Shareholder letter
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August 10 , 2026 JBG SMITH Our Fellow Shareholders : The second quarter unfolded against a backdrop of continued macroeconomic uncertainty . The conflict in the Middle East disrupted global energy markets and complicated the inflation outlook , while elevated interest rates , wider risk premiums , and higher return requirements continued to weigh on real estate capital markets . With inflation risks lingering and the labor market slowing , the Federal Reserve has maintained a cautious posture , leaving transaction activity below the levels we anticipated entering 2026 . While the metro area continues to work through the effects of last year's spending cuts and workforce reductions , Northern Virginia is benefiting from growing defense , intelligence , and technology spending . Demand for secure and specialized office space continues to strengthen , our National Landing office leasing pipeline is the strongest it has been in several years , and multifamily fundamentals are beginning to modestly improve against a backdrop of historically limited new supply . These trends reinforce our conviction that our portfolio is concentrated in markets aligned with enduring long - term demand drivers . While we remain measured in our expectations for the pace of recovery in the transaction markets , our priorities remain unchanged : allocate capital with discipline , preserve balance sheet flexibility , and maximize long - term NAV per share growth . Capital Allocation - We are actively pursuing new growth opportunities that align with our strategy and leverage our competitive strengths as a mixed - use owner , operator , and developer . We expect to fund growth opportunities through a combination of asset sales and private equity joint ventures - choosing among these sources based on their relative cost of capital and availability at the time . Across all channels , our capital allocation strategy remains focused on enhancing long - term shareholder value and positioning our portfolio for sustained NAV per share growth . During the second quarter , we sold a 50 % interest in Tysons Dulles Plaza , an approximately 491,500 - square - foot commercial asset in Tysons , Virginia . Additionally , we contributed 2200 Crystal Drive , an obsolete office building in National Landing , to a real estate venture that is converting the building into a 195 - unit multifamily asset . We are the developer and the property manager , and our partner has committed to contribute the equity required to fund the construction for a 70 % interest in the venture . This transaction is another demonstration of our ability to attract third- party capital , execute complex repositioning projects , and transform obsolete office buildings into durable , income- producing multifamily assets . These joint ventures further our goal of attracting private capital partners to scale and diversify our distressed office investment strategy and fund the construction of multifamily assets in our development pipeline while also enhancing the efficiency of our platform with incremental fee revenue and potential carried interest income . Financial and Operating Metrics For the three months ended June 30 , 2026 , we reported Core FFO attributable to common shares of $ 10.4 million , or $ 0.18 per diluted share . Annualized NOI increased 1.3 % quarter over quarter , totaling $ 249.2 million , adjusting for assets that were sold or recapitalized . Our multifamily portfolio ended the quarter at 89.6 % leased and 86.6 % 1
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2 occupied. Our office portfolio ended the quarter at 78.0% leased and 75.4% occupied. Our Same Store NOI declined 4.0% for the three months ended June 30, 2026. As of June 30, 2026, our Net Debt to Annualized Adjusted EBITDA was 12.4x. We are currently operating at elevated leverage levels while we lease up our newly constructed multifamily assets (The Grace, Reva, The Zoe, and Valen). In the near term, we expect our leverage will moderate through additional income from the stabilization of these newly constructed multifamily assets and additional commercial revenue from our signed but not yet commenced leases. Our floating rate exposure remains low, with 84.2% of our debt fixed or hedged as of the end of the second 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 near-term debt maturities. Our debt has a weighted average maturity of 2.3 years, after adjusting for 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 The Same Store multifamily portfolio ended the quarter at 94.3% leased, up 80 basis points quarter over quarter, and 92.0% occupied, flat from March 2026. June asking rents were up 1.0% from March and 2.6% from December 2025. Momentum carried into July, as of month end the portfolio was 94.4% leased, occupancy climbed to 92.3%, and asking rents rose another 1.9% from June. Our multifamily portfolio NOI increased approximately 1.0% from Q1 2026. We continue to make progress leasing our recently completed assets — The Grace and Reva were 90.4% leased and The Zoe and Valen were 58.8% leased as of quarter end, leasing velocity continued into July bringing the assets to 92.8% and 68.9% leased, respectively, as of month end. 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) The multifamily market continues to grapple with the effects of the federal workforce disruption that began in 2025. While we believe the risk of another wave of significant federal job cuts has largely subsided and that the market is in the early stages of recovery, it is a long and slow climb out of the valley. That climb is steepest for segments of the economy most linked to civilian federal employment, contracting, and grantmaking. Jobs data provide some helpful context: DC metro area employment appears to have bottomed in February and has since recovered by 17,400 jobs. This pace suggests a return to more typical labor market conditions given average annual growth of approximately 40,000 jobs in recent years. Unlike employment, metro-wide vacancy reached 6.8% in February and has yet to moderate, although rental rate trends have begun to improve. Asking rents declined 4.3% from their June 2025 peak to their January low but have since rebounded 2.4% through June – a modest but encouraging indicator. The supply side of the equation remains a telling and positive contributor to the market, with a pipeline that has slowed to a trickle relative to historic levels. Just over 2,200 units are slated to deliver in 2026 – a far cry from the 14,000 or more that delivered in peak years. The entire forward pipeline, inclusive of 2026 deliveries, is just over 9,000 units expected to deliver through 2028, representing just over 1.6% of regional inventory. This constrained supply, coupled with continued resilient home pricing in the DC metro region, has provided an important buffer against the recent demand shock. As a result, the market remains relatively well-occupied at 93.2% and has seen year-over-year rent declines of less than 2%. Looking ahead, these favorable supply dynamics should support a
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3 return to rental rate growth, particularly in Northern Virginia, where expanding defense -tech employment is helping to drive demand. Office Trends Our office portfolio ended the quarter at 78.0% leased, up 1.1% quarter over quarter, and 75.4% occupied, up 0.2% quarter over quarter, and NOI increased 1.6% from Q1 2026, adjusting for the recapitalization of Tysons Dulles Plaza. The spread between our leased and occupied percentages represents approximately $12.7 million of contractual annualized rent, which is expected to commence over the next 12 months. In the second quarter, we executed 151,000 square feet of leases (148,000 square feet in National Landing), including 88,000 square feet of new leases. For second generation leases, the rental rate mark-to-market was negative 2.0%. Our year-to-date leasing activity represents over 66% of our 2025 leasing activity, underscoring the continued momentum in our office leasing demand. Looking forward, lease rollover in National Landing is modest, averaging approximately 7% annually over the next five years. We expect our tenant retention rate to improve, as defense-tech tenants comprise approximately 70% of the portfolio’s tenancy. Over the last 18 months, we have achieved an 80% retention rate among these tenants and have expanded their footprints by an average of 9% upon renewal. We continue to execute upon our leasing pipeline, which currently stands at over 300,000 square feet of tenants looking to occupy space in National Landing over the next 12 months. Leasing activity in National Landing continues to be driven primarily by three categories of office users: (i) companies requiring a Sensitive Compartmented Information Facility (SCIF) or other forms of secure facilities; (ii) technology-related tenants attracted by the recent delivery of our placemaking interventions; and (iii) defense-related tenants who have long called this submarket home. 91% of our second quarter leasing activity was with tenants in the defense and technology industries. Demand for office space that has a SCIF is particularly strong, as these facilities require significant capital investments which can exceed $500 per square foot and extended construction timelines which can stretch over 18 months driven by security and certification requirements. The ability to deliver new SCIF or assign existing SCIF continues to be a key differentiator in our tenant discussions — currently, 92% of our National Landing GSA tenancy has a SCIF in their space, representing a lasting competitive advantage that is difficult to replicate elsewhere in the market. To support a healthier long-term office market in National Landing, we have reduced our office inventory by more than 25% since our formation by repurposing older, underutilized office buildings for redevelopment or conversion to multifamily housing, hospitality, and other complementary uses that create a vibrant mixed -use environment. At 1900 Crystal Drive and 2001 Richmond Highway, we demolished two obsolete office buildings and developed the sites into four new multifamily assets currently in lease up — The Grace, Reva, The Zoe, and Valen. We redeveloped 1770 Crystal Drive, an aging office property, into a best-in-class office building that was 100% pre- leased to Amazon and remains fully leased to Amazon today. More recently, we expanded this strategy through adaptive reuse and conversion of four obsolete office buildings. We entitled 2100 Crystal Drive for conversion into a 345-key, dual-branded hotel before selling the asset to a hotel developer. We recapitalized and commenced construction on the conversion of 2200 Crystal Drive into a 195-unit multifamily asset. During the second quarter we received entitlement approval to convert 1800 and 1901 South Bell Street into multifamily, advancing the next phase of inventory reduction and repositioning within the submarket. Our leasing efforts continue to focus on buildings with long-term potential, concentrating occupancy in areas of National Landing that are accessible via multi-modal transportation and that we have enhanced through our placemaking interventions, including the recent delivery of our new office amenity hub at 2011 Crystal Drive. Northern Virginia Office Trends (based on JLL and CBRE data) The Northern Virginia office market continued to distinguish itself from the broader region’s economic challenges during the second quarter, driven largely by the rapid growth of the defense technology sector. According to CBRE,
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4 the market recorded its sixth consecutive quarter of positive absorption, reaching 535,000 square feet year to date, while headline vacancy fell to 21.3%. Leasing activity was similarly strong, with 3 million square feet year to date, including 14 transactions over 50,000 square feet according to CBRE. Notably, 46% of that leasing activity was directly attributable to defense or technology firms. JLL similarly highlighted the market’s momentum, reporting that second quarter leasing activity exceeded the prior 3-year average by 13.5%. Supply dynamics continued to strengthen as well. JLL noted that the office redevelopment pipeline has grown to 17 million square feet, with nearly half of the new uses already jurisdictionally approved. While some of this inventory will ultimately add to apartment supply via conversions and wood frame multifamily sites, a significant share of it is slated for townhome and data center development. This is the healthiest office market we have seen since the pandemic, as Northern Virginia establishes itself as a leading hub for a new generation of defense technology companies. We continue to believe that this strong tenant demand, coupled with unprecedented levels of inventory removal and virtually no new starts, will drive vacancy rates to far healthier levels. This dynamic should benefit both our National Landing portfolio and our recent acquisitions in the path of defense tech growth. Perhaps even more important, demand is being driven not only by new business flowing to existing tenants in the market, but also by net new entrants who are often relatively new defense technology companies in critical areas like AI, cybersecurity, and space. Many of these new entrants have significant valuations backed by growing government contract revenue and are moving at speeds much more like private tech companies than traditional beltway players. We believe National Landing remains exceptionally well- positioned to capture more than its fair share of this demand; and we will continue to diligently pursue other opportunities to acquire assets elsewhere in the path of similar growth as they arise. * * * As we look ahead, our priorities remain clear and consistent: execute with discipline, preserve balance sheet flexibility, and allocate capital toward opportunities that offer compelling long -term risk-adjusted returns. While the macroeconomic environment remains uncertain, the underlying trends most important to our business continue to move in a favorable direction. Multifamily fundamentals are improving as new supply remains constrained, demand from defense, intelligence, and technology-oriented tenants continues to support leasing activity in National Landing, and our recent recapitalization and financing transactions have further strengthened our ability to pursue attractive investment opportunities. We believe the actions we have taken over the past several years — transforming National Landing through placemaking, recycling capital into higher-return opportunities, reducing obsolete office inventory, and strengthening relationships with institutional capital partners — have positioned us to benefit as market conditions normalize. As always, our focus remains on maximizing long-term NAV per share growth and creating value for our shareholders. Finally, we would like to provide additional context regarding the recent ruling by the DC Superior Court on the Wardman Tower matter. We, along with multiple other parties, are named defendants in a lawsuit arising out of a condominium development project known as Wardman Tower in Washington, DC. The lawsuit was filed by the Wardman Tower Residential Condominium Unit Owners Association. The building has 32 units which were originally purchased for prices totaling in aggregate approximately $115.0 million, equating to an average purchase price of approximately $3.6 million per unit. The lawsuit seeks damages resulting primarily from alleged construction and design deficiencies, and alleged misrepresentations and omissions, including claims under the DC Consumer Protection Procedures Act ("CPPA"). The Wardman Tower project was designed and constructed b y other parties and was substantially complete prior to our formation. We have never had any ownership interest in the project. One of our subsidiary entities, which was only made a defendant in the litigation during the trial, had acted under a project management agreement with the project owner. The lawsuit sought $185.0 million in compensatory
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5 damages and asked that those damages be trebled under the CPPA, for a total of approximately $555.0 million in damages – nearly 5x the aggregate original purchase price of all condominium units – plus attorneys’ fees. On July 31st, the court entered judgment in favor of the condominium association, found damages in the amount of $118.7 million, very close to the aggregate of the purchase prices the original owners paid for their units, and ordered the defendants, which include us, to pay treble that amount, or approximately $356.1 million in damages, plus attorneys’ fees in an amount to be determined. For a multitude of reasons which we intend to detail during the appeal process, we believe the judgment against us, including its conclusion that we are liable for acts of employees of a subsidiary providing services under a project management agreement between the project owner and another subsidiary, is not supported by the facts of the case or applicable law regarding corporate separateness. If upheld, this ruling could have implications far beyond this case by disrupting the principles of corporate separateness relied upon by companies across Washington, DC and throughout the United States. It could also discourage future real estate investment in the District and constrain development of new housing, particularly for-sale housing and adaptive-reuse conversions of older buildings to residential. We believe there are substantial grounds to challenge both the liability findings against us and the size and trebling of the award. We intend to appeal the judgment promptly and continue to defend ourselves vigorously in this matter. While we maintain substantial insurance coverage, we also believe that JBG SMITH should not have been named as a defendant in this case and should not bear any liability with respect to this matter. These arguments are expected to be addressed through the appellate process. The appeal could take years to conclude; any final resolution will not be determined until that process has run its course. We have high confidence in our grounds for appeal, and we believe that the court’s decision to hold JBG SMITH liable is not justifiable. For that reason, we do not believe a loss is probable, and, therefore, a liability has not been recognized in our financial statements. While the arguments we plan to make in our appeal will become public as that process unfolds, it is unlikely we will know the outcome of this process until the end. This judgment was a shocking surprise, and we do not like surprises any more than any other owner of the company. As the largest group of individual shareholders of JBG SMITH, our team is committed to doing everything we can to reverse this unfortunate and unjust outcome, and we will not rest until we do so. Thank you for your continued trust and confidence. Sincerely, W. Matthew Kelly Chief Executive Officer