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 September 30, 2023
and reported its financial results.
Additional information regarding our results of operations,
properties, and tenants can be found in our Third 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.
Third Quarter 2023 Highlights
- Net income (loss), Funds From Operations ("FFO") and Core FFO
attributable to common shareholders were:
THIRD QUARTER AND YEAR-TO-DATE
COMPARISON
in millions, except per share amounts
Three Months Ended
Nine Months Ended
September 30, 2023
September 30, 2022
September 30, 2023
September 30, 2022
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Net income (loss) (1)
$
(58.0
)
$
(0.58
)
$
(19.3
)
$
(0.17
)
$
(47.4
)
$
(0.45
)
$
104.0
$
0.86
FFO
$
40.1
$
0.40
$
40.1
$
0.35
$
106.5
$
0.98
$
125.0
$
1.03
Core FFO
$
41.0
$
0.40
$
41.2
$
0.36
$
118.0
$
1.09
$
121.0
$
1.00
___________________________
(1) Includes impairment losses recorded in
connection with the preparation and review of our third quarter
2023 consolidated financial statements totaling $59.3 million
related to real estate assets, and impairment losses recorded by
our unconsolidated real estate ventures, of which our proportionate
share was $3.3 million and $15.4 million in 2023 and 2022.
- Annualized Net Operating Income ("NOI") for the three months
ended September 30, 2023 was $319.8 million, compared to $317.5
million for the three months ended June 30, 2023, at our share.
Excluding the assets that were sold or recapitalized, Annualized
NOI for the three months ended September 30, 2023 was $313.7
million, compared to $310.7 million for the three months ended June
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 commercial portfolio NOI due to the burn off of
free rent, partially offset by lower occupancy and higher utilities
expense as a result of seasonality, and (ii) a decrease in our
multifamily portfolio NOI due to higher concessions and turnover
costs, partially offset by higher occupancy and rents.
- Same Store NOI ("SSNOI") at our share increased 3.7%
quarter-over-quarter to $76.9 million for the three months ended
September 30, 2023. SSNOI at our share increased 0.5%
year-over-year to $225.9 million for the nine months ended
September 30, 2023.
- The increase in SSNOI for the three months ended September 30,
2023 was substantially attributable to (i) higher occupancy and
rents, partially offset by higher concessions and higher operating
expenses in our multifamily portfolio and (ii) higher vacancy,
partially offset by the burn off of free rent and an increase in
parking revenue in our commercial portfolio.
Operating Portfolio
- The operating commercial portfolio was 85.6% leased and 84.4%
occupied as of September 30, 2023, compared to 86.3% and 84.0% as
of June 30, 2023, at our share.
- The operating multifamily portfolio was 96.9% leased and 95.6%
occupied as of September 30, 2023, compared to 96.8% and 93.7% as
of June 30, 2023, at our share.
- Executed approximately 434,000 square feet of office leases at
our share during the three months ended September 30, 2023,
comprising approximately 9,000 square feet of first-generation
leases and approximately 425,000 square feet of second-generation
leases, which generated a 0.9% rental rate increase on a GAAP basis
and a 0.1% rental rate decrease on a cash basis.
- Executed approximately 757,000 square feet of office leases at
our share during the nine months ended September 30, 2023,
comprising approximately 50,000 square feet of first-generation
leases and approximately 707,000 square feet of second-generation
leases, which generated a 2.4% rental rate increase on a GAAP basis
and a 0.7% rental rate increase on a cash basis.
Development Portfolio
Under-Construction
- As of September 30, 2023, we had two multifamily assets under
construction consisting of 1,583 units at our share.
Development Pipeline
- As of September 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 September 30, 2023, revenue from
third-party real estate services, including reimbursements, was
$23.9 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 $12.7
million, primarily driven by $5.8 million of property and asset
management fees, $4.3 million of development fees, $1.3 million of
other service revenue and $1.0 million of leasing fees.
Balance Sheet
- As of September 30, 2023, our total enterprise value was
approximately $4.1 billion, comprising 111.4 million common shares
and units valued at $1.6 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 $138.3
million.
- As of September 30, 2023, we had $130.5 million of cash and
cash equivalents ($138.3 million of cash and cash equivalents at
our share), and $657.5 million of capacity under our revolving
credit facility.
- Net Debt to annualized Adjusted EBITDA at our share for the
three months ended September 30, 2023 was 8.1x, and our Net Debt /
total enterprise value was 60.5% as of September 30, 2023.
Investing and Financing Activities
- On August 24, 2023, one of our unconsolidated real estate
ventures sold Stonebridge at Potomac Town Center, a 504,327 square
foot commercial asset in Woodbridge, Virginia, for $17.3 million at
our 10.0% share.
- On September 20, 2023, we sold Falkland Chase – South &
West and Falkland Chase – North, multifamily assets in Silver
Spring, Maryland, totaling 438 units, for $95.0 million.
- An increase of $30.0 million in borrowings under our revolving
credit facility.
- We repurchased and retired 7.9 million common shares for $120.8
million, a weighted average purchase price per share of
$15.24.
Subsequent to September 30, 2023:
- 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.
- We repurchased and retired 2.0 million common shares for $28.0
million, a weighted average purchase price per share of $13.85,
pursuant to a repurchase plan under Rule 10b5-1 of the Securities
Exchange Act of 1934, as amended.
Dividends
- On October 31, 2023, our Board of Trustees declared a quarterly
dividend of $0.225 per common share, payable on December 1, 2023 to
shareholders of record as of November 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 14.7 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 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; 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
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 September 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 September 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 September 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
September 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 September 30, 2023.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
in thousands
September 30, 2023
December 31, 2022
ASSETS
Real estate, at cost:
Land and improvements
$
1,207,873
$
1,302,569
Buildings and improvements
4,037,280
4,310,821
Construction in progress, including
land
709,878
544,692
5,955,031
6,158,082
Less: accumulated depreciation
(1,355,355
)
(1,335,000
)
Real estate, net
4,599,676
4,823,082
Cash and cash equivalents
130,522
241,098
Restricted cash
38,257
32,975
Tenant and other receivables
44,080
56,304
Deferred rent receivable
171,121
170,824
Investments in unconsolidated real estate
ventures
296,397
299,881
Intangible assets, net
139,876
162,246
Other assets, net
217,903
117,028
Assets held for sale
28,336
—
TOTAL ASSETS
$
5,666,168
$
5,903,438
LIABILITIES, REDEEMABLE NONCONTROLLING
INTERESTS AND EQUITY
Liabilities:
Mortgage loans, net
$
1,727,133
$
1,890,174
Revolving credit facility
92,000
—
Term loans, net
716,953
547,072
Accounts payable and accrued expenses
135,085
138,060
Other liabilities, net
145,550
132,710
Total liabilities
2,816,721
2,708,016
Commitments and contingencies
Redeemable noncontrolling interests
444,361
481,310
Total equity
2,405,086
2,714,112
TOTAL LIABILITIES, REDEEMABLE
NONCONTROLLING INTERESTS AND EQUITY
$
5,666,168
$
5,903,438
___________________________
Note: For complete financial statements,
please refer to our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2023.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
in thousands, except per share data
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
REVENUE
Property rental
$
120,294
$
119,811
$
364,919
$
368,445
Third-party real estate services,
including reimbursements
23,942
21,845
69,588
67,972
Other revenue
7,326
5,958
22,112
18,667
Total revenue
151,562
147,614
456,619
455,084
EXPENSES
Depreciation and amortization
50,265
50,056
152,914
157,597
Property operating
37,588
36,380
109,112
112,469
Real estate taxes
14,413
14,738
44,061
47,870
General and administrative:
Corporate and other
11,246
12,072
42,462
42,669
Third-party real estate services
21,405
21,230
67,333
72,422
Share-based compensation related to
Formation Transaction and special equity awards
46
548
397
4,369
Transaction and other costs
1,830
1,746
7,794
4,632
Total expenses
136,793
136,770
424,073
442,028
OTHER INCOME (EXPENSE)
Loss from unconsolidated real estate
ventures, net
(2,263
)
(13,867
)
(1,320
)
(12,829
)
Interest and other income, net
7,774
984
14,132
16,902
Interest expense
(27,903
)
(17,932
)
(80,580
)
(50,251
)
Gain on the sale of real estate, net
906
—
41,606
158,631
Loss on the extinguishment of debt
—
(1,444
)
(450
)
(3,073
)
Impairment loss
(59,307
)
—
(59,307
)
—
Total other income (expense)
(80,793
)
(32,259
)
(85,919
)
109,380
INCOME (LOSS) BEFORE INCOME TAX
EXPENSE
(66,024
)
(21,415
)
(53,373
)
122,436
Income tax expense
(77
)
(166
)
(672
)
(2,600
)
NET INCOME (LOSS)
(66,101
)
(21,581
)
(54,045
)
119,836
Net (income) loss attributable to
redeemable noncontrolling interests
7,926
2,546
5,961
(15,712
)
Net (income) loss attributable to
noncontrolling interests
168
(258
)
703
(174
)
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON SHAREHOLDERS
$
(58,007
)
$
(19,293
)
$
(47,381
)
$
103,950
EARNINGS (LOSS) PER COMMON SHARE - BASIC
AND DILUTED
$
(0.58
)
$
(0.17
)
$
(0.45
)
$
0.86
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED
101,445
114,360
108,351
120,741
_____________________________
Note: For complete financial statements,
please refer to our Quarterly Report on Form 10-Q for the quarter
ended September 30, 2023.
EBITDA, EBITDAre AND ADJUSTED
EBITDA RECONCILIATIONS (NON-GAAP)
(Unaudited)
dollars in thousands
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
EBITDA, EBITDAre and Adjusted
EBITDA
Net income (loss)
$
(66,101
)
$
(21,581
)
$
(54,045
)
$
119,836
Depreciation and amortization expense
50,265
50,056
152,914
157,597
Interest expense
27,903
17,932
80,580
50,251
Income tax expense
77
166
672
2,600
Unconsolidated real estate ventures
allocated share of above adjustments
4,499
7,725
12,781
27,048
EBITDA attributable to noncontrolling
interests
(2
)
(28
)
(4
)
(101
)
EBITDA
$
16,641
$
54,270
$
192,898
$
357,231
Gain on the sale of real estate, net
(906
)
—
(41,606
)
(158,631
)
Gain on the sale of unconsolidated real
estate assets
(641
)
—
(641
)
(6,179
)
Real estate impairment loss
59,307
—
59,307
—
Impairment related to unconsolidated real
estate ventures (1)
3,319
15,401
3,319
15,401
EBITDAre
$
77,720
$
69,671
$
213,277
$
207,822
Transaction and other costs, net of
noncontrolling interests (2)
1,830
1,746
7,794
4,598
Litigation settlement proceeds, net
(3,455
)
—
(3,455
)
—
(Income) loss from investments, net
221
567
(1,114
)
(14,721
)
Loss on the extinguishment of debt
—
1,444
450
3,073
Share-based compensation related to
Formation Transaction and special equity awards
46
548
397
4,369
Earnings and distributions in excess of
our investment in unconsolidated real estate venture
(80
)
(18
)
(588
)
(583
)
Lease liability adjustments
—
—
(154
)
—
Unconsolidated real estate ventures
allocated share of above adjustments
31
34
33
2,079
Adjusted EBITDA
$
76,313
$
73,992
$
216,640
$
206,637
Net Debt to Annualized Adjusted EBITDA
(3)
8.1x
7.9x
8.5x
8.4x
September 30, 2023
September 30, 2022
Net Debt (at JBG SMITH Share)
Consolidated indebtedness (4)
$
2,523,354
$
2,382,429
Unconsolidated indebtedness (4)
79,992
215,341
Total consolidated and unconsolidated
indebtedness
2,603,346
2,597,770
Less: cash and cash equivalents
138,282
272,388
Net Debt (at JBG SMITH Share)
$
2,465,064
$
2,325,382
___________________________
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. Adjusted EBITDA for the nine
months ended September 30, 2023 and 2022 is annualized by
multiplying by 1.33.
(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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
FFO and Core FFO
Net income (loss) attributable to common
shareholders
$(58,007)
$(19,293)
$(47,381)
$103,950
Net income (loss) attributable to
redeemable noncontrolling interests
(7,926)
(2,546)
(5,961)
15,712
Net income (loss) attributable to
noncontrolling interests
(168)
258
(703)
174
Net income (loss)
(66,101)
(21,581)
(54,045)
119,836
Gain on the sale of real estate, net of
tax
(906)
—
(41,606)
(155,506)
Gain on the sale of unconsolidated real
estate assets
(641)
—
(641)
(6,179)
Real estate depreciation and
amortization
48,568
47,840
147,681
150,599
Real estate impairment loss
59,307
—
59,307
—
Impairment related to unconsolidated real
estate ventures (1)
3,319
15,401
3,319
15,401
Pro rata share of real estate depreciation
and amortization from unconsolidated real estate ventures
2,984
4,999
8,855
18,285
FFO attributable to noncontrolling
interests
168
(336)
703
(409)
FFO Attributable to OP Units
$46,698
$46,323
$123,573
$142,027
FFO attributable to redeemable
noncontrolling interests
(6,600)
(6,227)
(17,050)
(17,070)
FFO Attributable to Common
Shareholders
$40,098
$40,096
$106,523
$124,957
FFO attributable to OP Units
$46,698
$46,323
$123,573
$142,027
Transaction and other costs, net of tax
and noncontrolling interests (2)
1,755
1,597
7,465
4,332
Litigation settlement proceeds, net
(3,455)
—
(3,455)
—
(Income) loss from investments, net of
tax
165
567
(836)
(10,928)
(Gain) loss from mark-to-market on
derivative instruments, net of noncontrolling interests
1,572
(2,779)
6,714
(8,173)
Loss on the extinguishment of debt
—
1,444
450
3,073
Earnings and distributions in excess of
our investment in unconsolidated real estate venture
(80)
(18)
(588)
(583)
Share-based compensation related to
Formation Transaction and special equity awards
46
548
397
4,369
Lease liability adjustments
—
—
(154)
—
Amortization of management contracts
intangible, net of tax
1,031
1,105
3,161
3,316
Unconsolidated real estate ventures
allocated share of above adjustments
63
(416)
104
1,129
Core FFO Attributable to OP
Units
$47,795
$48,371
$136,831
$138,562
Core FFO attributable to redeemable
noncontrolling interests
(6,755)
(7,158)
(18,858)
(17,541)
Core FFO Attributable to Common
Shareholders
$41,040
$41,213
$117,973
$121,021
FFO per common share - diluted
$0.40
$0.35
$0.98
$1.03
Core FFO per common share - diluted
$0.40
$0.36
$1.09
$1.00
Weighted average shares - diluted (FFO and
Core FFO)
101,461
114,387
108,359
120,752
See footnotes under table below.
FFO, CORE FFO AND FAD
RECONCILIATIONS (NON-GAAP)
(Unaudited)
in thousands, except per share data
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
FAD
Core FFO attributable to OP Units
$
47,795
$
48,371
$
136,831
$
138,562
Recurring capital expenditures and
Second-generation tenant improvements and leasing commissions
(3)
(9,225
)
(10,094
)
(28,621
)
(37,096
)
Straight-line and other rent adjustments
(4)
(5,226
)
(6,018
)
(19,914
)
(9,787
)
Third-party lease liability assumption
(payments) refunds
—
—
70
(25
)
Share-based compensation expense
5,995
5,714
24,480
26,378
Amortization of debt issuance costs
3,372
1,122
6,022
3,433
Unconsolidated real estate ventures
allocated share of above adjustments
875
(2,618
)
1,918
(3,555
)
Non-real estate depreciation and
amortization
323
740
1,019
2,568
FAD available to OP Units (A)
$
43,909
$
37,217
$
121,805
$
120,478
Distributions to common shareholders and
unitholders (B)
$
26,801
$
29,833
$
84,104
$
94,204
FAD Payout Ratio (B÷A) (5)
61.0
%
80.2
%
69.0
%
78.2
%
Capital Expenditures
Maintenance and recurring capital
expenditures
$
3,964
$
4,944
$
11,644
$
15,855
Share of maintenance and recurring capital
expenditures from unconsolidated real estate ventures
10
84
45
478
Second-generation tenant improvements and
leasing commissions
5,222
5,038
16,769
20,345
Share of Second-generation tenant
improvements and leasing commissions from unconsolidated real
estate ventures
29
28
163
418
Recurring capital expenditures and
Second-generation tenant improvements and leasing commissions
9,225
10,094
28,621
37,096
Non-recurring capital expenditures
10,422
13,832
31,019
40,194
Share of non-recurring capital
expenditures from unconsolidated real estate ventures
—
9
5
58
First-generation tenant improvements and
leasing commissions
7,288
13,627
14,587
22,274
Share of First-generation tenant
improvements and leasing commissions from unconsolidated real
estate ventures
94
321
647
1,038
Non-recurring capital expenditures
17,804
27,789
46,258
63,564
Total JBG SMITH Share of Capital
Expenditures
$
27,029
$
37,883
$
74,879
$
100,660
___________________________
(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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net income (loss) attributable to common
shareholders
$
(58,007
)
$
(19,293
)
$
(47,381
)
$
103,950
Add:
Depreciation and amortization expense
50,265
50,056
152,914
157,597
General and administrative expense:
Corporate and other
11,246
12,072
42,462
42,669
Third-party real estate services
21,405
21,230
67,333
72,422
Share-based compensation related to
Formation Transaction and special equity awards
46
548
397
4,369
Transaction and other costs
1,830
1,746
7,794
4,632
Interest expense
27,903
17,932
80,580
50,251
Loss on the extinguishment of debt
—
1,444
450
3,073
Impairment loss
59,307
—
59,307
—
Income tax expense
77
166
672
2,600
Net income (loss) attributable to
redeemable noncontrolling interests
(7,926
)
(2,546
)
(5,961
)
15,712
Net income (loss) attributable to
noncontrolling interests
(168
)
258
(703
)
174
Less:
Third-party real estate services,
including reimbursements revenue
23,942
21,845
69,588
67,972
Other revenue
2,704
1,764
8,276
5,758
Loss from unconsolidated real estate
ventures, net
(2,263
)
(13,867
)
(1,320
)
(12,829
)
Interest and other income, net
7,774
984
14,132
16,902
Gain on the sale of real estate, net
906
—
41,606
158,631
Consolidated NOI
72,915
72,887
225,582
221,015
NOI attributable to unconsolidated real
estate ventures at our share
5,374
7,107
14,977
22,371
Non-cash rent adjustments (1)
(5,226
)
(6,018
)
(19,914
)
(9,787
)
Other adjustments (2)
5,803
6,230
17,820
20,689
Total adjustments
5,951
7,319
12,883
33,273
NOI
$
78,866
$
80,206
$
238,465
$
254,288
Less: out-of-service NOI loss (3)
(995
)
(548
)
(2,606
)
(4,043
)
Operating Portfolio NOI
$
79,861
$
80,754
$
241,071
$
258,331
Non-Same Store NOI (4)
3,003
6,626
15,181
33,512
Same Store NOI (5)
$
76,858
$
74,128
$
225,890
$
224,819
Change in Same Store NOI
3.7
%
0.5
%
Number of properties in Same Store
pool
48
46
_________________________
(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/20231107394703/en/
Kevin Connolly Senior Vice President, Portfolio Management (240)
333‑3837 kconnolly@jbgsmith.com
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