Shareholder letter
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1 Managem ent Letter October 28, 2025 Our Fellow Shareholders: The third quarter showcased our team’s ability to execute on our strategic priorities, even as the broader economic environment remained uncertain. We made meaningful progress across our portfolio, driven by strong leasing momentum, disciplined capital allocation, and the continued transformation of National Landing into a vibrant, mixed-use destination. Notably, we accelerated office leasing during a typically slow period, converting a robust pipeline of prospective tenants into signed leases – particularly in National Landing. This momentum reflects the enduring appeal of our placemaking efforts and the area’s proximity to the Pentagon, which continues to attract defense technology tenants. While the freeze on federal procurement activity earlier this year thawed through the second and into the third quarter, and business activity had begun to normalize and even grow, the current government shutdown has the potential to significantly disrupt that normalization. It has already impacted economic activity in our region and, if prolonged, could begin to hinder tenants’ desire to make leasing decisions, and significantly dampen regional economic activity. The uncertainty surrounding federal operations and procurement, particularly in a market as closely tied to government and defense spending as ours, poses real risks to growth and stability. We remain focused on navigating these dynamics with agility and discipline, being good partners to our custo mers as they try to do the same, and positioning the portfolio to weather near-term volatility and capitalize on long-term growth opportunities. The following are highlights from this quarter: Completed construction of Valen, a 355-unit multifamily tower in the heart of National Landing. This is the fourth multifamily tower we have delivered in National Landing since the beginning of 2024 for a total of almost 1,600 new units. Leasing at these new towers continues to be strong, driven by the previous lack of new supply in the submarket and demand drivers such as Amazon and the vibrant amenities we’ve created through our placemaking interventions. Leased 182,000 square feet of office space. Our office leasing had a weighted average lease term of 4.3 years and included 108,000 square feet of new leases in National Landing. While the third quarter is typically slower than the second and fourth quarters, demand in National Landing remains strong, driven by the growing defense tech sector’s desire for proximity to the Pentagon and the appeal of the highly amenitized neighborhood we’ve created. Entitled 2100 and 2200 Crystal Drive, two obsolete office buildings in National Landing, for conversion to hospitality and multifamily uses. These assets were among the first to be approved through Arlington County’s new Adaptive Reuse Policy. 2100 Crystal Drive is entitled to be converted into a 345 -key, dual-brand hotel and is under contract to be sold to a hotel owner/operator. 2200 Crystal Drive was approved to be converted into approximately 195 multifamily units, and we expect to commence construction next year.
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2 Capital Allocation Our capital allocation strategy remains anchored in our core objective: maximizing long -term NAV per share growth. Leveraging our deep expertise in mixed-use, urban infill real estate, we have consistently rotated across asset classes based on relative value, cost of capital, and risk-adjusted return potential. In prior cycles, we divested low cap rate CBD office and reallocated capital to multifamily development. More recently, multifamily assets have commanded relatively attractive pricing in the private market. Monetizing these assets – especially when we can achieve premiums to NAV – has provided an efficient source of capital for opportunistic investments. This disciplined approach allows us to recycle capital into opportunities that we believe offer th e greatest potential for long-term NAV per share growth. Looking ahead, we continue to pursue new growth opportunities that align with our strategy and competitive advantages as a mixed-use owner, operator, and developer. We believe the current market dislocation is creating some of the most compelling office investment opportunities in nearly two decades, as demonstrated by our acquisition of Tysons Dulles Plaza in May. In parallel, we continue to explore opportunities to monetize our land bank and selectively recapitalize certain assets, generating incremental fee revenue and carried interest income through joint ventures with third-party investors. Given the substantial discount our shares have historically traded at relative to NAV, we allocated a significant amount of our capital to share repurchases. So far this year, we have repurchased 26.8 million shares at an average price of $16.52 per share, totaling $443.1 million. Since launching our share repurchase program in 2020, we have repurchased 83.6 million shares, which is approximately 62% of the shares outstanding as of December 31, 2019, at an average price of $18.79 per share, totaling $1.6 billion. As we have done throughout our time as a public company, we intend to fund growth opportunities through a combination of asset sales, private equity joint ventures, and selective issuances of public equity. Which of these we access at any given point in time depends upon their relative cost of capital and availability. Across all channels, our capital allocation strategy remains focused on enhancing long-term shareholder value and positioning the portfolio for sustained NAV per share growth. Financial and Operating Metrics For the three months ended September 30, 2025, we reported Core FFO attributable to common shares of $9.1 million, or $0.15 per diluted share. Annualized NOI decreased 3.8% quarter over quarter, totaling $232.9 million, excluding the assets that were sold, recapitalized, and recently acquired. Our multifamily portfolio ended the quarter at 89.1% leased and 87.2% occupied. Our office portfolio ended the quarter at 77.6% leased and 75.7% occupied. Our portfolio Same Store NOI decreased 6.7% for the three months ended September 30, 2025. As of September 30, 2025, our Net Debt to Annualized Adjusted EBITDA was 12.6x. We are currently operating at elevated leverage levels while our newly constructed multifamily assets (The Grace, Reva, The Zoe, and Valen) lease up. We expect our leverage will moderate through: (i) additional income from the stabilization of these newly constructed multifamily assets; (ii) rent growth in our existing multifamily portfolio given the limited multifamily supply pipeline in the DC metro area; (iii) additional commercial revenue from our signed but not yet commenced leases; and (iv) office demand in National Landing from prospective tenants seeking proximity to the Pentagon, local tech talent, and the placemaking attractions we have delivered. Our floating rate exposure remains low, with 88.1% of our debt fixed or hedged as of the end of the third quarter, after accounting for in-place interest rate swaps and caps. The floating rate exposure is tied to our revolving credit facility and assets where the business plan warrants preserving flexibility. We continue to be well positioned with respect to our balance sheet and our debt, which has a weighted average maturity of three years, after adjusting for
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3 by-right extension options. Our non-recourse asset-level financing strategy continues to be most valuable in an environment like today, providing a floor on our downside risk. Operating Portfolio Multifamily Trends Our Same Store multifamily portfolio ended the quarter at 93.1% leased, down 1.6%, and 92.2% occupied, down 0.6% quarter over quarter. In our Same Store multifamily portfolio, effective rents increased 2.2% blended across both new and renewal leases while achieving a 56.3% renewal rate. Our multifamily portfolio Same Store NOI decreased 2.2% for the three months ended September 30, 2025, driven by lower occupancy and increased operating expenses. This quarter, we completed construction of Valen, a 355-unit multifamily tower with 11,000 square feet of ground floor retail in the heart of National Landing which began leasing during the second quarter and is approximately 29% leased as of this week. We continue to make progress leasing The Grace and Reva, which were 82.5% leased, and The Zoe, which was 50.8% leased, as of September 30, 2025. Since Amazon brought their employees back to the office five days a week on January 2nd, we have seen a 40% increase in the number of Amazonians living in our National Landing multifamily portfolio. We believe that the amenity -rich environment we have developed in National Landing and proximity to transit are key factors contributing to the successful leasing performance. DC Metro Multifamily Trends (based on CoStar, Apartment List, and BLS data) Multifamily rent growth and occupancy across the DC metro area remained relatively flat with occupancy at approximately 94%, despite a sharp slowdown in new deliveries – approximately 10,000 units year-to-date, the lowest level in the past decade – and only one new start within our submarkets this quarter. While a seasonal slowdown following the summer is normal, the larger-than-normal loss in occupancy and a continuation of a deceleration in rent growth that have persisted since the spring has us monitorin g the health of the market closely. We take solace in the fact that new construction starts dwindled materially through 2023, 2024, and 2025 leaving the next few years with historically limited new deliveries – ideal conditions for tightened occupancy and strong rent growth as long as the demand side cooperates. Additionally, the market is bolstered by the structurally limited inventory of new for-sale housing and resulting high prices, as well as the potential for strong growth in sectors like defense and technology – which are increasingly relevant in the region’s growth story and likely to benefit from federal spending priorities post-shutdown. In the near term, we expect demand to remain tepid at a regional level due to disruptions and uncertainty around the federal government and its all-important procurement spending. As of the August BLS print, the region is essentially flat year-over-year from an employment perspective and down about 13,000 jobs from the beginning of the year. In contrast, by last August we had already added approximately 21,000 jobs making this year a significant reversal in trajectory even if the absolute numbers are somewhat modest in the scale of the overall economy. The reversal to date may not be the extent of the economic impact, however, as federal employees who took the “fork in the road” buyouts were paid through September 30 th, with their resignations becoming effective on that day. These numbers also do not factor in any additional impacts from a long-term federal government shutdown – all to say that the demand picture through the end of the year remains uncertain. Office Trends Our office portfolio ended the quarter at 77.6% leased, up 1.1% quarter over quarter, and 75.7% occupied, up 0.9% quarter over quarter. The spread between our leased and occupied percentages represents over $7.5 million of contractual annualized rent which is expected to commence by the end of next year. In the third quarter, we executed 182,000 square feet of leases with a weighted average lease term of 4.3 years. For second generation leases, the rental rate mark-to-market was positive 11.1%.
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4 Leasing activity continued to be strong during the third quarter when we typically see a slowdown relative to the second quarter. Leasing in National Landing continues to be driven primarily by office users who fall into three categories: (i) companies who need SCIF/secure facility space; (ii) technolo gy-related new tenants largely attracted by the recent delivery of our placemaking interventions; and (iii) defense-related tenants who have long called this submarket home. 100% of our third quarter leasing activity and approximately 95% of our year -to-date leasing activity was with tenants in the defense and technology industries. Demand for SCIF spaces that meet the current standard is particularly strong, and the ability to deliver new SCIF or assign existing SCIF is often a major differentiator in our tenant conversations. Looking forward, we have modest lease roll over the next five years in National Landing, averaging approximately 6% per year, and we expect our retention rate to improve given approximately 70% of our tenancy in our National Landing portfolio comprises defense-tech tenants. Our leasing efforts continue to focus on buildings with long-term potential, concentrating occupancy in areas of National Landing that we have enhanced through our placemaking interventions and that are accessible via multi - modal transportation. In total, we will have taken over 1.0 million square feet of obsolete office space out of service in National Landing. Our rationale for reducing competitive stock in National Landing remains the same: to help foster a healthier long-term office market while repurposing older, underutilized buildings for redevelopment or conversion to multifamily housing, hospitality, or other complimentary uses that will support a vibrant mixed -use environment. Northern Virginia Office Trends (based on JLL and CBRE data) As has become the norm, metro-wide statistics reflect nearly flat absorption, although CBRE reported that the year had turned to net positive absorption for the first time since 2019. That report reflects a cautiously expressed sentiment that the office market, which had run aground, was slowly lifting off the muddy bottom. For one thing, vacancy rates are starting to decline across the board. That decline, however, is not yet driven by demand but by inventory coming offline. In the third quarter, JLL reported that 2.6 million square feet had come offline in Northern Virginia with an additional 10.3 million square feet in the pipeline to be demolished for other uses. We expect more inventory to come offline as dramatic re-pricing of office and demand for suburban housing sites overlap. This reduction in inventory should steadily drive down vacancy – faster if demand expands – and compounds the trend of a shrinking “truly” competitive market that’s further reduced by “zombie” buildings which are not truly comp etitive in the market. While some of those buildings will ultimately trade and become competitive again via reset basis, many of them will disappear forever as they’re scraped for new uses. In short, the truly competitive vacancy rate is likely far lower than the roughly 20% (and dropping) that’s quoted in the statistics. Finally, JLL and CBRE both report single-digit vacancy rates for the “best” new product in the market, suggesting that, in the absence of new construction (which remains largely prohibitively expensive), demand is likely to compress to the “best of the rest” as it resumes – a trend we see playing out real-time in the market particularly among government contractors who place value for money high on their list of desirable characteristics in a building. We also believe that the Northern Virginia market, unlike the rest of the region, remains strongly aligned with the spending priorities of the current administration, and that a mandate to remain competitive in defense and technology is likely one of the few truly bipartisan issues left in Washington. Until the shutdown, this demand had already been filling our pipeline and that of Northern Virginia. However, there is some near -term risk of a protracted shutdown disrupting the spending authorization for contracts, which at the very least will likely lead to leasing decisions being put on pause and companies implementing austerity measures until it is resolved. * * *
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5 As we look ahead, we remain focused on the disciplined execution of our business plans and our capital allocation strategy. Our platform is built to navigate uncertainty and capitalize on dislocations, and we believe the current environment presents compelling opportunities to deploy capital into assets that offer attractive risk-adjusted returns. We are encouraged by the momentum in our office leasing pipeline, the resilience of our multifamily portfolio, the strength of our balance sheet, and the continued evolution of National Landing into a vibrant, 18-hour neighborhood. Above all, we remain committed to maximizing long-term NAV per share growth, and we believe our current positioning and investment discipline will allow us to drive meaningful value crea tion for shareholders over time. Thank you for your continued trust and partnership. Sincerely, W. Matthew Kelly Chief Executive Officer