JBG SMITH (NYSE: JBGS), a leading owner and developer of
high-quality, mixed-use properties in the Washington, DC market,
today filed its Form 10-Q for the quarter ended June 30, 2023 and
reported its financial results.
Additional information regarding our results of operations,
properties, and tenants can be found in our Second Quarter 2023
Investor Package, which is posted in the Investor Relations section
of our website at www.jbgsmith.com. We encourage investors to
consider the information presented here with the information in
that document.
Second Quarter 2023 Highlights
- Net income (loss), Funds From Operations ("FFO") and Core FFO
attributable to common shareholders were:
SECOND QUARTER AND
YEAR-TO-DATE COMPARISON
in millions, except per share amounts
Three Months Ended
Six Months Ended
June 30, 2023
June 30, 2022
June 30, 2023
June 30, 2022
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Net income (loss)
$
(10.5)
$
(0.10)
$
123.3
$
1.02
$
10.6
$
0.09
$
123.2
$
0.99
FFO
$
33.4
$
0.30
$
33.6
$
0.28
$
66.4
$
0.59
$
84.9
$
0.68
Core FFO
$
39.8
$
0.36
$
37.1
$
0.31
$
76.9
$
0.69
$
79.8
$
0.64
- Annualized Net Operating Income ("NOI") for the three months
ended June 30, 2023 was $317.5 million, compared to $327.5 million
for the three months ended March 31, 2023, at our share. Excluding
the assets that were sold or recapitalized, Annualized NOI for the
three months ended June 30, 2023 was $317.6 million, compared to
$316.6 million for the three months ended March 31, 2023, at our
share.
- The increase in Annualized NOI excluding the assets that were
sold or recapitalized was substantially attributable to (i) higher
occupancy at the Crystal City Marriott and higher parking revenue,
offset by an increase in bad debt expense as a result of a recovery
recognized in the prior quarter, and (ii) higher occupancy and
rents across the multifamily portfolio.
- Same Store NOI ("SSNOI") at our share increased 0.1%
year-over-year to $78.3 million for the three months ended June 30,
2023. SSNOI at our share decreased 0.7% year-over-year to $153.5
million for the six months ended June 30, 2023.
- The decrease in SSNOI year-over-year for the six months ended
June 30, 2023 was substantially attributable to (i) increased
abatement and higher vacancy, partially offset by an increase in
parking revenue in our commercial portfolio and (ii) higher
occupancy and rents, partially offset by higher concessions and
higher operating expenses, in our multifamily portfolio.
Operating Portfolio
- The operating commercial portfolio was 86.3% leased and 84.0%
occupied as of June 30, 2023, compared to 87.6% and 85.2% as of
March 31, 2023, at our share.
- The operating multifamily portfolio was 96.8% leased and 93.7%
occupied as of June 30, 2023, compared to 95.0% and 92.9% as of
March 31, 2023, at our share.
- Executed approximately 210,000 square feet of office leases at
our share during the three months ended June 30, 2023, comprising
approximately 23,000 square feet of first-generation leases and
approximately 187,000 square feet of second-generation leases,
which generated a 5.0% rental rate increase on a GAAP basis and a
2.7% rental rate increase on a cash basis.
- Executed approximately 323,000 square feet of office leases at
our share during the six months ended June 30, 2023, comprising
approximately 41,000 square feet of first-generation leases and
approximately 282,000 square feet of second-generation leases,
which generated a 4.8% rental rate increase on a GAAP basis and a
1.8% rental rate increase on a cash basis.
Development Portfolio
Under-Construction
- As of June 30, 2023, we had two multifamily assets under
construction consisting of 1,583 units at our share.
Development Pipeline
- As of June 30, 2023, we had 20 assets in the development
pipeline consisting of 9.8 million square feet of estimated
potential development density at our share.
Third-Party Asset Management and Real Estate Services
Business
- For the three months ended June 30, 2023, revenue from
third-party real estate services, including reimbursements, was
$22.9 million. Excluding reimbursements and service revenue from
our interests in real estate ventures, revenue from our third-party
asset management and real estate services business was $11.6
million, primarily driven by $6.0 million of property and asset
management fees, $2.8 million of development fees, $1.3 million of
leasing fees and $1.3 million of other service revenue.
Balance Sheet
- As of June 30, 2023, our total enterprise value was
approximately $4.2 billion, comprising 119.3 million common shares
and units valued at $1.8 billion, and debt (net of premium /
(discount) and deferred financing costs) at our share of $2.5
billion, less cash and cash equivalents at our share of $165.8
million.
- As of June 30, 2023, we had $156.6 million of cash and cash
equivalents ($165.8 million of cash and cash equivalents at our
share), and $687.5 million of capacity under our revolving credit
facility.
- Net Debt to annualized Adjusted EBITDA at our share for the
three months ended June 30, 2023 was 8.3x, and our Net Debt / total
enterprise value was 57.0% as of June 30, 2023.
Investing and Financing Activities
- In May 2023, we drew the $50.0 million remaining advance under
our Tranche A-2 Term Loan.
- During the second quarter of 2023, we borrowed $62.0 million
under our revolving credit facility. In June 2023, we amended and
extended the revolving credit facility, from January 2025 to June
2027 at an amended interest rate of SOFR plus 1.40% (based on our
current leverage level). We have the option to increase the recast
$750.0 million revolving credit facility or add term loans up to
$500.0 million, and we also have the right to extend the maturity
date beyond June 2027 via two six-month extension options.
- In June 2023, we entered into a $120.0 million term loan with a
five-year term and an interest rate of SOFR plus 1.25% (based on
our current leverage level). We also entered into an interest rate
swap with a total notional value of $120.0 million, which fixes
SOFR at an interest rate of 4.01% through the maturity date.
- In June 2023, we repaid mortgage loans with an aggregate
principal balance of $142.4 million.
- We repurchased and retired 9.3 million common shares for $135.7
million, a weighted average purchase price per share of
$14.54.
Subsequent to June 30, 2023:
- We repurchased and retired 2.0 million common shares for $31.5
million, a weighted average purchase price per share of $16.03,
pursuant to a repurchase plan under Rule 10b5-1 of the Securities
Exchange Act of 1934, as amended.
Dividends
- On August 3, 2023, our Board of Trustees declared a quarterly
dividend of $0.225 per common share, payable on August 31, 2023 to
shareholders of record as of August 17, 2023.
About JBG SMITH
JBG SMITH owns, operates, invests in, and develops mixed-use
properties in high growth and high barrier-to-entry submarkets in
and around Washington, DC. Through an intense focus on placemaking,
JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods
throughout the Washington, DC metropolitan area. Approximately
two-thirds of JBG SMITH's holdings are in the National Landing
submarket in Northern Virginia, which is anchored by four key
demand drivers: Amazon's new headquarters; Virginia Tech's
under-construction $1 billion Innovation Campus; the submarket’s
proximity to the Pentagon; and JBG SMITH’s deployment of
next-generation public and private 5G digital infrastructure. JBG
SMITH's dynamic portfolio currently comprises 15.0 million square
feet of high-growth office, multifamily, and retail assets at
share, 98% of which are Metro-served. It also maintains a
development pipeline encompassing 9.8 million square feet of
mixed-use, primarily multifamily, development opportunities. JBG
SMITH is committed to the operation and development of green,
smart, and healthy buildings and plans to maintain carbon neutral
operations annually. For more information on JBG SMITH please visit
www.jbgsmith.com.
Forward-Looking Statements
Certain statements contained herein may 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 performance. They represent our
intentions, plans, expectations and beliefs and are subject to
numerous assumptions, risks and uncertainties. Consequently, the
future results, financial condition and business of JBG SMITH
Properties ("JBG SMITH", the "Company", "we", "us", "our" or
similar terms) may differ materially from those expressed in these
forward-looking statements. You can find many of these statements
by looking for words such as "approximate", "hypothetical",
"potential", "believes", "expects", "anticipates", "estimates",
"intends", "plans", "would", "may" or similar expressions in this
earnings release. We also note the following forward-looking
statements: changes to the amount and manner in which tenants use
space; our annual dividend per share and dividend yield; whether in
the case of our under-construction assets and assets in the
development pipeline, estimated square feet, estimated number of
units and estimated potential development density are accurate;
expected timing, completion, modifications and delivery dates for
the projects we are developing for Amazon; the ability of any or
all of our demand drivers to materialize and their effect on
economic impact, job growth, expansion of public transportation and
related demand in the National Landing submarket; planned
infrastructure and educational improvements related to Amazon's
additional headquarters and the Virginia Tech Innovation Campus;
our development plans related to National Landing; whether we will
be able to successfully shift the majority of our portfolio to
multifamily; and whether the allocation of capital to our share
repurchase plan has any impact on our share price.
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. These factors include, among others: adverse
economic conditions in the Washington, DC metropolitan area, the
timing of and costs associated with development and property
improvements, financing commitments, and general competitive
factors. For further discussion of factors that could materially
affect the outcome of our forward-looking statements and other
risks and uncertainties, see "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the Cautionary Statement Concerning Forward-Looking
Statements in the Company's Annual Report on Form 10‑K for the year
ended December 31, 2022 and other periodic reports the Company
files with the Securities and Exchange Commission. For these
statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. You are cautioned not to place undue
reliance on our forward-looking statements. 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 hereof.
Pro Rata Information
We present certain financial information and metrics in this
release "at JBG SMITH Share," which refers to our ownership
percentage of consolidated and unconsolidated assets in real estate
ventures (collectively, "real estate ventures") as applied to these
financial measures and metrics. Financial information "at JBG SMITH
Share" is calculated on an asset-by-asset basis by applying our
percentage economic interest to each applicable line item of that
asset's financial information. "At JBG SMITH Share" information,
which we also refer to as being "at share," "our pro rata share" or
"our share," is not, and is not intended to be, a presentation in
accordance with GAAP. Given that a substantial portion of our
assets are held through real estate ventures, we believe this form
of presentation, which presents our economic interests in the
partially owned entities, provides investors valuable information
regarding a significant component of our portfolio, its
composition, performance and capitalization.
We do not control the unconsolidated real estate ventures and do
not have a legal claim to our co-venturers' share of assets,
liabilities, revenue and expenses. The operating agreements of the
unconsolidated real estate ventures generally allow each
co-venturer to receive cash distributions to the extent there is
available cash from operations. The amount of cash each investor
receives is based upon specific provisions of each operating
agreement and varies depending on certain factors including the
amount of capital contributed by each investor and whether any
investors are entitled to preferential distributions.
With respect to any such third-party arrangement, we would not
be in a position to exercise sole decision-making authority
regarding the property, real estate venture or other entity, and
may, under certain circumstances, be exposed to economic risks not
present were a third-party not involved. We and our respective
co-venturers may each have the right to trigger a buy-sell or
forced sale arrangement, which could cause us to sell our interest,
or acquire our co-venturers' interests, or to sell the underlying
asset, either on unfavorable terms or at a time when we otherwise
would not have initiated such a transaction. Our real estate
ventures may be subject to debt, and the repayment or refinancing
of such debt may require equity capital calls. To the extent our
co-venturers do not meet their obligations to us or our real estate
ventures or they act inconsistent with the interests of the real
estate venture, we may be adversely affected. Because of these
limitations, the non-GAAP "at JBG SMITH Share" financial
information should not be considered in isolation or as a
substitute for our financial statements as reported under GAAP.
Occupancy, non-GAAP financial measures, leverage metrics,
operating assets and operating metrics presented in our investor
package exclude our 10.0% subordinated interest in one commercial
building, our 33.5% subordinated interest in four commercial
buildings, and our 49.0% interest in three commercial buildings, as
well as the associated non-recourse mortgage loans, held through
unconsolidated real estate ventures, as our investment in each real
estate venture is zero, we do not anticipate receiving any
near-term cash flow distributions from the real estate ventures,
and we have not guaranteed their obligations or otherwise committed
to providing financial support.
Non-GAAP Financial Measures
This release includes non-GAAP financial measures. For these
measures, we have provided an explanation of how these non-GAAP
measures are calculated and why JBG SMITH's management believes
that the presentation of these measures provides useful information
to investors regarding JBG SMITH's financial condition and results
of operations. Reconciliations of certain non-GAAP measures to the
most directly comparable GAAP financial measure are included in
this earnings release. Our presentation of non-GAAP financial
measures may not be comparable to similar non-GAAP measures used by
other companies. In addition to "at share" financial information,
the following non-GAAP measures are included in this release:
Earnings Before Interest, Taxes, Depreciation and
Amortization ("EBITDA"), EBITDA for Real Estate ("EBITDAre") and
"Adjusted EBITDA" are non-GAAP financial measures. EBITDA and
EBITDAre are used by management as supplemental operating
performance measures, which we believe help investors and lenders
meaningfully evaluate and compare our operating performance from
period-to-period by removing from our operating results the impact
of our capital structure (primarily interest charges from our
outstanding debt and the impact of our interest rate swaps) and
certain non-cash expenses (primarily depreciation and amortization
expense on our assets). EBITDAre is computed in accordance with the
definition established by the National Association of Real Estate
Investment Trusts ("Nareit"). Nareit defines EBITDAre as GAAP net
income (loss) adjusted to exclude interest expense, income taxes,
depreciation and amortization expense, gains and losses on sales of
real estate 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 of
unconsolidated real estate ventures. These supplemental measures
may help investors and lenders understand our ability to incur and
service debt and to make capital expenditures. EBITDA and EBITDAre
are not substitutes for net income (loss) (computed in accordance
with GAAP) and may not be comparable to similarly titled measures
used by other companies.
Adjusted EBITDA represents EBITDAre adjusted for items we
believe are not representative of ongoing operating results, such
as Transaction and Other Costs, impairment write-downs of
right-of-use assets associated with leases in which we are a
lessee, gain (loss) on the extinguishment of debt, earnings
(losses) and distributions in excess of our investment in
unconsolidated real estate ventures, lease liability adjustments,
income from investments, business interruption insurance proceeds
and share-based compensation expense related to the Formation
Transaction and special equity awards. We believe that adjusting
such items not considered part of our comparable operations,
provides a meaningful measure to evaluate and compare our
performance from period-to-period.
Because EBITDA, EBITDAre and Adjusted EBITDA have limitations as
analytical tools, we use EBITDA, EBITDAre and Adjusted EBITDA to
supplement GAAP financial measures. Additionally, we believe that
users of these measures should consider EBITDA, EBITDAre and
Adjusted EBITDA in conjunction with net income (loss) and other
GAAP measures in understanding our operating results.
Funds from Operations ("FFO"), "Core FFO" and Funds Available
for Distribution ("FAD") are non-GAAP financial measures. FFO
is computed in accordance with the definition established by 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 expense 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.
Core FFO represents FFO adjusted to exclude items which we
believe are not representative of ongoing operating results, such
as Transaction and Other Costs, impairment write-downs of
right-of-use assets associated with leases in which we are a
lessee, gain (loss) on the extinguishment of debt, earnings
(losses) and distributions in excess of our investment in
unconsolidated real estate ventures, share-based compensation
expense related to the Formation Transaction and special equity
awards, lease liability adjustments, income from investments,
business interruption insurance proceeds, amortization of the
management contracts intangible and the mark-to-market of
derivative instruments, including our share of such adjustments for
unconsolidated real estate ventures.
FAD represents Core FFO less recurring tenant improvements,
leasing commissions and other capital expenditures, net deferred
rent activity, third-party lease liability assumption (payments)
refunds, recurring share-based compensation expense, accretion of
acquired below-market leases, net of amortization of acquired
above-market leases, amortization of debt issuance costs and other
non-cash income and charges, including our share of such
adjustments for unconsolidated real estate ventures. FAD is
presented solely as a supplemental disclosure that management
believes provides useful information as it relates to our ability
to fund dividends.
We believe FFO, Core FFO and FAD are meaningful non‑GAAP
financial measures useful in comparing our levered operating
performance from period-to-period and as compared to similar real
estate companies because these non‑GAAP measures exclude real
estate depreciation and amortization expense, which implicitly
assumes that the value of real estate diminishes predictably over
time rather than fluctuating based on market conditions, and other
non-comparable income and expenses. FFO, Core FFO and FAD do not
represent cash generated from operating activities and are 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, Core FFO and FAD may not be
comparable to similarly titled measures used by other
companies.
"Net Debt" is a non-GAAP financial measurement. Net Debt
represents our total consolidated and unconsolidated indebtedness
less cash and cash equivalents at our share. Net Debt is an
important component in the calculations of Net Debt to Annualized
Adjusted EBITDA and Net Debt / total enterprise value. We believe
that Net Debt is a meaningful non-GAAP financial measure useful to
investors because we review Net Debt as part of the management of
our overall financial flexibility, capital structure and leverage.
We may utilize a considerable portion of our cash and cash
equivalents at any given time for purposes other than debt
reduction. In addition, cash and cash equivalents at our share may
not be solely controlled by us. The deduction of cash and cash
equivalents at our share from consolidated and unconsolidated
indebtedness in the calculation of Net Debt, therefore, should not
be understood to mean that it is available exclusively for debt
reduction at any given time.
Net Operating Income ("NOI") and "Annualized NOI" are
non-GAAP financial measures management uses to assess an asset'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
for operating leases, if applicable. 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 expense 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. Annualized NOI, for all assets
except Crystal City Marriott, represents NOI for the three months
ended June 30, 2023 multiplied by four. Due to seasonality in the
hospitality business, Annualized NOI for Crystal City Marriott
represents the trailing 12‑month NOI as of June 30, 2023.
Management believes Annualized NOI provides useful information in
understanding our financial performance over a 12‑month period,
however, investors and other users are cautioned against
attributing undue certainty to our calculation of Annualized NOI.
Actual NOI for any 12‑month period will depend on a number of
factors beyond our ability to control or predict, including general
capital markets and economic conditions, any bankruptcy,
insolvency, default or other failure to pay rent by one or more of
our tenants and the destruction of one or more of our assets due to
terrorist attack, natural disaster or other casualty, among others.
We do not undertake any obligation to update our calculation to
reflect events or circumstances occurring after the date of this
earnings release. There can be no assurance that the Annualized NOI
shown will reflect our actual results of operations over any
12‑month period.
Definitions
"Development Pipeline" refers to assets that have the
potential to commence construction subject to receipt of full
entitlements, completion of design and market conditions where we
(i) own land or control the land through a ground lease or (ii) are
under a long-term conditional contract to purchase, or enter into,
a leasehold interest with respect to land.
"Estimated Potential Development Density" reflects
management's estimate of developable gross square feet based on our
current business plans with respect to real estate owned or
controlled as of June 30, 2023. Our current business plans may
contemplate development of less than the maximum potential
development density for individual assets. As market conditions
change, our business plans, and therefore, the Estimated Potential
Development Density, could change accordingly. Given timing, zoning
requirements and other factors, we make no assurance that Estimated
Potential Development Density amounts will become actual density to
the extent we complete development of assets for which we have made
such estimates.
"First-generation" is a lease on space that had been
vacant for at least nine months or a lease on newly delivered
space.
"Formation Transaction" refers collectively to the
spin-off on July 17, 2017 of substantially all of the assets and
liabilities of Vornado Realty Trust's Washington, DC segment, which
operated as Vornado / Charles E. Smith, and the acquisition of the
management business and certain assets and liabilities of The JBG
Companies.
"Free Rent" means the amount of base rent and tenant
reimbursements that are abated according to the applicable lease
agreement(s).
"GAAP" means accounting principles generally accepted in
the United States of America.
"In-Service" refers to commercial or multifamily
operating assets that are at or above 90% leased or have been
operating and collecting rent for more than 12 months as of June
30, 2023.
"Non-Same Store" refers to all operating assets excluded
from the same store pool.
"Same Store" refers to the pool of assets that were
in-service for the entirety of both periods being compared, except
for assets for which significant redevelopment, renovation, or
repositioning occurred during either of the periods being
compared.
"Second-generation" is a lease on space that had been
vacant for less than nine months.
"Transaction and Other Costs" include pursuit costs
related to completed, potential and pursued transactions,
demolition costs, severance and other costs.
"Under-Construction" refers to assets that were under
construction during the three months ended June 30, 2023.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
in thousands
June 30, 2023
December 31, 2022
ASSETS
Real estate, at cost:
Land and improvements
$
1,267,379
$
1,302,569
Buildings and improvements
4,175,488
4,310,821
Construction in progress, including
land
694,793
544,692
6,137,660
6,158,082
Less: accumulated depreciation
(1,396,766
)
(1,335,000
)
Real estate, net
4,740,894
4,823,082
Cash and cash equivalents
156,639
241,098
Restricted cash
46,205
32,975
Tenant and other receivables
44,863
56,304
Deferred rent receivable
165,797
170,824
Investments in unconsolidated real estate
ventures
309,219
299,881
Intangible assets, net
144,308
162,246
Other assets, net
175,677
117,028
TOTAL ASSETS
$
5,783,602
$
5,903,438
LIABILITIES, REDEEMABLE NONCONTROLLING
INTERESTS AND EQUITY
Liabilities:
Mortgage loans, net
$
1,689,207
$
1,890,174
Revolving credit facility
62,000
—
Term loans, net
716,757
547,072
Accounts payable and accrued expenses
129,325
138,060
Other liabilities, net
139,445
132,710
Total liabilities
2,736,734
2,708,016
Commitments and contingencies
Redeemable noncontrolling interests
455,886
481,310
Total equity
2,590,982
2,714,112
TOTAL LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS AND EQUITY
$
5,783,602
$
5,903,438
Note: For complete financial statements,
please refer to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2023.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
in thousands, except per share data
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
REVENUE
Property rental
$
120,592
$
117,036
$
244,625
$
248,634
Third-party real estate services,
including reimbursements
22,862
22,157
45,646
46,127
Other revenue
8,641
6,312
14,786
12,709
Total revenue
152,095
145,505
305,057
307,470
EXPENSES
Depreciation and amortization
49,218
49,479
102,649
107,541
Property operating
35,912
35,445
71,524
76,089
Real estate taxes
14,424
14,946
29,648
33,132
General and administrative:
Corporate and other
15,093
14,782
31,216
30,597
Third-party real estate services
22,105
24,143
45,928
51,192
Share-based compensation related to
Formation Transaction and special equity awards
—
1,577
351
3,821
Transaction and other costs
3,492
1,987
5,964
2,886
Total expenses
140,244
142,359
287,280
305,258
OTHER INCOME (EXPENSE)
Income (loss) from unconsolidated real
estate ventures, net
510
(2,107
)
943
1,038
Interest and other income, net
2,281
1,672
6,358
15,918
Interest expense
(25,835
)
(16,041
)
(52,677
)
(32,319
)
Gain on the sale of real estate, net
—
158,767
40,700
158,631
Loss on the extinguishment of debt
(450
)
(1,038
)
(450
)
(1,629
)
Total other income (expense)
(23,494
)
141,253
(5,126
)
141,639
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE
(11,643
)
144,399
12,651
143,851
Income tax expense
(611
)
(2,905
)
(595
)
(2,434
)
NET INCOME (LOSS)
(12,254
)
141,494
12,056
141,417
Net (income) loss attributable to
redeemable noncontrolling interests
1,398
(18,248
)
(1,965
)
(18,258
)
Net loss attributable to noncontrolling
interests
311
29
535
84
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS
$
(10,545
)
$
123,275
$
10,626
$
123,243
EARNINGS (LOSS) PER COMMON SHARE - BASIC
AND DILUTED
$
(0.10
)
$
1.02
$
0.09
$
0.99
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED
109,695
121,316
111,862
123,984
Note: For complete financial statements,
please refer to our Quarterly Report on Form 10-Q for the quarter
ended June 30, 2023.
EBITDA, EBITDAre AND ADJUSTED
EBITDA RECONCILIATIONS (NON-GAAP)
(Unaudited)
dollars in thousands
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
EBITDA, EBITDAre and Adjusted
EBITDA
Net income (loss)
$
(12,254
)
$
141,494
$
12,056
$
141,417
Depreciation and amortization expense
49,218
49,479
102,649
107,541
Interest expense
25,835
16,041
52,677
32,319
Income tax expense
611
2,905
595
2,434
Unconsolidated real estate ventures
allocated share of above adjustments
4,618
9,494
8,282
19,323
EBITDA attributable to noncontrolling
interests
(32
)
(47
)
(2
)
(73
)
EBITDA
$
67,996
$
219,366
$
176,257
$
302,961
Gain on the sale of real estate, net
—
(158,767
)
(40,700
)
(158,631
)
Gain on the sale of unconsolidated real
estate assets
—
(936
)
—
(6,179
)
EBITDAre
$
67,996
$
59,663
$
135,557
$
138,151
Transaction and other costs, net of
noncontrolling interests (1)
3,492
1,987
5,964
2,852
(Income) loss from investments, net
526
(1,217
)
(1,335
)
(15,288
)
Loss on the extinguishment of debt
450
1,038
450
1,629
Share-based compensation related to
Formation Transaction and special equity awards
—
1,577
351
3,821
Earnings and distributions in excess of
our investment in unconsolidated real estate venture
(341
)
(124
)
(508
)
(565
)
Lease liability adjustments
(154
)
—
(154
)
—
Unconsolidated real estate ventures
allocated share of above adjustments
—
1,841
2
2,045
Adjusted EBITDA
$
71,969
$
64,765
$
140,327
$
132,645
Net Debt to Annualized Adjusted EBITDA
(2)
8.3
x
8.1
x
8.5
x
7.9
x
June 30, 2023
June 30, 2022
Net Debt (at JBG SMITH Share)
Consolidated indebtedness (3)
$
2,454,311
$
2,000,762
Unconsolidated indebtedness (3)
87,886
279,534
Total consolidated and unconsolidated
indebtedness
2,542,197
2,280,296
Less: cash and cash equivalents
165,834
181,882
Net Debt (at JBG SMITH Share)
$
2,376,363
$
2,098,414
Note: All EBITDA measures as shown above
are attributable to common limited partnership units ("OP Units")
and certain fully-vested incentive equity awards that are
convertible into OP Units.
(1)
Includes pursuit costs related to
completed, potential and pursued transactions, demolition costs,
severance and other costs.
(2)
Quarterly Adjusted EBITDA is
annualized by multiplying by four. Adjusted EBITDA for the six
months ended June 30, 2023 and 2022 is annualized by multiplying by
two.
(3)
Net of premium/discount and
deferred financing costs.
FFO, CORE FFO AND FAD
RECONCILIATIONS (NON-GAAP)
(Unaudited)
in thousands, except per share data
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
FFO and Core FFO
Net income (loss) attributable to common
shareholders
$
(10,545
)
$
123,275
$
10,626
$
123,243
Net income (loss) attributable to
redeemable noncontrolling interests
(1,398
)
18,248
1,965
18,258
Net loss attributable to noncontrolling
interests
(311
)
(29
)
(535
)
(84
)
Net income (loss)
(12,254
)
141,494
12,056
141,417
Gain on the sale of real estate, net of
tax
—
(155,642
)
(40,700
)
(155,506
)
Gain on the sale of unconsolidated real
estate assets
—
(936
)
—
(6,179
)
Real estate depreciation and
amortization
47,502
47,242
99,113
102,759
Pro rata share of real estate depreciation
and amortization from unconsolidated real estate ventures
3,111
6,416
5,871
13,286
FFO attributable to noncontrolling
interests
311
(47
)
535
(73
)
FFO Attributable to OP Units
$
38,670
$
38,527
$
76,875
$
95,704
FFO attributable to redeemable
noncontrolling interests
(5,247
)
(4,966
)
(10,450
)
(10,843
)
FFO Attributable to Common
Shareholders
$
33,423
$
33,561
$
66,425
$
84,861
FFO attributable to OP Units
$
38,670
$
38,527
$
76,875
$
95,704
Transaction and other costs, net of tax
and noncontrolling interests (1)
3,337
1,892
5,710
2,735
(Income) loss from investments, net of
tax
404
(957
)
(1,001
)
(11,495
)
(Gain) loss from mark-to-market on
derivative instruments, net of noncontrolling interests
2,601
(2,027
)
5,142
(5,394
)
Loss on the extinguishment of debt
450
1,038
450
1,629
Earnings and distributions in excess of
our investment in unconsolidated real estate venture
(341
)
(124
)
(508
)
(565
)
Share-based compensation related to
Formation Transaction and special equity awards
—
1,577
351
3,821
Lease liability adjustments
(154
)
—
(154
)
—
Amortization of management contracts
intangible, net of tax
1,024
1,106
2,130
2,211
Unconsolidated real estate ventures
allocated share of above adjustments
5
1,593
41
1,545
Core FFO Attributable to OP
Units
$
45,996
$
42,625
$
89,036
$
90,191
Core FFO attributable to redeemable
noncontrolling interests
(6,241
)
(5,494
)
(12,103
)
(10,383
)
Core FFO Attributable to Common
Shareholders
$
39,755
$
37,131
$
76,933
$
79,808
FFO per common share - diluted
$
0.30
$
0.28
$
0.59
$
0.68
Core FFO per common share - diluted
$
0.36
$
0.31
$
0.69
$
0.64
Weighted average shares - diluted (FFO and
Core FFO)
109,708
121,327
111,868
123,990
See footnotes under table below.
FFO, CORE FFO AND FAD
RECONCILIATIONS (NON-GAAP)
(Unaudited)
in thousands, except per share data
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
FAD
Core FFO attributable to OP Units
$
45,996
$
42,625
$
89,036
$
90,191
Recurring capital expenditures and
Second-generation tenant improvements and leasing commissions
(2)
(11,602
)
(13,300
)
(19,396
)
(27,002
)
Straight-line and other rent adjustments
(3)
(6,311
)
(1,978
)
(14,688
)
(3,769
)
Third-party lease liability assumption
(payments) refunds
(25
)
(25
)
70
(25
)
Share-based compensation expense
9,137
10,171
18,485
20,664
Amortization of debt issuance costs
1,343
1,135
2,650
2,311
Unconsolidated real estate ventures
allocated share of above adjustments
641
(289
)
1,043
(937
)
Non-real estate depreciation and
amortization
341
760
696
1,828
FAD available to OP Units (A)
$
39,520
$
39,099
$
77,896
$
83,261
Distributions to common shareholders and
unitholders (B)
$
27,684
$
31,768
$
57,303
$
64,371
FAD Payout Ratio (B÷A) (4)
70.1
%
81.3
%
73.6
%
77.3
%
Capital Expenditures
Maintenance and recurring capital
expenditures
$
4,707
$
6,091
$
7,680
$
10,911
Share of maintenance and recurring capital
expenditures from unconsolidated real estate ventures
35
312
35
394
Second-generation tenant improvements and
leasing commissions
6,805
6,713
11,547
15,307
Share of Second-generation tenant
improvements and leasing commissions from unconsolidated real
estate ventures
55
184
134
390
Recurring capital expenditures and
Second-generation tenant improvements and leasing commissions
11,602
13,300
19,396
27,002
Non-recurring capital expenditures
10,904
13,552
20,597
26,362
Share of non-recurring capital
expenditures from unconsolidated real estate ventures
3
37
5
49
First-generation tenant improvements and
leasing commissions
4,174
4,197
7,299
8,647
Share of First-generation tenant
improvements and leasing commissions from unconsolidated real
estate ventures
240
244
553
717
Non-recurring capital expenditures
15,321
18,030
28,454
35,775
Total JBG SMITH Share of Capital
Expenditures
$
26,923
$
31,330
$
47,850
$
62,777
(1)
Includes pursuit costs related to
completed, potential and pursued transactions, demolition costs,
severance and other costs.
(2)
Includes amounts, at JBG SMITH
Share, related to unconsolidated real estate ventures.
(3)
Includes straight-line rent,
above/below market lease amortization and lease incentive
amortization.
(4)
The quarterly FAD payout ratio is
not necessarily indicative of an amount for the full year due to
fluctuation in the timing of capital expenditures, the commencement
of new leases and the seasonality of our operations.
NOI RECONCILIATIONS
(NON-GAAP)
(Unaudited)
dollars in thousands
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net income (loss) attributable to common
shareholders
$
(10,545
)
$
123,275
$
10,626
$
123,243
Add:
Depreciation and amortization expense
49,218
49,479
102,649
107,541
General and administrative expense:
Corporate and other
15,093
14,782
31,216
30,597
Third-party real estate services
22,105
24,143
45,928
51,192
Share-based compensation related to
Formation Transaction and special equity awards
—
1,577
351
3,821
Transaction and other costs
3,492
1,987
5,964
2,886
Interest expense
25,835
16,041
52,677
32,319
Loss on the extinguishment of debt
450
1,038
450
1,629
Income tax expense
611
2,905
595
2,434
Net income (loss) attributable to
redeemable noncontrolling interests
(1,398
)
18,248
1,965
18,258
Net loss attributable to noncontrolling
interests
(311
)
(29
)
(535
)
(84
)
Less:
Third-party real estate services,
including reimbursements revenue
22,862
22,157
45,646
46,127
Other revenue
3,846
1,798
5,572
3,994
Income (loss) from unconsolidated real
estate ventures, net
510
(2,107
)
943
1,038
Interest and other income, net
2,281
1,672
6,358
15,918
Gain on the sale of real estate, net
—
158,767
40,700
158,631
Consolidated NOI
75,051
71,159
152,667
148,128
NOI attributable to unconsolidated real
estate ventures at our share
5,175
8,321
9,604
15,268
Non-cash rent adjustments (1)
(6,311
)
(1,978
)
(14,688
)
(3,769
)
Other adjustments (2)
5,163
5,695
12,008
14,443
Total adjustments
4,027
12,038
6,924
25,942
NOI
$
79,078
$
83,197
$
159,591
$
174,070
Less: out-of-service NOI loss (3)
(902
)
(2,046
)
(1,611
)
(3,498
)
Operating Portfolio NOI
$
79,980
$
85,243
$
161,202
$
177,568
Non-Same Store NOI (4)
1,640
7,007
7,667
22,918
Same Store NOI (5)
$
78,340
$
78,236
$
153,535
$
154,650
Change in Same Store NOI
0.1
%
(0.7
)%
Number of properties in Same Store
pool
50
49
(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 related party management fees.
(3)
Includes the results of our
Under-Construction assets and assets in the Development
Pipeline.
(4)
Includes the results of
properties that were not In-Service for the entirety of both
periods being compared, including disposed properties, 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230808942708/en/
Barbat Rodgers Senior Vice President, Investor Relations (240)
333‑3805 brodgers@jbgsmith.com
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