $931,000 and $3.2 million for ~~both~~ the three ~~months~~ and nine months ended September 30, ~~2017~~2018. Charges for these services for 2019 were ~~approximately $912,000.~~ de minimis.

Pursuant to ~~an agreement,~~agreements, we are providing Vornado with leasing and property management services for certain of its assets that were not part of the Separation. The total revenue related to these services was $536,000 and $1.5 million for ~~both~~ the three ~~months~~ and nine months ended September 30, ~~2017 was $68,000.~~2019, and $507,000 and $1.6 million for the three and nine months ended September 30, 2018. We believe that the terms ~~of both~~ of these agreements are comparable to those that would have been negotiated based on market rates.

In August 2014, we completed a $185.0 million financing of the Universal buildings, a 687,000 square foot office complex located in Washington, DC. In connection with this financing, pursuant to a note agreement dated August 12, 2014, we used a portion of the financing proceeds and made an $86.0 million loan to Vornado at LIBOR plus 2.9% due August 2019. During 2016 and 2015, Vornado repaid $4.0 million and $7.0 million of the loan receivable, respectively. At the Separation, Vornado repaid the outstanding balance of the loan and related accrued interest. As of December 31, 2016, the balance of the receivable from Vornado, including accrued interest, was $75.1 million. We recognized interest income of $130,000 and $1.8 million during the three and nine months ended September 30, 2017, respectively, and $830,000 and $2.3 million during the three and nine months ended September 30, 2016, respectively.

In connection with the development of The Bartlett, prior to the Combination, we entered into various note agreements with Vornado whereby we could borrow up to a maximum of $170.0 million. Vornado contributed these note agreements along with accrued and unpaid interest to JBG SMITH at the Separation. As of December 31, 2016, the amounts outstanding under these note agreements at were $166.5 million, and are included in "Payable to former parent" on our balance sheets. We incurred interest of $365,000 and $4.1 million during the three and nine months ended September 30, 2017, respectively, and $1.2 million and $3.0 million during the three and nine months ended September 30, 2016, respectively.

In June 2016, the $115.0 million mortgage loan (including $608,000 of accrued interest) secured by the Bowen Building, a 231,000 square foot office building located in Washington, DC, was repaid with the proceeds of a $115.6 million draw on Vornado’s revolving credit facility. The loan was repaid with amounts drawn under our revolving credit facility. See Note 8 for further information. Given that the $115.6 million draw on Vornado’s credit facility is secured by an interest in the property, such amount was included in "Payable to former parent" in our balance sheets as of December 31, 2016. We incurred interest expense of $120,000 and $1.3 million during the three and nine months ended September 30, 2017, respectively, and $457,000 and $602,000 for the three and nine months ended September 30, 2016, respectively.

We have agreements ~~that are terminable on the second anniversary of the Combination,~~ with Building Maintenance Services ("BMS"), a wholly owned subsidiary of Vornado, to supervise cleaning, engineering and security services at our properties. We paid BMS ~~$3.6~~$5.5 million and ~~$9.9~~$16.1 million for the three and nine months ended September 30, 2019, and $5.4 million and $15.5 million during the three and nine months ended September 30, ~~2017, respectively, and $3.3 million and $9.6 million during the three and nine months ended September 30, 2016, respectively,~~2018, which are included in "Property operating expenses" in our statements of operations.

We entered into a consulting agreement with Mr. Schear, a member of our Board of Trustees and formerly the president of Vornado’s Washington, DC segment. The consulting agreement expires on December 31, 2017 and provides for the payment of consulting fees at the rate of $166,667 per month for the 24 months following the Separation, including after the termination of the consulting agreement. The amount due under this consulting agreement of $4.1 million was recorded as a liability inIn connection with the ~~Combination. As of September 30, 2017, the remaining liability is $3.6 million. In March 2017, Vornado amended Mr. Schear’s employment agreement~~Formation Transaction, we have a Tax Matters Agreement with ~~Vornado to provide~~Vornado. See Note 15 for ~~the payments that Mr. Schear will receive in connection~~additional information.

Transactions with ~~certain post-employment services.~~

~~Fees from~~ JBG Legacy Funds and the Washington Housing Initiative ("WHI")

~~In addition to our portfolio, we have a~~Our third-party asset management and real estate services business ~~that~~ provides fee-based real estate services to ~~our real estate ventures, legacy funds formerly organized by~~third parties, the JBG Legacy Funds and ~~other third parties.~~the WHI. We provide services for the benefit of the JBG Legacy Funds that own interests in the assets retained by the JBG Legacy Funds. In connection with the contribution of the JBG Assets to us, ~~it was determined that~~ 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) ~~would~~were not be transferred to us and remain under the control of these individuals. In addition, certain members of our senior management and Board of Trustees have an ownership interest in the JBG Legacy Funds and own carried interests in each fund and in certain of our ~~joint~~real estate ventures that ~~entitles~~entitle them to receive ~~additional compensation~~cash payments if the fund or ~~joint~~real estate venture achieves certain return thresholds. ~~This~~

The WHI was launched by us and the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. To date, the WHI Impact Pool ("Impact Pool") completed closings of capital commitments totaling $93.7 million, which included a commitment from us of $9.1 million. We are the third-party manager for the Impact Pool, which is the social impact investment vehicle of the WHI.

The third-party real estate services revenue, including expense reimbursements, from these JBG Legacy Funds and the Impact Pool was $10.2 million and $28.6 million for ~~both~~ the three and nine months ended September 30, ~~2017 was $8.4 million.~~

~~Registration Rights Agreements~~

~~In connection with~~2019, and $8.7 million and $25.6 million for the ~~Formation Transaction,~~three and nine months ended September 30, 2018. As of September 30, 2019 and December 31, 2018, we entered into a registration rights agreement with certain former investors in the legacy JBG funds that received our common shares in the Formation Transaction (the "Shares Registration Rights Agreement") and a separate registration rights agreement with the certain former investors in the legacy JBG funds and certain employees of JBG entities that received OP Units in the Formation Transaction (the "OP Units Registration Rights Agreement" and together with the Shares Registration Rights Agreement, the "Registration Rights Agreements"). Certain holders of common shares and OP Units who may benefithad receivables from the ~~Registration Rights Agreements are members~~JBG Legacy Funds and the Impact Pool totaling $6.9 million and $3.6 million for such services.

We rent our corporate offices from an unconsolidated real estate venture and incurred expenses totaling $1.3 million and $3.8 million for the three and nine months ended September 30, 2019 and $1.2 million and $3.6 million for the three and nine months ended September 30, 2018, which is recorded in "General and administrative expense" in our statements of ~~our management team and/or Board of Trustees.~~operations.


~~18.~~17.	Subsequent ~~Events~~Event

In October ~~2017, we closed a $78.0 million loan on 1235 South Clark, an office asset in Crystal City, Virginia. The loan has a 10-year term and a fixed interest rate of 3.94%.~~

~~In October 2017, we repaid a $67.3 million loan at 220 20th Street, a multifamily asset located in Crystal City, Virginia.~~

~~In October 2017, we entered into agreements in the specified notional amounts to swap variable interest rates to fixed rates on the following debt instruments:~~

~~$50.0 million related to our Tranche A-1 Term Loan;~~

~~$107.7 million related to our mortgage loan on RTC - West; and~~

~~$107.5 million related to our mortgage loan on 800 North Glebe Road.~~

In November 2017, we closed a $110.0 million refinancing on Atlantic Plumbing, a multifamily and retail asset in the U Street/Shaw submarket of Washington, DC. The loan has a five-year term and a floating rate of LIBOR plus 1.50%. A prior swap agreement has been novated to synthetically fix the interest rate through September 2020. At closing, $100.0 million was funded, which was used in part to repay the existing $88.4 million loan. We have the ability to draw an additional $10.0 million based on the asset’s performance.

~~On November 9, 2017,~~2019, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on November ~~30, 2017~~29, 2019 to shareholders of record onas of November ~~20, 2017.~~14, 2019.


~~ITEM 2.~~	~~MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

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 Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission (the "SEC") and declared effective on June 26, 2017, as well as the section entitled "Risk Factors" of the final Information Statement filed with the SEC as Exhibit 99.1 on our CurrentAnnual Report on Form ~~8-K filed on June 27, 2017.~~10-K for the year ended December 31, 2018.

For these 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

Prior to the Separation from Vornado, JBG SMITH was a wholly owned subsidiary of Vornado and had no material assets or operations. Pursuant to a separation agreement, on July 17, 2017, Vornado distributed 100% of the then outstanding common shares of JBG SMITH on a pro rata basis to the holders of its common shares. Prior to such distribution by Vornado, Vornado Realty L.P. ("VRLP"), Vornado's operating partnership, distributed common limited partnership units ("OP Units") inour operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership, on a pro rata basis to the holders of VRLP's common limited partnership units, consisting of Vornado and the other common limited partners of VRLP. Following such distribution by VRLP and prior to such distribution by Vornado, Vornado contributed to JBG SMITH all of the OP Units it received in exchange for common shares of JBG SMITH. Each Vornado common shareholder received one JBG SMITH common share for every two Vornado common shares held as of the close of business on July 7, 2017 (the "Record Date"). Vornado and each of the other limited partners of VRLP received one JBG SMITH LP OP Unit for every two common limited partnership units in VRLP held as of the close of business on the Record Date. The operations of JBG SMITH are presented as if the transfer of the Vornado Included Assets had been consummated prior to all historical periods presented in the accompanying financial statements at the carrying amounts of such assets and liabilities reflected in Vornado’s books and records.

The following is a discussion of the historical results of operations and liquidity and capital resources of JBG SMITH as of and for the three- and nine-month periods ended September 30, 2017 and 2016, which includes results prior to the consummation of the Formation Transaction. The historical results presented prior to the consummation of the Formation Transaction include the Vornado Included Assets, all of which were under common control of Vornado until July 17, 2017. Unless otherwise specified, the discussion of the historical results prior to July 18, 2017 does not include the results of the JBG Assets . The following discussion should be read in conjunction with the condensed consolidated and combined interim financial statements and notes thereto appearing in "Item 1. Financial Statements.".partnership.

References to the financial statements refer to our condensed consolidated ~~and combined~~ financial statements as of September 30, ~~2017~~2019 and December 31, ~~2016,~~2018, and for the three and nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018. References to the balance sheets refer to our condensed consolidated ~~and combined~~ balance sheets as of September 30, ~~2017~~2019 and December 31, ~~2016.~~2018. References to the statements of operations refer to our condensed consolidated ~~and combined~~ statements of operations for the three

and nine months ended September 30, ~~2017~~2019 and ~~2016.~~2018. References to the statements of cash flows refer to our condensed consolidated ~~and combined~~ statements of cash flows for the nine months ended September 30, ~~2017~~2019 and ~~2016.~~

2018.

The accompanying ~~unaudited~~ financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP")~~. GAAP~~, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures 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 these estimates. The historical financial results for the Vornado Included Assets reflect charges for certain corporate costs allocated by the former parent which we believe are reasonable. These charges were based on either actual costs incurred or a proportion of costs estimated to be applicable to the Vornado Included Assets based on an analysis of key metrics, including total revenues. Such costs do not necessarily reflect what the actual costs would have been if the Vornado Included Assets had been operating as a separate standalone public company. These charges are discussed further in Note 17 to the financial statements.

We ~~intend to elect~~have elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code")~~, commencing with the filing of our tax return for the 2017 calendar year, effective for our tax year ending December 31, 2017.~~. Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. Prior to the Separation, the Vornado Included Assets historically operated under Vornado’s REIT structure. Since Vornado operates as a REIT and distributes 100% of taxable income to its shareholders, no provision for federal income taxes has been made in the accompanying financial statements for the periods prior to the Separation. We intend ~~to continue~~ to adhere to these requirements and maintain our REIT status in future periods.

As a REIT, we are allowed to reduce taxable income by all or a portion of our distributions to shareholders. Future distributions will be declared and paid at the discretion of our Board of Trustees and will depend upon cash generated by operating activities, our financial condition, capital requirements, annual dividend requirements under the REIT provisions of the Code, as amended, and such other factors as our Board of Trustees deems relevant.

We also participate in ~~certain~~the activities conducted by subsidiary entities which have elected to be treated as taxable REIT subsidiaries ~~("TRS")~~ under the Code. As such, we are subject to federal, state, and local taxes on the income from these activities. Income taxes attributable to our TRSs are accounted for under the asset and liability method. Under the asset and liability method, deferred income taxes arise from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements, which will result in taxable or deductible amounts in the future.

We aggregate our operating segments into three reportable segments ~~(office,~~(commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and 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 that affects the sequential comparison of our results in individual quarters over time. We have historically experienced higher utility costs in the first and third quarters of the year.

We compete with a large number of 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

Amazon.com, Inc. ("Amazon") has selected sites that we own in National Landing in Northern Virginia as the location of an additional headquarters. To date, Amazon has executed leases totaling approximately 585,000 square feet at four office buildings in our National Landing portfolio. In March 2019, we executed three initial leases with Amazon totaling approximately 537,000 square feet at three of our existing office buildings in National Landing. These three initial leases encompass approximately 88,000 square feet at 241 18th Street South, approximately 191,000 square feet at 1800 South Bell Street, and approximately 258,000 square feet at 1770 Crystal Drive. We expect Amazon to begin moving into 241 18th Street South and 1800 South Bell in 2019, and 1770 Crystal Drive by the end of 2020. In April 2019, we executed a lease with Amazon for an additional approximately 48,000 square feet of short-term office space at 2345 Crystal Drive in National Landing. Amazon took occupancy of the space at 2345 Crystal Drive during the second quarter of 2019 and moved its first employees into National Landing.

In March 2019, we also executed purchase and sale agreements with Amazon for two of our National Landing development sites, Metropolitan Park and Pen Place, which will serve as the initial phase of new construction associated with Amazon’s new headquarters at National Landing. Subject to customary closing conditions, Amazon is expected to pay approximately $293.9 million for the sites, or $72.00 per square foot based on their combined estimated potential development density of up to approximately 4.1 million square feet.In May 2019, Amazon submitted its plans to Arlington County for approval of two new office buildings, totaling 2.1 million square feet, inclusive of over 50,000 square feet of street-level retail with new shops and restaurants, on the Metropolitan Park land sites. We are serving as the developer, property manager and retail leasing agent for Amazon.

In February 2019, the Commonwealth of Virginia enacted an incentives bill, which provides tax incentives to Amazon if it creates up to 37,850 full-time jobs with average salaries of $150,000 or higher in National Landing. As part of the incentive package, we expect $1.8 billion in infrastructure and education investments led by state and local governments.

To date, the Washington Housing Initiative Impact Pool ("Impact Pool") completed closings of capital commitments totaling $93.7 million, which included a commitment from us of $9.1 million. We are the third-party manager for the Impact Pool, which is the social impact investment vehicle of the Washington Housing Initiative ("WHI"). The WHI was launched by us and the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. The mission of the WHI is to preserve or build between 2,000 and 3,000 units of affordable workforce housing in the Washington metro region.

During 2018, we sold, recapitalized or entered into firm contracts to sell approximately $875.0 million of assets that were identified for sale because of their relatively low expected return potential and their high tax basis, enabling better capital retention. The assets sold generated approximately $30.0 million of net operating income ("NOI") in 2018. Subject to market conditions, we have set a goal to sell or recapitalize $400.0 million of assets during 2019. Also, consistent with our approach to capital recycling, in the competitive Washington, D.C. office leasing market, we are focused on retaining tenants and avoiding the costly concessions associated with backfilling vacancy. We believe this approach produces a higher comparable return while better positioning assets for potential sale or recapitalization, and simultaneously de-risking them at a time of greater supply and cyclical downturn risk. The lease renewals we executed in 2017 and 2018 have reduced our NOI in 2019, primarily due to free rent associated with these early renewals. Excluding the impact of any future capital recycling activity, as the free rent in these leases burns off and our under construction assets deliver, we expect our NOI to grow and surpass 2018 levels by the second half of 2020.

As of September 30, ~~2017,~~2019, our ~~portfolio comprised: (i) 69~~Operating Portfolio consists of 61 operating assets comprising ~~51 office~~45 commercial assets totaling ~~over 13.7~~approximately 12.7 million square feet ~~(11.8~~(11.0 million square feet at our share)~~, 14~~ and 16 multifamily assets totaling ~~6,016~~6,321 units ~~(4,232~~(4,537 units at our share). Additionally, we have (i) eight assets under construction comprising four commercial assets totaling approximately 943,000 square feet (821,000 square feet at our share) and four ~~other~~multifamily assets totaling ~~approximately 765,000 square feet (348,000 square feet~~1,476 units (1,298 units at our share); and (ii) nine assets under construction comprising four office assets totaling approximately 1.3 million square feet (1.2 million square feet at our share), four multifamily assets totaling 1,334 units (1,149 units at our share) and one other asset totaling approximately 41,100 square feet (4,100 square feet at our share; (iii) one near-term development multifamily asset totaling 433 units (303 units at our share), and (iv) 4240 future development assets totaling approximately ~~21.3~~21.9 million square feet ~~(17.6~~(18.7 million square feet at our share) of estimated potential development density.

Key highlights of operating results for the three and nine months ended September 30, ~~2017~~2019 included:

net income attributable to common shareholders of $9.4 million, or $0.06 per diluted common share, for the three months ended September 30, 2019 as compared to $22.8 million, or $0.19 per diluted common share, for the three months ended

September 30, 2018. Net income attributable to common shareholders of $31.2 million, or $0.23 per diluted common share, for the nine months ended September 30, 2019 as compared to $39.2 million, or $0.33 per diluted common share, for the nine months ended September 30, 2018. Net income attributable to common shareholders for the three and nine months ended September 30, 2019 included gains on sale of real estate of $8.1 million and $47.1 million. Net income attributable to common shareholders for the three and nine months ended September 30, 2018 included gains on the sale of real estate of $11.9 million and $45.8 million, and a gain of $15.5 million due to the sale of our 5% interest in a real estate venture that owned the Investment Building;

operating commercial portfolio leased and occupied percentages at our share of 90.2% and 86.8% as of September 30, 2019 compared to 90.3% and 86.0% as of June 30, 2019 and 87.1% and 85.4% as of September 30, 2018;

operating multifamily portfolio leased and occupied percentages at our share of 96.5% and 94.9% as of September 30, 2019 compared to 98.0% and 95.0% as of June 30, 2019 and 96.1% and 94.3% as of September 30, 2018;

▪•

the leasing of approximately 275,000 square feet, or 243,000 square feet at our share, at an initial rent⁽¹⁾ of $45.99 per square foot and a ~~net loss~~GAAP-basis weighted average rent per square foot ⁽²⁾ of ~~$69.8 million, or $0.61 per diluted common share,~~$45.98 for the three months ended September 30, ~~2017 as compared to net income of $21.0~~2019, and 1.5 million ~~or $0.21 per diluted common share, for the three months ended September 30, 2016. The net~~

~~loss for the three months ended September 30, 2017 was due in part to transaction and other costs of $104.1 million partially offset by a gain on bargain purchase of $27.8 million;~~


▪	~~an increase in operating office portfolio leased and occupied percentages to 88.2% leased and 87.5% occupied as of September 30, 2017 from 87.5% and 86.2% as of June 30, 2017;~~


▪	an increase in operating multifamily portfolio occupancy to 94.6% as of September 30, 2017 from 93.9% as of June 30, 2017. Multifamily portfolio leased percentage decreased to 96.2% as of September 30, 2017 from 96.8% as of June 30, 2017;


▪	~~the leasing of approximately 289,000~~ square feet, or ~~206,000~~1.4 million square feet at our share, ⁽¹⁾, at an initial rent⁽²⁾⁽¹⁾ of ~~$43.08~~$45.10 per square ~~foot;~~foot and a GAAP-basis weighted average rent per square foot ⁽²⁾ of $45.77 for the nine months ended September 30, 2019; and

▪•

~~an increase~~a decrease in same store ⁽³⁾ net operating income ~~("NOI")~~ of ~~6.3%~~8.4% to ~~$70.3~~$72.0 million for the three months ended September 30, ~~2017~~2019 as compared to ~~$66.1~~$78.6 million for the three months ended September 30, ~~2016.~~2018, and a decrease in same store ⁽³⁾ net operating income of 9.5% to $217.7 million for the nine months ended September 30, 2019 as compared to $240.5 million for the nine months ended September 30, 2018.

_________________


⁽¹⁾	~~Refers to our ownership percentage of consolidated and unconsolidated assets in real estate ventures.~~


⁽²⁾	Represents the cash basis weighted average starting rent per square foot, which excludes free rent and ~~periodic rent steps.~~fixed escalations.


⁽²⁾	Represents the weighted average rent per square foot that is recognized over the term of the respective leases, including the effect of free rent and fixed escalations.


⁽³⁾	Includes the results of the properties that are owned, operated and ~~stabilized~~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. ~~Excludes the JBG Assets acquired in the Combination.~~

Additionally, investing and financing activity during the ~~three~~nine months ended September 30, ~~2017~~2019 included:

the closing of an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other offering expenses, of $472.8 million. We intend to use the balance sheet capacity generated by the net proceeds of the offering to fund development opportunities and for general corporate purposes;

the redemption of 1.7 million common limited partnership units ("OP Units") for an equivalent number of our common shares;

the sale of two commercial assets for the gross sales price of $158.0 million;

the execution of agreements for the sale of Pen Place and Metropolitan Park, development assets having an estimated aggregate potential development density of up to approximately 4.1 million square feet, with Amazon for its additional headquarters, for $293.9 million;

▪•

the ~~issuance~~execution of ~~94.7~~an agreement to acquire F1RST Residences, a 325-unit multifamily asset located in the Ballpark submarket of Washington, D.C. with approximately 21,000 square feet of street level retail for a purchase price of approximately $160.5 million, ~~common shares and 5.8 million OP Units~~which we intend to use as a replacement property in ~~connection with the Separation (see Note 1 to the financial statements for more information)~~


▪	~~the completion of the Combination in~~a like-kind exchange for ~~23.3 million common shares and 13.9 million OP Units (see Note 3~~the expected proceeds from the sale of Metropolitan Park to ~~the financial statements for more information);~~


▪	the closing of a $1.4 billion credit facility, consisting of a $1.0 billion revolving credit facility with a four-year term, with two six-month extension options, a five and a half-year delayed draw $200.0 million unsecured term loan and a seven-year delayed draw $200.0 million unsecured term loan;


▪	~~the prepayment of mortgages payable with an aggregate principal balance of $181.7 million; and~~


▪	~~the investment of $115.9 million in development costs, construction in progress and real estate additions.~~Amazon;

the repayment of mortgages payable totaling approximately $475.1 million;

the payment of dividends totaling $99.7 million that were declared in December 2018, May 2019 and August 2019; and

the investment of $294.4 million in development costs, construction in progress and real estate additions.

Activity subsequent to September 30, 2019 included:

the declaration of a quarterly dividend of $0.225 per common share, payable on November 29, 2019 to shareholders of record as of November 14, 2019.

Critical Accounting Policies and Estimates

Our ~~Information Statement~~Annual Report on Form ~~10, as amended, filed with~~10-K for the ~~SEC on June 20, 2017~~year ended December 31, 2018 contains a description of our critical accounting policies, including business combinations, real estate, ~~deferred costs,~~investments in real estate ventures, revenue recognition and ~~income taxes. For the three and nine months ended September 30, 2017, there were~~share-based compensation. There have been no ~~material~~significant changes to ~~these~~our policies during 2019, except ~~for the addition of the following policy:~~

~~Business Combinations~~

We account for business combinations, including the acquisition of real estate, using the acquisition method by recognizing and measuring the identifiable assets acquired, liabilities assumed, and any noncontrolling interestsas discussed in the acquiree at their acquisition date fair values. As a result, upon the acquisition, we estimate the fair value of the acquired tangible assets (consisting of real estate, cash and cash equivalents, tenant and other receivables, investments in unconsolidated real estate ventures and other assets, as applicable), identified intangible assets and liabilities (consisting of the value of in-place leases, above- and below-market leases, options to enter into ground leases and management contracts, as applicable), assumed debt and other liabilities, and noncontrolling interests, as applicable, based on our evaluation of information and estimates available at that date. Based on these estimates, we allocate the purchase priceNote 2 to the identified assets acquired and liabilities assumed. Any excess of the purchase price over the estimated fair value of the net assets acquired is recorded as goodwill. Any excess of the fair value of assets acquired over the purchase price is recorded as a gain on bargain purchase. If, up to one year from the acquisition date, information regarding the fair value of the net assets acquired and liabilities assumed is received and estimates are refined, appropriate adjustments are made on a prospective basis to the purchase price allocation, which may include adjustments to identified assets, assumed liabilities, and goodwill or the gain on bargain purchase, as applicable. Transaction costsfinancial statements related to ~~business combinations are expensed as incurred and included in "Transaction and other costs" in~~ our ~~statements~~adoption of ~~operations.~~

~~The fair values of identified intangible assets are determined based on the following:~~

~~The results of operations of acquisitions are included in our financial statements~~Accounting Standards Update 2016-02, Leases ("Topic 842") as of ~~the dates they are acquired. The intangible assets and liabilities associated with acquisitions are included in "Other assets, net" and "Other liabilities, net", respectively, in our balance sheets.~~January 1, 2019.

Recent Accounting Pronouncements

See Note 2 to the financial statements for a description of ~~the potential impact of the adoption of any new~~recent accounting pronouncements.

Results of Operations

During the nine months ended September 30, 2019, we sold Commerce Executive/Commerce Executive Metro Land and 1600 K Street, and during 2018, we sold Summit I and II, the Bowen Building, Executive Tower, 1233 20th Street and the out-of-service portion of Falkland Chase-North, which we will collectively refer to as the "Disposed Properties" in the discussion below.

Comparison of the Three Months Ended September 30, ~~2017~~2019 to ~~2016~~2018

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 September 30, ~~2017~~2019 as compared to the same period in ~~2016:~~

2018:

Three Months Ended September 30,
2017 2016 % Change
(In thousands)
Property rentals revenue $ 116,458
$ 103,265
12.8 %
Tenant reimbursements revenue 9,593
10,231
(6.2 )%
Third-party real estate services revenue, including reimbursements
25,141
8,297
203.0 %
Depreciation and amortization expense 43,951
31,377
40.1 %
Property operating expense 29,634
27,287
8.6 %
Real estate taxes expense 17,194
14,462
18.9 %
General and administrative expense:
Corporate and other 10,593
10,913
(2.9 )%
Third-party real estate services 21,178
4,779
343.1 %
Share-based compensation related to Formation Transaction
14,445
—
*
Transaction and other costs 104,095
1,528
*
(Loss) income from unconsolidated real estate ventures (1,679 ) 584
*
Interest expense 15,309
13,028
17.5 %
Loss on extinguishment of debt 689
—
*
Gain on bargain purchase 27,771
—
*
Net loss attributable to redeemable noncontrolling interests 8,160
—
*

~~______________~~

* Not meaningful.



	Three Months Ended September 30,
	2019			2018		% Change
	(In thousands)
Property rentals revenue	$	123,963		$	126,580	(2.1	)%
Third-party real estate services revenue, including reimbursements	34,587			23,788		45.4	%
Depreciation and amortization expense	46,862			46,603		0.6	%
Property operating expense	35,800			38,381		(6.7	)%
Real estate taxes expense	16,740			16,905		(1.0	)%
General and administrative expense:
Corporate and other	11,015			8,201		34.3	%
Third-party real estate services	29,809			20,754		43.6	%
Share-based compensation related to Formation Transaction and special equity awards	9,549			8,387		13.9	%
Transaction and other costs	2,059			4,126		(50.1	)%
Income (loss) from unconsolidated real estate ventures, net	(1,144		)	13,484		(108.5	)%
Interest expense	10,583			18,979		(44.2	)%
Gain on sale of real estate	8,088			11,938		(32.2	)%

Property rentals revenue ~~increased~~decreased by approximately ~~$13.2~~$2.6 million, or ~~12.8%~~2.1%, to ~~$116.5~~$124.0 million in ~~2017~~2019 from ~~$103.3~~$126.6 million in ~~2016.~~2018. The ~~increase~~decrease was primarily due to ~~revenues of $13.8~~a $6.9 million ~~associated with~~decline in property rentals revenue related to the ~~assets acquired~~Disposed Properties and a decrease in ~~the Combination,~~revenue at 2101 L Street, 1800 South Bell Street and Courthouse Plaza 1 and 2. The decline in property rentals revenue was partially offset by a ~~decrease~~combined $2.5 million increase in revenue related to increased occupancy at Central Place Tower and 1221 Van Street, both of ~~$0.6 million in revenues associated with existing assets. The $0.6 million decrease in revenues associated with existing assets is primarily due to 1150 17~~th Stwhich we placed into service during the first quarter of 2018, and ~~1770 Crystal Drive being taken out of service, partially offset by~~ an increase in ~~occupancy and associated rentals~~straight line rental revenue primarily related to the ground lease at ~~The Bartlett which was placed into service~~1700 M Street executed in the ~~second~~fourth quarter of ~~2016.~~

Tenant reimbursements revenue decreased by approximately $600,000, or 6.2%, to $9.6 million in 2017 from $10.2 million in 2016. Revenue associated with existing assets decreased $2.0 million, primarily due to lower construction services provided to tenants and lower operating expenses, partially offset by an increase of $1.4 million associated with the assets acquired in the Combination.2018.

Third-party real estate services revenue, including reimbursements, increased by approximately ~~$16.8~~$10.8 million, or ~~203.0%~~45.4%, to ~~$25.1~~$34.6 million in ~~2017~~2019 from ~~$8.3~~$23.8 million in ~~2016.~~2018. The increase was primarily due to ~~the real estate services business acquired~~an increase in ~~the Combination, partially offset~~development fee income and an increase in reimbursement revenue primarily driven by ~~lower~~construction management ~~fees~~revenue, resulting from an increase in construction projects in 2019, and ~~leasing commissions from existing arrangements with third-parties.~~other service revenue.

Depreciation and amortization expense increased by approximately ~~$12.6 million,~~$259,000, or ~~40.1%~~0.6%, to ~~$44.0~~$46.9 million in ~~2017~~2019 from ~~$31.4~~$46.6 million in ~~2016.~~2018. The increase was primarily due to an aggregate $1.4 million increase in depreciation expense related to Central Place Tower, 1221 Van Street and West Half, which was placed into service in the third quarter of 2019, as well as an increase in tenant improvement depreciation across the portfolio due to an increase in occupancy. These increases were partially offset by a $2.1 million decline in depreciation and amortization expense ~~associated with~~related to the ~~assets acquired in the Combination.~~Disposed Properties.

Property operating expense ~~increased~~decreased by approximately ~~$2.3~~$2.6 million, or ~~8.6%~~6.7%, to ~~$29.6~~$35.8 million in ~~2017~~2019 from ~~$27.3~~$38.4 million in ~~2016.~~2018. The ~~increase~~decrease was primarily due to a $2.3 million decline in property operating expenses ~~of $4.2 million associated with~~related to the ~~assets acquired in the Combination, partially offset by a decrease of $1.9 million associated with existing assets due primarily to lower tenant services expense and lower utilities.~~Disposed Properties.

Real estate tax expense ~~increased~~decreased by approximately ~~$2.7 million,~~$165,000, or ~~18.9%~~1.0%, to ~~$17.2~~$16.7 million in ~~2017~~2019 from ~~$14.5~~$16.9 million in ~~2016.~~2018. The ~~increase~~decrease was primarily due to a $1.1 million decline in real estate ~~tax expense of $2.1 million~~ taxes attributable to the Disposed Properties and a decrease

associated with 1700 M Street as the ~~assets acquired in the Combination,~~ground lessor is responsible for real estate taxes, partially offset an increase in ~~the tax assessments and lower capitalized~~ real estate ~~taxes.~~taxes related to our properties in National Landing, Central Place Tower and 1221 Van Street.

General and administrative expense: corporate and other ~~decreased~~increased by approximately ~~$300,000,~~$2.8 million, or ~~2.9%~~34.3%, to ~~$10.6~~$11.0 million in ~~2017~~2019 from ~~$10.9~~$8.2 million in ~~2016.~~2018. The ~~decrease~~increase was primarily due to ~~lower marketing and general office expenses, partially offset by~~ an increase in ~~general operating expenses associated with~~share-based compensation expense from the ~~operations acquired~~issuance of the 2019 equity awards, an increase in compensation expense as a result of the ~~Combination.~~adoption of Topic 842, which requires the expensing of previously capitalized indirect internal leasing costs, and an increase in overall consulting, legal and marketing expenses.

General and administrative expense: third-party real estate services increased by approximately ~~$16.4~~$9.1 million, or ~~343.1%~~43.6%, to ~~$21.2~~$29.8 million in ~~2017~~2019 from ~~$4.8~~$20.8 million in ~~2016~~2018. The increase was primarily due to an increase in reimbursable expenses resulting from an increase in construction management projects, an increase in share-based compensation expense from the ~~real estate services business acquired~~issuance of the 2019 equity awards and an increase in ~~the Combination.~~

overall consulting and legal fees.

General and administrative expense: share-based compensation related to Formation Transaction ~~of $14.4~~and special equity awards increased by approximately $1.2 million, or 13.9%, to $9.5 million in ~~2017 consists of expense related~~2019 from $8.4 million in 2018. The increase was primarily due to share-based compensation associated with the special equity awards issued in ~~connection~~the fourth quarter of 2018, with vesting periods of up to five years, related to our successful pursuit of Amazon's additional headquarters in Northern Virginia, partially offset by the ~~Formation Transaction.~~vesting of certain awards issued in prior years.

Transaction and other costs of ~~$104.1~~$2.1 million in ~~2017 consists~~2019 consist primarily of ~~fees~~$1.0 million of expenses incurred in connection with the Formation Transaction (including integration and severance costs), costs related to other completed, potential and pursued transactions of $535,000 and demolition costs of $503,000 related to 1900 Crystal Drive. Transaction and other costs of $4.1 million in 2018 consist primarily of expenses incurred in connection with the Formation Transaction, including amounts incurred for transition services provided by our former parent, integration costs and severance ~~and transaction bonus expense of $34.3 million, investment banking fees of $33.6 million, legal fees of $13.1 million and accounting fees of $8.1 million.~~costs.

Income (loss) from unconsolidated real estate ventures, net decreased by approximately ~~$2.3~~$14.6 million to a loss of ~~$1.7~~$1.1 million in ~~2017~~2019 from income of ~~$584,000~~$13.5 million in ~~2016.~~2018. The decrease is primarily due to the sale of our 5% interest in a real estate venture that owned the Investment Building in the third quarter of 2018, resulting in a gain of $15.5 million, and the sale of the Warner Building in the fourth quarter of 2018, partially offset by an increase in income from Wardman Park.

Interest expense decreased by approximately $8.4 million, or 44.2%, to $10.6 million in 2019 from $19.0 million in 2018. The decrease was primarily due to ~~losses from interests~~the repayments of mortgages payable during 2018 and 2019. The decrease in ~~real estate ventures acquired in the Combination.~~

~~Interest~~interest expense ~~increased by approximately $2.3 million, or 17.5%, to $15.3 million for 2017 from $13.0 million in 2016. The increase~~ was ~~primarily~~also due to ~~$1.8~~a $2.6 million ~~of interest expense associated with the assets acquired~~increase in ~~the Combination and lower~~ capitalized interest related to ~~The Bartlett which was placed into service during~~higher construction spend and additional projects under redevelopment and to a $460,000 decrease related to the ~~second quarter of 2016, partially~~Disposed Properties, slightly offset by ~~lower interest expense associated with mortgages that were repaid.~~additional term loan borrowings in 2018.

~~Loss~~Gain on ~~extinguishment~~the sale of ~~debt~~real estate of ~~$689,000~~$8.1 million in ~~2017 relates~~2019 is related to the ~~prepayment~~sale of ~~mortgages payable.~~

~~The gain~~1600 K Street. Gain on ~~bargain purchase~~the sale of ~~approximately $27.8~~real estate of $11.9 million in 2017 represents the estimated fair value of the identifiable net assets acquired in excess of the purchase consideration in the Combination. The purchase consideration was based on the fair value of the common shares and OP Units issued in the Combination. See Note 32018 is related to the ~~financial statements for additional information.~~sale of Executive Tower.

~~Net loss attributable to redeemable noncontrolling interests of approximately $8.2 million in 2017 relates to the allocation of net loss to the noncontrolling interest in JBG SMITH LP.~~

Comparison of the Nine Months Ended September 30, ~~2017~~2019 to ~~2016~~2018

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 nine months ended September 30, ~~2017~~2019 as compared to the same period in ~~2016:~~2018:

Nine Months Ended September 30,
2017 2016 % Change
(In thousands)
Property rentals revenue $ 316,899
$ 299,497
5.8 %
Tenant reimbursements revenue 27,161
28,428
(4.5 )%
Third-party real estate services revenue, including reimbursements
38,881
24,617
57.9 %
Depreciation and amortization expense 109,726
98,291
11.6 %
Property operating expense 77,341
75,087
3.0 %
Real estate taxes expense 47,978
43,712
9.8 %
General and administrative expense:
Corporate and other 35,536
36,040
(1.4 )%
Third-party real estate services 30,362
14,272
112.7 %
Share-based compensation related to Formation Transaction
14,445
—
*
Transaction and other costs 115,173
1,528
*
Loss from unconsolidated real estate ventures (1,365 ) (952 ) 43.4 %
Interest expense 43,813
38,662
13.3 %
Loss on extinguishment of debt 689
—
*
Gain on bargain purchase 27,771
—
*
Net loss attributable to redeemable noncontrolling interests 2,481
—
*

~~______________~~

* Not meaningful.



	Nine Months Ended September 30,
	2019		2018		% Change
	(In thousands)
Property rentals revenue	$	365,702	$	384,399	(4.9	)%
Third-party real estate services revenue, including reimbursements	91,765		72,278		27.0	%
Depreciation and amortization expense	141,576		143,880		(1.6	)%
Property operating expense	100,087		108,003		(7.3	)%
Real estate taxes expense	52,241		54,024		(3.3	)%
General and administrative expense:
Corporate and other	34,888		25,218		38.3	%
Third-party real estate services	86,585		64,552		34.1	%
Share-based compensation related to Formation Transaction and special equity awards	30,203		26,912		12.2	%
Transaction and other costs	9,928		12,134		(18.2	)%
Income from unconsolidated real estate ventures, net	647		15,418		(95.8	)%
Interest expense	40,864		56,263		(27.4	)%
Gain on sale of real estate	47,121		45,789		2.9	%
Loss on extinguishment of debt	1,889		4,536		(58.4	)%
Reduction of gain on bargain purchase	—		7,606		(100.0	)%

Property rentals revenue, ~~increased~~decreased by approximately ~~$17.4~~$18.7 million, or ~~5.8%~~4.9%, to ~~$316.9~~$365.7 million in ~~2017~~2019 from ~~$299.5~~$384.4 million in ~~2016.~~2018. The ~~increase~~decrease was primarily due to ~~revenues~~a $25.4 million decline in property rentals revenue related to the Disposed Properties and a $2.6 million decline related to properties taken out of ~~$13.8 million associated with the assets acquired~~service for redevelopment subsequent to June 30, 2018. The decrease in the Combination and an increase of $3.6 million in revenues associated with existing assets. The $3.6 million increase in revenues associated with existing assets is primarily due to an increase in occupancy and associated rentals at The Bartlett multifamily project as the property rental revenue was ~~placed into service in the second quarter of 2016 and higher rents at 1215 S. Clark St,~~ partially offset by a ~~decrease~~combined $7.7 million increase in ~~revenues at 1150 17~~th Strevenue related to Central Place Tower and ~~1770 Crystal Drive,~~1221 Van Street, both of which ~~were taken out~~we placed into service during the first quarter of ~~service.~~

Tenant reimbursements revenue decreased by approximately $1.2 million, or 4.5%, to $27.2 million in 2017 from $28.4 million in 2016. Revenue associated with existing assets decreased by $2.6 million, primarily due to lower construction services provided to tenants2018, and ~~lower operating expenses, partially offset by~~ an increase ~~of $1.4 million associated with~~in straight line rental revenue, primarily related to the ~~assets acquired~~ground lease at 1700 M Street executed in the ~~Combination.~~fourth quarter of 2018.

Third-party real estate services revenue, including reimbursements, increased by approximately ~~$14.3~~$19.5 million, or ~~57.9%~~27.0%, to ~~$38.9~~$91.8 million in ~~2017~~2019 from ~~$24.6~~$72.3 million in ~~2016.~~2018. The increase was primarily due to ~~the real estate services business acquired~~an increase in ~~the Combination, partially offset~~development fee income and reimbursement revenue primarily driven by ~~lower~~construction management ~~fees~~revenue, resulting from an increase in construction projects in 2019, and ~~leasing commissions from existing arrangements with third-parties.~~other service revenue.

Depreciation and amortization expense ~~increased~~decreased by approximately ~~$11.4~~$2.3 million, or ~~11.6%~~1.6%, to ~~$109.7~~$141.6 million ~~for 2017~~ in 2019 from ~~$98.3~~$143.9 million in ~~2016.~~2018. The ~~increase~~decrease was primarily due to a $9.9 million decrease in depreciation and amortization expense ~~associated with~~related to the ~~assets acquired~~Disposed Properties, partially offset by an increase in depreciation and amortization expense of $4.5 million related to Central Place Tower and 1221 Van Street, and $771,000 related to the ~~Combination.~~acceleration of depreciation for 1800 South Bell Street.

Property operating expense ~~increased~~decreased by approximately ~~$2.2~~$7.9 million, or ~~3.0%~~7.3%, to ~~$77.3~~$100.1 million in ~~2017 and~~2019 from ~~$75.1~~$108.0 million in ~~2016.~~2018. The ~~increase~~decrease was primarily due to a $6.8 million decline in property operating expenses ~~of $4.2~~related to the Disposed Properties and a $2.1 million reduction associated with ~~the assets acquired~~properties taken out of service for redevelopment. The decrease in ~~the Combination,~~property operating expenses was partially offset by ~~a decrease~~an increase in expenses of ~~$2.0~~$1.3 million ~~associated with existing assets due primarily~~related to ~~lower tenant services expense~~Central Place Tower and ~~lower utilities.~~

1221 Van Street.

Real estate tax expense ~~increased~~decreased by approximately ~~$4.3~~$1.8 million, or ~~9.8%~~3.3%, to ~~$48.0~~$52.2 million in ~~2017~~2019 from ~~$43.7~~$54.0 million in ~~2016.~~2018. The ~~increase~~decrease was primarily due to a $4.8 million decline related to the Disposed Properties and an $896,000 decrease related to properties taken out of service for redevelopment for which we began capitalizing expenses during 2019. The decrease in real estate tax expense ~~of $2.1~~was partially offset by a $1.4 million ~~associated with the assets acquired in the Combination,~~increase related to Central Place Tower and 1221 Van Street and to an increase in ~~the tax assessments and lower capitalized~~ real estate ~~taxes.~~taxes related to our properties in National Landing.

General and administrative expense: corporate and other ~~decreased~~increased by approximately ~~$500,000,~~$9.7 million, or ~~1.4%~~38.3%, to ~~$35.5 million for 2017 from $36.0~~$34.9 million in ~~2016.~~2019 from $25.2 million in 2018. The ~~decrease~~increase was primarily due to ~~lower marketing and general office expenses, partially offset by~~ an increase in ~~general operating expenses associated with~~share-based compensation expense from the ~~operations acquired~~issuance of the 2019 equity awards, an increase in compensation expense as a result of the ~~Combination.~~adoption of Topic 842, which requires the expensing of previously capitalized indirect internal leasing costs, and an increase in overall consulting, legal and marketing expenses.

General and administrative expense: third-party real estate services increased by approximately ~~$16.1~~$22.0 million, or ~~112.7%~~34.1%, to ~~$30.4~~$86.6 million in ~~2017~~2019 from ~~$14.3~~$64.6 million in ~~2016~~2018. The increase is primarily due to an increase in reimbursable expenses resulting from an increase in construction management projects, an increase in share-based compensation expense from the ~~real estate services business acquired~~issuance of the 2019 equity awards and an increase in ~~the Combination.~~overall consulting and legal fees.

General and administrative expense: share-based compensation related to Formation Transaction ~~of $14.4~~and special equity awards increased by approximately $3.3 million, or 12.2%, to $30.2 million in ~~2017 consists of expense related~~2019 from $26.9 million in 2018. The increase was primarily due to share-based compensation associated with the special equity awards issued in ~~connection~~the fourth quarter of 2018, with vesting periods of up to five years, related to our successful pursuit of Amazon's additional headquarters in Northern Virginia, partially offset by the ~~Formation Transaction.~~vesting of certain awards issued in prior years.

Transaction and other costs of ~~$115.2~~$9.9 million in ~~2017 consists~~2019 consist of demolition costs of $4.7 million related to 1900 Crystal Drive, expenses incurred in connection with the Formation Transaction (including integration and severance costs) of $4.3 million and costs related to other completed, potential and pursued transactions of $961,000. Transaction and other costs of $12.1 million in 2018 consist primarily of ~~fees and~~ expenses incurred in connection with the Formation Transaction, including amounts incurred for transition services provided by our former parent, integration costs and severance ~~and transaction bonus expense of $34.3 million, investment banking fees of $33.6 million, legal fees of $13.1 million and accounting fees of $8.1 million.~~costs.

~~Loss~~Income from unconsolidated real estate ventures, ~~increased~~net decreased by approximately ~~$400,000~~$14.8 million to ~~$1.4~~$647,000 for 2019 from $15.4 million in ~~2017 from $1.0~~2018. The decrease is primarily due to the sale of our 5% interest in a real estate venture that owned the Investment Building, resulting in a gain of $15.5 million in ~~2016.~~2018. The ~~increase~~decrease in income from unconsolidated real estate ventures was also due to the ~~loss~~sales of the Investment Building and The Warner Building, which was partially offset by a gain from the sales of land parcels held by one of our unconsolidated real estate ventures in 2019.

Interest expense decreased by approximately $15.4 million, or 27.4%, to $40.9 million in 2019 from $56.3 million in 2018. The decrease was primarily due to ~~losses from interests~~the repayment of several mortgages payable during 2018 and 2019, a $8.3 million increase in real estate ventures acquired in the Combination, partially offset by a reduction of interest expense of approximately $1.7 million from the refinancing of the Warner Building mortgage loan in May 2016 at a lower interest rate and for a lower outstanding principal amount.

Interest expense increased by approximately $5.1 million, or 13.3%, to $43.8 million for 2017 from $38.7 million in 2016. The increase was primarily due to $1.8 million of interest expense associated with the assets acquired in the Combination and lower capitalized interest related to higher construction spend and additional projects under redevelopment and a $2.0 million decrease related to the Disposed Properties. The ~~Bartlett which~~decrease in interest expense was ~~placed into service during the second quarter of 2016,~~ partially offset by ~~lower~~additional term loan borrowings in 2018 and the ceasing of capitalized interest ~~expense associated with mortgages that were repaid.~~for Central Place Tower and 1221 Van Street.

Gain on the sale of real estate of $47.1 million in 2019 is due to the sale of Commerce Executive/Commerce Metro Land and 1600 K Street. Gain on the sale of real estate of $45.8 million in 2018 is primarily related to the sale of Summit I and II, the Bowen Building and Executive Tower.

Loss on extinguishment of debt of ~~$689,000~~$1.9 million and $4.5 million in ~~2017 related~~2019 and 2018 is due to ~~the prepayment~~our repayment of various mortgages payable.

The reduction of gain on bargain purchase of ~~approximately $27.8~~$7.6 million in ~~2017 represents~~2018 is due to finalizing the ~~estimated~~ fair ~~value of the identifiable net assets acquired~~values used in ~~excess of~~ the purchase ~~consideration in~~price allocation related to the Combination. ~~The purchase consideration was based on the fair value of the common shares and OP Units issued in the Combination. See Note 3 to the financial statements for additional information.~~

~~Net loss attributable to redeemable noncontrolling interests of approximately $2.5 million in 2017 relates to the allocation of net loss to the noncontrolling interest in JBG SMITH LP.~~

Funds From Operations

~~We believe Funds from Operations~~ ("FFO") ~~(when combined with the primary presentations~~

FFO is a non-GAAP financial measure computed in accordance with ~~GAAP) is a useful supplemental measure of our operating performance that is a recognized metric used extensively~~the definition established by ~~the real estate industry and, in particular, REITs. The~~ National Association of Real Estate Investment Trusts ("~~NAREIT"~~NAREIT") ~~stated~~ in ~~its April 2002~~the NAREIT FFO White Paper on Funds from Operations, "Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves."

- 2018 Restatement issued in 2018. NAREIT defines FFO as ~~defined by NAREIT, is~~ "net income (computed in accordance with GAAP), excluding ~~gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus~~ depreciation and amortization ~~and after adjustments for unconsolidated partnerships and~~related to real estate, ~~ventures. It states further that “adjustments for unconsolidated partnerships~~gains and ~~joint ventures will be calculated~~losses from the sale of certain real estate assets, gains and 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 ~~reflect funds from operations on~~decreases in the ~~same basis.”~~ value of depreciable real estate held by the entity."

We believe that financial analysts, investors and shareholders are better served by the clearer presentation of comparable period operating results generated from our FFO measure. Our method of calculating FFO may be different from methods used by other REITs and, accordingly, may not be comparable to such other REITs.

FFO is ~~presented~~a meaningful non‑GAAP financial measure useful in comparing our levered operating performance from period-to-period and as compared to ~~assist investors in analyzing our operating performance.~~similar real estate companies because FFO ~~(i)~~excludes real estate depreciation and amortization expense and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO does not represent cash ~~flow~~generated from ~~operations as defined by GAAP, (ii)~~operating activities and is not necessarily indicative of cash available to fund ~~all~~ cash ~~flow needs, including the ability to make distributions, (iii) is not an alternative to cash flow as a measure of liquidity,~~requirements and ~~(iv)~~ should not be considered as an alternative to net ~~(loss)~~ income ~~(which is determined~~(computed in accordance with GAAP) ~~for purposes of evaluating our operating performance.~~as a performance measure or cash flow as a liquidity measure. FFO may not be comparable

to similarly titled measures used by other companies.

The following reflects the reconciliation of net ~~(loss)~~ income attributable to ~~JBG SMITH Properties,~~common shareholders, the most directly comparable GAAP measure, to FFO:



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(In thousands, except per share amounts)
Net income attributable to common shareholders	$	9,360		$	22,830		$	31,181		$	39,214
Net income attributable to redeemable noncontrolling interests	1,172			3,552			4,271			6,532
Net loss attributable to noncontrolling interests	—			—			—			(127		)
Net income	10,532			26,382			35,452			45,619
Gain on sale of real estate	(8,088		)	(11,938		)	(47,121		)	(45,789		)
Gain on sale of unconsolidated real estate ventures	—			(15,488		)	(335		)	(15,488		)
Real estate depreciation and amortization	44,164			43,945			133,507			136,171
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures	4,713			6,345			14,170			18,960
Net (income) loss attributable to noncontrolling interests in consolidated real estate ventures	—			—			(5		)	129
FFO attributable to OP Units ⁽¹⁾	51,321			49,246			135,668			139,602
FFO attributable to redeemable noncontrolling interests	(5,705		)	(6,631		)	(15,502		)	(20,057		)
FFO attributable to common shareholders ⁽¹⁾	$	45,616		$	42,615		$	120,166		$	119,545
FFO per diluted common share	$	0.34		$	0.36		$	0.93		$	1.01
Weighted average diluted shares	134,127			119,835			129,527			118,588

_______________

Note: FFO attributable to OP Units and common shareholders for the ~~three~~nine months ended September 30, ~~2017:~~2018 has been restated in compliance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.


⁽¹⁾	Due to our adoption of Topic 842, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.5 million and $4.3 million for the three and nine months ended September 30, 2018).

Three Months Ended September 30, 2017

(In thousands)
Net loss attributable to JBG SMITH Properties $ (69,831 )
Net loss attributable to redeemable noncontrolling interests (8,160 )
Net loss (77,991 )
Real estate depreciation and amortization 41,393
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures 6,059
FFO attributable to the operating partnership common units (30,539 )
FFO attributable to redeemable noncontrolling interests 3,195
FFO attributable to diluted common shareholders $ (27,344 )
Weighted average diluted shares 114,744

NOI and Same Store NOI

~~In this section, we present~~We utilize NOI, which is a non-GAAP financial measure, ~~that we use~~ to assess a segment’s performance. The most directly comparable GAAP measure is net income ~~(loss)~~ attributable to JBG SMITH Properties plus depreciation and amortization expense, general and administrative expense, transaction and other costs, interest expense, gain (loss) on extinguishment of debt and income tax expense, less third-party real estate services, less reimbursements, other income, income (loss) from unconsolidated real estate ventures, interest and other (loss) income, gain on bargain purchase and noncontrolling interests.common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue) less operating expense, before deferred rent and related party management fees. Management uses NOI as a supplemental performance measure for our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe that to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income ~~(loss)~~ attributable to ~~JBG SMITH Properties~~common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income ~~(loss)~~ attributable to ~~JBG SMITH Properties~~common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.

We also provide certain information on a "same store" basis. Information provided on a same store basis includes the results of properties that are owned, operated and ~~stabilized~~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. While there is judgment surrounding changes in designations, a property is removed from the same store pool when athe property is considered to be ~~a property~~ 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 operating income. A development property or property under construction 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.

~~For~~During the ~~three and~~ nine months ended September 30, ~~2017, all of the JBG Assets and two Vornado Included Assets (The Bartlett and 1800 South Bell Street) were not included in the~~2019, our same store ~~comparison as they~~pool changed from prior year due to the exclusion of Commerce Executive and 1600 K Street, which were ~~not in service or~~sold both during 2019, and 2001 Richmond Highway, which is being ~~taken~~phased out of service ~~during portions of the periods being compared.~~for future development.

Same store NOI ~~increased~~decreased by ~~$4.2~~$6.6 million, or ~~6.3%~~8.4%, and ~~$6.3~~$22.8 million, or ~~3.1%~~9.5%, for the three and nine months ended September 30, ~~2017, respectively,~~2019 as compared to the three and nine months ended September 30, ~~2016, respectively.~~2018. The ~~increase~~decrease in same store

NOI for the three and nine months ended September 30, ~~2017~~2019, was ~~primarily due~~largely attributable to ~~the expiration of~~increased rental abatements, rent ~~abatements~~reductions and ~~higher property rental revenue from~~an increase in assumed lease ~~commencements.~~liability payments.

The following table reflects the reconciliation of net ~~(loss)~~ income attributable to ~~JBG SMITH Properties, the most directly comparable GAAP measure,~~common shareholders to NOI and same store NOI for the periods presented:

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands)
Net (loss) income attributable to JBG SMITH Properties $ (69,831 ) $ 21,014
$ (57,851 ) $ 49,344
Add:
Depreciation and amortization expense 43,951
31,377
109,726
98,291
General and administrative expense:
Corporate and other 10,593
10,913
35,536
36,040
Third-party real estate services 21,178
4,779
30,362
14,272
Share-based compensation related to Formation Transaction
14,445
—
14,445
—
Transaction and other costs 104,095
1,528
115,173
1,528
Interest expense 15,309
13,028
43,813
38,662
Loss on extinguishment of debt 689
—
689
—
Income tax (benefit) expense (1,034 ) 302
(317 ) 884
Less:
Third-party real estate services, including reimbursements
25,141
8,297
38,881
24,617
Other income 1,158
1,564
3,701
3,938
(Loss) income from unconsolidated real estate ventures (1,679 ) 584
(1,365 ) (952 )
Interest and other (loss) income, net (379 ) 749
1,366
2,292
Gain on bargain purchase 27,771
—
27,771
—
Net loss attributable to redeemable noncontrolling interests 8,160
—
2,481
—
Total 79,223
71,747
218,741
209,126
Adjustment ⁽¹⁾
11,315
10,492
45,645
30,762
NOI 90,538
82,239
264,386
239,888
Non-same store NOI⁽²⁾
20,266
16,137
59,029
40,792
Same store NOI ⁽³⁾
$ 70,272
$ 66,102
$ 205,357
$ 199,096

Growth in same store NOI 6.3 % 3.1 %
Number of properties 36
36



	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
	(Dollars in thousands)
Net income attributable to common shareholders	$	9,360		$	22,830		$	31,181		$	39,214
Add:
Depreciation and amortization expense	46,862			46,603			141,576			143,880
General and administrative expense:
Corporate and other	11,015			8,201			34,888			25,218
Third-party real estate services	29,809			20,754			86,585			64,552
Share-based compensation related to Formation Transaction and special equity awards	9,549			8,387			30,203			26,912
Transaction and other costs	2,059			4,126			9,928			12,134
Interest expense	10,583			18,979			40,864			56,263
Loss on extinguishment of debt	—			79			1,889			4,536
Reduction of gain on bargain purchase	—			—			—			7,606
Income tax expense (benefit)	432			(841		)	(689		)	(1,436		)
Net income attributable to redeemable noncontrolling interests	1,172			3,552			4,271			6,532
Less:
Third-party real estate services, including reimbursements	34,587			23,788			91,765			72,278
Other income ⁽¹⁾	2,196			1,708			5,951			4,904
Income (loss) from unconsolidated real estate ventures, net	(1,144		)	13,484			647			15,418
Interest and other income (loss), net	(640		)	4,091			2,363			5,177
Gain on sale of real estate	8,088			11,938			47,121			45,789
Net loss attributable to noncontrolling interests	—			—			—			127
Consolidated NOI	77,754			77,661			232,849			241,718
NOI attributable to unconsolidated real estate ventures at our share	5,500			9,642			15,745			27,893
Non-cash rent adjustments ⁽²⁾	(10,348		)	(1,369		)	(25,894		)	(3,659		)
Other adjustments ⁽³⁾	3,181			3,179			10,120			11,060
Total adjustments	(1,667		)	11,452			(29		)	35,294
NOI	76,087			89,113			232,820			277,012
Less: out-of-service NOI loss ⁽⁴⁾	(2,189		)	(1,357		)	(5,193		)	(3,526		)
Operating portfolio NOI	78,276			90,470			238,013			280,538
Non-same store NOI ⁽⁵⁾	6,286			11,855			20,322			40,036
Same store NOI ⁽⁶⁾	$	71,990		$	78,615		$	217,691		$	240,502

Change in same store NOI	(8.4		)%				(9.5		)%
Number of properties in same store pool	55						54

^{___________________________________________________}


⁽¹⁾	Excludes parking income of $6.3 million and $6.4 million for the three months ended September 30, 2019 and 2018, and $19.5 million and $19.3 million for the nine months ended September 30, 2019 and 2018.

⁽²⁾

Adjustment ~~to: (i) include the financial information of the JBG Assets as if the Combination had been completed as of the beginning of the periods presented; (ii) include proportionate share of NOI attributable~~ to ~~unconsolidated real estate ventures; (iii) include other income related to operating properties; (iv)~~ exclude straight-line rent, above/below market lease amortization and lease incentive ~~amortization; and (v) exclude NOI related to non-operating assets.~~amortization.


⁽²⁾⁽³⁾	Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue.


⁽⁴⁾	Includes the results for our under construction assets and future development pipeline.


⁽⁵⁾	Includes the results for properties that were not owned, operated and ~~stabilized~~in service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. The decrease in non-same store NOI is primarily attributable to lost income from disposed assets.


⁽³⁾⁽⁶⁾	Includes the results of the properties that are owned, operated and ~~stabilized~~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.

Reportable Segments

We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. As of December 31, 2018, we redefined our reportable segments to be aligned with our new 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, we aggregate our operating segments into three reportable segments (commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services. To conform to the current period presentation, we have reclassified the prior period segment financial data for certain properties that had been classified as part of other to the commercial and multifamily segments, and the elimination of intersegment activity has been included as part of other. The commercial segment was previously referred to as the office segment.

The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the NOI of properties within each segment. NOI includes revenue from property rentals and deducts property operating expenses and real estate taxes.

With respect to the third-party asset management and real estate services business, the CODM reviews revenues streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative: third-party real estate services"), which are disclosed separately in the statements of operations and discussed in the preceding pages under "Results of Operations." The following presents a reconciliation of revenue from our third-party asset management and real estate services business, excluding reimbursements, to "Third-party real estate services revenue, including reimbursements":

Three Months Ended September 30, Nine Months Ended September 30,
2017 2016 2017 2016
(In thousands)
Rental revenue:
Office $ 99,451
$ 90,552
$ 272,270
$ 262,633
Multifamily 24,945
16,726
65,822
47,625
Other 4,299
5,276
10,274
19,820
Eliminations (2,644 ) 942
(4,306 ) (2,153 )
Total rental revenue 126,051
113,496
344,060
327,925

Rental expense:
Office 40,038
36,876
108,562
104,595
Multifamily 9,748
6,445
24,689
17,657
Other 4,706
4,071
14,150
18,728
Eliminations (7,664 ) (5,643 ) (22,082 ) (22,181 )
Total rental expense 46,828
41,749
125,319
118,799

NOI:
Office 59,413
53,676
163,708
158,038
Multifamily 15,197
10,281
41,133
29,968
Other (407 ) 1,205
(3,876 ) 1,092
Eliminations 5,020
6,585
17,776
20,028
Total NOI $ 79,223
$ 71,747
$ 218,741
$ 209,126



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
	(In thousands)
Property management fees	$	5,758	$	6,355	$	16,873	$	18,773
Asset management fees	3,577		3,720		10,612		11,288
Leasing fees	2,033		1,455		5,331		4,753
Development fees	6,783		2,259		10,912		6,490
Construction management fees	370		590		1,469		2,076
Other service revenue	1,005		185		3,626		1,883
Third-party real estate services revenue, excluding reimbursements	19,526		14,564		48,823		45,263
Reimbursements revenue ⁽¹⁾	15,061		9,224		42,942		27,015
Third-party real estate services revenue, including reimbursements	$	34,587	$	23,788	$	91,765	$	72,278

_________________


⁽¹⁾	Represents reimbursements by third parties for amounts incurred by us, including allocated payroll costs and amounts paid to third-party contractors for construction management projects.

The increase in third-party real estate services revenue, including reimbursements, is primarily due to an increase in development fees and reimbursements revenue resulting from an increase in both construction management and development projects conducted on behalf of third-parties during 2019.

Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.

Property revenue is calculated as property rentals revenue plus other property operating income (primarily parking income). Property expense is calculated as property operating expenses plus real estate taxes. Consolidated NOI is calculated as total property revenue less total property expense. See Note 14 to the financial statements for the reconciliation of net income attributable to common shareholders to consolidated NOI for the three and nine months ended September 30, 2019 and 2018.



	Three Months Ended September 30,					Nine Months Ended September 30,
	2019		2018			2019			2018
	(In thousands)
Property revenue:
Commercial	$	100,915	$	105,255		$	304,763		$	323,737
Multifamily	29,040		28,005			86,332			80,733
Other ⁽¹⁾	339		(313		)	(5,918		)	(725		)
Total property revenue	130,294		132,947			385,177			403,745

Property expense:
Commercial	39,204		42,294			121,346			125,339
Multifamily	13,042		11,806			36,905			33,968
Other ⁽¹⁾	294		1,186			(5,923		)	2,720
Total property expense	52,540		55,286			152,328			162,027

Consolidated NOI:
Commercial	61,711		62,961			183,417			198,398
Multifamily	15,998		16,199			49,427			46,765
Other ⁽¹⁾	45		(1,499		)	5			(3,445		)
Consolidated NOI	$	77,754	$	77,661		$	232,849		$	241,718

_________________


⁽¹⁾	Includes activity related to future development assets and corporate entities and the elimination of intersegment activity.

Comparison of the Three Months Ended September 30, ~~2017 compared~~2019 to September 30, ~~2016~~2018

~~Office: Rental~~Commercial: Property revenue ~~increased~~decreased by ~~$8.9~~$4.3 million, or ~~9.8%~~4.1%, to ~~$99.5~~$100.9 million in ~~2017~~2019 from ~~$90.6~~$105.3 million in ~~2016.~~2018. Consolidated NOI ~~increased~~decreased by ~~$5.7~~$1.3 million, or ~~10.7%~~2.0%, to ~~$59.4~~$61.7 million in ~~2017~~2019 from ~~$53.7~~$63.0 million in ~~2016.~~2018. The ~~increase~~decrease in property revenue and consolidated NOI is primarily due to the ~~Combination.~~sale of the Disposed Properties, an increase in lease incentive amortization in the portfolio, and a decrease in revenue at 2101 L Street and Courthouse Plaza 1 and 2. These decreases were partially offset by an increase in revenue and consolidated NOI from Central Place Tower, which we placed into service during the first quarter of 2018, and the ground lease at 1700 M Street executed in the fourth quarter of 2018.

Multifamily: ~~Rental~~Property revenue increased by ~~$8.2~~$1.0 million, or ~~49.1%~~3.7%, to ~~$24.9~~$29.0 million in ~~2017~~2019 from ~~$16.7~~$28.0 million in ~~2016.~~2018. Consolidated NOI ~~increased~~decreased by ~~$4.9 million,~~$201,000, or ~~47.8%~~1.2%, to ~~$15.2~~$16.0 million in ~~2017~~2019 from ~~$10.3~~$16.2 million in ~~2016.~~2018. The increase in property revenue is primarily due to an increase in occupancy at 1221 Van Street, which we placed into service during the first quarter of 2018. The decrease in consolidated NOI is primarily due to an increase in general property operating expenses, partially offset by the increase in property revenue.

Comparison of the Nine Months Ended September 30, 2019 to 2018

Commercial: Property revenue decreased by $19.0 million, or 5.9%, to $304.8 million in 2019 from $323.7 million in 2018. Consolidated NOI decreased by $15.0 million, or 7.6%, to $183.4 million in 2019 from $198.4 million in 2018. The decrease in property revenue and consolidated NOI is primarily due to the ~~Combination~~sale of the Disposed Properties and due to rent reductions at 2101 L Street, 2011 Crystal Drive and Courthouse Plaza 1 and 2. These decreases were partially offset by an increase in revenue and consolidated NOI from Central Place Tower, which we placed into service during the first quarter of 2018, and the ground lease at 1700 M Street executed in the fourth quarter of 2018.

Multifamily: Property revenue increased by $5.6 million, or 6.9%, to $86.3 million in 2019 from $80.7 million in 2018. Consolidated NOI increased by $2.7 million, or 5.7%, to $49.4 million in 2019 from $46.8 million in 2018. The increase in property revenue and consolidated NOI is primarily due to an increase in occupancy at 1221 Van Street, which we placed into service during the first quarter of 2018, and an increase in occupancy ~~and associated rentals~~ at ~~The Bartlett which was placed into service in the second quarter of 2016.~~

Other: Rental revenue decreased by $1.0 million, or 18.5%, to $4.3 million in 2017 from $5.3 million in 2016. Net operating income (loss) decreased by $1.6 million, or 133.8%, to a loss of $407,000 from income of $1.2 million. The decrease in revenue and net operating income (loss) is primarily due to properties which were taken out of service, including 1700 M Street and 1770 Crystal Drive.

~~Nine Months Ended September 30, 2017 compared to September 30, 2016~~

Office: Rental revenue increased by $9.7 million, or 3.7%, to $272.3 million in 2017 from $262.6 million in 2016. NOI increased by $5.7 million, or 3.6%, to $163.7 million in 2017 from $158.0 million in 2016. The increase in revenue and NOI is primarily due to the Combination and higher rents due to rent commencements at 1215 S. Clark St.

Multifamily: Rental revenue increased by $18.2 million, or 38.2%, to $65.8 million in 2017 from $47.6 million in 2016. NOI increased by $11.1 million, or 37.3%, to $41.1 million in 2017 from $30.0 million in 2016. The increase in revenue and NOI is primarily due to the Combination and an increase in occupancy and associated rentals at The Bartlett which was placed into service in the second quarter of 2016.

Other: Rental revenue decreased by $9.5 million, or 48.2%, to $10.3 million in 2017 from $19.8 million in 2016. Net operating income (loss) decreased by $5.0 million, or 454.9%, to a loss of $3.9 million from income of $1.1 million. The decrease in revenue and net operating income (loss) is primarily due to properties which were taken out of service, including 1700 M Street and 1770 Crystal Drive.

RiverHouse Apartments.

Liquidity and Capital Resources

Property rental income is our primary source of operating cash flow and is dependent on a number of factors including occupancy levels and rental rates, as well as our tenants’ ability to pay rent. In addition, to our ~~portfolio, we have a~~ third-party asset management and real estate services business ~~that~~ provides fee-based real estate services to ~~our real estate ventures,~~third parties, the legacy funds (the "JBG Legacy Funds") formerly organized by JBG ~~("JBG Legacy Funds")~~ and ~~other third parties.~~the Impact Pool. Our assets provide ~~us with~~ a relatively consistent level of cash flow that enables us to pay operating

expenses, debt service, recurring capital expenditures, dividends to shareholders and distributions to holders of OP Units. Other sources of liquidity to fund cash requirements include proceeds from financings, asset sales and ~~asset sales.~~the issuance and sale of equity securities, including from our "at the market" offering. We anticipate that cash flows from continuing operations ~~over the next 12 months~~ and proceeds from financings, recapitalizations and asset sales, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, dividends to shareholders and distributions to holders of OP ~~Units.~~Units over the next 12 months.

Financing Activities

The following is a summary of mortgages ~~payable as of September 30, 2017 and December 31, 2016:~~payable:



	Weighted Average Effective Interest Rate ⁽¹⁾	September 30, 2019			December 31, 2018
		(In thousands)
Variable rate ⁽²⁾	3.67%	$	14,000		$	308,918
Fixed rate ⁽³⁾	4.20%	1,347,840			1,535,734
Mortgages payable		1,361,840			1,844,652
Unamortized deferred financing costs and premium/ discount, net		(3,269		)	(6,271		)
Mortgages payable, net		$	1,358,571		$	1,838,381

^{__________________________}


⁽¹⁾	~~Includes variable rate mortgages payable with~~Weighted average effective interest rate ~~caps.~~as of September 30, 2019.


⁽²⁾	Includes a variable rate mortgage payable with an interest rate cap agreement as of December 31, 2018.


⁽³⁾	Includes variable rate mortgages payable with interest rates ~~effectively~~ fixed ~~pursuant to~~by interest rate ~~swaps.~~


⁽³⁾	~~Includes mortgages payable assumed as part of the Combination. See Note 3 to the financial statements for additional information.~~

⁽⁴⁾

~~As part of the Combination, we assumed~~our mortgages payable ~~with an aggregate principal balance of $768.5 million.~~ are recourse to us. See Note 15 to the financial statements for additional information.

As of September 30, ~~2017.~~2019 and December 31, 2018, we had various interest rate swap and cap agreements with an aggregate notional value of $1.1 billion and $1.3 billion on certain of our mortgages payable. See Note 13 to the financial statements for additional information.

~~On July 18, 2017, we entered into~~We have a $1.4 billion credit facility, consisting of a $1.0 billion revolving credit facility maturing in July 2021, with two six-month extension options, a delayed draw $200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023, and a delayed draw $200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024. ~~The interest rate for~~Effective as of July 17, 2019, the credit facility ~~varies based on a ratio~~was amended to extend the delayed draw period of our total outstanding indebtedness to a valuation of certain real property and assets and ranges (a) in the case of the revolving credit facility, from LIBOR plus 1.10% to LIBOR plus 1.50%, (b) in the case of the Tranche A-1 Term Loan ~~from LIBOR plus 1.20%~~ to ~~LIBOR plus 1.70%~~July 2020 and ~~(c) in~~to reduce the ~~case~~applicable interest rate of the Tranche A-2 Term Loan by 40 basis points, to LIBOR plus 1.15% from LIBOR plus 1.55%.

The following is a summary of amounts outstanding under the credit ~~facility as of September 30, 2017:~~facility:



	Interest Rate ⁽¹⁾	September 30, 2019			December 31, 2018
		(In thousands)
Revolving credit facility ^{(2) (3) (4)}	3.12%	$	—		$	—

Tranche A-1 Term Loan ⁽⁵⁾	3.32%	$	100,000		$	100,000
Tranche A-2 Term Loan ⁽⁵⁾	3.82%	200,000			200,000
Unsecured term loans		300,000			300,000
Unamortized deferred financing costs, net		(2,876		)	(2,871		)
Unsecured term loans, net		$	297,124		$	297,129

^{__________________________}


⁽¹⁾	Interest rate as of September 30, 2019.


⁽²⁾	As of September 30, ~~2017,~~2019 and December 31, 2018, letters of credit with an aggregate face amount of ~~$5.2~~$2.4 million and $5.7 million were provided under our revolving credit facility.

~~Long-term Liquidity Requirements~~

Our long-term capital requirements consist primarily of maturities under our credit facility and mortgage loans, construction commitments for development and redevelopment projects and costs related to growing our business, including acquisitions. We intend to fund these requirements through a combination of sources including debt proceeds, proceeds from asset recapitalizations and sales, capital from institutional partners that desire to form real estate venture relationships with us and available cash.

~~Contractual Obligations and Commitments~~

~~Below is a summary of our contractual obligations and commitments as of September 30, 2017:~~

Total 2017 2018 2019 2020 2021 2022 Thereafter
Contractual cash obligations
(principal and interest):
(In thousands)
Debt obligations ⁽¹⁾
$ 2,480,892
$ 23,597
$ 464,528
$ 294,361
$ 276,060
$ 261,943
$ 371,899
$ 788,504
Operating leases ⁽²⁾
914,903
1,974
8,391
8,170
7,825
7,496
6,580
874,467
Capital lease obligation 15,767
235
953
972
992
1,011
1,032
10,572
Total contractual cash
obligations ⁽³⁾
$ 3,411,562
$ 25,806
$ 473,872
$ 303,503
$ 284,877
$ 270,450
$ 379,511
$ 1,673,543

~~_________________~~


⁽¹⁾⁽³⁾	~~Excludes~~As of September 30, 2019 and December 31, 2018, net deferred financing costs related to our ~~proportionate share of unconsolidated real estate venture indebtedness. See further information~~revolving credit facility totaling $3.4 million and $4.8 million were included in ~~Off-Balance Sheet Arrangements section below.~~"Other assets, net."


⁽²⁾⁽⁴⁾	~~Includes ground leases.~~The interest rate for the revolving credit facility excludes a 0.15% facility fee.


⁽³⁾⁽⁵⁾	~~Excludes obligations related to construction or development contracts, since payments are only due upon satisfactory performance under~~The interest rate includes the ~~contracts. See Commitments and Contingencies section below for further information.~~impact of interest rate swap agreements.

Liquidity Requirements

Our principal liquidity needs for the next 12 months and beyond are to fund:

normal recurring expenses;

debt service and principal repayment obligations, including balloon payments on maturing debt;

capital expenditures, including major renovations, tenant improvements and leasing costs;

development expenditures;

dividends to shareholders and distributions to holders of OP Units and

possible acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein.

We expect to satisfy these needs using one or more of the following:

cash flows from operations;

distributions from real estate ventures;

cash and cash equivalent balances;

proceeds from the issuance and sale of equity securities and

proceeds from financings, recapitalizations and asset sales.

We anticipate that cash flows from continuing operations and proceeds from financings, recapitalizations and asset sales, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, dividends to shareholders and distributions to holders of OP Units over the next 12 months.

Contractual Obligations and Commitments

During the nine months ended September 30, 2019, there were no material changes to the contractual obligation information presented in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2018.

As of September 30, ~~2017,~~2019, we expect to fund additional capital to certain of our unconsolidated investments totaling approximately ~~$50.6 million, which we anticipate will be primarily expended over the next two to three years.~~$47.1 million.

~~On November 9, 2017, after completion of the period covered by this Quarterly Report on Form 10-Q,~~In October 2019, our Board of Trustees declared a quarterly dividend of $0.225 per common ~~share, payable on November 30, 2017 to shareholders of record on November 20, 2017.~~share.

~~See Note 18 to the financial statements for additional information about events occurring after September 30, 2017.~~

Summary of Cash Flows

The following summary discussion of our cash flows is based on the statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash ~~flows for the periods presented below.~~flows:

Nine Months Ended September 30,
2017 2016 Change
(In thousands)
Net cash provided by operating activities $ 23,393
$ 101,383
$ (77,990 )
Net cash provided by (used in) investing activities 88,184
(204,105 ) 292,289
Net cash provided by financing activities 227,319
63,040
164,279



	Nine Months Ended September 30,
	2019			2018
	(In thousands)
Net cash provided by operating activities	$	112,639		$	136,661
Net cash (used in) provided by investing activities	(145,438		)	88,881
Net cash used in financing activities	(123,013		)	(183,890		)

Cash Flows for the Nine Months Ended September 30, ~~2017~~2019

Cash and cash equivalents, ~~were $367.9~~and restricted cash decreased $155.8 million atto $243.7 million as of September 30, ~~2017,~~2019 compared to ~~$29.0~~$399.5 million atas of December 31, ~~2016, an increase of $338.9 million.~~2018. This ~~increase~~decrease resulted from ~~$23.4 million of net cash provided by operating activities, $88.2~~$145.4 million of net cash used in investing activities and ~~$227.3~~$123.0 million of net cash used in financing activities, partially offset by $112.6 million of net cash provided by ~~financing~~operating activities. Our outstanding debt was $1.7 billion and $2.1 billion atas of September 30, ~~2017, a $974.8 million increase from the balance at~~2019 and December 31, ~~2016.~~2018.

Net cash provided by operating activities of ~~$23.4~~$112.6 million primarily comprised: (i) $157.9 million of net ~~loss of $60.3 million, (ii) $110.7~~income (before $169.6 million of non-cash items ~~which include depreciation~~ and ~~amortization, deferred rent, equity in loss from unconsolidated~~a $47.1 million gain on sale of real ~~estate ventures, amortization~~estate) and (ii) $1.8 million of ~~above- and below-market lease intangibles, unrealized gains on interest rate swaps and bad debt expense, (iii) share-based compensation of $17.2 million, (iv)~~ return on capital from unconsolidated real estate ventures, ~~of $1.1 million, and (v) $689,000 loss on the extinguishment of debt,~~ partially offset by ~~(vi) $27.8~~(iii) $47.1 million ~~gain on bargain purchase and (vii) the~~of net change in operating assets and ~~liabilities~~liabilities. Non-cash income adjustments of ~~$18.2 million.~~

~~Net cash provided by investing activities of $88.2~~$169.6 million primarily comprised: (i) $83.9 million net cash consideration received in connection with the Combination, (ii) $75.0 million proceeds from repayment of a receivable by our former parent and (iii) $50.9 million repayment of notes receivable, partially offset by $115.9 million of development costs, construction in progress and real estate additions.

Net cash provided by financing activities of $227.3 million comprised: (i) $407.8 million of proceeds from borrowings related to the credit facility and The Bartlett and (ii) $160.2 million of contributions from our former parent, net, partially offset by (iii) $192.7 million for the repayments of borrowings, (iv) $115.6 million repayment of borrowings by our former parent, (v) $17.8 million capital lease payments and (vi) $18.7 million of debt issuance costs.

~~Cash Flows for the Nine Months Ended September 30, 2016~~

~~Cash and cash equivalents were~~ ~~$35.3 million~~ ~~at September 30, 2016, compared to~~ ~~$75.0 million~~ at ~~December 31, 2015, a decrease of~~ ~~$39.7 million. This decrease resulted from~~ ~~$204.1 million~~ ~~of net cash used in investing activities, partially offset by~~ ~~$101.4 million~~ ~~of net cash provided by operating activities and~~ ~~$63.0 million~~ ~~of net cash provided by financing activities.~~

~~Net cash provided by operating activities of $101.4 million comprised: (i) net income of $49.3 million, (ii) $92.4 million of non-cash adjustments, which~~ include depreciation and amortization, ~~loss from unconsolidated real estate ventures,~~share-based compensation expense, deferred rent and ~~accretion~~amortization of ~~below-market~~ lease ~~intangibles and (iii) distributions of income from unconsolidated real estate ventures of $1.0 million, partially offset by (iv) the net change in operating assets and liabilities of $45.5 million.~~incentives.

Net cash used in investing activities of ~~$204.1~~$145.4 million primarily comprised: (i) ~~$185.4~~$294.4 million of development costs, construction in progress and real estate additions, partially offset by (ii) ~~$20.0~~$157.8 million of ~~investments~~proceeds from the sale of real estate.

Net cash used in ~~and advances~~financing activities of $123.0 million primarily comprised: (i) $482.8 million of repayments of mortgages payable, (ii) $99.7 million of dividends paid to ~~unconsolidated real estate ventures~~common shareholders and (iii) ~~$1.9~~$13.6 million of ~~other investments,~~distributions to redeemable noncontrolling interests, partially offset by (iv) ~~a decrease~~$473.5 million of ~~$3.2~~net proceeds from the issuance of common stock.

Cash Flows for the Nine Months Ended September 30, 2018

Cash and cash equivalents, and restricted cash increased $41.7 million to $380.2 million as of September 30, 2018 compared to $338.6 million as of December 31, 2017. This increase resulted from $136.7 million of net cash provided by operating activities and $88.9 million of net cash provided by investing activities, partially offset by $183.9 million of net cash used in ~~restricted cash.~~financing activities.

Net cash provided by operating activities of $136.7 million primarily comprised: (i) $181.7 million of net income (before $181.9 million of non-cash items and $45.8 million gain on sale of real estate) and (ii) $6.8 million of return on capital from unconsolidated real estate ventures, partially offset by (iii) $51.9 million of net change in operating assets and liabilities. Non-cash adjustments of $181.9 million primarily include depreciation and amortization, share-based compensation expense, reduction of gain on bargain purchase and deferred rent.

Net cash provided by investing activities of $88.9 million primarily comprised: (i) $346.1 million of proceeds from the sale of real estate and (ii) $24.6 million distribution of capital from sale of interest in an unconsolidated real estate venture, partially offset by (iii) $260.4 million of development costs, construction in progress and real estate additions and (iv) $22.7 million of investments in unconsolidated real estate ventures.

Net cash used in financing activities of ~~$63.0~~$183.9 million primarily ~~comprised :~~comprised: (i) ~~$39.0~~$267.3 million of repayments of mortgages payable, (ii) $150.8 million repayment of our revolving credit facility, (iii) $80.2 million of dividends paid to common shareholders and (iv) $13.3 million of distributions to redeemable noncontrolling interests, partially offset by (v) $250.0 million of proceeds from borrowings ~~from~~under our ~~former parent and (ii) $33.0~~unsecured term loans, (vi) $43.8 million of ~~net contributions~~aggregate proceeds from borrowings under mortgages payable and (vii) $35.0 million of proceeds from borrowings under our ~~former parent, partially offset by (iii) $8.9 million for the repayments of borrowings.~~revolving credit facility.

Off-Balance Sheet Arrangements

Unconsolidated Real Estate Ventures

We consolidate entities in which ~~we own less than a 100% equity interest if~~ 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 September 30, ~~2017,~~2019, we have investments in ~~and advances to~~ unconsolidated real estate ventures totaling ~~$285.0~~$320.9 million. For the majority of 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 ~~joint~~real estate ventures, see Note 54 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 (1) guarantee portions of the principal, interest and other amounts in connection with ~~their~~ borrowings, (2) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with ~~their~~ borrowings and (3) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside partners whereby the partners agree to reimburse the ~~joint~~real estate venture or us for their share of any payments made under certain of these guarantees. Amounts that may be required to be paid in future periods in relation to budget overruns or operating losses that are also included in some of our guarantees are not estimable. Guarantees (excluding environmental) terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. At times, we have agreements with our outside partners whereby we agree to reimburse our partner for their share of any payments made by them under certain guarantees. As of September 30, ~~2017, the aggregate amount of our~~2019, we had no principal payment guarantees ~~was approximately $63.8 million~~ for our unconsolidated real estate ventures.

Reconsideration events could cause us to consolidate these unconsolidated real estate ventures and partnerships in the ~~future.~~future or deconsolidate a consolidated entity. We evaluate reconsideration events as we become aware of them. Some triggers to be considered are additional contributions required by each partner and each partners’ ability to make those contributions. Under certain of these circumstances, we may purchase our partner’s interest. Our unconsolidated real estate ventures are held in entities which appear sufficiently stable to meet their capital requirements; however, if market conditions worsen and our partners are unable to meet their commitments, there is a possibility we may have to consolidate these entities.

Commitments and Contingencies

Insurance

We maintain general liability insurance with limits of $200.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $2.0 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 terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per ~~occurrence and in the aggregate, and $2.0 billion per occurrence and in the aggregate for nuclear, biological, chemical and radiological terrorism events, as defined~~occurrence. These policies are partially reinsured by ~~the Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020. Insurance premiums are charged directly to each of the properties.~~third-party insurance providers.

Construction Commitments

Other

AsIn connection with the Formation Transaction, we entered into an agreement with Vornado regarding tax matters (the "Tax Matters Agreement") that provides special rules that allocate tax liabilities if the distribution of ~~September 30, 2017,~~JBG SMITH shares by Vornado, together with certain related transactions, is determined not to be tax-free. Under the Tax Matters Agreement, we ~~expect~~may be required to ~~fund additional capital to certain of our unconsolidated investments totaling approximately $50.6 million, which we anticipate will be primarily expended over the next two to three years.~~

~~Inflation~~

~~Substantially all of our office~~indemnify Vornado against any taxes and ~~retail leases contain provisions designed to mitigate the adverse impact of inflation. These provisions generally increase rental rates or reimbursable expenses during the terms~~related amounts and costs resulting from a violation by us of the lease either at (i) fixed rates, (ii) indexed escalations (based on the Consumer Price Index of other measures) or (iii) the lesser of a fixed rate or an indexed escalation. We may be adversely impacted by inflation on the leases that do not contain indexed escalation provisions or when the increases provided by the escalation provisions are less than inflation. In addition, most of our office and retail leases require the tenant to pay an allocable share of operating expenses, including common area maintenance costs, real estate taxes and insurance. We believe that inflationary increases may be at least partially offset by the contractual rent increases and expense escalations described above. Our majority multifamily properties are subject to one-year leases, which provide us with the opportunity to adjust rental rates annually and mitigate the impact of inflation. We do not believe inflation has had a material impact on our historical financial position or results of operations.

Tax Matters Agreement.

Environmental Matters

Under various federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner’s ability to sell such real estate or to borrow using such real estate as collateral. In connection with the ownership and operation of our assets, we may be potentially liable for such costs. The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous materials or generated hazardous wastes. The release of such hazardous materials and wastes could result in us incurring liabilities to remediate any resulting contamination. The presence of contamination ifor the ~~responsible party is unable~~failure to remediate contamination at our properties may (1) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or ~~unwilling~~property damage), (2) subject our properties to ~~do so.~~liens in favor of the government for damages and costs the government incurs in connection with the contamination, (3) impose restrictions on the manner in which a property may be used or businesses may be operated, or (4) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. In addition, our assets are exposed to the risk of contamination originating from other sources. While a property owner ~~generally is~~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 send contaminated materials to other locations for treatment or disposal, we may be liable for cleanup of those sites if they become contaminated.

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, ~~screening for the presence~~visual or historical evidence of ~~asbestos‑containing materials, polychlorinated biphenyls and~~ underground storage tanks, and the preparation and issuance of a written report. Soil and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any issues raised by the initial assessment that could reasonably be expected to pose a material concern to the property or result in us incurring material environmental ~~liabilities.~~liabilities as a result of redevelopment. They 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 ~~the~~ appropriate actions.

~~Each of our properties has been subjected to varying degrees of environmental assessment at various times.~~ The environmental assessments did not reveal any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of ~~operations.~~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 15 to the financial statements, environmental liabilities total $17.9 million as of September 30, 2019 and December 31, 2018, and primarily relate to a liability to remediate pre-existing environmental matters at Potomac Yard Land Bay H, which was acquired in December 2018.

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. Our exposure to a change in interest rates is summarized in the table below.



	September 30, 2019						December 31, 2018
			Weighted Average Effective Interest Rate		Effect of 1% Change in Base Rates				Weighted Average Effective Interest Rate
	Balance		Weighted Average Effective Interest Rate		Effect of 1% Change in Base Rates		Balance		Weighted Average Effective Interest Rate
Debt (contractual balances):	(Dollars in thousands)
Mortgages payable
Variable rate ⁽¹⁾	$	14,000	3.67	%	$	142	$	308,918	4.30	%
Fixed rate ⁽²⁾	1,347,840		4.20	%	—		1,535,734		4.09	%
	$	1,361,840			$	142	$	1,844,652
Credit facility (variable rate):
Revolving credit facility	$	—	3.12	%	$	—	$	—	3.60	%
Tranche A-1 Term Loan ⁽³⁾	100,000		3.32	%	—		100,000		3.32	%
Tranche A-2 Term Loan ⁽⁴⁾	200,000		3.82	%	633		200,000		4.05	%
Pro rata share of debt of unconsolidated entities (contractual balances):
Variable rate ⁽¹⁾	$	227,396	4.91	%	$	2,306	$	146,980	6.19	%
Fixed rate ⁽²⁾	96,060		4.21	%	—		152,410		4.44	%
	$	323,456			$	2,306	$	299,390

2017 2016
(Amounts in thousands) September 30,
Weighted
Average
Interest
Rate

Effect of 1%
Change in
Base Rates
December 31,
Weighted
Average
Interest
Rate
Balance Balance
Consolidated debt (contractual balances):
Mortgages payable
Variable rate ⁽¹⁾
$ 1,152,106
2.95 % $ 11,681
$ 547,291
2.11%
Fixed rate ⁽²⁾
836,141
4.79 % —
620,327
5.52%
$ 1,988,247
$ 11,681
$ 1,167,618

Credit facility (variable rate):
Revolving credit facility $ 115,751
2.34 % $ 1,174
—
—
Tranche A-1 Term Loan 50,000
2.44 % $ 507
—
—

Pro rata share of debt of unconsolidated entities (contractual balances):
Variable rate ⁽¹⁾
$ 159,169
4.08 % $ 1,614
$ 17,050
1.87%
Fixed rate ⁽²⁾
230,541
3.90 % —
150,150
3.65%
$ 389,710
$ 1,614
$ 167,200

~~_________________~~________________


⁽¹⁾	Includes variable rate mortgages payable with interest rate ~~caps.~~cap agreements.


⁽²⁾	Includes variable rate mortgages payable with interest rates ~~effectively~~ fixed ~~pursuant~~by interest rate ~~swaps.~~swap agreements.


⁽³⁾	As of September 30, 2019 and December 31, 2018, the outstanding balance was fixed by interest rate swap agreements.


⁽⁴⁾	As of September 30, 2019, a portion of the outstanding balance was fixed by interest rate swap agreements with a notional value of $137.6 million.

The fair value of our ~~consolidated debt~~mortgages payable is ~~calculated~~estimated by discounting the future contractual cash flows of these instruments using current ~~risk‑adjusted~~risk-adjusted rates available to borrowers with similar credit profiles based on market sources. The fair value of our revolving credit facility and unsecured 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 September 30, ~~2017~~2019 and December 31, ~~2016~~2018, the estimated fair value of our consolidated debt was ~~$2.1~~$1.7 billion and ~~$1.2 billion, respectively.~~$2.2 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. We do not enter into derivative financial instruments for speculative purposes.

Derivative Financial Instruments Designated as Cash Flow Hedges

Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are designated as cash flow hedges, and are carried at their estimated fair value on a recurring basis. We assess the effectiveness of our cash flow 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 (loss) and is subsequently reclassified into "Interest expense" in the period that the hedged forecasted transactions affect earnings. Our cash flow 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 and equity.

As of September 30, 2019 and December 31, 2018, we had interest rate swap and cap agreements with an aggregate notional value of $1.0 billion and $786.4 million, which were designated as cash flow hedges. The fair value of our interest rate swaps and caps designated as cash flow hedges consisted of assets totaling $7.9 million as of December 31, 2018, included in "Other assets, net" in our balance sheet, and liabilities totaling $27.6 million and $1.7 million as of September 30, 2019 and December 31, 2018, included in "Other liabilities, net" in our balance sheets.

Derivative Financial Instruments Not Designated as Hedges

Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are considered economic hedges, but not designated as accounting hedges, and are carried at their estimated fair value on a recurring ~~basis with realized~~basis. Realized and unrealized gains are recorded ~~into earnings~~in "Interest expense" in the statements of operations in the period in which the change occurs.

As of September 30, ~~2017,~~2019 and December 31, 2018, we had various interest rate swap and cap agreements ~~assumed in the Combination. As~~with an aggregate notional value of ~~September 30, 2017, the~~$307.7 million and $646.4 million, which were not designated as cash flow hedges. The fair value of our interest rate swaps and caps not designated as hedges primarily consisted of ~~liabilities~~assets totaling ~~$703,000~~$2.5 million as of December 31, 2018, included in ~~"Accounts payable and accrued expenses"~~"Other assets, net" in our balance sheet.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

~~We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)~~As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~As required by Rule 13a-15(b) under the Exchange Act,~~ we carried out an evaluation, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, ~~2017,~~2019, our disclosure controls and procedures were effective at the reasonable assurance level such that the information required to be disclosed by us in reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.effective.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended September 30, ~~2017~~2019 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

We are, from time to time, involved in legal actions arising in the ordinary course of business. In our opinion, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.

ITEM 1A. RISK FACTORS

There ~~were~~have been no material changes to the ~~Risk Factors~~risk factors previously disclosed in our ~~Information Statement on Form 10, as amended,~~Annual Report for the year ended December 31, 2018, filed with the SEC on ~~June 20, 2017.~~February 26, 2019.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS


~~(a)~~	~~Exhibits~~

(a) Exhibit Index



Exhibits	Description

~~2.1~~	Amendment to Master Transaction Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG Properties, Inc., JBG/Operating Partners, L.P., certain affiliates of JBG Properties Inc. and JBG/Operating Partners set forth on Schedule A thereto, JBG SMITH Properties and JBG SMITH Properties LP (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.2~~	Separation and Distribution Agreement, dated as of July 17, 2017, by and among Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP (incorporated by reference to Exhibit 2.2 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.3~~	Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VI Transferred, L.L.C. and JBGS/Fund VI OP Mergerco, L.L.C. (incorporated by reference to Exhibit 2.3 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.4~~	Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund VII Transferred, L.L.C. and JBGS/Fund VII OP Mergerco, L.L.C. (incorporated by reference to Exhibit 2.4 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.5~~	Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Fund IX Transferred, L.L.C. and JBGS/Fund IX OP Mergerco, L.L.C. (incorporated by reference to Exhibit 2.5 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.6~~	Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH Properties LP and JBG/Fund VIII Legacy, L.L.C. (incorporated by reference to Exhibit 2.6 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.7~~	Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG SMITH Properties LP and JBG/UDM Legacy, L.L.C. (incorporated by reference to Exhibit 2.7 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.8~~	Agreement and Plan of Merger, dated as of July 17, 2017, by and between JBG/Operating Partners, L.P. and JBGS/OP Mergerco, L.L.C. (incorporated by reference to Exhibit 2.8 to our Current Report on Form 8-K, filed on July 21, 2017).

~~2.9~~	Contribution and Assignment Agreement, dated as of July 18, 2017, by and between JBG Properties, Inc. and JBG SMITH Properties LP (incorporated by reference to Exhibit 2.9 to our Current Report on Form 8-K, filed on July 21, 2017).

3.1	Declaration of Trust of JBG SMITH Properties, as amended and restated (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on July 21, 2017).

3.2	Articles Supplementary to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on March 6, 2018).

3.3	Articles of Amendment to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K, filed on May 3, 2018).

3.4	Amended and Restated Bylaws of JBG SMITH Properties (incorporated by reference to Exhibit ~~3.2~~3.3 to our ~~Current~~Annual Report on Form ~~8-K,~~10-K, filed on ~~July 21, 2017)~~March 12, 2018).

~~10.1~~31.1**	Tax Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.2~~	Employee Matters Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust, Vornado Realty L.P., JBG SMITH Properties and JBG SMITH Properties LP (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.3~~	Transition Services Agreement, dated as of July 17, 2017, by and between Vornado Realty Trust and JBG SMITH Properties (incorporated by reference to Exhibit 10.3 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.4~~	Credit Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.4 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.5~~	Registration Rights Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties and the holders listed on Schedule I thereto (for holders of common shares of JBG SMITH Properties received in the combination) (incorporated by reference to Exhibit 10.5 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.6~~	Registration Rights Agreement, dated as of July 18, 2017, by and among JBG SMITH Properties and the holders listed on Schedule I thereto (for holders of OP Units of JBG SMITH LP received in the combination) (incorporated by reference to Exhibit 10.6 to our Current Report on Form 8-K, filed on July 21, 2017).



~~Exhibits~~	~~Description~~
~~10.7~~	~~Form of JBG SMITH Properties Unit Issuance Agreement (incorporated by reference to Exhibit 10.7 to our Current Report on Form 8-K, filed on July 21, 2017).~~

~~10.8~~	JBG SMITH Properties Non-Employee Trustee Unit Issuance Agreement, dated July 18, 2017, by and among, JBG SMITH Properties, JBG SMITH Properties LP, Michael J. Glosserman and Glosserman Family JBG Operating, L.L.C. (incorporated by reference to Exhibit 10.8 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.9~~	~~JBG SMITH Properties 2017 Employee Share Purchase Plan (incorporated by reference to Exhibit 10.9 to our Current Report on Form 8-K, filed on July 21, 2017).~~

~~10.10~~	~~JBG SMITH Properties 2017 Omnibus Share Plan (incorporated by reference to Exhibit 10.10 to our Current Report on Form 8-K, filed on July 21, 2017).~~

~~10.11~~	Employment Agreement, dated as of July 17, 2017, by and between JBG SMITH Properties and Stephen W. Theriot (incorporated by reference to Exhibit 10.11 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.12~~	Form of Indemnification Agreement between JBG SMITH Properties and each of its trustees and executive officers (incorporated by reference to Exhibit 10.12 to our Current Report on Form 8-K, filed on July 21, 2017).

~~10.13~~	First Amended and Restated Limited Partnership Agreement of JBG SMITH Properties LP, dated as of July 17, 2017 (incorporated by reference to Exhibit 10.13 to our Current Report on Form 8-K, filed on July 21, 2017).

~~31.1~~	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002

~~31.2~~31.2**	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002

~~32.1~~32.1**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and 18 U.S.C 1350, as created by Section 906 of the Sarbanes- Oxley Act of 2002

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	XBRL Taxonomy Extension Schema

101.CAL	XBRL Extension Calculation Linkbase

101.LAB	XBRL Extension Labels Linkbase

101.PRE	XBRL Taxonomy Extension Presentation Linkbase

101.DEF	XBRL Taxonomy Extension Definition Linkbase

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

_______________



**	Filed herewith.

~~SIGNATURE~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		JBG SMITH Properties

Date:	November ~~13, 2017~~5, 2019	/s/ Stephen W. Theriot
		Stephen W. Theriot
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

5753



Maryland				~~81‑4307010~~ 81-4307010
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
		~~(I.R.S. Employer~~ ~~Identification No.)~~
4445 Willard Avenue ~~Suite 400~~	Chevy Chase MD	MD	20815
~~(Address of principal executive offices)~~			Suite 400	(Zip Code)
~~(240) 333‑3600~~ ~~Registrant’s telephone number, including area code~~ (Address of Principal Executive Offices)



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



		~~JBG SMITH PROPERTIES~~ ~~QUARTERLY REPORT ON FORM 10-Q~~ ~~QUARTER ENDED SEPTEMBER 30, 2017~~

	~~TABLE OF CONTENTS~~

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	Page
	Condensed Consolidated ~~and Combined~~ Balance Sheets (unaudited) as of September 30, ~~2017~~ 2019 and December 31, ~~2016~~	2
	~~Condensed Consolidated and Combined Statements of Operations (unaudited) for the three and nine~~ ~~months ended September 30, 2017 and 2016~~ 2018	3
	Condensed Consolidated ~~and Combined Statement~~Statements of ~~Equity~~Operations (unaudited) for the three and nine months ended September 30, ~~2017~~2019 and 2018	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and ~~Combined~~nine months ended September 30, 2019 and 2018	5
	Condensed Consolidated Statements of Equity (unaudited) for the three and nine months ended September 30, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, ~~2017~~2019 and ~~2016~~2018	58
	Notes to Condensed Consolidated ~~and Combined~~ Financial Statements (unaudited)	710

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3632
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5249
Item 4.	Controls and Procedures	5351

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	5451
Item 1A.	Risk Factors	5451
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5451
Item 3.	Defaults Upon Senior Securities	5451
Item 4.	Mine Safety Disclosures	5451
Item 5.	Other Information	5451
Item 6.	Exhibits	5552
Signatures		5752



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



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



Fair value of purchase consideration:
Common shares and OP Units	$	1,224,886
Cash	20,573
Total consideration paid	$	1,245,459

Fair value of assets acquired and liabilities assumed:
Land and improvements	$	342,932
Building and improvements	623,889
Construction in progress, including land	632,664
Leasehold improvements and equipment	7,890
Cash	104,516
Restricted cash	13,460
Investments in and advances to unconsolidated real estate ventures	238,388
Identified intangible assets	146,600
Notes receivable ⁽¹⁾	50,934
Identified intangible liabilities	(8,449		)
Mortgages payable assumed ⁽²⁾	(768,523		)
Capital lease obligations assumed ⁽³⁾	(33,543		)
Deferred tax liability ⁽⁴⁾	(21,476		)
Other liabilities acquired, net	(52,065		)
Noncontrolling interests in consolidated subsidiaries	(3,987		)
Net assets acquired	1,273,230
Gain on bargain purchase ⁽⁵⁾	27,771
Total consideration paid	$	1,245,459



Outstanding common shares and common limited partnership units prior to the Combination	100,571
Exchange ratio ⁽¹⁾	2.71
Common shares and OP Units issued in consideration	37,164
Price per share/unit ⁽²⁾	$	37.10
Fair value of common shares and OP Units issued in consideration	$	1,378,780
Fair value adjustment to OP Units due to transfer restrictions	(43,303		)
Portion of consideration attributable to performance of future services ⁽³⁾	(110,591		)
Fair value of common shares and OP Units purchase consideration	$	1,224,886



	Total Fair Value		Weighted Average Amortization Period
	Total Fair Value		Weighted Average Amortization Period	Useful Life ⁽¹⁾
	(In thousands)		(In years)
Tangible assets:
Building and improvements	$	559,042		3 - 40 years
Tenant improvements	64,847			Shorter of useful life or remaining life of the respective lease
Total building and improvements	$	623,889
Leasehold improvements	$	4,422		Shorter of useful life or remaining life of the respective lease
Identified intangible assets:
In-place leases	$	59,351	6.4	Remaining life of the respective lease
Above-market real estate leases	11,700		6.3	Remaining life of the respective lease
Below-market ground leases	659		88.5	Remaining life of the respective lease
Option to enter into ground lease	17,090		N/A	Remaining life of contract
Management and leasing contracts ⁽²⁾	57,800		7.4	Estimated remaining life of contracts, ranging between 3 - 8 years
Total identified intangible assets	$	146,600
Identified intangible liabilities:
Below-market real estate leases	$	8,449	10.2	Remaining life of the respective lease



	September 30, 2017			December 31, 2016
	(In thousands)
Tenants	$	32,106		$	26,278
Other	23,835			11,314
Allowance for doubtful accounts	(5,467		)	(4,212		)
Total tenant and other receivables, net	$	50,474		$	33,380



	Ownership Interest ⁽¹⁾	Investment Balance
Real Estate Venture Partners ⁽¹⁾	September 30, 2017	September 30, 2017		December 31, 2016
		(In thousands)
Landmark	1.8% - 59.0%	$	110,562	$	—
CBREI Venture	5.0% - 64.0%	85,386		—
Canadian Pension Plan Investment Board	55.0%	36,223		36,312
Brandywine	30.0%	13,753		—
Berkshire Group	50.0%	27,647		—
MRP Realty	70.0%	1,802		—
JP Morgan	5.0%	9,351		9,335
Other		242		129
Total investments in unconsolidated real estate ventures		284,966		45,776
Advances to unconsolidated real estate ventures		20		—
Total investments in and advances to unconsolidated real estate ventures		$	284,986	$	45,776



	Weighted Average Interest Rate	Balance as of
	September 30, 2017	September 30, 2017			December 31, 2016
		(In thousands)
Variable rate ⁽¹⁾	4.08%	$	531,989		$	31,000
Fixed rate ⁽²⁾	3.90%	643,801			273,000
Unconsolidated real estate ventures - mortgages payable		1,175,790			304,000
Unamortized deferred financing costs, net		(860		)	(1,034		)
Unconsolidated real estate ventures - mortgages payable, net		$	1,174,930		$	302,966



	Interest Rate	Balance as of
	September 30, 2017	September 30, 2017
		(In thousands)
Revolving credit facility ⁽¹⁾	2.34%	$	115,751

Tranche A-1 Term Loan	2.44%	$	50,000
Unamortized deferred financing costs, net		(3,611		)
Unsecured term loan, net		$	46,389



Formation Awards	$	3,963
LTIP Units that vested immediately	2,546
OP Units ⁽¹⁾	7,936
Share-based compensation related to Formation Transaction ⁽²⁾	14,445
LTIP Units that vest over four years	885
OPP Units	469
Other equity awards	1,526
Share-based compensation expense - other⁽³⁾	2,880
Total share-based compensation expense	17,325
Less amount capitalized	(161		)
Net share-based compensation expense ⁽⁴⁾	$	17,164



	September 30, 2017				December 31, 2016
	Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value
	(In thousands)
Financial liabilities:
Mortgages payable	$	1,988,247	$	2,015,653	$	1,167,618	$	1,192,267



	Three Months Ended September 30, 2017
	Office		Multifamily		Other				Eliminations			Total
	(In thousands)
Rental revenue:
Property rentals	$	91,534	$	23,397	$	4,171			$	(2,644	)	$	116,458
Tenant reimbursements	7,917		1,548		128				—			9,593
Total rental revenue	99,451		24,945		4,299				(2,644		)	126,051
Rental expense:								—
Property operating	27,000		6,796		3,502				(7,664		)	29,634
Real estate taxes	13,038		2,952		1,204				—			17,194
Total rental expense	40,038		9,748		4,706				(7,664		)	46,828
NOI	$	59,413	$	15,197	$	(407	)		$	5,020		$	79,223



	Three Months Ended September 30, 2016
	Office		Multifamily		Other			Eliminations			Total
	(In thousands)
Rental revenue:
Property rentals	$	81,575	$	15,850	$	4,898		$	942		$	103,265
Tenant reimbursements	8,977		876		378			—			10,231
Total rental revenue	90,552		16,726		5,276			942			113,496
Rental expense:							—
Property operating	25,083		4,782		3,065			(5,643		)	27,287
Real estate taxes	11,793		1,663		1,006						14,462
Total rental expense	36,876		6,445		4,071			(5,643		)	41,749
NOI	$	53,676	$	10,281	$	1,205		$	6,585		$	71,747



	Nine Months Ended September 30, 2017
	Office		Multifamily		Other				Eliminations			Total
	(In thousands)
Rental revenue:
Property rentals	$	249,532	$	62,050	$	9,623			$	(4,306	)	$	316,899
Tenant reimbursements	22,738		3,772		651				—			27,161
Total rental revenue	272,270		65,822		10,274				(4,306		)	344,060
Rental expense:								—
Property operating	71,377		16,716		11,330				(22,082		)	77,341
Real estate taxes	37,185		7,973		2,820				—			47,978
Total rental expense	108,562		24,689		14,150				(22,082		)	125,319
NOI	$	163,708	$	41,133	$	(3,876	)		$	17,776		$	218,741



	Nine Months Ended September 30, 2016
	Office		Multifamily		Other			Eliminations			Total
	(In thousands)
Rental revenue:
Property rentals	$	237,826	$	45,203	$	18,621		$	(2,153	)	$	299,497
Tenant reimbursements	24,807		2,422		1,199			—			28,428
Total rental revenue	262,633		47,625		19,820			(2,153		)	327,925
Rental expenses:							—
Property operating	69,740		12,594		14,934			(22,181		)	75,087
Real estate taxes	34,855		5,063		3,794			—			43,712
Total rental expense	104,595		17,657		18,728			(22,181		)	118,799
NOI	$	158,038	$	29,968	$	1,092		$	20,028		$	209,126



	2017						2016
(Amounts in thousands)	September 30,		Weighted Average Interest Rate		Effect of 1% Change in Base Rates		December 31,		Weighted Average Interest Rate
	Balance		Weighted Average Interest Rate		Effect of 1% Change in Base Rates		Balance		Weighted Average Interest Rate
Consolidated debt (contractual balances):
Mortgages payable
Variable rate ⁽¹⁾	$	1,152,106	2.95	%	$	11,681	$	547,291	2.11%
Fixed rate ⁽²⁾	836,141		4.79	%	—		620,327		5.52%
	$	1,988,247			$	11,681	$	1,167,618
Credit facility (variable rate):
Revolving credit facility	$	115,751	2.34	%	$	1,174	—		—
Tranche A-1 Term Loan	50,000		2.44	%	$	507	—		—

Pro rata share of debt of unconsolidated entities (contractual balances):
Variable rate ⁽¹⁾	$	159,169	4.08	%	$	1,614	$	17,050	1.87%
Fixed rate ⁽²⁾	230,541		3.90	%	—		150,150		3.65%
	$	389,710			$	1,614	$	167,200

~~Standard~~

~~Description~~

~~Date of Adoption~~

~~Effect on the Financial Statements or Other~~
~~Significant Matters~~

~~Standard adopted~~

~~ASU 2017‑01 Business Combinations (Topic 805): Clarifying the~~
~~Definition of a Business~~

This standard provides a screen to determine when an asset acquired or group of assets acquired is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated.

~~September~~
~~2017~~

~~The adoption and implementation of this standard did not have an impact on our results of operations, financial condition or cash flows.~~