JBG SMITH PROPERTIES Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2020 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year endedDecember 31, 2020 . One of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the current pandemic of the novel coronavirus ("COVID-19") on our financial condition, results of operations, cash flows, performance, tenants, the real estate market, and the global economy and financial markets. The significance, extent and duration of the impact of COVID-19 on us and our tenants remains largely uncertain and dependent on near-term and future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19, the distribution, effectiveness and willingness of people to take COVID-19 vaccines, the extent and effectiveness of the containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in the area in which we operate. Moreover, investors are cautioned to interpret many of the risks identified under the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
Organization and Basis of Presentation
JBG SMITH Properties ("JBG SMITH"), aMaryland real estate investment trust ("REIT"), owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail. JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in theWashington, D.C. metropolitan area that have high barriers to entry and vibrant urban amenities. Over half of our portfolio is inNational Landing where we serve as the exclusive developer for Amazon.com, Inc.'s ("Amazon") new headquarters and whereVirginia Tech's planned new$1 billion Innovation Campus is located. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI")Impact Pool , Amazon, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties. Substantially all our assets are held by, and our operations are conducted through,JBG SMITH Properties LP ("JBG SMITH LP "), our operating partnership. JBG SMITH is referred to as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures. We were organized for the purpose of receiving, via the spin-off onJuly 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado")Washington, D.C. segment. OnJuly 18, 2017 , we acquired the management business and certain assets and liabilities of JBG (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction." 30
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References to our financial statements refer to our unaudited condensed consolidated financial statements as ofJune 30, 2021 andDecember 31, 2020 , and for the three and six months endedJune 30, 2021 and 2020. References to our balance sheets refer to our condensed consolidated balance sheets as ofJune 30, 2021 andDecember 31, 2020 . References to our statements of operations refer to our condensed consolidated statements of operations for the three and six months endedJune 30, 2021 and 2020. References to our statements of cash flows refer to our condensed consolidated statements of cash flows for the six months endedJune 30, 2021 and 2020. The accompanying financial statements are prepared in accordance with accounting principles generally accepted inthe United States of America ("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. We have elected to be taxed as a REIT under sections 856-860 of the Internal Revenue Code of 1986, as amended (the "Code"). Under those sections, a REIT which distributes at least 90% of its REIT taxable income as dividends to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to its shareholders. We currently adhere and intend to continue to adhere to these requirements and to maintain our REIT status in future periods. We also participate in the activities conducted by our subsidiary entities that have elected to be treated as taxable REIT subsidiaries under the Code. As such, we are subject to federal, state and local taxes on the income from these activities. 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. 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. For instance, we have historically experienced higher utility costs in the first and third quarters of the year. We compete with many property owners and developers. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our assets at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.
Overview
As ofJune 30, 2021 , our Operating Portfolio consisted of 64 operating assets comprising 43 commercial assets totaling 13.3 million square feet (11.4 million square feet at our share) and 21 multifamily assets totaling 7,776 units (6,125 units at our share). Additionally, we have: (i) one under-construction multifamily asset with 808 units (808 units at our share); (ii) 11 near-term development assets totaling 5.2 million square feet (5.0 million square feet at our share) of estimated potential development density; and (iii) 26 future development assets totaling 14.7 million square feet (11.9 million square feet at our share) of estimated potential development density. We continue to focus on our comprehensive plan to reposition our holdings inNational Landing inNorthern Virginia by executing a broad array of Placemaking strategies. Our Placemaking strategies include the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces. In keeping with our dedication to Placemaking, each new project is intended to contribute to authentic and distinct neighborhoods by creating a vibrant street environment with robust retail offerings and other amenities including improved public spaces. We have also invested in Citizens Broadband Radio Service ("CBRS") wireless spectrum inNational Landing as part of our efforts to makeNational Landing among the first 5G-operable submarkets in the nation. InNovember 2018 , Amazon announced it had selected sites that we own inNational Landing as the location of its new headquarters. We currently have leases with Amazon totaling approximately 1.0 million square feet at six office buildings inNational Landing , including approximately 167,000 square feet leased during the second quarter of 2021. InMarch 2019 , 31
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we executed purchase and sale agreements with Amazon for two of ourNational Landing development sites,Metropolitan Park andPen Place , which will serve as the initial phase of construction associated with Amazon's new headquarters atNational Landing . InJanuary 2020 , we soldMetropolitan Park to Amazon for$155.0 million and began constructing two new office buildings thereon, totaling 2.1 million square feet, inclusive of over 50,000 square feet of street-level retail with new shops and restaurants. We are the developer, property manager and retail leasing agent for Amazon's new headquarters atNational Landing .
2021 Outlook
A fundamental component of our strategy to maximizing long-term net asset value per share is active capital allocation. Since our inception in 2017, we have completed the sale, recapitalization and ground lease of$1.6 billion of primarily office assets, and we intend to opportunistically sell at least another$1.5 billion of non-core office assets and land. We are currently targeting dispositions primarily of office assets in submarkets where we have less concentration and where we anticipate lower growth rates going forward relative to other opportunities within our portfolio. Additionally, we may market select land assets where ground lease or joint venture execution may represent the clearest path to maximizing value. Redeploying the proceeds from any such sales and recapitalizations will not only help fund our planned growth but will also further advance the strategic shift of our portfolio to majority multifamily. OnMarch 11, 2020 , theWorld Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. OnMarch 13, 2020 , a National Emergency was declared inthe United States in response to COVID-19. The efforts made by federal, state and local governments to mitigate the spread of COVID-19 included orders requiring the temporary closure of or imposed limitations on the operations of certain non-essential businesses, which adversely affected many tenants, especially tenants in the retail industry. While many of these restrictions have been removed, it is difficult to determine the long-term impact of COVID-19 on our business, and we expect it to continue to negatively impact our operations in 2021. The pandemic continues to evolve daily, and while we are optimistic about the future, given the rapid rise of new COVID-19 infections and the higher transmissibility of new variants, we remain cautious about the medium-term implications for office assets. Vacancy is still at record highs across the region, and most companies are still not fully back in the office. While we have seen an increase in leasing activity in our portfolio this quarter, occupancy of our in-service commercial portfolio declined by 250 basis points fromMarch 31, 2021 . Although parking revenue remained relatively flat during the three months endedJune 30, 2021 as compared to the same period in 2020, parking revenue in our commercial portfolio was approximately 50% below pre-pandemic levels of approximately$30 million annually. We are seeing improvements in our multifamily portfolio, with a 140 basis point increase in the occupancy of our in-service operating multifamily portfolio fromMarch 31, 2021 . While rents have not yet recovered to pre-pandemic levels, we are seeing an increase in market rents due to increased demand and limited new supply. Due to the business disruptions and challenges caused by COVID-19, we provided rent deferrals and other lease concessions primarily to retail tenants. We have entered into agreements with certain tenants, many of which have been placed on the cash basis of accounting, resulting in the deferral to future periods or abatement of$2.4 million of rent that had been contractually due in the second quarter of 2021. We are negotiating additional rent deferrals and other lease concessions with some of our tenants, which have been considered when establishing credit losses against billed and deferred rent receivables. During 2020, we began recognizing revenue from substantially all co-working tenants and retailers except for grocers, pharmacies, essential businesses and certain national credit tenants on the cash basis of accounting. With 95% of our retail tenants now open for business, we expect the need to enter into additional deferrals to decrease as we enter the fall unless new restrictions are imposed. The significance, extent and duration of the impact of COVID-19 on our business remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time. These developments include: the continued severity, duration, transmission rate and geographic spread of COVID-19 inthe United States , the continued speed of the vaccine distribution, the effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and the efficacy of vaccines against variants of COVID-19, the extent and effectiveness of other containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in areas in which we 32
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operate, as containment measures continue to be lifted, and whether the residential market in theWashington, D.C. region and any of our properties will be materially impacted by the moratoriums on residential evictions, among others. These uncertainties make it difficult to predict operating results for our business for 2021. Therefore, we could experience material declines in revenue, net income, NOI and/or Funds from Operations ("FFO"). For more information, see "Risk Factors" in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2020 . Operating Results
Key highlights for the three and six months ended
net loss attributable to common shareholders of
diluted common share, for the three months ended
compared to net income attributable to common shareholders of
income attributable to common shareholders for the six months ended
2021 and 2020 included a gain on the sale of real estate of
third-party real estate services revenue, including reimbursements, of
compared to
operating commercial portfolio leased and occupied percentages at our share of
? 85.9% and 84.4% as of
2021, and 90.4% and 88.1% as of
operating multifamily portfolio leased and occupied percentages at our share of
91.6% and 86.3% as of
multifamily portfolio was 95.0% leased and 89.8% occupied as of
compared to 92.3% leased and 88.4% occupied as of
leased and 90.2% occupied as of
the leasing of 722,000 square feet, or 715,000 square feet at our share, at an
initial rent (1) of
rent per square foot (2) of
share, at an initial rent (1) of
weighted average rent per square foot (2) of
an increase in same store (3) NOI of 0.4% to
ended
for the six months ended
months ended
(1) Represents the cash basis weighted average starting rent per square foot at
our share, which excludes free rent and fixed escalations.
(2) Represents the weighted average rent per square foot recognized over the term
of the respective leases, including the effect of free rent and fixed
escalations.
(3) Includes the results of the properties that are owned, operated and
in-service for the entirety of both periods being compared, which excludes
properties for which significant redevelopment, renovation or repositioning
occurred during either of the periods being compared.
Additionally, investing and financing activity during the six months ended
the leasing of the land underlying
Landing to a lessee, which plans to construct an 808-unit multifamily asset
comprising two towers with ground floor retail. Through the structure of the
the development manager for the construction of
separately, we are the lessee in a master lease of the asset. We have an option
to acquire the asset until a specified period after completion. See Note 5 to
the financial statements for additional information;
an investment in two real estate ventures, in which we have 50% ownership
interests, to design, develop, manage and own approximately 2.0 million square ? feet of new mixed-use development located in Potomac Yard, the southern portion
of
contributed to one of the real estate
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ventures based on the cash received and the remeasurement of our retained
interest in the asset. See Note 4 to the financial statements for additional
information;
recognition of an aggregate gain of
statements for additional information;
? the payment of dividends to our common shareholders totaling
distributions to our noncontrolling interests of
? the repurchase and retirement of 619,749 of our common shares for
million, an average purchase price of
? the investment of
real estate additions.
Activity subsequent to
? the declaration of a quarterly dividend of
a new mortgage loan with a principal balance of
interest rate of LIBOR plus 1.60% per annum.
Critical Accounting Policies and Estimates
Our Annual Report on Form 10-K for the year endedDecember 31, 2020 contains a description of our critical accounting policies, including asset acquisitions and business combinations, real estate, investments in real estate ventures, revenue recognition and share-based compensation. There have been no significant changes to our policies during the six months endedJune 30, 2021 .
Recent Accounting Pronouncements
See Note 2 to the financial statements for a description of recent accounting pronouncements.
Results of Operations InJanuary 2020 , we soldMetropolitan Park . InDecember 2020 , we acquired the Americana Portfolio, which consists of a 1.4-acre future development parcel inNational Landing that was formerly occupied by theAmericana Hotel and three other parcels. InApril 2021 , we contributed Potomac Yard Landbay G to an unconsolidated real estate venture.
Comparison of the Three Months Ended
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 endedJune 30, 2021 compared to the same period in 2020: Three Months Ended June 30, 2021 2020 % Change (Dollars in thousands) Property rental revenue$ 122,819 $
115,459 6.4 % Third-party real estate services revenue, including reimbursements
26,745 27,167 (1.6) %
Depreciation and amortization expense 56,678 52,616 7.7 %
Property operating expense 35,000 33,792 3.6 %
Real estate taxes expense 18,558 17,869 3.9 %
General and administrative expense:
Corporate and other 13,895 13,216 5.1 %
Third-party real estate services 25,557 29,239 (12.6) %
Share-based compensation related to Formation
Transaction and special equity awards 4,441 8,858 (49.9) %
Transaction and other costs 2,270 1,372 65.5 %
Income (loss) from unconsolidated real estate
ventures, net 3,953 (13,485) (129.3) %
Interest expense 16,773 15,770 6.4 %
Gain on sale of real estate 11,290 - N/A
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Property rental revenue increased by approximately $7.4 million , or 6.4%, to
$122.8 million in 2021 from $115.5 million in 2020. The increase was primarily
due to (i) a $4.6 million increase related to the deferral of rent and the
write-off of deferred rent receivables for tenants that were placed on the cash
basis of accounting in 2020 and a decrease in uncollectable operating lease
receivables attributable to COVID-19 in 2021, (ii) a $4.2 million increase
related to 4747 Bethesda Avenue , West Half, The Wren, 900 W Street and 901 W
Street as these properties placed additional space into service, (iii) a $2.7
million increase related to 1770 Crystal Drive , which was placed into service in
the fourth quarter of 2020, and (iv) a $1.5 million increase related to the
commencement of leases with Amazon at 2100 Crystal Drive and 2200 Crystal Drive .
The increase in property rental revenue was partially offset by a $3.4 million
decrease related to the Universal Buildings and RTC-West due to lower occupancy
and a $1.7 million decrease related to RiverHouse Apartments and The Bartlett
due to increased rent concessions and lower market rents.
Third-party real estate services revenue, including reimbursements, decreased by
approximately $422,000 , or 1.6%, to $26.7 million in 2021 from $27.2 million in
2020. The decrease was primarily due to a $2.0 million decrease in
reimbursements revenue related to tenant services projects, partially offset by
a $1.3 million increase in development fee revenue primarily related to the
timing of development projects.
Depreciation and amortization expense increased by approximately $4.1 million ,
or 7.7%, to $56.7 million in 2021 from $52.6 million in 2020. The increase was
primarily due to a $2.2 million increase related to 4747 Bethesda Avenue , West
Half, The Wren, 900 W Street and 901 W Street as these properties placed
additional space into service, a $2.0 million increase related to 2345 Crystal
Drive due to an increase in tenant improvements and an $801,000 increase due to
1770 Crystal Drive being placed into service. The increase in depreciation and
amortization expense was partially offset by a $1.1 million decrease at 7200
Wisconsin Avenue due to the disposal of a tenant improvement in 2020.
Property operating expense increased by approximately $1.2 million , or 3.6%, to
$35.0 million in 2021 from $33.8 million in 2020. The increase was primarily due
to a $1.6 million increase related to 2451 Crystal Drive for costs incurred for
construction management services provided to tenants and a $1.1 million increase
related to 4747 Bethesda Avenue , West Half, The Wren and 900 W Street as these
properties placed additional space into service. The increase in property
operating expense was partially offset by a $674,000 decrease related to 1901
South Bell Street due to costs incurred in 2020 for construction management
services provided to tenants and a $567,000 decrease related to the Crystal City
Marriott as the property incurred higher costs due to COVID-19 in 2020.
Real estate tax expense increased by approximately $689,000 , or 3.9%, to $18.6
million in 2021 from $17.9 million in 2020. The increase was primarily due to a
$641,000 increase at 4747 Bethesda Avenue , The Wren, 900 W Street and 901 W
Street as these properties placed additional space into service.
General and administrative expense: corporate and other increased by
approximately $679,000 , or 5.1%, to $13.9 million in 2021 from $13.2 million in
2020. The increase was primarily due to increases in employee compensation and
consulting costs, partially offset by declines in share-based compensation
expense and temporary staffing costs.
General and administrative expense: third-party real estate services decreased
by approximately $3.7 million , or 12.6%, to $25.6 million in 2021 from $29.2
million in 2020. The decrease was primarily due to a decrease in reimbursable
expenses related to tenant services projects.
General and administrative expense: share-based compensation related to
Formation Transaction and special equity awards decreased by approximately $4.4
million , or 49.9%, to $4.4 million in 2021 from $8.9 million in 2020. The
decrease was primarily due to the graded vesting of certain awards issued in
prior years, which resulted in lower expense as portions of the awards vested.
Transaction and other costs of $2.3 million in 2021 includes $1.6 million of
expenses related to completed, potential and pursued transactions, $439,000 of
demolition costs related to 2000 South Bell Street and 2001 South Bell Street ,
and $222,000 of integration and severance costs. Transaction and other costs of
$1.4 million in 2020 consist primarily of integration and severance costs.
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Income from unconsolidated real estate ventures increased by approximately$17.4 million , or 129.3%, to$4.0 million for 2021 from a loss of$13.5 million in 2020. The increase was primarily due to (i) a$6.5 million impairment charge recognized in 2020 related to our investment in a venture that ownedThe Marriott Wardman Park hotel, and to losses incurred from the hotel's COVID-19 related closure and (ii) an aggregate gain of$5.2 million from the sale of various assets by our real estate ventures in 2021 as compared to a$3.0 million loss from the sale of Woodglen in 2020. Interest expense increased by approximately$1.0 million , or 6.4%, to$16.8 million in 2021 from$15.8 million in 2020. The increase was primarily due to a$1.8 million decrease in capitalized interest primarily due to the placing of additional space into service at4747 Bethesda Avenue , West Half, The Wren,901 W Street and1770 Crystal Drive . The increase was also due to higher average outstanding balances under our mortgage loans. The increase in interest expense was partially offset by a lower outstanding balance under our revolving credit facility. Gain on the sale of real estate of$11.3 million in 2021 was based on the cash received and the remeasurement of our retained interest in the land we contributed to one of our unconsolidated real estate ventures. See Note 4 to the financial statements for additional information.
Comparison of the Six Months Ended
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 six months endedJune 30, 2021 compared
to
the same period in 2020:
Six Months Ended June 30,
2021 2020 % Change
(Dollars in thousands)
Property rental revenue $ 245,060 $ 235,839 3.9 % Third-party real estate services revenue, including reimbursements
64,852 56,883 14.0 %
Depreciation and amortization expense 121,404 101,105 20.1 %
Property operating expense 69,731 68,295 2.1 %
Real estate taxes expense 36,868 36,068 2.2 %
General and administrative expense:
Corporate and other 26,370 26,392 (0.1) %
Third-party real estate services 54,493 58,053 (6.1) %
Share-based compensation related to Formation
Transaction and special equity awards 9,386 18,299 (48.7) %
Transaction and other costs 5,960 6,681 (10.8) %
Income (loss) from unconsolidated real estate
ventures, net 3,010 (16,177) (118.6) %
Interest expense 33,069 27,775 19.1 %
Gain on sale of real estate 11,290 59,477 (81.0) %
Property rental revenue increased by approximately $9.2 million , or 3.9%, to
$245.1 million in 2021 from $235.8 million in 2020. The increase was primarily
due to (i) an $8.1 million increase related to 4747 Bethesda Avenue , West Half,
The Wren, 900 W Street and 901 W Street as these properties placed additional
space into service, (ii) a $6.1 million increase due to the deferral of rent and
the write-off of deferred rent receivable for tenants that were placed on the
cash basis of accounting in 2020 and a decrease in uncollectable operating lease
receivables attributable to COVID-19 and (iii) a $4.8 million increase as 1770
Crystal Drive was placed into service in the fourth quarter of 2020. The
increase in property rental revenue was partially offset by a $6.1 million
decrease related to the Universal Buildings and RTC-West due to lower occupancy
and a $3.5 million decrease related to RiverHouse Apartments and The Bartlett
due to increased rent concessions and lower market rents.
Third-party real estate services revenue, including reimbursements, increased by
approximately $8.0 million , or 14.0%, to $64.9 million in 2021 from $56.9
million in 2020. The increase was primarily due to a $12.8 million increase in
development fees related to the timing of development projects. The increase in
third-party real estate services revenue was partially offset by a $1.8 million
decrease in reimbursements revenue related to tenant services projects, a $1.7
million decrease in property and asset management fees due to the sale of assets
within the JBG Legacy Funds and a $1.1 million decrease in construction
management fees due to the timing of construction projects.
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Depreciation and amortization expense increased by approximately$20.3 million , or 20.1%, to$121.4 million in 2021 from$101.1 million in 2020. The increase was primarily due to a$7.0 million increase related to the Universal Buildings due to the write-off of certain tenant improvements, a$6.5 million increase related to4747 Bethesda Avenue , West Half, The Wren,900 W Street and901 W Street as these properties placed additional space into service, a$4.1 million increase related to2345 Crystal Drive due to an increase in tenant improvements, a$1.6 million increase due to1770 Crystal Drive being placed into service and a$1.4 million increase related to RTC-West due to the acceleration of depreciation of certain assets. Property operating expense increased by approximately$1.4 million , or 2.1%, to$69.7 million in 2021 from$68.3 million in 2020. The increase was primarily due to (i) a$2.4 million increase related to4747 Bethesda Avenue , West Half, The Wren,900 W Street and901 W Street as these properties placed additional space into service, (ii) a$1.6 million increase related to2451 Crystal Drive due to costs incurred for construction management services provided to tenants and (iii) a$990,000 increase in ground rent expense related toCourthouse Plaza 1 and 2. The increase in property operating expense was partially offset by a$3.7 million decrease related to1901 South Bell Street and1235 S. Clark Street due to costs incurred in 2020 for construction management services provided to tenants. Real estate tax expense increased by approximately$800,000 , or 2.2%, to$36.9 million in 2021 from$36.1 million in 2020. The increase was primarily due to a$1.3 million increase at4747 Bethesda Avenue , The Wren and901 W Street as these properties placed additional space into service and an increase of$356,000 due to1770 Crystal Drive being placed into service, partially offset by a decrease in real estate tax assessments for various properties located inNational Landing .
General and administrative expense: corporate and other decreased by
approximately
General and administrative expense: third-party real estate services decreased by approximately$3.6 million , or 6.1%, to$54.5 million in 2021 from$58.1 million in 2020. This decrease was primarily due to a decrease in reimbursable expenses related to tenant services projects and a decrease in share-based compensation expense. General and administrative expense: share-based compensation related to Formation Transaction and special equity awards decreased by approximately$8.9 million , or 48.7%, to$9.4 million in 2021 from$18.3 million in 2020. The decrease was primarily due to the graded vesting of certain awards issued in prior years, which resulted in lower expense as portions of the awards vested. Transaction and other costs of$6.0 million in 2021 includes$4.1 million of expenses related to completed, potential and pursued transactions,$1.4 million of demolition costs related to2000 South Bell Street and2001 South Bell Street and$462,000 of integration and severance costs. Transaction and other costs of$6.7 million in 2020 primarily includes$4.0 million of costs related to a charitable commitment to theWashington Housing Conservancy , a non-profit that acquires and owns affordable workforce housing in theWashington, D.C. metropolitan area, and$2.7 million of integration and severance costs. Income from unconsolidated real estate ventures increased by approximately$19.2 million , or 118.6%, to$3.0 million for 2021 from a loss of$16.2 million in 2020. The increase was primarily due to (i) a$6.5 million impairment charge recognized in 2020 related to our investment in a venture that ownedThe Marriott Wardman Park hotel, and$2.1 million for losses incurred from its COVID-19 related closure and (ii) an aggregate gain of$5.2 million from the sale of various assets by our real estate ventures in 2021 as compared to a$3.0 million loss from the sale of Woodglen in 2020. Interest expense increased by approximately$5.3 million , or 19.1%, to$33.1 million in 2021 from$27.8 million in 2020. The increase was primarily due to a$5.4 million decrease in capitalized interest primarily due to the placing of additional space into service at4747 Bethesda Avenue , West Half, The Wren,901 W Street and1770 Crystal Drive . The increase was also due to higher average outstanding balances under our unsecured term loans and mortgage loans. The increase in interest expense was partially offset by a lower outstanding balance under our revolving credit facility. 37
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Gain on the sale of real estate of$11.3 million in 2021 was based on the cash received and the remeasurement of our retained interest in the land we contributed to one of our unconsolidated real estate ventures. See Note 4 to the financial statements for additional information. Gain on the sale of real estate of$59.5 million in 2020 was due to the sale ofMetropolitan Park .
FFO
FFO is a non-GAAP financial measure computed in accordance with the definition established by theNational Association of Real Estate Investment Trusts ("NAREIT") in the NAREIT FFO White Paper - 2018 Restatement. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures. We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO does not represent cash generated from operating activities and is not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as a performance measure or cash flow as a liquidity measure. FFO may not be comparable to similarly titled measures used by other companies.
The following is the reconciliation of net income (loss) attributable to common shareholders, the most directly comparable GAAP measure, to FFO:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(Inthousands)
Net income (loss) attributable to common shareholders$ (2,973) $ (36,780) $ (23,704) $ 6,145 Net income (loss) attributable to redeemable noncontrolling interests (345) (3,483) (2,575) 1,767 Net loss attributable to noncontrolling interests - - (1,108) - Net income (loss) (3,318) (40,263) (27,387) 7,912 Gain on sale of real estate (11,290) - (11,290) (59,477) (Gain) loss on sale from unconsolidated real estate ventures (5,189) 2,952 (5,189) 2,952 Real estate depreciation and amortization 54,475 49,924 116,975 95,586 Impairment of investment in unconsolidated real estate venture (1) - 6,522 - 6,522 Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures 7,277 7,498 14,588 14,380 FFO attributable to noncontrolling interests (41) (6) 1,030 (3) FFO attributable to OP Units 41,914 26,627 88,727 67,872 FFO attributable to redeemable noncontrolling interests (4,054) (2,911) (8,539) (7,408)
FFO attributable to common shareholders
(1) During the second quarter of 2020, we determined that our investment in the
venture that owns
decline in the fair value of the underlying asset and recorded an impairment
charge of
zero, and we suspended equity loss recognition for the venture after
2020. On
former venture partner.
NOI and Same Store NOI
NOI is a non-GAAP financial measure management uses to assess a segment's
performance. The most directly comparable GAAP measure is net income (loss)
attributable to common shareholders. We use NOI internally as a performance
measure and believe NOI 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, net of free rent and payments associated with assumed lease
liabilities) less operating expenses and ground rent, if applicable.
38
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NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure of 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 to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. During the three months endedJune 30, 2021 , our same store pool remained at 56 properties due to the inclusion of the commercial portion of2221 S. Clark Street , which was bifurcated from the multifamily portion of the building, and the exclusion ofFairway Apartments , which was sold by an unconsolidated real estate venture during the second quarter of 2021. During the six months endedJune 30, 2021 , our same store pool increased from 52 properties to 56 properties due to the inclusion of1800 South Bell Street ,500 L'Enfant Plaza , F1RST Residences,1221 Van Street and the commercial portion of2221 S. Clark Street and the exclusion ofFairway Apartments . Information provided on a same store basis includes the results of properties that are owned, operated and in-service for the entirety of both periods being compared, which excludes 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 the property is considered to be under-construction because it is undergoing significant redevelopment or renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property NOI. A development property or under-construction property is moved to the same store pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period. Acquisitions are moved into the same store pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment. Same store NOI increased by$336,000 , or 0.4%, to$76.5 million for the three months endedJune 30, 2021 from$76.1 million in the same period in 2020. The increase was largely attributable to a decrease in uncollectable operating lease receivables and rent deferrals, partially offset by lower occupancy in our commercial portfolio, and lower rents and higher concessions in our multifamily portfolio. Same store NOI decreased$7.3 million , or 4.6%, to$152.2 million for the six months endedJune 30, 2021 from$159.5 million for the same period in 2020. The decrease was substantially attributable to COVID-19, which commenced at the end of the first quarter of 2020, including (i) higher concessions, lower rents and higher operating costs in our multifamily portfolio and (ii) lower occupancy and a decline in parking revenue in our commercial portfolio. The decline was partially offset by a decrease in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, the burn-off of rent abatements and a decrease in cleaning expenses across our commercial portfolio. 39 Table of Contents
The following is the reconciliation of net income (loss) attributable to common shareholders to NOI and same store NOI:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(Dollars in thousands)
Net income (loss) attributable to common
shareholders $ (2,973) $ (36,780) $ (23,704) $ 6,145
Add:
Depreciation and amortization expense 56,678 52,616 121,404 101,105
General and administrative expense:
Corporate and other 13,895 13,216 26,370 26,392
Third-party real estate services 25,557 29,239 54,493 58,053
Share-based compensation related to
Formation Transaction and special equity
awards 4,441 8,858 9,386 18,299
Transaction and other costs 2,270 1,372 5,960 6,681
Interest expense 16,773 15,770 33,069 27,775Loss on extinguishment of debt - - - 33 Income tax expense (benefit) (5) (888) 4,310 (3,233) Net income (loss) attributable to redeemable noncontrolling interests (345) (3,483) (2,575) 1,767 Net loss attributable to noncontrolling interests - - (1,108) -
Less:
Third-party real estate services, including reimbursements revenue 26,745 27,167 64,852 56,883 Other revenue 1,904 1,516 4,090 3,146 Income (loss) from unconsolidated real estate ventures, net 3,953 (13,485) 3,010 (16,177) Interest and other income (loss), net (38)
114 (29) 1,021 Gain on sale of real estate 11,290 - 11,290 59,477 Consolidated NOI 72,437 64,608 144,392 138,667 NOI attributable to unconsolidated real estate ventures at our share 8,109 7,495 15,613 16,073 Non-cash rent adjustments (1) (4,088) (1,419) (8,853) (4,964) Other adjustments (2) 5,191 3,516 9,933 6,330 Total adjustments 9,212 9,592 16,693 17,439 NOI 81,649 74,200 161,085 156,106 Less: out-of-service NOI loss (3) (1,329) (1,475) (2,619) (2,857) Operating Portfolio NOI 82,978 75,675 163,704 158,963 Non-same store NOI (4) 6,527 (440) 11,490 (567) Same store NOI (5)$ 76,451 $ 76,115 $ 152,214 $ 159,530 Change in same store NOI 0.4% (4.6)%
Number of properties in same store pool 56 56
(1) Adjustment to exclude straight-line rent, above/below market lease
amortization and lease incentive amortization.
(2) Adjustment to include other revenue and payments associated with assumed
lease liabilities related to operating properties and to exclude commercial
lease termination revenue and allocated corporate general and administrative
expenses to operating properties.
(3) Includes the results of our under-construction assets, and near-term and
future development pipelines.
(4) Includes the results of properties that were not 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.
(5) Includes the results of the properties that are owned, operated and
in-service for the entirety of both 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. We defined our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer,who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, 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. 40
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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.
With respect to the third-party asset management and real estate services
business, the CODM reviews revenue 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 both disclosed separately in our statements of
operations and discussed in the preceding pages under "Results of Operations."
The following represents the components of revenue from our third-party real
estate services business:
Three Months Ended June 30, Six Months Ended June 30,
2021 2020 2021 2020
(In thousands)
Property management fees $ 4,776 $ 4,735 $ 9,718 $ 10,759
Asset management fees 2,229 2,375 4,457 5,099
Development fees (1) 4,392 3,048 18,642 5,860
Leasing fees 1,424 794 2,284 2,541
Construction management fees 234 460 406 1,473
Other service revenue 1,790 1,817 3,488 3,452
Third-party real estate services
revenue, excluding reimbursements 14,845 13,229 38,995 29,184
Reimbursement revenue (2) 11,900 13,938 25,857 27,699
Third-party real estate services
revenue, including reimbursements 26,745 27,167 64,852 56,883
Third-party real estate services
expenses 25,557 29,239 54,493 58,053
Third-party real estate services
revenue less expenses $ 1,188 $
(2,072)
(1) Estimated development fee revenue totaling
is expected to be recognized over the next six years as unsatisfied
performance obligations are completed.
(2) Represents reimbursements of expenses incurred by us on behalf of third
parties, including allocated payroll costs and amounts paid to third-party
contractors for construction management projects.
Third-party real estate services revenue, including reimbursements, decreased by approximately$422,000 , or 1.6%, to$26.7 million for the three months endedJune 30, 2021 from$27.2 million for the same period in 2020. The decrease was primarily due to a$2.0 million decrease in reimbursements revenue related to tenant services projects, partially offset by a$1.3 million increase in development fee revenue primarily related to the timing of development projects. Third-party real estate services revenue, including reimbursements, increased by approximately$8.0 million , or 14.0%, to$64.9 million for the six months endedJune 30, 2021 from$56.9 million for the same period in 2020. The increase was primarily due to a$12.8 million increase in development fees related to the timing of development projects. The increase in third-party real estate services revenue was partially offset by a$1.8 million decrease in reimbursements revenue related to tenant services projects, a$1.7 million decrease in property and asset management fees due to the sale of assets within the JBG Legacy Funds and a$1.1 million decrease in construction management fees due to the timing of construction projects. Third-party real estate services expenses decreased by approximately$3.7 million , or 12.6%, to$25.6 million for the three months endedJune 30, 2021 from$29.2 million for the same period in 2020. The decrease was primarily due to a decrease in reimbursable expenses related to tenant services projects. Third-party real estate services expenses decreased by approximately$3.6 million , or 6.1%, to$54.5 million for the six months endedJune 30, 2021 from$58.1 million in 2020. This decrease was primarily due to a decrease in reimbursable expenses related to tenant services projects and a decrease in share-based compensation expense. Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below. 41
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Property revenue is calculated as property rental revenue plus parking revenue. Property expense is calculated as property operating expenses plus real estate taxes. Consolidated NOI is calculated as property revenue less property expense. See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three and six months endedJune 30, 2021 and 2020. The following is a summary of NOI by segment: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 (In thousands) Property revenue: Commercial$ 95,570 $ 86,347 $ 188,863 $ 183,789 Multifamily 32,828 31,656 65,479 64,596 Other (1) (2,403) (1,734) (3,351) (5,355) Total property revenue 125,995 116,269 250,991 243,030 Property expense: Commercial 37,260 36,025 73,007 76,340 Multifamily 17,107 15,399 34,547 30,444 Other (1) (809) 237 (955) (2,421) Total property expense 53,558 51,661 106,599 104,363 Consolidated NOI: Commercial 58,310 50,322 115,856 107,449 Multifamily 15,721 16,257 30,932 34,152 Other (1) (1,594) (1,971) (2,396) (2,934) Consolidated NOI$ 72,437 $ 64,608 $ 144,392 $ 138,667
(1) Includes activity related to future development assets and corporate entities
and the elimination of intersegment activity.
Comparison of the Three Months Ended
Commercial: Property rental revenue increased by$9.2 million , or 10.7%, to$95.6 million in 2021 from$86.3 million in 2020. Consolidated NOI increased by$8.0 million , or 15.9%, to$58.3 million in 2021 from$50.3 million in 2020. The increase in property revenue and consolidated NOI was due to (i) a decline in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, (ii) increases related to4747 Bethesda Avenue and1770 Crystal Drive as these properties were placed into service, and (iii) increases related to2100 Crystal Drive ,2200 Crystal Drive ,1225 South Clark Street and2345 Crystal Drive due to higher occupancy. These increases were partially offset by a decrease related to the Universal Buildings due to lower occupancy. Multifamily: Property rental revenue increased by$1.2 million , or 3.7%, to$32.8 million in 2021 from$31.7 million in 2020. Consolidated NOI decreased by$536,000 , or 3.3%, to$15.7 million in 2021 from$16.3 million in 2020. The increase in property revenue was due to The Wren,900 W Street ,901 W Street and West Half as these properties placed additional units into service. The decrease in consolidated NOI was due to an increase in rent concessions and lower market rates, primarily at The Bartlett andRiverHouse Apartments , partially offset by increases in consolidated NOI from The Wren,901 W Street and West Half.
Comparison of the Six Months Ended
Commercial: Property rental revenue increased by$5.1 million , or 2.8%, to$188.9 million in 2021 from$183.8 million in 2020. Consolidated NOI increased by$8.4 million , or 7.8%, to$115.9 million in 2021 from$107.4 million in 2020. The increase in property revenue and consolidated NOI was due to (i) a decline in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, (ii) increases in revenues related to4747 Bethesda Avenue and1770 Crystal Drive as these properties were placed into service, and (iii) increases related to2100 Crystal Drive ,1225 South Clark Street and2345 Crystal Drive due to higher occupancy. These increases were partially offset by a decrease in parking revenue due to reduced transient and office parking and decreases related to the Universal Buildings and RTC-West due to lower occupancy. 42 Table of Contents Multifamily: Property rental revenue increased by$883,000 , or 1.4%, to$65.5 million in 2021 from$64.6 million in 2020. Consolidated NOI decreased by$3.2 million , or 9.4%, to$30.9 million in 2021 from$34.2 million in 2020. The increase in property revenue was due to The Wren,900 W Street ,901 W Street and West Half as these properties placed additional units into service. The decrease in consolidated NOI was due to (i) an increase in rent concessions and lower market rates, primarily at The Bartlett andRiverHouse Apartments , (ii) higher operating expenses and (iii) higher insurance costs. The decrease in consolidated NOI was partially offset by increases related to The Wren,900 W Street ,901 W Street and West Half as these properties placed additional units into service.
Liquidity and Capital Resources
Property rental income is our primary source of operating cash flow and is dependent on many factors including occupancy levels and rental rates, as well as our tenants' ability to pay rent. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the WHI, Amazon, the JBG Legacy Funds and other third parties. Our assets provide 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, recapitalizations, asset sales and the issuance and sale of securities. 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, any dividends to shareholders and distributions to holders of OP Units over the next 12 months.
Financing Activities
The following is a summary of mortgages payable:
Weighted Average
Effective
Interest Rate (1) June 30, 2021 December 31, 2020
(In thousands)
Variable rate (2) 2.14% $ 677,246 $ 678,346
Fixed rate (3) 4.32% 923,280 925,523
Mortgages payable 1,600,526 1,603,869
Unamortized deferred financing costs and
premium/discount, net (4) (9,383) (10,131)
Mortgages payable, net $ 1,591,143 $ 1,593,738
(1) Weighted average effective interest rate as of
(2) Includes variable rate mortgages payable with interest rate cap agreements.
(3) Includes variable rate mortgages payable with interest rates fixed by
interest rate swap agreements.
(4) As of
mortgage loan totaling
As ofJune 30, 2021 andDecember 31, 2020 , the net carrying value of real estate collateralizing our mortgages payable totaled$1.7 billion and$1.8 billion . Our mortgages payable contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. Certain mortgages payable are recourse to us. See Note 17 to the financial statements for additional information.
In
As ofJune 30, 2021 andDecember 31, 2020 , we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of$1.3 billion . See Note 15 to the financial statements for additional information. 43 Table of Contents Credit Facility
As ofJune 30, 2021 andDecember 31, 2020 , our$1.4 billion credit facility consisted of a$1.0 billion revolving credit facility maturing inJanuary 2025 , a$200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing inJanuary 2023 and a$200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing inJuly 2024 . The following is a summary of amounts outstanding under the credit facility: Effective Interest Rate (1) June 30, 2021 December 31, 2020 (In thousands) Revolving credit facility (2) (3) (4) 1.15% $ - $ - Tranche A-1 Term Loan (5) 2.59%$ 200,000 $ 200,000 Tranche A-2 Term Loan (5) 2.49% 200,000 200,000 Unsecured term loans 400,000 400,000 Unamortized deferred financing costs, net (1,678) (2,021) Unsecured term loans, net$ 398,322 $ 397,979
(1) Effective interest rate as of
(2) As of
aggregate face amount of
credit facility.
(3) As of
related to our revolving credit facility totaling
million were included in "Other assets, net."
(4) The interest rate for our revolving credit facility excludes a 0.15% facility
fee.
(5) As of
by interest rate swap agreements. The interest rate swaps mature concurrently
with the respective term loan and provide a weighted average interest rate of
1.39% for the Tranche A-1 Term Loan and 1.34% for the Tranche A-2 Term Loan.
Our existing floating rate debt instruments, including our credit facility, with a principal balance totaling$1.5 billion and our hedging arrangements with a notional value totaling$1.7 billion currently use as a reference rate theU.S. dollar London Interbank Offered Rate ("LIBOR"), and we expect a transition from LIBOR to another reference rate due to plans to phase out the reference rate by the end of 2021, after which point its continuation cannot be assured. Though an alternative reference rate for LIBOR, the Secured Overnight Financing Rate ("SOFR"), exists, significant uncertainties still remain. We can provide no assurance regarding the future of LIBOR and when our LIBOR-based instruments will transition from LIBOR as a reference rate to SOFR or another reference rate. The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things, result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions. In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations.
Common Shares Repurchased
InMarch 2020 , ourBoard of Trustees authorized the repurchase of up to$500 million of our outstanding common shares. During the six months endedJune 30, 2021 , we repurchased and retired 619,749 common shares for$19.2 million , an average purchase price of$30.96 per share. During the six months endedJune 30, 2020 , we repurchased and retired 1.4 million common shares for$41.2 million , an average purchase price of$29.01 per share. Since we began the share repurchase program, we have repurchased and retired 4.4 million common shares for$124.0 million , an average purchase price of$28.18 per share. Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, 44
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applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice.
Liquidity Requirements
Our principal liquidity needs for the next 12 months and beyond include:
? 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;
? common share repurchases; and
? 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 and cash equivalent balances;
? cash flows from operations;
? distributions from real estate ventures; and
? proceeds from financings, recapitalizations and asset sales.
While we do not expect the need to do so during the next 12 months, we also can issue securities to raise funds.
While we have not experienced a significant impact to date in this regard, we expect COVID-19 to continue to have an adverse impact on our liquidity and capital resources. Future decreases in cash flows from operations resulting from tenant defaults, rent deferrals or decreases in our rents or occupancy, would decrease the cash available for the capital uses described above. As ofJune 30, 2021 , we had$998.5 million of availability under our credit facility (net of outstanding letters of credit totaling$1.5 million ). As ofJune 30, 2021 , we had no debt on a consolidated basis and at our share scheduled to mature in 2021.
Contractual Obligations and Commitments
During the six months endedJune 30, 2021 , 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 endedDecember 31, 2020 .
As of
As ofJune 30, 2021 , we had committed tenant-related obligations totaling$68.9 million ($65.0 million related to our consolidated entities and$3.9 million related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions. We launched the WHI with theFederal City Council inJune 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. We are the manager for theWHI Impact Pool , which is the social impact debt financing vehicle of the WHI. As ofJune 30, 2021 , theWHI Impact Pool had completed 45
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closings of capital commitments totaling
On
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