JBGS JBG SMITH Properties

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-K for the year ended December 31, 2023 and reported its financial results.

Additional information regarding our results of operations, properties, and tenants can be found in our Fourth 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.

Fourth Quarter 2023 Highlights

• Net income (loss), Funds From Operations ("FFO") and Core FFO attributable to common shareholders were:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOURTH QUARTER AND FULL YEAR COMPARISON

in millions, except per share amounts

 

Three Months Ended

 

Year Ended

 

 

 

December 31, 2023

 

December 31, 2022

 

December 31, 2023

 

December 31, 2022

 

 

 

Amount

Per Diluted Share

 

Amount

Per Diluted Share

 

Amount

Per Diluted Share

 

Amount

Per Diluted Share

 

Net income (loss) (1)

 

$

(32.6)

$

(0.35)

 

$

(18.6)

$

(0.17)

 

$

(80.0)

$

(0.78)

 

$

85.4

$

0.70

 

FFO

 

$

33.9

$

0.35

 

$

31.1

$

0.27

 

$

140.4

$

1.33

 

$

156.0

$

1.31

 

Core FFO

 

$

36.1

$

0.38

 

$

34.3

$

0.30

 

$

154.1

$

1.46

 

$

155.3

$

1.30

_____________

(1)

Includes impairment losses of $30.9 million and $90.2 million related to real estate assets recorded during the three months and year ended December 31, 2023, and impairment losses recorded by our unconsolidated real estate ventures, of which our proportionate share was $25.3 million and $3.9 million during the three months ended December 31, 2023 and 2022, and $28.6 million and $19.3 million during the years ended December 31, 2023 and 2022. Also includes gains on the sale of real estate of $37.7 million and $3.3 million during the three months ended December 31, 2023 and 2022, and $79.3 million and $161.9 million during the years ended December 31, 2023 and 2022.

• Annualized Net Operating Income ("NOI") for the three months ended December 31, 2023 was $322.4 million, compared to $319.8 million for the three months ended September 30, 2023, at our share. Excluding the assets that were sold or recapitalized, Annualized NOI for the three months ended December 31, 2023 was $318.6 million, compared to $309.4 million for the three months ended September 30, 2023, at our share.
  • The increase in Annualized NOI excluding the assets that were sold or recapitalized was substantially attributable to (i) an increase in our multifamily portfolio NOI due to lower concessions and lower operating expenses, and (ii) a decrease in our commercial portfolio NOI due to higher abatement and tenant expirations, partially offset by lower utilities due to seasonality.
• Same Store NOI ("SSNOI") at our share increased 7.1% quarter-over-quarter to $80.3 million for the three months ended December 31, 2023. SSNOI at our share increased 1.6% year-over-year to $299.9 million for the year ended December 31, 2023.
  • The increase in SSNOI for the three months ended December 31, 2023 was substantially attributable to (i) higher rents and occupancy, partially offset by higher operating expenses in our multifamily portfolio and (ii) burn off of rent abatements and lower operating expenses, partially offset by lower occupancy in our commercial portfolio.

Operating Portfolio

• The operating multifamily portfolio was 96.0% leased and 94.7% occupied as of December 31, 2023, compared to 96.9% and 95.6% as of September 30, 2023, at our share.
• Across our multifamily portfolio, we increased effective rents by 7.0% upon renewal for fourth quarter lease expirations while achieving a 56.0% renewal rate.
• The operating commercial portfolio was 86.3% leased and 84.9% occupied as of December 31, 2023, compared to 85.6% and 84.4% as of September 30, 2023, at our share.
• Executed approximately 170,000 square feet of office leases at our share during the three months ended December 31, 2023, comprising approximately 20,000 square feet of first-generation leases and approximately 150,000 square feet of second-generation leases, which generated a 3.5% rental rate increase on a cash basis and a 0.2% rental rate increase on a GAAP basis.
• Executed approximately 927,000 square feet of office leases at our share during the year ended December 31, 2023, comprising approximately 70,000 square feet of first-generation leases and approximately 857,000 square feet of second-generation leases, which generated a 1.2% rental rate increase on a cash basis and a 2.1% rental rate increase on a GAAP basis.

Development Portfolio

Under-Construction

• As of December 31, 2023, we had two multifamily assets under construction consisting of 1,583 units at our share.

Development Pipeline

• As of December 31, 2023, we had 17 assets in the development pipeline consisting of 8.8 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 December 31, 2023, revenue from third-party real estate services, including reimbursements, was $22.5 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 $11.0 million, primarily driven by $6.3 million of property and asset management fees, $1.9 million of leasing fees, $1.2 million of development fees and $1.2 million of other service revenue.

Balance Sheet

• As of December 31, 2023, our total enterprise value was approximately $4.3 billion, comprising 107.5 million common shares and units valued at $1.8 billion, and debt (net of premium / (discount) and deferred financing costs) at our share of $2.6 billion, less cash and cash equivalents at our share of $171.6 million.
• As of December 31, 2023, we had $164.8 million of cash and cash equivalents ($171.6 million of cash and cash equivalents at our share), and $687.5 million of availability under our revolving credit facility.
• Net Debt to annualized Adjusted EBITDA at our share for the three months ended December 31, 2023 was 8.7x, and our Net Debt / total enterprise value was 57.2% as of December 31, 2023.

Investing and Financing Activities

• On October 4, 2023, we sold 5 M Street Southwest, an asset in our development pipeline located in Washington, DC with an estimated potential development density of 664,700 square feet, for $29.5 million.
• On November 14, 2023, one of our unconsolidated real estate ventures sold Rosslyn Gateway – North and South, commercial assets totaling 250,490 square feet, and related land parcels with estimated potential development density totaling 809,500 square feet in Arlington, Virginia, for $9.4 million at our 18.0% share.
• On November 30, 2023, we sold Crystal City Marriott, a 345-key hotel in our commercial portfolio located in Arlington, Virginia, for $80.0 million.
• On December 5, 2023, we sold Capitol Point – North – 75 New York Avenue, an asset in our development pipeline located in Washington, DC with an estimated potential development density of 286,900 square feet, for $11.5 million.
• Borrowings under our revolving credit facility decreased by $30.0 million for the quarter.
• We repurchased and retired 4.1 million common shares for $58.6 million, a weighted average purchase price per share of $14.17.

Subsequent to December 31, 2023

• We repurchased and retired 2.7 million common shares for $45.4 million, a weighted average purchase price per share of $16.52, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.
• We repaid all amounts outstanding under our revolving credit facility.
• On January 22, 2024, we sold North End Retail, a multifamily asset with 27,355 square feet in Washington, DC, for $14.3 million.
• On February 13, 2024, one of our unconsolidated real estate ventures sold Central Place Tower, a commercial asset with 551,594 square feet in Rosslyn, Virginia, for $162.5 million at our 50.0% share.

Dividends

• On February 14, 2024, our Board of Trustees declared a quarterly dividend of $0.175 per common share, payable on March 15, 2024 to shareholders of record as of March 1, 2024.

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, most notably National Landing. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, DC metropolitan area. Approximately 75.0% 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 5G digital infrastructure. JBG SMITH's dynamic portfolio currently comprises 14.2 million square feet of high-growth office, multifamily, and retail assets at share, 99% of which are Metro-served. It also maintains a development pipeline encompassing 8.8 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: 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; 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, 2023 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, our 49.0% interest in three commercial buildings and our 9.9% interest in one commercial building, 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 caps) 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, litigation settlement 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, litigation settlement 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 adjusted for 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 December 31, 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 December 31, 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 December 31, 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 multifamily or commercial operating assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of December 31, 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, and severance and other costs.

"Under-Construction" refers to assets that were under construction during the three months ended December 31, 2023.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

in thousands

 

December 31, 2023

 

December 31, 2022

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Real estate, at cost:

 

 

 

 

 

 

 

 

Land and improvements

 

$

1,194,737

 

$

1,302,569

 

 

Buildings and improvements

 

 

4,021,322

 

 

4,310,821

 

 

Construction in progress, including land

 

 

659,103

 

 

544,692

 

 

 

 

 

5,875,162

 

 

6,158,082

 

 

Less: accumulated depreciation

 

 

(1,338,403)

 

 

(1,335,000)

 

 

Real estate, net

 

 

4,536,759

 

 

4,823,082

 

 

Cash and cash equivalents

 

 

164,773

 

 

241,098

 

 

Restricted cash

 

 

35,668

 

 

32,975

 

 

Tenant and other receivables

 

 

44,231

 

 

56,304

 

 

Deferred rent receivable

 

 

171,229

 

 

170,824

 

 

Investments in unconsolidated real estate ventures

 

 

264,281

 

 

299,881

 

 

Deferred leasing costs, net

 

 

81,477

 

 

94,069

 

 

Intangible assets, net

 

 

56,616

 

 

68,177

 

 

Other assets, net

 

 

163,481

 

 

117,028

 

 

TOTAL ASSETS

 

$

5,518,515

 

$

5,903,438

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Mortgage loans, net

 

$

1,783,014

 

$

1,890,174

 

 

Revolving credit facility

 

 

62,000

 

 

—

 

 

Term loans, net

 

 

717,172

 

 

547,072

 

 

Accounts payable and accrued expenses

 

 

124,874

 

 

138,060

 

 

Other liabilities, net

 

 

138,869

 

 

132,710

 

 

Total liabilities

 

 

2,825,929

 

 

2,708,016

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable noncontrolling interests

 

 

440,737

 

 

481,310

 

 

Total equity

 

 

2,251,849

 

 

2,714,112

 

 

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY

 

$

5,518,515

 

$

5,903,438

 

Note: For complete financial statements, please refer to our Annual Report on Form 10-K for the year ended December 31, 2023.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in thousands, except per share data

 

Three Months Ended December 31,

 

Year Ended

December 31,

 

 

2023

 

2022

 

2023

 

2022

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

Property rental

 

$

118,240

 

$

123,293

 

$

483,159

 

$

491,738

Third-party real estate services, including reimbursements

 

 

22,463

 

 

21,050

 

 

92,051

 

 

89,022

Other revenue

 

 

6,876

 

 

6,397

 

 

28,988

 

 

25,064

Total revenue

 

 

147,579

 

 

150,740

 

 

604,198

 

 

605,824

EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

57,281

 

 

56,174

 

 

210,195

 

 

213,771

Property operating

 

 

34,937

 

 

37,535

 

 

144,049

 

 

150,004

Real estate taxes

 

 

13,607

 

 

14,297

 

 

57,668

 

 

62,167

General and administrative:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and other

 

 

12,376

 

 

15,611

 

 

54,838

 

 

58,280

Third-party real estate services

 

 

21,615

 

 

22,107

 

 

88,948

 

 

94,529

Share-based compensation related to Formation Transaction and special equity awards

 

 

152

 

 

1,022

 

 

549

 

 

5,391

Transaction and other costs

 

 

943

 

 

879

 

 

8,737

 

 

5,511

Total expenses

 

 

140,911

 

 

147,625

 

 

564,984

 

 

589,653

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

Loss from unconsolidated real estate ventures, net

 

 

(25,679)

 

 

(4,600)

 

 

(26,999)

 

 

(17,429)

Interest and other income, net

 

 

1,649

 

 

1,715

 

 

15,781

 

 

18,617

Interest expense

 

 

(28,080)

 

 

(25,679)

 

 

(108,660)

 

 

(75,930)

Gain on the sale of real estate, net

 

 

37,729

 

 

3,263

 

 

79,335

 

 

161,894

Loss on the extinguishment of debt

 

 

—

 

 

—

 

 

(450)

 

 

(3,073)

Impairment loss

 

 

(30,919)

 

 

—

 

 

(90,226)

 

 

—

Total other income (expense)

 

 

(45,300)

 

 

(25,301)

 

 

(131,219)

 

 

84,079

INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT

 

 

(38,632)

 

 

(22,186)

 

 

(92,005)

 

 

100,250

Income tax (expense) benefit

 

 

968

 

 

1,336

 

 

296

 

 

(1,264)

NET INCOME (LOSS)

 

 

(37,664)

 

 

(20,850)

 

 

(91,709)

 

 

98,986

Net (income) loss attributable to redeemable noncontrolling interests

 

 

4,635

 

 

2,468

 

 

10,596

 

 

(13,244)

Net (income) loss attributable to noncontrolling interests

 

 

432

 

 

(197)

 

 

1,135

 

 

(371)

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS

 

$

(32,597)

 

$

(18,579)

 

$

(79,978)

 

$

85,371

EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED

 

$

(0.35)

 

$

(0.17)

 

$

(0.78)

 

$

0.70

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED

 

 

95,434

 

 

113,854

 

 

105,095

 

 

119,005

Note: For complete financial statements, please refer to our Annual Report on Form 10-K for the year ended December 31, 2023.

EBITDA, EBITDAre AND ADJUSTED EBITDA RECONCILIATIONS (NON-GAAP)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

dollars in thousands

 

Three Months Ended December 31,

 

Year Ended

December 31,

 

 

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA, EBITDAre and Adjusted EBITDA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(37,664)

 

$

(20,850)

 

$

(91,709)

 

$

98,986

 

 

Depreciation and amortization expense

 

 

57,281

 

 

56,174

 

 

210,195

 

 

213,771

 

 

Interest expense

 

 

28,080

 

 

25,679

 

 

108,660

 

 

75,930

 

 

Income tax expense (benefit)

 

 

(968)

 

 

(1,336)

 

 

(296)

 

 

1,264

 

 

Unconsolidated real estate ventures allocated share of above adjustments

 

 

3,892

 

 

3,738

 

 

16,673

 

 

30,786

 

 

EBITDA attributable to noncontrolling interests

 

 

32

 

 

22

 

 

28

 

 

(79)

 

EBITDA

 

$

50,653

 

$

63,427

 

$

243,551

 

$

420,658

 

 

Gain on the sale of real estate, net

 

 

(37,729)

 

 

(3,263)

 

 

(79,335)

 

 

(161,894)

 

 

(Gain) loss on the sale of unconsolidated real estate assets

 

 

230

 

 

(618)

 

 

(411)

 

 

(6,797)

 

 

Real estate impairment loss

 

 

30,919

 

 

—

 

 

90,226

 

 

—

 

 

Impairment related to unconsolidated real estate ventures (1)

 

 

25,279

 

 

3,885

 

 

28,598

 

 

19,286

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDAre

 

$

69,352

 

$

63,431

 

$

282,629

 

$

271,253

 

 

Transaction and other costs, net of noncontrolling interests (2)

 

 

943

 

 

879

 

 

8,737

 

 

5,477

 

 

Litigation settlement proceeds, net

 

 

—

 

 

—

 

 

(3,455)

 

 

—

 

 

(Income) loss from investments, net

 

 

182

 

 

298

 

 

(932)

 

 

(14,423)

 

 

Loss on the extinguishment of debt

 

 

—

 

 

—

 

 

450

 

 

3,073

 

 

Share-based compensation related to Formation Transaction and special equity awards

 

 

152

 

 

1,022

 

 

549

 

 

5,391

 

 

Earnings and distributions in excess of our investment in unconsolidated real estate venture

 

 

(118)

 

 

(405)

 

 

(706)

 

 

(988)

 

 

Lease liability adjustments

 

 

6

 

 

—

 

 

(148)

 

 

—

 

 

Unconsolidated real estate ventures allocated share of above adjustments

 

 

27

 

 

26

 

 

60

 

 

2,105

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

70,544

 

$

65,251

 

$

287,184

 

$

271,888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Debt to Annualized Adjusted EBITDA (3)

 

 

8.7

x

 

8.6

x

 

8.5

x

 

8.2

x

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

December 31, 2022

 

Net Debt (at JBG SMITH Share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated indebtedness (4)

 

 

 

 

 

 

 

$

2,551,987

 

$

2,431,730

 

 

Unconsolidated indebtedness (4)

 

 

 

 

 

 

 

 

66,271

 

 

54,975

 

 

Total consolidated and unconsolidated indebtedness

 

 

 

 

 

 

 

 

2,618,258

 

 

2,486,705

 

 

Less: cash and cash equivalents

 

 

 

 

 

 

 

 

171,631

 

 

253,698

 

Net Debt (at JBG SMITH Share)

 

 

 

 

 

 

 

$

2,446,627

 

$

2,233,007

 

Note: All EBITDA measures as shown above are attributable to common limited partnership units ("OP Units") and certain fully vested incentive equity awards that may be convertible into OP Units.

(1) Related to decreases in the value of the underlying real estate assets.

(2) Includes pursuit costs related to completed, potential and pursued transactions, demolition costs, severance and other costs.

(3) Quarterly Adjusted EBITDA is annualized by multiplying by four.

(4) 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 December 31,

 

Year Ended December 31,

 

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO and Core FFO

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

$

(32,597)

 

$

(18,579)

 

$

(79,978)

 

$

85,371

 

 

Net income (loss) attributable to redeemable noncontrolling interests

 

(4,635)

 

 

(2,468)

 

 

(10,596)

 

 

13,244

 

 

Net income (loss) attributable to noncontrolling interests

 

(432)

 

 

197

 

 

(1,135)

 

 

371

 

 

Net income (loss)

 

(37,664)

 

 

(20,850)

 

 

(91,709)

 

 

98,986

 

 

Gain on the sale of real estate, net of tax

 

(37,729)

 

 

(3,263)

 

 

(79,335)

 

 

(158,769)

 

 

(Gain) loss on the sale of unconsolidated real estate assets

 

230

 

 

(618)

 

 

(411)

 

 

(6,797)

 

 

Real estate depreciation and amortization

 

55,588

 

 

54,153

 

 

203,269

 

 

204,752

 

 

Real estate impairment loss

 

30,919

 

 

—

 

 

90,226

 

 

—

 

 

Impairment related to unconsolidated real estate ventures (1)

 

25,279

 

 

3,885

 

 

28,598

 

 

19,286

 

 

Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures

 

2,690

 

 

2,884

 

 

11,545

 

 

21,169

 

 

FFO attributable to noncontrolling interests

 

321

 

 

(326)

 

 

1,024

 

 

(735)

 

FFO Attributable to OP Units

$

39,634

 

$

35,865

 

$

163,207

 

$

177,892

 

 

FFO attributable to redeemable noncontrolling interests

 

(5,770)

 

 

(4,776)

 

 

(22,820)

 

 

(21,846)

 

FFO Attributable to Common Shareholders

$

33,864

 

$

31,089

 

$

140,387

 

$

156,046

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FFO attributable to OP Units

$

39,634

 

$

35,865

 

$

163,207

 

$

177,892

 

 

Transaction and other costs, net of tax and noncontrolling interests (2)

 

969

 

 

981

 

 

8,434

 

 

5,313

 

 

Litigation settlement proceeds, net

 

—

 

 

—

 

 

(3,455)

 

 

—

 

 

(Income) loss from investments, net of tax

 

137

 

 

109

 

 

(699)

 

 

(10,819)

 

 

(Gain) loss from mark-to-market on derivative instruments, net of noncontrolling interests

 

439

 

 

1,487

 

 

7,153

 

 

(6,686)

 

 

Loss on the extinguishment of debt

 

—

 

 

—

 

 

450

 

 

3,073

 

 

Earnings and distributions in excess of our investment in unconsolidated real estate venture

 

(118)

 

 

(405)

 

 

(706)

 

 

(988)

 

 

Share-based compensation related to Formation Transaction and special equity awards

 

152

 

 

1,022

 

 

549

 

 

5,391

 

 

Lease liability adjustments

 

6

 

 

—

 

 

(148)

 

 

—

 

 

Amortization of management contracts intangible, net of tax

 

1,032

 

 

1,106

 

 

4,193

 

 

4,422

 

 

Unconsolidated real estate ventures allocated share of above adjustments

 

26

 

 

21

 

 

130

 

 

1,150

 

Core FFO Attributable to OP Units

$

42,277

 

$

40,186

 

$

179,108

 

$

178,748

 

 

Core FFO attributable to redeemable noncontrolling interests

 

(6,155)

 

 

(5,883)

 

 

(25,013)

 

 

(23,424)

 

Core FFO Attributable to Common Shareholders

$

36,122

 

$

34,303

 

$

154,095

 

$

155,324

 

 

FFO per common share - diluted

$

0.35

 

$

0.27

 

$

1.33

 

$

1.31

 

 

Core FFO per common share - diluted

$

0.38

 

$

0.30

 

$

1.46

 

$

1.30

 

 

Weighted average shares - diluted (FFO and Core FFO)

 

95,545

 

 

113,917

 

 

105,195

 

 

119,036

 

See footnotes under table below.

FFO, CORE FFO AND FAD RECONCILIATIONS (NON-GAAP)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

in thousands, except per share data

 

Three Months Ended

December 31,

 

Year Ended December 31,

 

 

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FAD

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Core FFO attributable to OP Units

 

$

42,277

 

$

40,186

 

$

179,108

 

$

178,748

 

 

Recurring capital expenditures and Second-generation tenant improvements and leasing commissions (3)

 

 

(12,055)

 

 

(16,780)

 

 

(40,676)

 

 

(53,876)

 

 

Straight-line and other rent adjustments (4)

 

 

(3,568)

 

 

(7,655)

 

 

(23,482)

 

 

(17,442)

 

 

Third-party lease liability assumption (payments) refunds

 

 

—

 

 

—

 

 

70

 

 

(25)

 

 

Share-based compensation expense

 

 

4,887

 

 

8,084

 

 

29,367

 

 

34,462

 

 

Amortization of debt issuance costs

 

 

3,755

 

 

1,162

 

 

9,777

 

 

4,595

 

 

Unconsolidated real estate ventures allocated share of above adjustments

 

 

932

 

 

2,315

 

 

2,850

 

 

(1,240)

 

 

Non-real estate depreciation and amortization

 

 

318

 

 

546

 

 

1,337

 

 

3,114

 

FAD available to OP Units (A)

 

$

36,546

 

$

27,858

 

$

158,351

 

$

148,336

 

 

Distributions to common shareholders and unitholders (B)

 

$

25,216

 

$

29,625

 

$

109,320

 

$

123,829

 

 

FAD Payout Ratio (B÷A) (5)

 

 

69.0

%

 

106.3

%

 

69.0

%

 

83.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Expenditures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Maintenance and recurring capital expenditures

 

$

7,151

 

$

6,282

 

$

18,795

 

$

22,137

 

 

Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures

 

 

17

 

 

72

 

 

62

 

 

550

 

 

Second-generation tenant improvements and leasing commissions

 

 

4,747

 

 

10,276

 

 

21,516

 

 

30,621

 

 

Share of Second-generation tenant improvements and leasing commissions from unconsolidated real estate ventures

 

 

140

 

 

150

 

 

303

 

 

568

 

 

Recurring capital expenditures and Second-generation tenant improvements and leasing commissions

 

 

12,055

 

 

16,780

 

 

40,676

 

 

53,876

 

 

Non-recurring capital expenditures

 

 

2,595

 

 

11,822

 

 

33,614

 

 

52,016

 

 

Share of non-recurring capital expenditures from unconsolidated real estate ventures

 

 

5

 

 

5

 

 

10

 

 

63

 

 

First-generation tenant improvements and leasing commissions

 

 

3,046

 

 

5,075

 

 

17,633

 

 

27,349

 

 

Share of First-generation tenant improvements and leasing commissions from unconsolidated real estate ventures

 

 

479

 

 

229

 

 

1,126

 

 

1,267

 

 

Non-recurring capital expenditures

 

 

6,125

 

 

17,131

 

 

52,383

 

 

80,695

 

Total JBG SMITH Share of Capital Expenditures

 

$

18,180

 

$

33,911

 

$

93,059

 

$

134,571

 

(1)

Related to decreases in the value of the underlying real estate assets.

(2)

Includes pursuit costs related to completed, potential and pursued transactions, demolition costs, severance and other costs.

(3)

Includes amounts, at JBG SMITH Share, related to unconsolidated real estate ventures.

(4)

Includes straight-line rent, above/below market lease amortization and lease incentive amortization.

(5)

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 December 31,

 

Year Ended December 31,

 

 

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to common shareholders

 

$

(32,597)

 

$

(18,579)

 

$

(79,978)

 

$

85,371

 

Add:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

 

57,281

 

 

56,174

 

 

210,195

 

 

213,771

 

 

General and administrative expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and other

 

 

12,376

 

 

15,611

 

 

54,838

 

 

58,280

 

 

Third-party real estate services

 

 

21,615

 

 

22,107

 

 

88,948

 

 

94,529

 

 

Share-based compensation related to Formation Transaction and special equity awards

 

 

152

 

 

1,022

 

 

549

 

 

5,391

 

 

Transaction and other costs

 

 

943

 

 

879

 

 

8,737

 

 

5,511

 

 

Interest expense

 

 

28,080

 

 

25,679

 

 

108,660

 

 

75,930

 

 

Loss on the extinguishment of debt

 

 

—

 

 

—

 

 

450

 

 

3,073

 

 

Impairment loss

 

 

30,919

 

 

—

 

 

90,226

 

 

—

 

 

Income tax expense (benefit)

 

 

(968)

 

 

(1,336)

 

 

(296)

 

 

1,264

 

 

Net income (loss) attributable to redeemable noncontrolling interests

 

 

(4,635)

 

 

(2,468)

 

 

(10,596)

 

 

13,244

 

 

Net income (loss) attributable to noncontrolling interests

 

 

(432)

 

 

197

 

 

(1,135)

 

 

371

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Third-party real estate services, including reimbursements revenue

 

 

22,463

 

 

21,050

 

 

92,051

 

 

89,022

 

 

Other revenue

 

 

2,624

 

 

1,663

 

 

10,902

 

 

7,421

 

 

Loss from unconsolidated real estate ventures, net

 

 

(25,679)

 

 

(4,600)

 

 

(26,999)

 

 

(17,429)

 

 

Interest and other income, net

 

 

1,649

 

 

1,715

 

 

15,781

 

 

18,617

 

 

Gain on the sale of real estate, net

 

 

37,729

 

 

3,263

 

 

79,335

 

 

161,894

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated NOI

 

 

73,948

 

 

76,195

 

 

299,528

 

 

297,210

 

 

NOI attributable to unconsolidated real estate ventures at our share

 

 

4,475

 

 

4,483

 

 

19,452

 

 

26,861

 

 

Non-cash rent adjustments (1)

 

 

(3,568)

 

 

(7,655)

 

 

(23,482)

 

 

(17,442)

 

 

Other adjustments (2)

 

 

5,174

 

 

7,069

 

 

22,994

 

 

27,739

 

 

Total adjustments

 

 

6,081

 

 

3,897

 

 

18,964

 

 

37,158

 

NOI

 

$

80,029

 

$

80,092

 

$

318,492

 

$

334,368

 

 

Less: out-of-service NOI loss (3)

 

 

(905)

 

 

(805)

 

 

(3,512)

 

 

(4,849)

 

Operating Portfolio NOI

 

$

80,934

 

$

80,897

 

$

322,004

 

$

339,217

 

 

Non-Same Store NOI (4)

 

 

618

 

 

5,889

 

 

22,125

 

 

44,174

 

Same Store NOI (5)

 

$

80,316

 

$

75,008

 

$

299,879

 

$

295,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in Same Store NOI

 

 

7.1

%

 

 

 

 

1.6

%

 

 

 

 

Number of properties in Same Store pool

 

 

44

 

 

 

 

 

42

 

 

 

 

(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/20240220370937/en/

Kevin Connolly Executive Vice President, Portfolio Management & Investor Relations (240) 333‑3837 kconnolly@jbgsmith.com