August 6, 2019
To Our Fellow Shareholders:
We are pleased to report on our performance for the second quarter of 2019. For details regarding our financial and operating results, please see our second quarter earnings release and supplemental information, which follow this letter.
Over the past three months, we achieved a number of significant milestones across our portfolio and our company. During the quarter, Virginia Tech announced the relocation of its $1 billion Innovation Campus to a site in the Potomac Yard section of National Landing, immediately adjacent to approximately two million square feet of JBG SMITH controlled development density. In addition, Amazon took occupancy of its first short-term space in National Landing, we continued to advance the design and entitlement of Amazon’s new headquarters, the development of our Under Construction assets, and the entitlement of our Future Development Pipeline. During the quarter, we also successfully closed a $472 million equity offering, which we discussed at length in our first quarter investor letter, and we made progress on our ongoing capital recycling efforts. Lastly, we announced the initial $78 million closing of the Washington Housing Initiative Impact Pool, which was launched last year.
Virginia Tech Innovation Campus
In June, Virginia Tech announced that it had moved the planned location of its $1 billion Innovation Campus to a site in Potomac Yard, the southern portion of National Landing, which will be one Metro stop and approximately one mile south of Amazon’s new headquarters. When combined with Amazon’s proximity, the Innovation Campus represents a pivotal moment for the submarket that should substantially benefit all our assets in National Landing. While the campus was originally slated to be on the west side of Richmond Highway, across from our holdings, we believe the new location is a far better outcome for JBG SMITH, as it is immediately adjacent to approximately two million square feet of development density that we own. In addition, JBG SMITH currently serves as the master planner and property manager of the 65-acre development site where the planned Innovation Campus will be located.
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On this campus, Virginia Tech intends to create an innovation ecosystem by co-locating academic and private sector uses to accelerate research and development spending, as well as the commercialization of technology. The planned campus is similar in concept to Cornell Tech on Roosevelt Island in New York City (https://tech.cornell.edu/campus/). Virginia Tech has engaged the same fundraising team that Cornell used for its Roosevelt Island campus to augment the $500 million that has been committed to the first phases of the campus by the Commonwealth of Virginia and Virginia Tech. The initial phase of the campus, anticipated to commence construction in the third quarter of 2021, is expected to include approximately two million square feet of mixed-use development, of which 600,000 square feet is expected to be devoted to Virginia Tech. The remaining approximately 1.4 million square feet is expected to include retail, residential, and office, a substantial portion of which could be positioned to attract commercial tenants seeking close proximity to the campus. The first graduate students, who will be housed in existing temporary academic space, are expected to begin classes as early as 2020. When the Innovation Campus is fully operational, Virginia Tech plans to graduate approximately 750 master’s students and 150 PhD students in computer science annually.
Amazon’s New Headquarters at National Landing
In May, Amazon submitted its plans to Arlington County for approval of two new office buildings, totaling 2.1 million square feet, inclusive of 50,000 square feet of street-level retail with new shops and restaurants, on the Metropolitan 6, 7, and 8 land sites. JBG SMITH will serve as the developer, property manager, and retail leasing agent for Amazon. Amazon’s plans also call for 1.1 acres of new public open space designed to accommodate a dog park, recreation areas, farmers markets, and other community uses.
National Landing Leasing Momentum
Not surprisingly, we have seen an increase in inbound leasing traffic in National Landing. Since the Amazon announcement, we have completed approximately 1.0 million square feet of new lease transactions and nearly 400,000 square feet of renewals, increasing our operating commercial leased percentage in National Landing to 89.3%, up 5.0% from the time of the Amazon announcement. One example of new demand is the 10,000 square foot lease we signed with Amify, a company that partners with industry leading brands to drive sales on Amazon.com, reflecting one segment of follow-on demand that we expect Amazon to generate in National Landing.
While our leasing efforts continue to focus on tenants in the DC Metro area, we are also actively marketing National Landing to prospective tenants and brokers in other constrained markets, specifically the San Francisco Bay area. This market is home to scores of tenants that ultimately grew to cluster around Amazon in Seattle, and we believe a similar effect is likely to occur in National Landing. The Bay Area has enjoyed the benefits of rapid growth in the tech sector; however, it suffers from limited office space availability, high housing costs exacerbated by regulatory and geographic constraints on new supply, severe congestion, and limited development opportunities. Many companies outside of the technology sector are being priced out of the real estate and employment markets, and even technology companies have started to turn to other markets to accommodate their growth. We believe that the same advantages Amazon found compelling about the DC Metro region are broadly appealing: availability of tech talent, abundant office space, low housing costs compared to other gateway markets, access to federal policymakers, and a business-friendly climate - particularly in Northern Virginia. While it is still early in these pursuits, we are encouraged by the response we have received, and we believe that Amazon’s selection of National Landing for its second headquarters has increased prospective tenants’ focus and attention on the submarket.
Key Under Construction Assets in National Landing
In addition to the ground-up projects we are developing on behalf of Amazon, we continue to make progress on our Under Construction assets in National Landing, including 1770 Crystal Drive and Central District Retail. Amazon has fully leased the office portion of 1770 Crystal Drive, totaling approximately 272,000 square feet, and we expect to complete construction in the second quarter of 2021, with Amazon’s occupancy occurring shortly thereafter. Central District Retail, totaling 109,000 square feet, will serve as the retail heart of National Landing and includes a 49,000 square foot Alamo Drafthouse Cinema, specialty grocer, restaurants, bars, and other experiential offerings. As is often the case with anchor retail, Central District Retail represents an important investment in our broader submarket repositioning and, even prior to completion, we believe it has already paid dividends by changing the perception of the neighborhood and attracting retail and office tenants to National Landing.
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Key Entitlements in the Future Development Pipeline
We continue to make progress on the entitlement of our 18.7 million square foot (at share) Future Development Pipeline. Of the 18.7 million square feet, 4.1 million square feet is under contract for sale to Amazon, 3.6 million square feet is fully entitled, and the remaining 11.0 million square feet is zoned for our planned use, subject to the final stage of design and/or entitlement. To that end, Arlington County is moving through its approval process for 1900 Crystal Drive, which currently contemplates two residential towers, totaling approximately 750 units, with retail and neighborhood-serving amenities at the base. In addition, we submitted plans to add nearly 1,000 housing units at RiverHouse Apartments, located along the western edge of National Landing, within three blocks of Amazon’s new headquarters. This new development will occupy existing surface parking enabling the continued operation of the three existing multifamily towers.
Washington, DC Market Update
Outside of National Landing, the DC market finished the second quarter with little change in underlying fundamentals.
According to JLL, the DC Metro office market saw approximately 2.0 million square feet of net absorption through the first half of the year, with 76% in JBG SMITH submarkets - strong performance, particularly in Northern Virginia, but still low relative to historic averages. To put this into context, the submarkets in which JBG SMITH operates contain 50% of the inventory of the overall DC Metro office market. In DC proper, the new supply environment remains challenging with 1.9 million square feet delivered in the first half of the year and another 3.6 million square feet currently under construction. While we believe that this pipeline of new Trophy product will lease, it will likely be at the expense of the Commodity Class A market downtown, which was already 14% vacant at quarter end. The pressure on the Commodity Class A market segment is compounded by the fact that asking rents in many second-generation buildings located in mature markets are nearly equivalent with rents in new construction buildings in amenity-rich emerging markets, such as the Ballpark and the Wharf. This value gap has allowed these emerging markets to attract tenant and investor demand at the expense of the mature markets. As this trend continues, downward pressure downtown may not be limited to Commodity Class A product and should begin to put pressure on today’s relatively healthy Class B market.
In contrast to the broader DC office market, National Landing remains headed in a positive direction, with vacancy dropping 170 basis points to 15.5% - substantially below the 19.9% in the historically better performing Rosslyn-Ballston corridor. After the 16% growth in National Landing asking rents that JLL reported last quarter, rents held steady in the second quarter, suggesting broker-reported asking rent increases reflect a fundamental market reset. At current levels, JLL’s reported rent in National Landing is only a 3% discount to office rents in the Rosslyn-Ballston corridor - a gap we believe will continue to narrow and potentially invert, as National Landing continues to recover, and absorbs the vacancy that caused it to diverge from other close-in Northern Virginia submarkets. As the vacancy decline and resilient rental rate indicate, tenant interest in the submarket is strong, and we are optimistic that other companies will follow Amazon’s lead in selecting National Landing as their entry point into our region.
The multifamily market was another notable bright spot. During the first half of the year, just under 5,200 units delivered, representing approximately 47% of the expected 2019 pipeline of 10,958 units - down significantly from annual peak deliveries of 15,000 units. The pace of new starts has also slowed, with less than 5,000 units starting construction through the first half of the year. As a result, the total number of expected deliveries in 2020 and 2021 combined stands at only 78% of the historic one-year peak, with limited time remaining for additional new starts to increase that figure. The lease-up pace in the DC urban emerging markets where much of the new supply is concentrated demonstrates the appeal of these submarkets, with 93% average occupancy in buildings that delivered 12 to 18 months ago. Year-over-year, same store rents grew by 4%, reflecting continued momentum in rental housing. Top-of-market rents continued to rise, with reported lease-up rental rates north of $5.00 per square foot for the best new units in premium, mature submarkets, leaving ample room for growth in the emerging markets where JBG SMITH is concentrated. While it is too early to see significant increases in multifamily rents in National Landing, we expect to see a narrowing of the current discount to nearby emerging markets, such as the Ballpark
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and the Wharf, especially as Amazon hiring picks up, office vacancy continues to decline, and overall market momentum builds.
The downtown office investment sales market was conspicuously quiet for the first six months of the year. According to JLL, volume in DC was just over $1 billion as of the end of the second quarter. For reference, JLL reported consistent full year investment sales volumes of approximately $5 billion (net of corporate transactions) in each of 2017 and 2018, suggesting a marked slowdown this year. It is uncertain whether core fund redemptions, the potential for further downtown office distress, the dollar’s strength impacting foreign buyers’ hedging costs, or all of the above are to blame. Despite reduced sales volume, there continues to be a substantial number of listings in the market, suggesting that buyer and seller expectations remain distant. While this has not yet impacted our current asset recycling strategy, it does suggest that cap rates for office could be widening. One notable change in the market is the increasing interest we have seen among institutional investors for assets in Arlington, Virginia. According to JLL, Arlington is starting to draw more attention from institutional investors and foreign capital which, historically, rarely looked outside downtown DC. JLL notes this increased interest is driven partially by Amazon’s selection of National Landing and partially by worsening fundamentals in the District.
From a multifamily perspective, investment sales volume remains concentrated in value-add, largely suburban product, with only $773 million in Class A urban sales year-to-date and $1.4 billion in Class B suburban deals during the same time period, according to CoStar. Cap rates for the best downtown assets remain largely stable at around 4.6% and approximately 5.2% for comparable assets located outside of the District, according to CoStar. The notable exception to this stability has been National Landing, where several recent Class A trades have highlighted substantial value appreciation. Following the recent trade of the Meridian at Pentagon City at a 3.7% cap rate, m.flats Crystal City is now reported to be under contract at a 3.8% cap rate, according to local brokers. The 198-unit building, which is proximate to Amazon’s new headquarters, was built on ground-leased land in 2017 and is expected to trade at a cap rate level almost 75 basis points below the three-year Arlington average. The depth of the buyer pool, combined with recent pricing on these two deals, indicate that investors now view National Landing as a core multifamily market.
Operating Portfolio
Our 11.1 million square foot operating commercial portfolio (at share) generated $240 million of annualized NOI and was 90.3% leased and 86.0% occupied as of the end of the second quarter. During the quarter, we completed 41 office lease transactions, totaling 395,000 square feet (at share), including 388,000 square feet in our operating portfolio and 7,000 square feet in our Under Construction portfolio. Notable among this activity was Amazon taking occupancy of 48,000 square feet of short-term space at 2345 Crystal Drive and moving its first employees into National Landing. For second-generation leases, the rental rate mark-to-market was positive 6.0% on a cash basis. Our performance this quarter reflects increased market demand, specifically in National Landing, which accounted for 78.0% of our leasing volume. Our mark-to-market will vary from quarter-to-quarter depending on the leases that are signed. While our performance this quarter (and year-to-date) is better than our expectations, it is still consistent with our long-term assumptions. As a reminder, in conjunction with our investor days, we updated our mark-to-market assumption through 2024 to negative 3%, from negative 5%, due to the expected demand resulting from Amazon’s selection of National Landing.
Consistent with the expectations we outlined last year, same store NOI decreased 9.2% across our operating portfolio during the second quarter, predominately related to the previously discussed blend-and-extend lease renewals we executed in 2017 and 2018. These early blend-and-extend lease renewals significantly de-risk our DC assets at a time of increasing supply and downturn risk, as well as enhance our ability to sell or recapitalize assets on a more attractive basis. We continue to expect that the concessions associated with these early blend-and-extend lease renewals will result in negative same store NOI growth throughout 2019. As the free rent in these leases burns off, we expect the temporary decline in NOI to reverse, resulting in positive same store NOI growth in 2020.
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Our operating multifamily portfolio, comprising approximately 4,537 units (at share), generated $82 million of annualized NOI and ended the second quarter at 98.0% leased and 95.0% occupied. We saw particularly strong performance at 1221 Van Street in the Ballpark and The Bartlett in National Landing.
We have seen an increase in property taxes this year, particularly in Arlington County. This increase is expected in a rising market, and while we never like higher expenses, they reflect increased economic activity, the long-awaited arrival of a demand driver like Amazon, and anticipated growth. In addition, while not as impactful as the property tax increases, it is worth noting that we have seen an industry-wide increase in property insurance costs.
Development Portfolio
Our development portfolio consists of eight assets totaling 1.9 million square feet (at share) currently under construction and a Future Development Pipeline totaling 18.7 million square feet. Of the 1.9 million square feet in our Under Construction portfolio, 1.1 million square feet is multifamily and 800,000 square feet is commercial, which is 84.0% pre-leased. We have significant balance sheet capacity to execute on our development opportunities, some of which we expect to develop, while others will likely be sold, recapitalized, or ground leased.
Under Construction
At the end of the second quarter, our eight assets under construction all had guaranteed maximum price construction contracts in place. These assets have weighted average estimated completion and stabilization dates of the second quarter of 2020 and the third quarter of 2021, respectively, with a projected NOI yield based on Estimated Total Project Cost of 6.4%. As a reminder, this yield includes Central District Retail, our anchor investment in National Landing, which we believe will substantially benefit all of our holdings in the submarket.
In the second quarter, we moved 500 L’Enfant Plaza into our recently delivered operating commercial portfolio. The building is 79.3% leased, from the bottom up, to Urban Institute and Noblis.
Near-Term Development
We do not have any assets in the Near-Term Development pipeline as of the end of the second quarter. As a reminder, we only place assets into our Near-Term Development Pipeline when they have substantially completed the entitlement process and when we intend to commence construction within 18 months, subject to market conditions. Once our current plans are approved by Arlington County, we expect 1900 Crystal Drive to be placed into our Near-Term Development pipeline, as we currently plan to commence construction in 2020.
Future Development Pipeline
Our Future Development pipeline comprises 18.7 million square feet, with an Estimated Total Investment per square foot of approximately $38.49. 79% of this pipeline is within a 20-minute rush hour commute of National Landing, in the submarkets that we believe will most directly benefit from Amazon’s growth over time. At the end of the second quarter, approximately 58.9% of this pipeline was in National Landing, 18.6% was in DC, 13.9% was in Reston, and the remaining 8.6% was in other Virginia and Maryland submarkets. Our DC holdings are concentrated in the fast-growing emerging submarkets of Union Market and the Ballpark, and our Reston holdings include one of the best development sites on the Metro, adjacent to Reston Town Center.
Of the 18.7 million square feet in our Future Development Pipeline, 4.1 million square feet is under contract for sale to Amazon, 3.6 million square feet is fully entitled, and the remaining 11.0 million square feet is zoned for our planned use, subject to the final stage of design and/or entitlement. Of this 11.0 million square feet, we are actively advancing the entitlement of 8.8 million square feet, which we expect to be fully entitled within the next two years. The remaining 2.2 million square feet is either encumbered with existing lease term or encompasses land that we do not believe is suitable for new development in the near term.
Of the 11.0 million square feet requiring final entitlements, 6.9 million square feet is in National Landing, excluding the land under contract for sale to Amazon. These development opportunities represent approximately 65% of the unencumbered development opportunities in the submarket. Based on our current plans, we expect the next phase of development to include 2.2 million square feet of office, which could be pre-leased to Amazon or other tenants
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seeking to co-locate near Amazon and/or the Virginia Tech Innovation Campus, and 4.7 million square feet of multifamily, comprising approximately 4,000 to 5,000 units. In addition to adding value on their own, we expect these opportunities to be accretive to all our holdings in National Landing by virtue of their placemaking attributes, as well as their ability to activate long dormant, out-of-service sites and street frontage.
The following bar chart summarizes the data described above:
Third-Party Asset Management and Real Estate Services BusinessOur share of revenue from our third-party asset management and real estate services business was $14.6 million in the second quarter, primarily driven by $5.4 million in property management fees and $3.5 million in asset management fees. The portion of total revenues associated with the JBG Legacy Funds was $6.0 million. The Funds continued to focus on disposing of assets in accordance with their underlying business plans. We expect the fees from retaining management and leasing of sold assets, the Amazon-related fees that we expect to receive, and other new third-party fee income streams to more than offset the wind down of the JBG Legacy Fund business over the next several years. In addition, any fee income associated with the Washington Housing Initiative will be reflected in the third-party asset management and real estate services business.
Capital Allocation
Acquisitions/Dispositions
On the acquisition front, we continue to remain cautious, given aggressive pricing across asset classes. If shrinking investment sales volumes are a precursor to a downturn and/or a correction in asset pricing, there may be better acquisition opportunities around the corner. That said, we do expect to be active multifamily buyers in the emerging growth submarkets where we are already concentrated to fulfill 1031 exchange needs. We have identified our first exchange candidate for the proceeds from the sale of Metropolitan 6, 7, and 8 land sites - a stabilized DC
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multifamily asset which we expect to close later this year, subject to the tenants’ purchase rights. We expect the sale of the Pen Place land to close in 2021, and we intend to seek a 1031 exchange for the proceeds from that sale. We expect the acquisitions from these two 1031 exchanges to generate approximately $15 million of annualized NOI.
As we announced earlier this year, we continue to seek capital recycling opportunities where we can source capital at or above our estimated NAV, and we are targeting approximately $400 million of asset sales and recapitalizations in 2019. As of August, we have entered into firm contracts for $294 million for the sale of land to Amazon, of which we expect $150 million to close by early 2020 with the balance closing in 2021, subject to the final design and entitlement processes. As noted above, we expect to execute on 1031 exchanges with the proceeds from these land sales. In addition, subsequent to quarter-end, we closed on the sale of 1600 K Street for $43 million. We are also currently in the market with an additional $375 million of assets, but it is possible that some of these will not close given the uncertain investment sales climate and our demanding expectations as a seller.
As a result of the proceeds from our recent equity offering, we believe we are sufficiently capitalized to execute on our near-term growth plans while continuing to preserve ample balance sheet capacity. That said, given current market pricing we intend to continue to be opportunistic asset sellers where we can source capital at or above our estimated NAV. Given the low basis of many of the assets in our portfolio, we are likely to seek 1031 exchanges for some of these asset sales. For higher basis assets that generate liquidity, we may deleverage further and accrue capacity for future acquisition and/or development opportunities. When the next downturn or price correction comes, we will be glad to have this capacity.
Development
We continue to advance the entitlement and design readiness of opportunities in our Future Development Pipeline. We expect multifamily development opportunities to remain attractive, particularly in light of potentially declining supply levels, especially in National Landing and other emerging growth submarkets with strong demand drivers. In National Landing, we intend to be active developers because we have the expected benefit of both attractive project level returns on future starts and a broader submarket repositioning. Opportunities for new investment in other emerging growth submarkets are potentially attractive only if supply levels remain in check, rents for new multifamily product continue to grow, and/or construction cost increases moderate.
Balance Sheet
In April, we successfully completed our first equity offering, issuing 11.5 million shares at $42.00 per share, raising net proceeds of approximately $472 million, including an upsize of 1 million shares (out of a potential 1.8 million shares) and full exercise of the overallotment option (1.5 million shares). It is worth noting that when compared to our office and multifamily peers, our pipeline of development opportunities represents 23% of our total assets, which is approximately three times the peer average. At the same time, our Net Debt/Adjusted EBITDA of 5.2x is nearly a full turn lower than the peer average and is among the lowest in our peer group. As a result of our successful equity offering, we believe our balance sheet is very well positioned both to execute on our development opportunities and to take advantage of acquisitions when the next downturn and/or correction in asset pricing occurs.
As of June 30, 2019, we had $280.3 million of cash ($289.6 million of cash at share), $1.1 billion available under our credit facility, and an unencumbered multifamily borrowing base of $750 million, including our Under Construction multifamily assets. During the quarter, we repaid $475.1 million of mortgage debt. Our Net Debt/Total Enterprise Value was 22.2%, using our share price at June 30, 2019, and our Net Debt/Adjusted EBITDA was 5.2x. These leverage metrics include the debt incurred to date to develop our eight Under Construction assets, but none of the estimated NOI from those assets. As a result, we believe Net Debt/Total Enterprise Value is the most meaningful measure to evaluate our leverage. Our long-term leverage targets remain unchanged at 25% to 35% Net Debt/Total Enterprise Value and between 6x and 7x Net Debt/Adjusted EBITDA, with peak levels in the mid-8x’s during periods of more active development.
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We have a well-laddered debt maturity profile. As of June 30, 2019, our average debt maturity was 4.0 years, with approximately $593 million (at share) coming due in the next two years. Consistent with our strategy to finance our business primarily with non-recourse, asset-level financing, 85% of our consolidated and unconsolidated debt is mortgage debt, of which only approximately $8.3 million is recourse to JBG SMITH. Our debt was 88% fixed rate, and we have caps in place for 67% of our floating rate debt.
Environmental, Social, and Governance
In July we released our annual sustainability report, which highlights accomplishments, key performance metrics, and our ESG management strategy. We believe that strong environmental sustainability, social responsibility, and corporate governance practices are essential to maximizing long-term NAV per share. We are investing in efficiency at our assets, partnering with regional stakeholders to strengthen community resilience, and creating an inclusive culture that will continue to attract innovative thinkers to our organization, all of which are intended to ensure that we are positioned to create value for our shareholders over the long term. We are committed to transparency in our ESG strategy, and we intend to continue to benchmark our performance to ensure we are exceeding industry expectations. To access our annual sustainability report please visit our website at https://www.jbgsmith.com/about/sustainability.
During the second quarter, we announced the initial $78 million closing of the Washington Housing Initiative Impact Pool, including a commitment from JBG SMITH of approximately $7.6 million. The Washington Housing Initiative was launched by JBG SMITH and the Federal City Council in June 2018 to help preserve housing for middle income renters (defined as affordable workforce housing) for whom housing assistance is often unavailable, despite the fact that market rate housing remains unaffordable. The Initiative seeks to preserve or build up to 3,000 housing units in the DC Metro region over the next decade. The Impact Pool is the JBG SMITH managed component of the Washington Housing Initiative and consists primarily of third-party investment capital. JBG SMITH is the financial sponsor of this vehicle with an investment of just under 10%. The founding investors in the Impact Pool are many of our largest banking relationships, including Bank of America, PNC Bank, SunTrust, JPMorgan Chase, BB&T, United Bank, and Wells Fargo. For more information about the Washington Housing Initiative please visit our website at https://www.jbgsmith.com/about/washington-housing-initiative.
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Thank you for taking the time to read our quarterly investor letter. As always, we encourage you to come visit us in DC, to spend time with our team and see our real estate in person. We are energized and focused on the opportunities before us, and we will continue to work hard to create value and maintain your trust and confidence.
W. Matthew Kelly
Chief Executive Officer
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FOR IMMEDIATE RELEASE
CONTACT
Jaime Marcus
SVP, Investor Relations
(240) 333-3643
jmarcus@jbgsmith.com
JBG SMITH ANNOUNCES SECOND QUARTER 2019 RESULTS
Chevy Chase, MD (August 6, 2019) - JBG SMITH (NYSE: JBGS), a leading owner and developer of high-quality, mixed-use properties in the Washington, DC market, today filed its Form 10-Q for the quarter ended June 30, 2019 and reported its financial results.
Additional information regarding our results of operations, properties and tenants can be found in our Second Quarter 2019 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com.
Second Quarter 2019 Financial Results
| • | Net loss attributable to common shareholders was $3.0 million, or $0.03 per diluted share. |
| • | Funds From Operations (“FFO”) attributable to common shareholders was $39.4 million, or $0.30 per diluted share. |
| • | Core Funds From Operations (“Core FFO”) attributable to common shareholders was $54.5 million, or $0.41 per diluted share. |
Six Months Ended June 30, 2019 Financial Results
| • | Net income attributable to common shareholders was $21.8 million, or $0.16 per diluted share. |
| • | FFO attributable to common shareholders was $74.6 million, or $0.59 per diluted share. |
| • | Core FFO attributable to common shareholders was $98.7 million, or $0.78 per diluted share. |
Operating Portfolio Highlights
| • | Annualized Net Operating Income (“NOI”) for the three months ended June 30, 2019 was $322.0 million, compared to $321.6 million for the three months ended March 31, 2019, at our share. |
| • | The operating commercial portfolio was 90.3% leased and 86.0% occupied as of June 30, 2019, compared to 90.2% and 85.6% as of March 31, 2019, at our share. |
| • | The operating multifamily portfolio was 98.0% leased and 95.0% occupied as of June 30, 2019, compared to 97.0% and 94.8% as of March 31, 2019, at our share. |
| • | Executed approximately 395,000 square feet of office leases at our share in the second quarter, comprising approximately 120,000 square feet of new leases and approximately 275,000 square feet of second generation leases, which generated a 14.9% rental rate increase on a GAAP basis and a 6.0% rental rate increase on a cash basis. |
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| • | Executed approximately 1.2 million square feet of commercial leases at our share during the six months ended June 30, 2019, comprising approximately 676,000 square feet of new leases and approximately 504,000 square feet of second generation leases, which generated a 5.1% rental rate increase on a GAAP basis and a 0.3% rental rate decrease on a cash basis. The new leases include three initial leases entered into with Amazon.com, Inc. ("Amazon") during the first quarter totaling 537,000 square feet at three of our existing office buildings in National Landing in conjunction with the creation of Amazon's additional headquarters. The leases encompass approximately 88,000 square feet at 241 18th Street South, approximately 191,000 square feet at 1800 South Bell Street and approximately 258,000 square feet at 1770 Crystal Drive. We expect Amazon to begin moving into 241 18th Street South and 1800 South Bell in 2019 and 1770 Crystal Drive by the end of 2020. Also, in April 2019, we executed an agreement with Amazon to lease an additional approximately 48,000 square feet of office space at 2345 Crystal Drive in National Landing , which it began moving into in the second quarter. |
| • | Same Store Net Operating Income (“SSNOI”) at our share decreased 9.2% to $74.0 million for the three months ended June 30, 2019, compared to $81.5 million for the three months ended June 30, 2018. SSNOI decreased 9.7% to $147.0 million for the six months ended June 30, 2019, compared to $162.9 million for the six months ended June 30, 2018. The decrease in SSNOI for the three months ended June 30, 2019 is largely attributable to increased rental abatements, lower NOI at Crystal City Marriott, as a result of the ongoing room renovations, and an increase in assumed lease liability payments. The reported same store pools as of June 30, 2019 include only the assets that were in service for the entirety of both periods being compared. |
Development Portfolio Highlights
Under Construction
| • | During the quarter ended June 30, 2019, there were eight assets under construction (four commercial assets and four multifamily assets), consisting of 821,099 square feet and 1,298 units, both at our share. |
Near-Term Development
| • | As of June 30, 2019, there were no assets in near-term development. |
Future Development Pipeline
| • | As of June 30, 2019, there were 40 future development assets consisting of 18.7 million square feet of estimated potential density at our share, including the 4.1 million square feet held for sale to Amazon. |
Third-Party Asset Management and Real Estate Services Business
For the three months ended June 30, 2019, revenue from third-party real estate services, including reimbursements, was $29.5 million. Excluding reimbursements and service revenue from our interests in consolidated and unconsolidated real estate ventures, revenue from our third-party asset management and real estate services business was $14.6 million, of which $5.4 million came from property management fees, $3.5 million came from asset management fees, $1.1 million came from leasing fees, $2.5 million came from development fees, $0.5 million came from construction management fees and $1.6 million came from other service revenue.
Balance Sheet
| • | We had $1.7 billion of debt ($2.0 billion including our share of debt of unconsolidated real estate ventures) as of June 30, 2019. Of the $2.0 billion of debt at our share, approximately 88% was fixed-rate and rate caps were in place for approximately 67% of our floating rate debt. |
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| • | The weighted average interest rate of our debt at share was 4.27% as of June 30, 2019. |
| • | At June 30, 2019, our total enterprise value was approximately $7.6 billion, comprising 149.3 million common shares and units valued at $5.9 billion and debt (net of premium / (discount) and deferred financing costs) at our share of $2.0 billion, less cash and cash equivalents at our share of $289.6 million. |
| • | As of June 30, 2019, we had $280.3 million of cash and cash equivalents on a GAAP basis ($289.6 million of cash and cash equivalents at our share), $1.1 billion of capacity under our credit facility, and an unencumbered multifamily borrowing base of $750.0 million, including our Under Construction multifamily assets. |
| • | Net Debt to Annualized Adjusted EBITDA at our share for the three and six months ended June 30, 2019 was 5.2x and 5.5x and our Net Debt / Total Enterprise Value was 22.2% as of June 30, 2019. Net Debt to Annualized Adjusted EBITDA for the three and six months ended June 30, 2019 includes the $472.8 million of net proceeds from the underwritten public offering completed in April 2019. |
Financing and Investing Activities
| • | Closed an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other offering expenses, of $472.8 million. We intend to use the net proceeds to fund development opportunities and for general corporate purposes. |
| • | Repaid mortgage debt totaling approximately $475.1 million. |
| • | Amended our credit facility to extend the delayed draw period of our Tranche A-1 Term Loan to July 2020 and reduce the interest rate of the Tranche A-2 Term Loan 40 basis points to LIBOR plus 1.15% effective as of July 17, 2019. |
Subsequent to June 30, 2019:
| • | Closed on the sale of 1600 K Street, an 83,000 square foot commercial asset located in Washington DC, for $43.0 million. |
Dividends
In August 2019, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on August 26, 2019 to shareholders of record on August 13, 2019.
About JBG SMITH
JBG SMITH is an S&P 400 company that owns, operates, invests in and develops a dynamic portfolio of high-quality mixed-use properties in and around Washington, DC. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Capital region, including National Landing where it now serves as the exclusive developer for Amazon’s new headquarters. JBG SMITH’s portfolio currently comprises 20.6 million square feet of high-quality office, multifamily and retail assets, 98% at our share of which are Metro-served. It also maintains a robust future pipeline encompassing 18.7 million square feet of mixed-use development opportunities. For more information on JBG SMITH please visit www.jbgsmith.com.
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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 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 anticipated dispositions, our indicated annual dividend per share and dividend yield, annualized net operating income; in the case of our construction and near-term development assets, estimated square feet, estimated number of units and in the case of our future development assets, estimated potential development density. Expected key Amazon transaction terms and timeframes for closing, planned infrastructure improvements related to Amazon's additional headquarters; the economic impacts of Amazon's additional headquarters on the DC region and National Landing; our development plans related to Amazon's additional headquarters; the expected accretion to our net asset value ("NAV") as a result of the Amazon transaction and our future NAV growth rate; in the case of our Amazon lease transaction and our new development opportunities in National Landing, the total square feet to be leased to Amazon and the expected net effective rent, estimated square feet, estimated number of units, the estimated construction start and occupancy dates, estimated incremental investment, projected NOI yield; and in the case of our future development opportunities, estimated potential development density. 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” and the Cautionary Statement Concerning Forward-Looking Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 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 after the date hereof.
We are reiterating the assumptions in our estimated NOI bridge and the potential estimated NAV impact from Amazon in National Landing, which can be found in our Spring 2019 Investor Day presentation on our website at http://investors.jbgsmith.com/presentations.
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,
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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.
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
Management uses EBITDA and EBITDAre, non-GAAP financial measures, as supplemental operating performance measures and believes they help investors and lenders meaningfully evaluate and compare our operating performance from period-to-period by removing from our operating results the impact of our capital structure (primarily interest charges from our outstanding debt and the impact of our interest rate swaps) and certain non-cash expenses (primarily depreciation and amortization 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 expenses, gains on sales of real estate and impairment losses of real estate, 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,” a non-GAAP financial measure, represents EBITDAre adjusted for items we believe are not representative of ongoing operating results, such as transaction and other costs, gain (loss) on the extinguishment of debt, distributions in excess of our investment in unconsolidated real estate ventures, gain on the bargain purchase of a business, lease liability adjustments and share-based compensation expense related to the
5
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")
FFO is a non-GAAP financial measure computed in accordance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018. NAREIT defines FFO as “net income (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity."
"Core FFO" represents FFO adjusted to exclude items (net of tax) which we believe are not representative of ongoing operating results, such as transaction and other costs, gains (or losses) on extinguishment of debt, gain on the bargain purchase of a business, 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, amortization of the management contracts intangible and the mark-to-market of derivative instruments.
"FAD" is a non-GAAP financial measure and represents FFO less recurring tenant improvements, leasing commissions and other capital expenditures, net deferred rent activity, third-party lease liability assumption payments, 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. 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 and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO, 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 Operating Income ("NOI") and Annualized NOI
“NOI” is a non-GAAP financial measure management uses to measure the operating performance of our assets and consists of property-related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent, if applicable. 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 amortization of acquired above-market leases and below-market ground lease intangibles. Annualized NOI, for all assets except Crystal City Marriott, represents NOI for the three months ended June 30, 2019 multiplied by four. Due to seasonality in the hospitality business, annualized NOI for Crystal City Marriott represents the trailing 12-month NOI as of June 30, 2019. 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
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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.
Management uses each of these measures as supplemental performance measures for its assets and believes they provide useful information to investors because they reflect only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets.
However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. Moreover, our method of calculating NOI may differ from other real estate companies and, accordingly, may not be comparable. NOI should be considered only as a supplement to net operating income (loss) (computed in accordance with GAAP) as a measure of the operating performance of our assets.
Same Store and Non-Same Store
“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.
“Non-same store” refers to all operating assets excluded from the same store pool.
Definitions
GAAP
"GAAP" refers to accounting principles generally accepted in the United States of America.
Formation Transaction
"Formation Transaction" refers collectively to the spin-off on July 17, 2017 of substantially all of the assets and liabilities of Vornado’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.
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CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) | |||||||
| in thousands | June 30, 2019 | December 31, 2018 | |||||
| ASSETS | |||||||
| Real estate, at cost: | |||||||
| Land and improvements | $ | 1,227,558 | $ | 1,371,874 | |||
| Buildings and improvements | 3,717,356 | 3,722,930 | |||||
| Construction in progress, including land | 859,717 | 697,930 | |||||
| 5,804,631 | 5,792,734 | ||||||
| Less accumulated depreciation | (1,093,665 | ) | (1,051,875 | ) | |||
| Real estate, net | 4,710,966 | 4,740,859 | |||||
| Cash and cash equivalents | 280,349 | 260,553 | |||||
| Restricted cash | 16,429 | 138,979 | |||||
| Tenant and other receivables, net | 51,787 | 46,568 | |||||
| Deferred rent receivable, net | 162,641 | 143,473 | |||||
| Investments in unconsolidated real estate ventures | 319,756 | 322,878 | |||||
| Other assets, net | 296,916 | 264,994 | |||||
| Assets held for sale | 168,431 | 78,981 | |||||
| TOTAL ASSETS | $ | 6,007,275 | $ | 5,997,285 | |||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |||||||
| Liabilities: | |||||||
| Mortgages payable, net | $ | 1,360,467 | $ | 1,838,381 | |||
| Unsecured term loans, net | 296,952 | 297,129 | |||||
| Accounts payable and accrued expenses | 140,132 | 130,960 | |||||
| Other liabilities, net | 192,638 | 181,606 | |||||
| Liabilities related to assets held for sale | — | 3,717 | |||||
| Total liabilities | 1,990,189 | 2,451,793 | |||||
| Commitments and contingencies | |||||||
| Redeemable noncontrolling interests | 574,228 | 558,140 | |||||
| Total equity | 3,442,858 | 2,987,352 | |||||
| TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | $ | 6,007,275 | $ | 5,997,285 | |||
_______________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | |||||||||||||||
| in thousands, except per share data | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| REVENUE | |||||||||||||||
| Property rentals | $ | 122,326 | $ | 126,591 | $ | 241,739 | $ | 257,819 | |||||||
| Third-party real estate services, including reimbursements | 29,487 | 24,160 | 57,178 | 48,490 | |||||||||||
| Other income | 8,804 | 8,696 | 16,899 | 16,175 | |||||||||||
| Total revenue | 160,617 | 159,447 | 315,816 | 322,484 | |||||||||||
| EXPENSES | |||||||||||||||
| Depreciation and amortization | 45,995 | 48,117 | 94,714 | 97,277 | |||||||||||
| Property operating | 32,113 | 34,464 | 64,287 | 69,622 | |||||||||||
| Real estate taxes | 18,266 | 17,509 | 35,501 | 37,119 | |||||||||||
| General and administrative: | |||||||||||||||
| Corporate and other | 11,559 | 8,603 | 23,873 | 17,017 | |||||||||||
| Third-party real estate services | 28,710 | 21,189 | 56,776 | 43,798 | |||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | |||||||||||
| Transaction and other costs | 2,974 | 3,787 | 7,869 | 8,008 | |||||||||||
| Total expenses | 149,140 | 142,766 | 303,674 | 291,366 | |||||||||||
| OTHER INCOME (EXPENSE) | |||||||||||||||
| Income (loss) from unconsolidated real estate ventures, net | (1,810 | ) | 3,836 | 1,791 | 1,934 | ||||||||||
| Interest and other income, net | 2,052 | 513 | 3,003 | 1,086 | |||||||||||
| Interest expense | (13,107 | ) | (18,027 | ) | (30,281 | ) | (37,284 | ) | |||||||
| Gain on sale of real estate | — | 33,396 | 39,033 | 33,851 | |||||||||||
| Loss on extinguishment of debt | (1,889 | ) | (4,457 | ) | (1,889 | ) | (4,457 | ) | |||||||
| Reduction of gain on bargain purchase | — | (7,606 | ) | — | (7,606 | ) | |||||||||
| Total other income (expense) | (14,754 | ) | 7,655 | 11,657 | (12,476 | ) | |||||||||
| INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT | (3,277 | ) | 24,336 | 23,799 | 18,642 | ||||||||||
| Income tax (expense) benefit | (51 | ) | (313 | ) | 1,121 | 595 | |||||||||
| NET INCOME (LOSS) | (3,328 | ) | 24,023 | 24,920 | 19,237 | ||||||||||
| Net (income) loss attributable to redeemable noncontrolling interests | 288 | (3,574 | ) | (3,099 | ) | (2,980 | ) | ||||||||
| Net loss attributable to noncontrolling interests | — | 125 | — | 127 | |||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (3,040 | ) | $ | 20,574 | $ | 21,821 | $ | 16,384 | ||||||
| EARNINGS (LOSS) PER COMMON SHARE: | |||||||||||||||
| Basic | $ | (0.03 | ) | $ | 0.17 | $ | 0.16 | $ | 0.14 | ||||||
| Diluted | $ | (0.03 | ) | $ | 0.17 | $ | 0.16 | $ | 0.14 | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING : | |||||||||||||||
| Basic | 131,754 | 117,955 | 127,189 | 117,955 | |||||||||||
| Diluted | 131,754 | 117,955 | 127,189 | 117,955 | |||||||||||
___________________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
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EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)
(Unaudited)
| dollars in thousands | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| EBITDA, EBITDAre and Adjusted EBITDA | ||||||||||||||||
| Net income (loss) | $ | (3,328 | ) | $ | 24,023 | $ | 24,920 | $ | 19,237 | |||||||
| Depreciation and amortization expense | 45,995 | 48,117 | 94,714 | 97,277 | ||||||||||||
Interest expense (1) | 13,107 | 18,027 | 30,281 | 37,284 | ||||||||||||
| Income tax (expense) benefit | 51 | 313 | (1,121 | ) | (595 | ) | ||||||||||
| Unconsolidated real estate ventures allocated share of above adjustments | 10,357 | 10,602 | 18,163 | 20,777 | ||||||||||||
| Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures | (4 | ) | 129 | (5 | ) | 129 | ||||||||||
EBITDA (2) | $ | 66,178 | $ | 101,211 | $ | 166,952 | $ | 174,109 | ||||||||
| Gain on sale of real estate | — | (33,396 | ) | (39,033 | ) | (33,851 | ) | |||||||||
| Gain on sale of unconsolidated real estate assets | (335 | ) | — | (335 | ) | — | ||||||||||
EBITDAre (2) | $ | 65,843 | $ | 67,815 | $ | 127,584 | $ | 140,258 | ||||||||
Transaction and other costs (3) | 2,974 | 3,787 | 7,869 | 8,008 | ||||||||||||
| Loss on extinguishment of debt | 1,889 | 4,457 | 1,889 | 4,457 | ||||||||||||
| Reduction of gain on bargain purchase | — | 7,606 | — | 7,606 | ||||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | ||||||||||||
Earnings (losses) and distributions in excess of our investment in unconsolidated real estate venture (4) | (232 | ) | (5,412 | ) | (6,673 | ) | (5,412 | ) | ||||||||
| Unconsolidated real estate ventures allocated share of above adjustments | — | — | — | 30 | ||||||||||||
| Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures | — | (124 | ) | — | (124 | ) | ||||||||||
Adjusted EBITDA (2) | $ | 79,997 | $ | 87,226 | $ | 151,323 | $ | 173,348 | ||||||||
Net Debt to Annualized Adjusted EBITDA (5) | 5.2x | 6.3x | 5.5x | 6.3x | ||||||||||||
| June 30, 2019 | June 30, 2018 | |||||||||||||||
| Net Debt (at JBG SMITH Share) | ||||||||||||||||
Consolidated indebtedness (6) | $ | 1,653,538 | $ | 2,033,183 | ||||||||||||
Unconsolidated indebtedness (6) | 312,686 | 440,177 | ||||||||||||||
| Total consolidated and unconsolidated indebtedness | 1,966,224 | 2,473,360 | ||||||||||||||
| Less: cash and cash equivalents | 289,554 | 276,629 | ||||||||||||||
| Net Debt (at JBG SMITH Share) | $ | 1,676,670 | $ | 2,196,731 | ||||||||||||
| $ | (0.29 | ) | ||||||||||||||
____________________
Note: All EBITDA measures as shown above are attributable to operating partnership common units. EBITDAre for the six months ended June 30, 2018 was restated in compliance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.
| (1) | Interest expense includes the amortization of deferred financing costs and the ineffective portion of any interest rate swaps or caps, net of capitalized interest. |
| (2) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.5 million and $2.8 million for the three and six months ended June 30, 2018). |
| (3) | Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs and severance costs), demolition costs and costs related to other completed, potential and pursued transactions. |
| (4) | As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized. |
| (5) | Net Debt to Annualized Adjusted EBITDA for the three and six months ended June 30, 2019 includes $472.8 million of net proceeds from the underwritten public offering completed in April 2019. Adjusted EBITDA for the three months ended June 30, 2019 and 2018 is annualized by multiplying by four. Adjusted EBITDA for the six months ended June 30, 2019 and 2018 is annualized by multiplying by two. |
| (6) | Net of premium/discount and deferred financing costs. |
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FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
| in thousands, except per share data | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| FFO and Core FFO | |||||||||||||||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 20,574 | $ | 21,821 | $ | 16,384 | ||||||
| Net income (loss) attributable to redeemable noncontrolling interests | (288 | ) | 3,574 | 3,099 | 2,980 | ||||||||||
| Net loss attributable to noncontrolling interests | — | (125 | ) | — | (127 | ) | |||||||||
| Net income (loss) | (3,328 | ) | 24,023 | 24,920 | 19,237 | ||||||||||
| Gain on sale of real estate | — | (33,396 | ) | (39,033 | ) | (33,851 | ) | ||||||||
| Gain on sale of unconsolidated real estate assets | (335 | ) | — | (335 | ) | — | |||||||||
| Real estate depreciation and amortization | 43,308 | 45,587 | 89,343 | 92,226 | |||||||||||
| Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures | 4,804 | 6,179 | 9,457 | 12,615 | |||||||||||
| Net (income) loss attributable to noncontrolling interests in consolidated real estate ventures | (4 | ) | 129 | (5 | ) | 131 | |||||||||
FFO Attributable to Operating Partnership Common Units (1) | $ | 44,445 | $ | 42,522 | $ | 84,347 | $ | 90,358 | |||||||
| FFO attributable to redeemable noncontrolling interests | (5,014 | ) | (6,299 | ) | (9,797 | ) | (13,426 | ) | |||||||
FFO attributable to common shareholders (1) | $ | 39,431 | $ | 36,223 | $ | 74,550 | $ | 76,932 | |||||||
| FFO attributable to the operating partnership common units | $ | 44,445 | $ | 42,522 | $ | 84,347 | $ | 90,358 | |||||||
Transaction and other costs, net of tax (2) | 2,847 | 3,394 | 7,473 | 7,530 | |||||||||||
| (Gain) loss from mark-to-market on derivative instruments | 524 | (432 | ) | 48 | (1,551 | ) | |||||||||
| Share of (gain) loss from mark-to-market on derivative instruments held by unconsolidated real estate ventures | 1,153 | (90 | ) | 1,380 | (432 | ) | |||||||||
| Loss on extinguishment of debt, net of noncontrolling interests | 1,889 | 4,333 | 1,889 | 4,333 | |||||||||||
Earnings (losses) and distributions in excess of our investment in unconsolidated real estate venture (3) | (232 | ) | (5,412 | ) | (6,673 | ) | (5,412 | ) | |||||||
| Reduction of gain on bargain purchase | — | 7,606 | — | 7,606 | |||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | |||||||||||
| Amortization of management contracts intangible, net of tax | 1,288 | 1,287 | 2,575 | 2,573 | |||||||||||
Core FFO Attributable to Operating Partnership Common Units (1) | $ | 61,437 | $ | 62,305 | $ | 111,693 | $ | 123,530 | |||||||
| Core FFO attributable to redeemable noncontrolling interests | (6,931 | ) | (9,229 | ) | (12,955 | ) | (18,266 | ) | |||||||
Core FFO attributable to common shareholders (1) | $ | 54,506 | $ | 53,076 | $ | 98,738 | $ | 105,264 | |||||||
| FFO per diluted common share | $ | 0.30 | $ | 0.31 | $ | 0.59 | $ | 0.65 | |||||||
| Core FFO per diluted common share | $ | 0.41 | $ | 0.45 | $ | 0.78 | $ | 0.89 | |||||||
| Weighted average diluted shares | 131,754 | 117,955 | 127,189 | 117,955 | |||||||||||
See footnotes on page 12.
11
FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
| in thousands, except per share data | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| FAD | |||||||||||||||
| Core FFO attributable to the operating partnership common units | $ | 61,437 | $ | 62,305 | $ | 111,693 | $ | 123,530 | |||||||
| Recurring capital expenditures and second generation tenant improvements and leasing commissions | (20,076 | ) | (11,057 | ) | (42,373 | ) | (17,154 | ) | |||||||
Straight-line and other rent adjustments (4) | (8,739 | ) | (1,216 | ) | (15,547 | ) | (2,291 | ) | |||||||
| Share of straight-line rent from unconsolidated real estate ventures | (1,473 | ) | 189 | (1,608 | ) | 348 | |||||||||
| Third-party lease liability assumption payments | (1,183 | ) | (619 | ) | (2,319 | ) | (1,091 | ) | |||||||
| Share of third party lease liability assumption payments for unconsolidated real estate ventures | — | — | — | (50 | ) | ||||||||||
| Share-based compensation expense | 5,694 | 5,941 | 11,024 | 10,217 | |||||||||||
| Amortization of debt issuance costs | 875 | 1,201 | 1,845 | 2,365 | |||||||||||
| Share of amortization of debt issuance costs from unconsolidated real estate ventures | 69 | 66 | 117 | 135 | |||||||||||
| Non-real estate depreciation and amortization | 916 | 758 | 1,828 | 1,507 | |||||||||||
FAD available to the Operating Partnership Common Units (A) (5) | $ | 37,520 | $ | 57,568 | $ | 64,660 | $ | 117,516 | |||||||
Distributions to common shareholders and unitholders (6) (B) | $ | 34,006 | $ | 31,197 | $ | 65,290 | $ | 62,394 | |||||||
FAD Payout Ratio (B÷A) (7) | 90.6 | % | 54.2 | % | 101.0 | % | 53.1 | % | |||||||
| Capital Expenditures | |||||||||||||||
| Maintenance and recurring capital expenditures | $ | 7,252 | $ | 3,989 | $ | 12,747 | $ | 6,672 | |||||||
| Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures | 252 | 250 | 340 | 1,399 | |||||||||||
| Second generation tenant improvements and leasing commissions | 12,357 | 6,273 | 28,512 | 8,166 | |||||||||||
| Share of second generation tenant improvements and leasing commissions from unconsolidated real estate ventures | 215 | 545 | 774 | 917 | |||||||||||
| Recurring capital expenditures and second generation tenant improvements and leasing commissions | 20,076 | 11,057 | 42,373 | 17,154 | |||||||||||
| First generation tenant improvements and leasing commissions | 18,996 | 6,676 | 25,193 | 10,861 | |||||||||||
| Share of first generation tenant improvements and leasing commissions from unconsolidated real estate ventures | 419 | 1,391 | 652 | 2,386 | |||||||||||
| Non-recurring capital expenditures | 5,470 | 3,765 | 12,192 | 7,131 | |||||||||||
| Share of non-recurring capital expenditures from unconsolidated joint ventures | 30 | 142 | 30 | 762 | |||||||||||
| Non-recurring capital expenditures | 24,915 | 11,974 | 38,067 | 21,140 | |||||||||||
| Total JBG SMITH Share of Capital Expenditures | $ | 44,991 | $ | 23,031 | $ | 80,440 | $ | 38,294 | |||||||
_______________
Note: FFO attributable to operating partnership common units and FFO attributable to common shareholders for the six months ended June 30, 2018 were restated in compliance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.
| (1) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.5 million and $2.8 million for the three and six months ended June 30, 2018). |
| (2) | Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs, and severance costs), demolition costs and costs related to other completed, potential and pursued transactions. |
| (3) | As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized. |
| (4) | Includes straight-line rent, above/below market lease amortization and lease incentive amortization. |
| (5) | The decline in FAD available to the Operating Partnership Common Units was attributable to a significant increase in second generation tenant improvements and leasing commissions from the early renewal of several leases during the three and six months ended June 30, 2019. |
| (6) | The distribution for the six months ended June 30, 2019 excludes a special dividend of $0.10 per common share that was paid in January 2019. |
| (7) | The FAD payout ratio on a quarterly basis is not necessarily indicative of an amount for the full year due to fluctuation in timing of capital expenditures, the commencement of new leases and the seasonality of our operations. |
12
NOI RECONCILIATIONS (NON-GAAP)
(Unaudited)
| dollars in thousands | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 20,574 | $ | 21,821 | $ | 16,384 | ||||||
| Add: | |||||||||||||||
| Depreciation and amortization expense | 45,995 | 48,117 | 94,714 | 97,277 | |||||||||||
| General and administrative expense: | |||||||||||||||
| Corporate and other | 11,559 | 8,603 | 23,873 | 17,017 | |||||||||||
| Third-party real estate services | 28,710 | 21,189 | 56,776 | 43,798 | |||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | |||||||||||
| Transaction and other costs | 2,974 | 3,787 | 7,869 | 8,008 | |||||||||||
| Interest expense | 13,107 | 18,027 | 30,281 | 37,284 | |||||||||||
| Loss on extinguishment of debt | 1,889 | 4,457 | 1,889 | 4,457 | |||||||||||
| Reduction of gain on bargain purchase | — | 7,606 | — | 7,606 | |||||||||||
| Income tax expense (benefit) | 51 | 313 | (1,121 | ) | (595 | ) | |||||||||
| Net income (loss) attributable to redeemable noncontrolling interests | (288 | ) | 3,574 | 3,099 | 2,980 | ||||||||||
| Less: | |||||||||||||||
| Third-party real estate services, including reimbursements | 29,487 | 24,160 | 57,178 | 48,490 | |||||||||||
Other income (1) | 2,114 | 2,080 | 3,755 | 3,196 | |||||||||||
| Income (loss) from unconsolidated real estate ventures, net | (1,810 | ) | 3,836 | 1,791 | 1,934 | ||||||||||
| Interest and other income, net | 2,052 | 513 | 3,003 | 1,086 | |||||||||||
| Gain on sale of real estate | — | 33,396 | 39,033 | 33,851 | |||||||||||
| Net loss attributable to noncontrolling interests | — | 125 | — | 127 | |||||||||||
| Consolidated NOI | 78,637 | 81,234 | 155,095 | 164,057 | |||||||||||
| NOI attributable to unconsolidated real estate ventures at our share | 5,091 | 9,024 | 10,260 | 18,261 | |||||||||||
Non-cash rent adjustments (2) | (8,738 | ) | (1,237 | ) | (15,544 | ) | (2,333 | ) | |||||||
Other adjustments (3) | 3,758 | 3,623 | 7,083 | 7,839 | |||||||||||
| Total adjustments | 111 | 11,410 | 1,799 | 23,767 | |||||||||||
| NOI | $ | 78,748 | $ | 92,644 | $ | 156,894 | $ | 187,824 | |||||||
Less: out-of-service NOI loss (4) | (1,556 | ) | (1,456 | ) | (2,827 | ) | (2,264 | ) | |||||||
| Operating portfolio NOI | $ | 80,304 | $ | 94,100 | $ | 159,721 | $ | 190,088 | |||||||
Non-same store NOI (5) | 6,311 | 12,611 | 12,721 | 27,219 | |||||||||||
Same store NOI (6) | $ | 73,993 | $ | 81,489 | $ | 147,000 | $ | 162,869 | |||||||
| Change in same store NOI | (9.2 | )% | (9.7 | )% | |||||||||||
| Number of properties in same store pool | 55 | 55 | |||||||||||||
___________________
| (1) | Excludes parking income of $6.7 million and $6.6 million for the three months ended June 30, 2019 and 2018, and $13.1 million and $13.0 million for the six months ended June 30, 2019 and 2018. |
| (2) | Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization. |
| (3) | Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue. |
| (4) | Includes the results for our Under Construction assets and Future Development Pipeline. |
| (5) | Includes the results for properties that were not owned, operated and in service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. The decrease in non-same store NOI is primarily attributable to lost income from disposed assets. |
| (6) | Includes the results of the properties that are owned, operated and in service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. |
13
| TABLE OF CONTENTS | JUNE 30, 2019 |
| Page | |
| Overview | |
| Disclosures | 3-4 |
| Company Profile | 5-6 |
| Financial Highlights | |
| Financial Highlights - Trends | 8-9 |
| Portfolio Overview | |
| Financial Information | |
| Condensed Consolidated Balance Sheets | |
| Condensed Consolidated Statements of Operations | |
| Unconsolidated Real Estate Ventures - Balance Sheet and Operating Information | |
| Other Tangible Assets and Liabilities | |
| EBITDA, EBITDAre and Adjusted EBITDA (Non-GAAP) | |
| FFO, Core FFO and FAD (Non-GAAP) | 16-17 |
| Third-Party Asset Management and Real Estate Services Business (Non-GAAP) | |
| Pro Rata Adjusted General and Administrative Expenses (Non-GAAP) | |
| Operating Assets | |
| Summary & Same Store NOI (Non-GAAP) | 21-22 |
| Summary NOI (Non-GAAP) | |
| Summary NOI - Commercial (Non-GAAP) | |
| Summary NOI - Multifamily (Non-GAAP) | |
| NOI Reconciliations (Non-GAAP) | |
| Leasing Activity | |
| Leasing Activity - Office | |
| Net Effective Rent - Office | |
| Lease Expirations | |
| Signed But Not Yet Commenced Leases | |
| Tenant Concentration | |
Industry Diversity | |
| Property Data | |
| Portfolio Summary | |
| Property Tables: | |
| Commercial | 34-37 |
| Multifamily | 38-40 |
| Under Construction | |
| Future Development | |
| Disposition Activity | |
| Debt | |
| Debt Summary | |
| Debt by Instrument | 45-46 |
| Real Estate Ventures | |
| Consolidated Real Estate Ventures | |
| Unconsolidated Real Estate Ventures | 48-49 |
| Definitions | 50-53 |
| Appendices - Reconciliations of Non-GAAP Financial Measures | 54-57 |
 | Page 2 | |
| DISCLOSURES | JUNE 30, 2019 |
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 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 document. We also note the following forward-looking statements: our potential net operating income ("NOI") growth and the assumptions on which such growth is premised, our estimated future leverage (Debt/EBITDA) profile, the potential effect of Amazon.com, Inc. ("Amazon") on job growth, rent growth and cap rates in the Washington, DC metropolitan area and National Landing, in particular, our anticipated dispositions and 1031 exchanges, our indicated annual dividend per share and dividend yield, annualized NOI; adjusted annualized NOI; in the case of our construction assets, estimated square feet, estimated number of units, the estimated completion date, estimated stabilization date, estimated incremental investment, estimated total investment, projected NOI yield, weighted average projected NOI yield, NOI yield or estimated total project cost, estimated total NOI weighted average completion date, weighted average stabilization date and estimated incremental investment, intended type of asset use and potential tenants, and estimated stabilized NOI; and in the case of our future development assets, estimated potential development density, estimated commercial SF/multifamily units to be replaced, estimated remaining acquisition cost, estimated capitalized cost, estimated total investment, expected key Amazon transaction terms, our anticipated role as developer, property manager and retail leasing agent in connection with Amazon’s new headquarters, planned infrastructure and education improvements related to Amazon’s new headquarters; the economic impacts of Amazon’s new headquarters on the DC region and National Landing, our development planned related to Amazon’s new headquarters, the expected accretion to our net asset value ("NAV") as a result of the Amazon transaction and our future NAV growth rate; in the case of our Amazon lease transactions and our development opportunities in National Landing, the total square feet to be leased to Amazon and the expected net effective rent, estimated square feet, estimated number of units, the estimated construction start and occupancy dates, estimated incremental investment, and projected NOI yield; and in the case of our future development opportunities, estimated potential development density. 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” and the Cautionary Statement Concerning Forward-Looking Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 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 issuance of this Investor Package.
We are reiterating the assumptions in our estimated NOI bridge and the potential estimated NAV impact from Amazon in National Landing, which can be found in our Spring 2019 Investor Day presentation on our website at http://investors.jbgsmith.com/presentations.
Organization and Basis of Presentation
JBG SMITH Properties ("JBG SMITH") was organized as a Maryland real estate investment trust ("REIT") on October 27, 2016 for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C. segment. On July 18, 2017, JBG SMITH acquired the management business and certain assets and liabilities of The JBG Companies ("JBG") (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction."
The information contained in this Investor Package does not purport to disclose all items required by the accounting principles generally accepted in the United States of America (“GAAP”) and is unaudited information, unless otherwise indicated.
Pro Rata Information
We present certain financial information and metrics in this Investor Package “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,
| Page 3 | |
| DISCLOSURES | JUNE 30, 2019 |
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.
Definitions
See pages 50-53 for definitions of terms used in this Investor Package.
Information herein with respect to the proposed transaction with Amazon is based on executed leases and purchase and sale agreements between us and Amazon. Closing under these agreements is subject to customary closing conditions.
Non-GAAP Measures
This Investor Package includes non-GAAP measures. For these measures, we have provided an explanation of how these non-GAAP measures are calculated and why our management believes that the presentation of these measures provides useful information to investors regarding our financial condition and results of operations. Reconciliations of certain non-GAAP measures to the most directly comparable GAAP financial measure are included in this Investor Package. 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 Investor Package:
| • | Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") |
| • | EBITDA for Real Estate ("EBITDAre") |
| • | Adjusted EBITDA |
| • | Funds from Operations ("FFO") |
| • | Core FFO |
| • | Funds Available for Distribution ("FAD") |
| • | Net Operating Income ("NOI") |
| • | Annualized NOI |
| • | Adjusted Annualized NOI |
| • | Estimated Stabilized NOI |
| • | Projected NOI Yield |
| • | Same Store NOI |
| • | Adjusted Consolidated and Unconsolidated Indebtedness |
| • | Net Debt |
| • | Pro Rata Adjusted General and Administrative Expenses |
| Page 4 | |
| COMPANY PROFILE | JUNE 30, 2019 (Unaudited) |
| Company Overview | ||||
JBG SMITH is an S&P 400 company that owns, operates, invests in and develops assets concentrated in leading urban infill submarkets in and around Washington, DC. We own and operate a portfolio of high-quality commercial and multifamily assets, many of which are amenitized with ancillary retail. Our portfolio reflects our longstanding strategy of owning and operating assets within the Metro-served submarkets in the Washington, DC metropolitan area that have high barriers to entry and key urban amenities, including being within walking distance of a Metro station. Our revenues are derived primarily from leases with commercial and multifamily tenants, including fixed rents and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance. In addition to our portfolio, we have a third-party asset management and real estate services business that provides fee-based real estate services to third parties, our real estate ventures and the legacy funds formerly organized by JBG ("JBG Legacy Funds").
Q2 2019 Financial Results
| ▪ | Net loss attributable to common shareholders was $3.0 million, or $0.03 per diluted share. |
| ▪ | FFO attributable to common shareholders was $39.4 million, or $0.30 per diluted share. |
| ▪ | Core FFO attributable to common shareholders was $54.5 million, or $0.41 per diluted share. |
Q2 2019 to Q1 2019 Comparison
Below are the key highlights regarding quarter over quarter changes in the JBG SMITH portfolio.
Operating Assets
| ▪ | Annualized NOI for the operating portfolio for the three months ended June 30, 2019 was $322.0 million, compared to $321.6 million for the three months ended March 31, 2019, at our share. |
| ▪ | The operating commercial portfolio was 90.3% leased and 86.0% occupied as of June 30, 2019, compared to 90.2% and 85.6% as of March 31, 2019, at our share. |
| ▪ | The operating multifamily portfolio was 98.0% leased and 95.0% occupied as of June 30, 2019, compared to 97.0% and 94.8% as of March 31, 2019, at our share. |
| ▪ | Same store NOI at our share decreased 9.2% to $74.0 million for the three months ended June 30, 2019, compared to $81.5 million for the three months ended June 30, 2018. The decrease in same store NOI for the three months ended June 30, 2019 is largely attributable to increased rental abatements, lower NOI at Crystal City Marriott, as a result of the ongoing room renovations, and an increase in assumed lease liability payments. The reported same store pools as of June 30, 2019 include only the assets that were in service for the entirety of both periods being compared. See page 52 for the definition of same store. |
Under Construction
| ▪ | During the quarter ended June 30, 2019, there were eight assets under construction (four commercial assets and four multifamily assets), consisting of 821,099 square feet and 1,298 units, both at our share. |
Near-Term Development
| ▪ | As of June 30, 2019, there were no assets in near-term development. |
Future Development
| ▪ | As of June 30, 2019, there were 40 future development assets consisting of 18.7 million square feet of estimated potential density at our share, including the 4.1 million square feet held for sale to Amazon. |
| Page 5 | |
| COMPANY PROFILE | JUNE 30, 2019 (Unaudited) |
| Company Overview | ||||
Equity Offering
In April 2019, we closed an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other offering expenses, of $472.8 million. We intend to use the net proceeds to fund development opportunities and for general corporate purposes.
Disposition Activity
In July 2019, we sold 1600 K Street, an 83,000 square foot commercial asset located in Washington DC, for $43.0 million.
| Executive Officers | Company Snapshot as of June 30, 2019 | |||
| W. Matthew Kelly | Chief Executive Officer and Trustee | Exchange/ticker | NYSE: JBGS | |
| David P. Paul | President and Chief Operating Officer | Insider ownership (1) | approximately 8% | |
| Stephen W. Theriot | Chief Financial Officer | Indicated annual dividend per share | $0.90 | |
| Kevin P. Reynolds | Chief Development Officer | Dividend yield | 2.3% | |
| Steven A. Museles | Chief Legal Officer | |||
| M. Moina Banerjee | Executive Vice President, Head of Capital Markets | Total Enterprise Value (dollars in billions, except share price) | ||
| Common share price | $39.34 | |||
Common shares and common limited partnership units ("OP Units") outstanding (in millions) | 149.28 | |||
| Total market capitalization | $5.87 | |||
| Total consolidated and unconsolidated indebtedness at JBG SMITH share | 1.97 | |||
| Less: cash and cash equivalents at JBG SMITH share | (0.29) | |||
| Net debt | $1.68 | |||
| Total Enterprise Value | $7.55 | |||
| Net Debt / Total Enterprise Value | 22.2% | |||
| (1) | Represents the percentage of all outstanding common shares of JBG SMITH Properties owned or represented by the Company’s trustees and executive officers as of the date of the annual proxy assuming that all OP Units are redeemed for shares and including the 11.5 million common shares issued in the underwritten public offering completed in April 2019. | |||
| Page 6 | |
| FINANCIAL HIGHLIGHTS | JUNE 30, 2019 (Unaudited) |
| dollars in thousands, except per share data | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||
| Summary Financial Results | |||||||
| Total revenue | $ | 160,617 | $ | 315,816 | |||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 21,821 | ||
| Per diluted common share | $ | (0.03 | ) | $ | 0.16 | ||
| Operating portfolio NOI | $ | 80,304 | $ | 159,721 | |||
FFO attributable to operating partnership common units (1) | $ | 44,445 | $ | 84,347 | |||
| Per operating partnership common unit | $ | 0.30 | $ | 0.59 | |||
Core FFO attributable to operating partnership common units (1) | $ | 61,437 | $ | 111,693 | |||
| Per operating partnership common unit | $ | 0.41 | $ | 0.78 | |||
FAD attributable to the operating partnership common units (1) | $ | 37,520 | $ | 64,660 | |||
| FAD payout ratio | 90.6 | % | 101.0 | % | |||
EBITDA attributable to operating partnership common units (1) | $ | 66,178 | $ | 166,952 | |||
EBITDAre attributable to operating partnership common units (1) | $ | 65,843 | $ | 127,584 | |||
Adjusted EBITDA attributable to operating partnership common units (1) | $ | 79,997 | $ | 151,323 | |||
Net debt / total enterprise value (2) | 22.2 | % | 22.2 | % | |||
Net debt to annualized adjusted EBITDA (2) | 5.2x | 5.5x | |||||
| June 30, 2019 | |||||||
| Debt Summary and Key Ratios (at JBG SMITH Share) | |||||||
Total consolidated indebtedness (3) | $ | 1,653,538 | |||||
Total consolidated and unconsolidated indebtedness (3) | $ | 1,966,224 | |||||
| Weighted average interest rates: | |||||||
| Variable rate debt | 5.10 | % | |||||
| Fixed rate debt | 4.16 | % | |||||
| Total debt | 4.27 | % | |||||
| Cash and cash equivalents | $ | 289,554 | |||||
____________________
| (1) | Operating partnership common units include units owned by JBG SMITH Properties. |
| (2) | Includes the $472.8 million of net proceeds from the underwritten public offering completed in April 2019. |
| (3) | Net of premium/discount and deferred financing costs. |
| Page 7 | |
| FINANCIAL HIGHLIGHTS - TRENDS | JUNE 30, 2019 (Unaudited) |
| Three Months Ended | ||||||||||||||||
| dollars in thousands, except per share data, at JBG SMITH share | Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | |||||||||||
Commercial NOI (1) | $ | 59,735 | $ | 59,304 | $ | 65,462 | $ | 71,314 | $ | 75,311 | ||||||
Multifamily NOI (2) | 20,569 | 20,357 | 20,078 | 19,615 | 19,324 | |||||||||||
Operating portfolio NOI (3) | $ | 80,304 | $ | 79,661 | $ | 85,540 | $ | 90,929 | $ | 94,635 | ||||||
Total Annualized NOI (4) | $ | 322,026 | $ | 321,583 | $ | 341,849 | $ | 364,915 | $ | 378,540 | ||||||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 24,861 | $ | 710 | $ | 22,830 | $ | 20,574 | |||||
| Per diluted common share | $ | (0.03 | ) | $ | 0.20 | $ | (0.01 | ) | $ | 0.19 | $ | 0.17 | ||||
FFO attributable to operating partnership common units (3) (5) | $ | 44,445 | $ | 39,902 | $ | 44,834 | $ | 49,246 | $ | 42,522 | ||||||
| Per operating partnership common unit | $ | 0.30 | $ | 0.28 | $ | 0.32 | $ | 0.36 | $ | 0.31 | ||||||
Core FFO attributable to operating partnership common units (3) (5) | $ | 61,437 | $ | 50,256 | $ | 56,948 | $ | 59,256 | $ | 62,305 | ||||||
| Per operating partnership common unit | $ | 0.41 | $ | 0.36 | $ | 0.41 | $ | 0.43 | $ | 0.45 | ||||||
FAD attributable to operating partnership common units (5) (6) | $ | 37,520 | $ | 27,140 | $ | 20,736 | $ | 45,019 | $ | 57,568 | ||||||
| FAD payout ratio | 90.6 | % | 115.3 | % | 150.9 | % | 69.3 | % | 54.2 | % | ||||||
EBITDA attributable to operating partnership common units (3) (5) | $ | 66,178 | $ | 100,774 | $ | 97,503 | $ | 102,109 | $ | 101,211 | ||||||
EBITDAre attributable to operating partnership common units (3) (5) | $ | 65,843 | $ | 61,741 | $ | 70,555 | $ | 74,683 | $ | 67,815 | ||||||
Adjusted EBITDA attributable to operating partnership common units (3) (5) | $ | 79,997 | $ | 71,326 | $ | 82,608 | $ | 83,842 | $ | 87,226 | ||||||
Net debt / total enterprise value (7) | 22.2 | % | 26.3 | % | 31.0 | % | 30.8 | % | 30.5 | % | ||||||
Net debt to annualized adjusted EBITDA (7) | 5.2x | 7.1x | 6.5x | 6.7x | 6.3x | |||||||||||
| Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | ||||||||||||
| Number of Operating Assets | ||||||||||||||||
Commercial (1) | 46 | 45 | 46 | 49 | 51 | |||||||||||
Multifamily (2) | 16 | 16 | 16 | 16 | 16 | |||||||||||
| Total | 62 | 61 | 62 | 65 | 67 | |||||||||||
Operating Portfolio % Leased (8) | ||||||||||||||||
Commercial (1) (9) | 90.3 | % | 90.2 | % | 89.6 | % | 87.1 | % | 87.5 | % | ||||||
Multifamily (2) | 98.0 | % | 97.0 | % | 95.7 | % | 96.1 | % | 95.9 | % | ||||||
| Weighted Average | 92.3 | % | 92.0 | % | 91.2 | % | 89.4 | % | 89.5 | % | ||||||
Operating Portfolio % Occupied (10) | ||||||||||||||||
Commercial (1) (9) | 86.0 | % | 85.6 | % | 85.5 | % | 85.4 | % | 86.0 | % | ||||||
Multifamily (2) | 95.0 | % | 94.8 | % | 93.9 | % | 94.3 | % | 92.6 | % | ||||||
| Weighted Average | 88.4 | % | 88.1 | % | 87.7 | % | 87.6 | % | 87.7 | % | ||||||
See footnotes on page 9.
| Page 8 | |
| FINANCIAL HIGHLIGHTS - TRENDS | JUNE 30, 2019 (Unaudited) |
Footnotes
Note: See appendices for reconciliations of non-GAAP financial measures to their respective comparable GAAP financial measures.
| (1) | Beginning in Q4 2018, we renamed the Office portfolio to the Commercial portfolio and reclassified Vienna Retail, Stonebridge at Potomac Town Center and Crystal City Marriott from the Other portfolio to the Commercial portfolio. All prior periods have been restated to conform to the new presentation. |
| (2) | Beginning in Q4 2018, we reclassified North End Retail from the Other portfolio to the Multifamily portfolio. All prior periods have been restated to conform to the new presentation. |
| (3) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $2.2 million, $1.5 million and $1.5 million for Q4 2018, Q3 2018 and Q2 2018). |
| (4) | Beginning in Q3 2018, JBG SMITH revised the presentation of annualized NOI for Crystal City Marriott to reflect the trailing 12-month NOI due to the seasonality in the hospitality business. |
| (5) | Operating partnership common units include units owned by JBG SMITH Properties. |
| (6) | Since Q4 2018, FAD available to the Operating Partnership Common Units has been adversely impacted by increases in second generation tenant improvements and leasing commissions from the early renewal of several leases during the quarters. Additionally, Q4 2018 was further impacted by increases in recurring capital expenditures, which is consistent with historical seasonality trends. |
| (7) | Q2 2019 includes the $472.8 million of net proceeds from the underwritten public offering completed in April 2019. |
| (8) | Beginning in Q3 2018, JBG SMITH excludes storage square feet from the percent leased metric. |
| (9) | Crystal City Marriott and 1700 M Street are excluded from the percent leased and the percent occupied metrics. |
| (10) | Percent occupied excludes occupied retail square feet. |
| Page 9 | |
PORTFOLIO OVERVIEW | JUNE 30, 2019 (Unaudited) |
| 100% Share | At JBG SMITH Share | |||||||||||||||||||||||||
| Number of Assets | Square Feet/Units | Square Feet/Units | % Leased | % Occupied | Annualized Rent (in thousands) | Annualized Rent per Square Foot/Monthly Rent Per Unit (1) | Annualized NOI (in thousands) | |||||||||||||||||||
| Operating | ||||||||||||||||||||||||||
Commercial (2) | ||||||||||||||||||||||||||
| In service | 45 | 12,611,379 | 10,973,761 | 90.4 | % | 86.1 | % | $ | 411,463 | $ | 44.78 | $ | 241,454 | |||||||||||||
| Recently delivered | 1 | 215,194 | 105,435 | 79.3 | % | 74.3 | % | 4,277 | 54.58 | (1,704 | ) | |||||||||||||||
| Total / weighted average | 46 | 12,826,573 | 11,079,196 | 90.3 | % | 86.0 | % | $ | 415,740 | $ | 44.87 | $ | 239,750 | |||||||||||||
| Multifamily | ||||||||||||||||||||||||||
| In service | 16 | 6,321 | 4,537 | 98.0 | % | 95.0 | % | $ | 116,090 | $ | 2,144 | $ | 82,276 | |||||||||||||
| 88.1 | % | |||||||||||||||||||||||||
| Operating - Total / Weighted Average | 62 | 12,826,573 SF/ 6,321 Units | 11,079,196 SF/ 4,537 Units | 92.3 | % | 88.4 | % | $ | 531,830 | $44.87 per SF/ $2,144 per unit | $ | 322,026 | ||||||||||||||
Development (3) | ||||||||||||||||||||||||||
| Under Construction | ||||||||||||||||||||||||||
Commercial (4) | 4 | 943,244 | 821,099 | 84.0 | % | |||||||||||||||||||||
| Multifamily | 4 | 1,476 | 1,298 | N/A | ||||||||||||||||||||||
| Development - Total | 8 | 943,244 SF/ 1,476 Units | 821,099 SF/ 1,298 Units | 84.0 | % | |||||||||||||||||||||
| Future Development | 40 | 21,921,200 | 18,667,300 | |||||||||||||||||||||||
_______________
| (1) | For commercial assets, represents annualized office rent divided by occupied office square feet; annualized retail rent and retail square feet are excluded from this metric. For multifamily assets, represents monthly multifamily rent divided by occupied units; retail rent is excluded from this metric. Crystal City Marriott and 1700 M Street are excluded from annualized rent per square foot metrics. Occupied square footage may differ from leased square footage because leased square footage includes leases that have been signed but have not yet commenced. |
| (2) | Crystal City Marriott and 1700 M Street are excluded from percent leased, percent occupied, annualized rent, and annualized rent per square foot metrics. |
| (3) | Refer to pages 41-42 for detail on under construction and future development assets. |
| (4) | Includes JBG SMITH’s lease for approximately 84,400 square feet at 4747 Bethesda Avenue. |
| Page 10 | |
| CONDENSED CONSOLIDATED BALANCE SHEETS | JUNE 30, 2019 (Unaudited) |
| in thousands | June 30, 2019 | December 31, 2018 | |||||
| ASSETS | |||||||
| Real estate, at cost: | |||||||
| Land and improvements | $ | 1,227,558 | $ | 1,371,874 | |||
| Buildings and improvements | 3,717,356 | 3,722,930 | |||||
| Construction in progress, including land | 859,717 | 697,930 | |||||
| 5,804,631 | 5,792,734 | ||||||
| Less accumulated depreciation | (1,093,665 | ) | (1,051,875 | ) | |||
| Real estate, net | 4,710,966 | 4,740,859 | |||||
| Cash and cash equivalents | 280,349 | 260,553 | |||||
| Restricted cash | 16,429 | 138,979 | |||||
| Tenant and other receivables, net | 51,787 | 46,568 | |||||
| Deferred rent receivable, net | 162,641 | 143,473 | |||||
| Investments in unconsolidated real estate ventures | 319,756 | 322,878 | |||||
| Other assets, net | 296,916 | 264,994 | |||||
| Assets held for sale | 168,431 | 78,981 | |||||
| TOTAL ASSETS | $ | 6,007,275 | $ | 5,997,285 | |||
| LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |||||||
| Liabilities: | |||||||
| Mortgages payable, net | $ | 1,360,467 | $ | 1,838,381 | |||
| Unsecured term loans, net | 296,952 | 297,129 | |||||
| Accounts payable and accrued expenses | 140,132 | 130,960 | |||||
| Other liabilities, net | 192,638 | 181,606 | |||||
| Liabilities related to assets held for sale | — | 3,717 | |||||
| Total liabilities | 1,990,189 | 2,451,793 | |||||
| Commitments and contingencies | |||||||
| Redeemable noncontrolling interests | 574,228 | 558,140 | |||||
| Total equity | 3,442,858 | 2,987,352 | |||||
| TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | $ | 6,007,275 | $ | 5,997,285 | |||
_______________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
| Page 11 | |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | JUNE 30, 2019 (Unaudited) (Unaudited) (In thousands) |
| in thousands, except per share data | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| REVENUE | |||||||||||||||
| Property rentals | $ | 122,326 | $ | 126,591 | $ | 241,739 | $ | 257,819 | |||||||
| Third-party real estate services, including reimbursements | 29,487 | 24,160 | 57,178 | 48,490 | |||||||||||
| Other income | 8,804 | 8,696 | 16,899 | 16,175 | |||||||||||
| Total revenue | 160,617 | 159,447 | 315,816 | 322,484 | |||||||||||
| EXPENSES | |||||||||||||||
| Depreciation and amortization | 45,995 | 48,117 | 94,714 | 97,277 | |||||||||||
| Property operating | 32,113 | 34,464 | 64,287 | 69,622 | |||||||||||
| Real estate taxes | 18,266 | 17,509 | 35,501 | 37,119 | |||||||||||
| General and administrative: | |||||||||||||||
| Corporate and other | 11,559 | 8,603 | 23,873 | 17,017 | |||||||||||
| Third-party real estate services | 28,710 | 21,189 | 56,776 | 43,798 | |||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | |||||||||||
| Transaction and other costs | 2,974 | 3,787 | 7,869 | 8,008 | |||||||||||
| Total expenses | 149,140 | 142,766 | 303,674 | 291,366 | |||||||||||
| OTHER INCOME (EXPENSE) | |||||||||||||||
| Income (loss) from unconsolidated real estate ventures, net | (1,810 | ) | 3,836 | 1,791 | 1,934 | ||||||||||
| Interest and other income, net | 2,052 | 513 | 3,003 | 1,086 | |||||||||||
| Interest expense | (13,107 | ) | (18,027 | ) | (30,281 | ) | (37,284 | ) | |||||||
| Gain on sale of real estate | — | 33,396 | 39,033 | 33,851 | |||||||||||
| Loss on extinguishment of debt | (1,889 | ) | (4,457 | ) | (1,889 | ) | (4,457 | ) | |||||||
| Reduction of gain on bargain purchase | — | (7,606 | ) | — | (7,606 | ) | |||||||||
| Total other income (expense) | (14,754 | ) | 7,655 | 11,657 | (12,476 | ) | |||||||||
| INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT | (3,277 | ) | 24,336 | 23,799 | 18,642 | ||||||||||
| Income tax (expense) benefit | (51 | ) | (313 | ) | 1,121 | 595 | |||||||||
| NET INCOME (LOSS) | (3,328 | ) | 24,023 | 24,920 | 19,237 | ||||||||||
| Net (income) loss attributable to redeemable noncontrolling interests | 288 | (3,574 | ) | (3,099 | ) | (2,980 | ) | ||||||||
| Net loss attributable to noncontrolling interests | — | 125 | — | 127 | |||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | (3,040 | ) | $ | 20,574 | $ | 21,821 | $ | 16,384 | ||||||
| EARNINGS (LOSS) PER COMMON SHARE: | |||||||||||||||
| Basic | $ | (0.03 | ) | $ | 0.17 | $ | 0.16 | $ | 0.14 | ||||||
| Diluted | $ | (0.03 | ) | $ | 0.17 | $ | 0.16 | $ | 0.14 | ||||||
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING : | |||||||||||||||
| Basic | 131,754 | 117,955 | 127,189 | 117,955 | |||||||||||
| Diluted | 131,754 | 117,955 | 127,189 | 117,955 | |||||||||||
___________________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2019.
| Page 12 | |
UNCONSOLIDATED REAL ESTATE VENTURES | JUNE 30, 2019 (Unaudited) |
| in thousands, at JBG SMITH share | |||
| BALANCE SHEET INFORMATION | June 30, 2019 | ||
| Total real estate, at cost | $ | 649,122 | |
| Less accumulated depreciation | (33,289 | ) | |
| Real estate, net | 615,833 | ||
| Cash and cash equivalents | 9,224 | ||
| Other assets, net | 43,440 | ||
| Total assets | $ | 668,497 | |
| Borrowings, net | $ | 312,686 | |
| Other liabilities, net | 48,012 | ||
| Total liabilities | $ | 360,698 | |
| OPERATING INFORMATION | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||
| Total revenue | $ | 17,185 | 30,952 | ||||
| Expenses: | |||||||
| Depreciation and amortization | 4,828 | 9,505 | |||||
| Property operating | 8,240 | 15,937 | |||||
| Real estate taxes | 1,598 | 2,905 | |||||
| Total expenses | 14,666 | 28,347 | |||||
| Other income (expense): | |||||||
| Interest expense | (4,221 | ) | (7,897 | ) | |||
| Gain on the sale of unconsolidated real estate venture | 335 | 335 | |||||
| Interest and other income, net | 584 | 587 | |||||
| Loss before income tax expense | (783 | ) | (4,370 | ) | |||
| Income tax expense | — | (1 | ) | ||||
| Net loss | $ | (783 | ) | $ | (4,371 | ) | |
Earnings (losses) and distributions in excess of our investment in unconsolidated real estate venture | 232 | 6,673 | |||||
| Other | (1,259 | ) | (511 | ) | |||
| Income (loss) from unconsolidated real estate ventures, net | $ | (1,810 | ) | $ | 1,791 | ||
| Page 13 | |
| OTHER TANGIBLE ASSETS AND LIABILITIES | JUNE 30, 2019 (Unaudited) |
| in thousands, at JBG SMITH share | June 30, 2019 | ||
Other Tangible Assets, Net (1) (2) | |||
| Restricted cash | $ | 20,235 | |
| Tenant and other receivables, net | 55,741 | ||
| Other assets, net | 32,674 | ||
| Total Other Tangible Assets, Net | $ | 108,650 | |
Other Tangible Liabilities, Net (2) (3) | |||
| Accounts payable and accrued liabilities | $ | 165,239 | |
| Other liabilities, net | 151,629 | ||
| Total Other Tangible Liabilities, Net | $ | 316,868 | |
____________________
| (1) | Excludes cash and cash equivalents. |
| (2) | Excludes assets held for sale and liabilities related to assets held for sale. |
| (3) | Excludes debt. |
| Page 14 | |
| EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||
| EBITDA, EBITDAre and Adjusted EBITDA | ||||||||||||||||
| Net income (loss) | $ | (3,328 | ) | $ | 24,023 | $ | 24,920 | $ | 19,237 | |||||||
| Depreciation and amortization expense | 45,995 | 48,117 | 94,714 | 97,277 | ||||||||||||
Interest expense (1) | 13,107 | 18,027 | 30,281 | 37,284 | ||||||||||||
| Income tax (expense) benefit | 51 | 313 | (1,121 | ) | (595 | ) | ||||||||||
| Unconsolidated real estate ventures allocated share of above adjustments | 10,357 | 10,602 | 18,163 | 20,777 | ||||||||||||
| Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures | (4 | ) | 129 | (5 | ) | 129 | ||||||||||
EBITDA (2) | $ | 66,178 | $ | 101,211 | $ | 166,952 | $ | 174,109 | ||||||||
| Gain on sale of real estate | — | (33,396 | ) | (39,033 | ) | (33,851 | ) | |||||||||
| Gain on sale of unconsolidated real estate assets | (335 | ) | — | (335 | ) | — | ||||||||||
EBITDAre (2) | $ | 65,843 | $ | 67,815 | $ | 127,584 | $ | 140,258 | ||||||||
Transaction and other costs (3) | 2,974 | 3,787 | 7,869 | 8,008 | ||||||||||||
| Loss on extinguishment of debt | 1,889 | 4,457 | 1,889 | 4,457 | ||||||||||||
| Reduction of gain on bargain purchase | — | 7,606 | — | 7,606 | ||||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | ||||||||||||
Earnings (losses) and distributions in excess of our investment in unconsolidated real estate venture (4) | (232 | ) | (5,412 | ) | (6,673 | ) | (5,412 | ) | ||||||||
| Unconsolidated real estate ventures allocated share of above adjustments | — | — | — | 30 | ||||||||||||
| Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures | — | (124 | ) | — | (124 | ) | ||||||||||
Adjusted EBITDA (2) | $ | 79,997 | $ | 87,226 | $ | 151,323 | $ | 173,348 | ||||||||
Net Debt to Annualized Adjusted EBITDA (5) | 5.2x | 6.3x | 5.5x | 6.3x | ||||||||||||
| June 30, 2019 | June 30, 2018 | |||||||||||||||
| Net Debt (at JBG SMITH Share) | ||||||||||||||||
Consolidated indebtedness (6) | $ | 1,653,538 | $ | 2,033,183 | ||||||||||||
Unconsolidated indebtedness (6) | 312,686 | 440,177 | ||||||||||||||
| Total consolidated and unconsolidated indebtedness | 1,966,224 | 2,473,360 | ||||||||||||||
| Less: cash and cash equivalents | 289,554 | 276,629 | ||||||||||||||
| Net Debt (at JBG SMITH Share) | $ | 1,676,670 | $ | 2,196,731 | ||||||||||||
| $ | (0.29 | ) | ||||||||||||||
____________________
Note: All EBITDA measures as shown above are attributable to operating partnership common units. EBITDAre for the six months ended June 30, 2018 was restated in compliance with the definition established by National Association of Real Estate Investment Trusts (“NAREIT”) in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.
| (1) | Interest expense includes the amortization of deferred financing costs and the ineffective portion of any interest rate swaps or caps, net of capitalized interest. |
| (2) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.5 million and $2.8 million for the three and six months ended June 30, 2018). |
| (3) | Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs and severance costs), demolition costs and costs related to other completed, potential and pursued transactions. |
| (4) | As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized. |
| (5) | Net Debt to Annualized Adjusted EBITDA for the three and six months ended June 30, 2019 includes $472.8 million of net proceeds from the underwritten public offering completed in April 2019. Adjusted EBITDA for the three months ended June 30, 2019 and 2018 is annualized by multiplying by four. Adjusted EBITDA for the six months ended June 30, 2019 and 2018 is annualized by multiplying by two. |
| (6) | Net of premium/discount and deferred financing costs. |
| Page 15 | |
| FFO, CORE FFO AND FAD (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| in thousands, except per share data | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| FFO and Core FFO | |||||||||||||||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 20,574 | $ | 21,821 | $ | 16,384 | ||||||
| Net income (loss) attributable to redeemable noncontrolling interests | (288 | ) | 3,574 | 3,099 | 2,980 | ||||||||||
| Net loss attributable to noncontrolling interests | — | (125 | ) | — | (127 | ) | |||||||||
| Net income (loss) | (3,328 | ) | 24,023 | 24,920 | 19,237 | ||||||||||
| Gain on sale of real estate | — | (33,396 | ) | (39,033 | ) | (33,851 | ) | ||||||||
| Gain on sale of unconsolidated real estate assets | (335 | ) | — | (335 | ) | — | |||||||||
| Real estate depreciation and amortization | 43,308 | 45,587 | 89,343 | 92,226 | |||||||||||
| Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures | 4,804 | 6,179 | 9,457 | 12,615 | |||||||||||
| Net (income) loss attributable to noncontrolling interests in consolidated real estate ventures | (4 | ) | 129 | (5 | ) | 131 | |||||||||
FFO Attributable to Operating Partnership Common Units (1) | $ | 44,445 | $ | 42,522 | $ | 84,347 | $ | 90,358 | |||||||
| FFO attributable to redeemable noncontrolling interests | (5,014 | ) | (6,299 | ) | (9,797 | ) | (13,426 | ) | |||||||
FFO attributable to common shareholders (1) | $ | 39,431 | $ | 36,223 | $ | 74,550 | $ | 76,932 | |||||||
| FFO attributable to the operating partnership common units | $ | 44,445 | $ | 42,522 | $ | 84,347 | $ | 90,358 | |||||||
Transaction and other costs, net of tax (2) | 2,847 | 3,394 | 7,473 | 7,530 | |||||||||||
| (Gain) loss from mark-to-market on derivative instruments | 524 | (432 | ) | 48 | (1,551 | ) | |||||||||
| Share of (gain) loss from mark-to-market on derivative instruments held by unconsolidated real estate ventures | 1,153 | (90 | ) | 1,380 | (432 | ) | |||||||||
| Loss on extinguishment of debt, net of noncontrolling interests | 1,889 | 4,333 | 1,889 | 4,333 | |||||||||||
Earnings (losses) and distributions in excess of our investment in unconsolidated real estate venture (3) | (232 | ) | (5,412 | ) | (6,673 | ) | (5,412 | ) | |||||||
| Reduction of gain on bargain purchase | — | 7,606 | — | 7,606 | |||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | |||||||||||
| Amortization of management contracts intangible, net of tax | 1,288 | 1,287 | 2,575 | 2,573 | |||||||||||
Core FFO Attributable to Operating Partnership Common Units (1) | $ | 61,437 | $ | 62,305 | $ | 111,693 | $ | 123,530 | |||||||
| Core FFO attributable to redeemable noncontrolling interests | (6,931 | ) | (9,229 | ) | (12,955 | ) | (18,266 | ) | |||||||
Core FFO attributable to common shareholders (1) | $ | 54,506 | $ | 53,076 | $ | 98,738 | $ | 105,264 | |||||||
| FFO per diluted common share | $ | 0.30 | $ | 0.31 | $ | 0.59 | $ | 0.65 | |||||||
| Core FFO per diluted common share | $ | 0.41 | $ | 0.45 | $ | 0.78 | $ | 0.89 | |||||||
| Weighted average diluted shares | 131,754 | 117,955 | 127,189 | 117,955 | |||||||||||
| FAD | |||||||||||||||
| Core FFO attributable to the operating partnership common units | $ | 61,437 | $ | 62,305 | $ | 111,693 | $ | 123,530 | |||||||
| Recurring capital expenditures and second generation tenant improvements and leasing commissions | (20,076 | ) | (11,057 | ) | (42,373 | ) | (17,154 | ) | |||||||
Straight-line and other rent adjustments (4) | (8,739 | ) | (1,216 | ) | (15,547 | ) | (2,291 | ) | |||||||
| Share of straight-line rent from unconsolidated real estate ventures | (1,473 | ) | 189 | (1,608 | ) | 348 | |||||||||
| Third-party lease liability assumption payments | (1,183 | ) | (619 | ) | (2,319 | ) | (1,091 | ) | |||||||
| Share of third party lease liability assumption payments for unconsolidated real estate ventures | — | — | — | (50 | ) | ||||||||||
| Share-based compensation expense | 5,694 | 5,941 | 11,024 | 10,217 | |||||||||||
| Amortization of debt issuance costs | 875 | 1,201 | 1,845 | 2,365 | |||||||||||
| Share of amortization of debt issuance costs from unconsolidated real estate ventures | 69 | 66 | 117 | 135 | |||||||||||
| Non-real estate depreciation and amortization | 916 | 758 | 1,828 | 1,507 | |||||||||||
FAD available to the Operating Partnership Common Units (A) (5) | $ | 37,520 | $ | 57,568 | $ | 64,660 | $ | 117,516 | |||||||
Distributions to common shareholders and unitholders (6) (B) | $ | 34,006 | $ | 31,197 | $ | 65,290 | $ | 62,394 | |||||||
FAD Payout Ratio (B÷A) (7) | 90.6 | % | 54.2 | % | 101.0 | % | 53.1 | % | |||||||
See footnotes on page 17.
| Page 16 | |
| FFO, CORE FFO AND FAD (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| in thousands, except per share data | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Capital Expenditures | |||||||||||||||
| Maintenance and recurring capital expenditures | $ | 7,252 | $ | 3,989 | $ | 12,747 | $ | 6,672 | |||||||
| Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures | 252 | 250 | 340 | 1,399 | |||||||||||
| Second generation tenant improvements and leasing commissions | 12,357 | 6,273 | 28,512 | 8,166 | |||||||||||
| Share of second generation tenant improvements and leasing commissions from unconsolidated real estate ventures | 215 | 545 | 774 | 917 | |||||||||||
| Recurring capital expenditures and second generation tenant improvements and leasing commissions | 20,076 | 11,057 | 42,373 | 17,154 | |||||||||||
| First generation tenant improvements and leasing commissions | 18,996 | 6,676 | 25,193 | 10,861 | |||||||||||
| Share of first generation tenant improvements and leasing commissions from unconsolidated real estate ventures | 419 | 1,391 | 652 | 2,386 | |||||||||||
| Non-recurring capital expenditures | 5,470 | 3,765 | 12,192 | 7,131 | |||||||||||
| Share of non-recurring capital expenditures from unconsolidated joint ventures | 30 | 142 | 30 | 762 | |||||||||||
| Non-recurring capital expenditures | 24,915 | 11,974 | 38,067 | 21,140 | |||||||||||
| Total JBG SMITH Share of Capital Expenditures | $ | 44,991 | $ | 23,031 | $ | 80,440 | $ | 38,294 | |||||||
_______________
Note: FFO attributable to operating partnership common units and FFO attributable to common shareholders for the six months ended June 30, 2018 were restated in compliance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.
| (1) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.5 million and $2.8 million for the three and six months ended June 30, 2018). |
| (2) | Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs, and severance costs), demolition costs and costs related to other completed, potential and pursued transactions. |
| (3) | As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized. |
| (4) | Includes straight-line rent, above/below market lease amortization and lease incentive amortization. |
| (5) | The decline in FAD available to the Operating Partnership Common Units was attributable to a significant increase in second generation tenant improvements and leasing commissions from the early renewal of several leases during the three and six months ended June 30, 2019. |
| (6) | The distribution for the six months ended June 30, 2019 excludes a special dividend of $0.10 per common share that was paid in January 2019. |
| (7) | The FAD payout ratio on a quarterly basis is not necessarily indicative of an amount for the full year due to fluctuation in timing of capital expenditures, the commencement of new leases and the seasonality of our operations. |
| Page 17 | |
THIRD-PARTY ASSET MANAGEMENT AND REAL ESTATE SERVICES BUSINESS (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
dollars in thousands, at JBG SMITH share | Three Months Ended June 30, 2019 | |||||||||||
| Source of Revenue | ||||||||||||
| Third-Party Management | JBG SMITH JV Partner (1) | JBG Legacy Funds | Total | |||||||||
| Service Revenue | ||||||||||||
| Property management fees | $ | 2,717 | $ | 1,134 | $ | 1,509 | $ | 5,360 | ||||
| Asset management fees | — | 548 | 2,925 | 3,473 | ||||||||
| Leasing fees | 827 | 204 | 61 | 1,092 | ||||||||
| Development fees | 892 | 419 | 1,233 | 2,544 | ||||||||
| Construction management fees | 108 | 230 | 137 | 475 | ||||||||
| Other service revenue | 469 | 989 | 161 | 1,619 | ||||||||
Total Revenue (2) | $ | 5,013 | $ | 3,524 | $ | 6,026 | $ | 14,563 | ||||
Pro Rata adjusted general and administrative expense: third-party real estate services (3) | (12,128 | ) | ||||||||||
Total Services Revenue Less Allocated General and Administrative Expenses (4) | $ | 2,435 | ||||||||||
____________________
| (1) | Service revenues from joint ventures are calculated on an asset-by-asset basis by applying our real estate venture partners’ respective economic interests to the fees we earned from each consolidated and unconsolidated real estate venture. |
| (2) | Included in “Third-party real estate services, including reimbursements” in our consolidated statement of operations are $14.2 million of reimbursement revenue and $0.7 million of service revenue from our economic interest in consolidated and unconsolidated real estate ventures that are excluded from this table. |
| (3) | Our personnel perform services for wholly owned properties and properties we manage on behalf of third parties, real estate ventures and JBG Legacy Funds. |
We allocate personnel and other costs to wholly owned properties (included in "Property operating expenses" and "General and administrative expense: corporate and other" in our consolidated statement of operations) and to properties owned by the third parties, real estate ventures and JBG Legacy Funds (included in "General and administrative expense: third-party real estate services" in our consolidated statement of operations) using estimates of the time spent performing services related to properties in the respective portfolios and other allocation methodologies.
Allocated general and administrative expenses related to real estate ventures are calculated on an asset-by-asset basis by applying our real estate venture partners’ respective economic interests to the total general and administrative expenses allocated to each asset. See "pro rata adjusted general and administrative expenses" on the next page for a reconciliation of "G&A: third-party real estate services" to "Pro Rata adjusted general and administrative expense: third-party real estate services."
| (4) | Services revenue, excluding reimbursement revenue and service revenue from our economic interest in consolidated and unconsolidated real estate ventures, less allocated general and administrative expenses. Management uses this measure as a supplemental performance measure for its third-party asset management and real estate services business and believes it provides useful information to investors because it reflects only those revenue and expense items incurred by the Company and can be used to assess the profitability of the third-party asset management and real estate services business. |
| Page 18 | |
PRO RATA ADJUSTED GENERAL AND ADMINISTRATIVE EXPENSES (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | Three Months Ended June 30, 2019 | ||||||||||||||
| Per Statement of Operations | Adjustments (1) | Pro Rata Adjusted | |||||||||||||
| A | B | C | |||||||||||||
| General and Administrative Expenses | |||||||||||||||
| Corporate and other | $ | 11,559 | $ | — | $ | — | $ | 2,401 | $ | 13,960 | |||||
| Third-party real estate services | 28,710 | — | (14,230 | ) | (2,401 | ) | 12,079 | ||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | (9,523 | ) | — | — | — | |||||||||
| Total | $ | 49,792 | $ | (9,523 | ) | $ | (14,230 | ) | $ | — | $ | 26,039 | |||
_______________
| (1) | Adjustments: |
A - Removes share-based compensation related to the Formation Transaction and special equity awards. |
B - Removes $14.2 million of G&A expenses reimbursed by third-party owners of real estate we manage related to revenue which has been excluded from Service Revenue on page 18. Revenue from reimbursements is included in "Third-party real estate services, including reimbursements" in our consolidated statement of operations. |
C - Reflects an adjustment to allocate our share of G&A expenses of unconsolidated real estate ventures from "Third-party real estate services" to "Corporate and other" and our consolidated real estate venture partners' share of G&A expenses from "Corporate and other" to "Third-party real estate services." |
| Page 19 | |
OPERATING ASSETS | JUNE 30, 2019 (Unaudited) |
| dollars in thousands, at JBG SMITH share | Plus: Signed But Not Yet Commenced Leases | Adjusted Annualized NOI | |||||||||||||
Q2 2019 NOI | Annualized NOI | ||||||||||||||
| % Occupied | |||||||||||||||
Commercial (1) | |||||||||||||||
| DC | 91.6 | % | $ | 12,991 | $ | 51,964 | $ | 1,281 | $ | 53,245 | |||||
| VA | 84.7 | % | 43,881 | 176,334 | 22,254 | 198,588 | |||||||||
| MD | 85.8 | % | 2,863 | 11,452 | 989 | 12,441 | |||||||||
| Total / weighted average | 86.0 | % | $ | 59,735 | $ | 239,750 | $ | 24,524 | $ | 264,274 | |||||
| Multifamily | |||||||||||||||
| DC | 93.1 | % | $ | 6,588 | $ | 26,352 | $ | 95 | $ | 26,447 | |||||
| VA | 95.6 | % | 12,342 | 49,368 | — | 49,368 | |||||||||
| MD | 96.0 | % | 1,639 | 6,556 | — | 6,556 | |||||||||
| Total / weighted average | 95.0 | % | $ | 20,569 | $ | 82,276 | $ | 95 | $ | 82,371 | |||||
| Total / Weighted Average | 88.4 | % | $ | 80,304 | $ | 322,026 | $ | 24,619 | $ | 346,645 | |||||
____________________
| (1) | Crystal City Marriott and 1700 M Street are excluded from the percent occupied metric. |
| Page 20 | |
| SUMMARY & SAME STORE NOI (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | 100% Share | At JBG SMITH Share | ||||||||||||||||||||||||
| NOI for the Three Months Ended June 30, | ||||||||||||||||||||||||||
| Number of Assets | Square Feet/Units | Square Feet/Units | % Leased (1) | % Occupied (1) | 2019 | 2018 | % Change | |||||||||||||||||||
Same Store (2) | ||||||||||||||||||||||||||
| DC | 14 | 2,573,585 SF/ 1,541 Units | 1,863,544 SF/ 857 Units | 95.0 | % | 93.2 | % | $ | 18,180 | $ | 19,305 | (5.8 | )% | |||||||||||||
| VA | 32 | 8,559,681 SF/ 3,202 Units | 7,683,477 SF/ 2,891 Units | 91.4 | % | 86.6 | % | 51,311 | 58,590 | (12.4 | )% | |||||||||||||||
| MD | 9 | 551,815 SF/ 1,287 Units | 500,442 SF/ 498 Units | 93.1 | % | 90.4 | % | 4,502 | 3,594 | 25.3 | % | |||||||||||||||
| Total / weighted average | 55 | 11,685,081 SF/ 6,030 Units | 10,047,463 SF/ 4,246 Units | 92.2 | % | 88.1 | % | $ | 73,993 | $ | 81,489 | (9.2 | )% | |||||||||||||
Non-Same Store (3) | ||||||||||||||||||||||||||
| DC | 3 | 249,194 SF/ 291 Units | 139,435 SF/ 291 Units | 89.1 | % | 84.4 | % | $ | 1,399 | $ | 5,509 | (74.6 | )% | |||||||||||||
| VA | 4 | 892,298 SF | 892,298 SF | 95.3 | % | 95.2 | % | 4,912 | 7,102 | (30.8 | )% | |||||||||||||||
| MD | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Total / weighted average | 7 | 1,141,492 SF/ 291 Units | 1,031,733 SF/ 291 Units | 93.6 | % | 92.2 | % | $ | 6,311 | $ | 12,611 | (50.0 | )% | |||||||||||||
| Total Operating Portfolio | ||||||||||||||||||||||||||
| DC | 17 | 2,822,779 SF/ 1,832 Units | 2,002,979 SF/ 1,148 Units | 94.4 | % | 92.1 | % | $ | 19,579 | $ | 24,814 | (21.1 | )% | |||||||||||||
| VA | 36 | 9,451,979 SF/ 3,202 Units | 8,575,775 SF/ 2,891 Units | 91.7 | % | 87.2 | % | 56,223 | 65,692 | (14.4 | )% | |||||||||||||||
| MD | 9 | 551,815 SF/ 1,287 Units | 500,442 SF/ 498 Units | 93.1 | % | 90.4 | % | 4,502 | 3,594 | 25.3 | % | |||||||||||||||
Operating Portfolio - Total / Weighted Average | 62 | 12,826,573 SF/ 6,321 Units | 11,079,196 SF/ 4,537 Units | 92.3 | % | 88.4 | % | $ | 80,304 | $ | 94,100 | (14.7 | )% | |||||||||||||
_______________
| (1) | Crystal City Marriott and 1700 M Street are excluded from the percent leased and percent occupied metrics. |
| (2) | 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. |
| (3) | The decrease in non-same store NOI is primarily attributable to lost income from disposed assets. |
| Page 21 | |
| SUMMARY & SAME STORE NOI (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | 100% Share | At JBG SMITH Share | ||||||||||||||||||||||||
| NOI for the Six Months Ended June 30, | ||||||||||||||||||||||||||
| Number of Assets | Square Feet/Units | Square Feet/Units | % Leased (1) | % Occupied (1) | 2019 | 2018 | % Change | |||||||||||||||||||
Same Store (2) | ||||||||||||||||||||||||||
| DC | 14 | 2,573,585 SF/ 1,541 Units | 1,863,544 SF/ 857 Units | 95.0 | % | 93.2 | % | $ | 35,486 | $ | 39,498 | (10.2 | )% | |||||||||||||
| VA | 32 | 8,559,681 SF/ 3,202 Units | 7,683,477 SF/ 2,891 Units | 91.4 | % | 86.6 | % | 103,177 | 115,630 | (10.8 | )% | |||||||||||||||
| MD | 9 | 551,815 SF/ 1,287 Units | 500,442 SF/ 498 Units | 93.1 | % | 90.4 | % | 8,337 | 7,741 | 7.7 | % | |||||||||||||||
| Total / weighted average | 55 | 11,685,081 SF/ 6,030 Units | 10,047,463 SF/ 4,246 Units | 92.2 | % | 88.1 | % | $ | 147,000 | $ | 162,869 | (9.7 | )% | |||||||||||||
Non-Same Store (3) | ||||||||||||||||||||||||||
| DC | 3 | 249,194 SF/ 291 Units | 139,435 SF/ 291 Units | 89.1 | % | 84.4 | % | $ | 2,783 | $ | 12,121 | (77.0 | )% | |||||||||||||
| VA | 4 | 892,298 SF | 892,298 SF | 95.3 | % | 95.2 | % | 9,938 | 15,098 | (34.2 | )% | |||||||||||||||
| MD | — | — | — | — | — | — | — | — | ||||||||||||||||||
| Total / weighted average | 7 | 1,141,492 SF/ 291 Units | 1,031,733 SF/ 291 Units | 93.6 | % | 92.2 | % | $ | 12,721 | $ | 27,219 | (53.3 | )% | |||||||||||||
| Total Operating Portfolio | ||||||||||||||||||||||||||
| DC | 17 | 2,822,779 SF/ 1,832 Units | 2,002,979 SF/ 1,148 Units | 94.4 | % | 92.1 | % | $ | 38,269 | $ | 51,619 | (25.9 | )% | |||||||||||||
| VA | 36 | 9,451,979 SF/ 3,202 Units | 8,575,775 SF/ 2,891 Units | 91.7 | % | 87.2 | % | 113,115 | 130,728 | (13.5 | )% | |||||||||||||||
| MD | 9 | 551,815 SF/ 1,287 Units | 500,442 SF/ 498 Units | 93.1 | % | 90.4 | % | 8,337 | 7,741 | 7.7 | % | |||||||||||||||
Operating Portfolio - Total / Weighted Average | 62 | 12,826,573 SF/ 6,321 Units | 11,079,196 SF/ 4,537 Units | 92.3 | % | 88.4 | % | $ | 159,721 | $ | 190,088 | (16.0 | )% | |||||||||||||
See footnotes on page 21.
| Page 22 | |
| SUMMARY NOI (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | NOI for the Three Months Ended June 30, 2019 at JBG SMITH Share | |||||||||||||||
Consolidated (6) | Unconsolidated | Commercial (6) | Multifamily | Total | ||||||||||||
| Number of operating assets | 45 | 17 | 46 | 16 | 62 | |||||||||||
Property rentals (1) | $ | 103,542 | $ | 7,881 | $ | 82,982 | $ | 28,441 | $ | 111,423 | ||||||
| Tenant expense reimbursement | 9,135 | 726 | 7,804 | 2,057 | 9,861 | |||||||||||
| Other revenue | 9,899 | 979 | 8,942 | 1,936 | 10,878 | |||||||||||
| Total revenue | 122,576 | 9,586 | 99,728 | 32,434 | 132,162 | |||||||||||
| Operating expenses | (46,701 | ) | (4,490 | ) | (39,331 | ) | (11,860 | ) | (51,191 | ) | ||||||
| Ground rent expense | (662 | ) | (5 | ) | (662 | ) | (5 | ) | (667 | ) | ||||||
| Total expenses | (47,363 | ) | (4,495 | ) | (39,993 | ) | (11,865 | ) | (51,858 | ) | ||||||
NOI (1) | $ | 75,213 | $ | 5,091 | $ | 59,735 | $ | 20,569 | $ | 80,304 | ||||||
| Annualized NOI | $ | 301,662 | $ | 20,364 | $ | 239,750 | $ | 82,276 | $ | 322,026 | ||||||
| Additional Information | ||||||||||||||||
| Free rent (at 100% share) | $ | 8,408 | $ | 3,363 | $ | 11,364 | $ | 407 | $ | 11,771 | ||||||
| Free rent (at JBG SMITH share) | $ | 8,408 | $ | 1,214 | $ | 9,383 | $ | 239 | $ | 9,622 | ||||||
Annualized free rent (at JBG SMITH share) (2) | $ | 33,632 | $ | 4,856 | $ | 37,532 | $ | 956 | $ | 38,488 | ||||||
| Payments associated with assumed lease liabilities (at 100% share) | $ | 1,184 | $ | — | $ | 1,184 | $ | — | $ | 1,184 | ||||||
| Payments associated with assumed lease liabilities (at JBG SMITH share) | $ | 1,184 | $ | — | $ | 1,184 | $ | — | $ | 1,184 | ||||||
Annualized payments associated with assumed lease liabilities (at JBG SMITH share)(3) | $ | 4,736 | $ | — | $ | 4,736 | $ | — | $ | 4,736 | ||||||
% occupied (at JBG SMITH share) (4) | 88.4 | % | 88.2 | % | 86.0 | % | 95.0 | % | 88.4 | % | ||||||
Annualized base rent of signed leases, not commenced (at 100% share) (5) | $ | 23,304 | $ | 2,816 | $ | 26,025 | $ | 95 | $ | 26,120 | ||||||
Annualized base rent of signed leases, not commenced (at JBG SMITH share) (5) | $ | 23,304 | $ | 1,315 | $ | 24,524 | $ | 95 | $ | 24,619 | ||||||
___________________
| (1) | Property rentals excludes straight-line rent adjustments, and other GAAP adjustments, and include payments associated with assumed lease liabilities. NOI excludes approximately $4.2 million of related party management fees at JBG SMITH's share. See definition of NOI on page 51. |
| (2) | Represents JBG SMITH's share of free rent for the three months ended June 30, 2019 multiplied by four. |
| (3) | Represents JBG SMITH's share of payments associated with assumed lease liabilities for the three months ended June 30, 2019 multiplied by four. |
| (4) | Crystal City Marriott and 1700 M Street are excluded from the percent occupied metric. |
| (5) | Represents monthly base rent before free rent and straight-line rent adjustments, plus estimated tenant reimbursements for the month in which the lease commences, multiplied by 12. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to monthly base rent. Includes only leases for office and retail spaces that were vacant as of June 30, 2019. |
| (6) | Includes $2.2 million of annualized NOI from 1600 K Street, which was sold in July 2019. |
| Page 23 | |
SUMMARY NOI - COMMERCIAL (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | NOI for the Three Months Ended June 30, 2019 at JBG SMITH Share | ||||||||||||||||||
Consolidated (6) | Unconsolidated | DC (6) | VA | MD | Total | ||||||||||||||
| Number of operating assets | 35 | 11 | 11 | 31 | 4 | 46 | |||||||||||||
Property rentals (1) | $ | 77,344 | $ | 5,638 | $ | 18,520 | $ | 60,618 | $ | 3,844 | $ | 82,982 | |||||||
| Tenant expense reimbursement | 7,202 | 602 | 2,672 | 4,791 | 341 | 7,804 | |||||||||||||
| Other revenue | 8,119 | 823 | 1,774 | 6,533 | 635 | 8,942 | |||||||||||||
| Total revenue | 92,665 | 7,063 | 22,966 | 71,942 | 4,820 | 99,728 | |||||||||||||
| Operating expenses | (35,604 | ) | (3,727 | ) | (9,842 | ) | (27,752 | ) | (1,737 | ) | (39,331 | ) | |||||||
| Ground rent expense | (662 | ) | — | (133 | ) | (309 | ) | (220 | ) | (662 | ) | ||||||||
| Total expenses | (36,266 | ) | (3,727 | ) | (9,975 | ) | (28,061 | ) | (1,957 | ) | (39,993 | ) | |||||||
NOI (1) | $ | 56,399 | $ | 3,336 | $ | 12,991 | $ | 43,881 | $ | 2,863 | $ | 59,735 | |||||||
| Annualized NOI | $ | 226,406 | $ | 13,344 | $ | 51,964 | $ | 176,334 | $ | 11,452 | $ | 239,750 | |||||||
| Additional Information | |||||||||||||||||||
| Free rent (at 100% share) | $ | 8,190 | $ | 3,174 | $ | 4,040 | $ | 6,884 | $ | 440 | $ | 11,364 | |||||||
| Free rent (at JBG SMITH share) | $ | 8,190 | $ | 1,193 | $ | 2,384 | $ | 6,763 | $ | 236 | $ | 9,383 | |||||||
Annualized free rent (at JBG SMITH share) (2) | $ | 32,760 | $ | 4,772 | $ | 9,536 | $ | 27,052 | $ | 944 | $ | 37,532 | |||||||
| Payments associated with assumed lease liabilities (at 100% share) | $ | 1,184 | $ | — | $ | — | $ | 1,184 | $ | — | $ | 1,184 | |||||||
| Payments associated with assumed lease liabilities (at JBG SMITH share) | $ | 1,184 | $ | — | $ | — | $ | 1,184 | $ | — | $ | 1,184 | |||||||
Annualized payments associated with assumed lease liabilities (at JBG SMITH share) (3) | $ | 4,736 | $ | — | $ | — | $ | 4,736 | $ | — | $ | 4,736 | |||||||
% occupied (at JBG SMITH share) (4) | 86.0 | % | 85.8 | % | 91.6 | % | 84.7 | % | 85.8 | % | 86.0 | % | |||||||
Annualized base rent of signed leases, not commenced (at 100% share) (5) | $ | 23,209 | $ | 2,816 | $ | 2,627 | $ | 22,409 | $ | 989 | $ | 26,025 | |||||||
Annualized base rent of signed leases, not commenced (at JBG SMITH share) (5) | $ | 23,209 | $ | 1,315 | $ | 1,281 | $ | 22,254 | $ | 989 | $ | 24,524 | |||||||
___________________
| (1) | Property rentals excludes straight-line rent adjustments, and other GAAP adjustments, and include payments associated with assumed lease liabilities. NOI excludes approximately $3.1 million of related party management fees at JBG SMITH's share. See definition of NOI on page 51. |
| (2) | Represents JBG SMITH's share of free rent for the three months ended June 30, 2019 multiplied by four. |
| (3) | Represents JBG SMITH's share of payments associated with assumed lease liabilities for the three months ended June 30, 2019 multiplied by four. |
| (4) | Crystal City Marriott and 1700 M Street are excluded from the percent occupied metric. |
| (5) | Represents monthly base rent before free rent and straight-line rent adjustments, plus estimated tenant reimbursements for the month in which the lease commences, multiplied by 12. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to monthly base rent. Includes only leases for office and retail spaces that were vacant as of June 30, 2019. |
| (6) | Includes $2.2 million of annualized NOI from 1600 K Street, which was sold in July 2019. |
| Page 24 | |
| SUMMARY NOI - MULTIFAMILY (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | NOI for the Three Months Ended June 30, 2019 at JBG SMITH Share | ||||||||||||||||||
| Consolidated | Unconsolidated | DC | VA | MD | Total | ||||||||||||||
| Number of operating assets | 10 | 6 | 6 | 5 | 5 | 16 | |||||||||||||
Property rentals (1) | $ | 26,198 | $ | 2,243 | $ | 8,928 | $ | 17,086 | $ | 2,427 | $ | 28,441 | |||||||
| Tenant expense reimbursement | 1,933 | 124 | 688 | 1,297 | 72 | 2,057 | |||||||||||||
| Other revenue | 1,780 | 156 | 429 | 1,368 | 139 | 1,936 | |||||||||||||
| Total revenue | 29,911 | 2,523 | 10,045 | 19,751 | 2,638 | 32,434 | |||||||||||||
| Operating expenses | (11,097 | ) | (763 | ) | (3,457 | ) | (7,409 | ) | (994 | ) | (11,860 | ) | |||||||
| Ground rent expense | — | (5 | ) | — | — | (5 | ) | (5 | ) | ||||||||||
| Total expenses | (11,097 | ) | (768 | ) | (3,457 | ) | (7,409 | ) | (999 | ) | (11,865 | ) | |||||||
NOI (1) | $ | 18,814 | $ | 1,755 | $ | 6,588 | $ | 12,342 | $ | 1,639 | $ | 20,569 | |||||||
| Annualized NOI | $ | 75,256 | $ | 7,020 | $ | 26,352 | $ | 49,368 | $ | 6,556 | $ | 82,276 | |||||||
| Additional Information | |||||||||||||||||||
| Free rent (at 100% share) | $ | 218 | $ | 189 | $ | 208 | $ | 129 | $ | 70 | $ | 407 | |||||||
| Free rent (at JBG SMITH share) | $ | 218 | $ | 21 | $ | 129 | $ | 101 | $ | 9 | $ | 239 | |||||||
Annualized free rent (at JBG SMITH share) (2) | $ | 872 | $ | 84 | $ | 516 | $ | 404 | $ | 36 | $ | 956 | |||||||
| Payments associated with assumed lease liabilities (at 100% share) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
| Payments associated with assumed lease liabilities (at JBG SMITH share) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
Annualized payments associated with assumed lease liabilities (at JBG SMITH share) (3) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||
% occupied (at JBG SMITH share) | 95.1 | % | 94.3 | % | 93.1 | % | 95.6 | % | 96.0 | % | 95.0 | % | |||||||
Annualized base rent of signed leases, not commenced (at 100% share) (4) | $ | 95 | — | $ | 95 | — | — | $ | 95 | ||||||||||
Annualized base rent of signed leases, not commenced (at JBG SMITH share) (4) | $ | 95 | — | $ | 95 | — | — | $ | 95 | ||||||||||
___________________
| (1) | Property rentals excludes straight-line rent adjustments, and other GAAP adjustments, and include payments associated with assumed lease liabilities. NOI excludes approximately $1.1 million of related party management fees at JBG SMITH's share. See definition of NOI on page 51. |
| (2) | Represents JBG SMITH's share of free rent for the three months ended June 30, 2019 multiplied by four. |
| (3) | Represents JBG SMITH's share of payments associated with assumed lease liabilities for the three months ended June 30, 2019 multiplied by four. |
| (4) | Represents monthly base rent before free rent and straight-line rent adjustments, plus estimated tenant reimbursements for the month in which the lease commences, multiplied by 12. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to monthly base rent. Includes only leases for office and retail spaces that were vacant as of June 30, 2019. |
| Page 25 | |
| NOI RECONCILIATIONS (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 20,574 | $ | 21,821 | $ | 16,384 | ||||||
| Add: | |||||||||||||||
| Depreciation and amortization expense | 45,995 | 48,117 | 94,714 | 97,277 | |||||||||||
| General and administrative expense: | |||||||||||||||
| Corporate and other | 11,559 | 8,603 | 23,873 | 17,017 | |||||||||||
| Third-party real estate services | 28,710 | 21,189 | 56,776 | 43,798 | |||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 9,097 | 20,654 | 18,525 | |||||||||||
| Transaction and other costs | 2,974 | 3,787 | 7,869 | 8,008 | |||||||||||
| Interest expense | 13,107 | 18,027 | 30,281 | 37,284 | |||||||||||
| Loss on extinguishment of debt | 1,889 | 4,457 | 1,889 | 4,457 | |||||||||||
| Reduction of gain on bargain purchase | — | 7,606 | — | 7,606 | |||||||||||
| Income tax expense (benefit) | 51 | 313 | (1,121 | ) | (595 | ) | |||||||||
| Net income (loss) attributable to redeemable noncontrolling interests | (288 | ) | 3,574 | 3,099 | 2,980 | ||||||||||
| Less: | |||||||||||||||
| Third-party real estate services, including reimbursements | 29,487 | 24,160 | 57,178 | 48,490 | |||||||||||
Other income (1) | 2,114 | 2,080 | 3,755 | 3,196 | |||||||||||
| Income (loss) from unconsolidated real estate ventures, net | (1,810 | ) | 3,836 | 1,791 | 1,934 | ||||||||||
| Interest and other income, net | 2,052 | 513 | 3,003 | 1,086 | |||||||||||
| Gain on sale of real estate | — | 33,396 | 39,033 | 33,851 | |||||||||||
| Net loss attributable to noncontrolling interests | — | 125 | — | 127 | |||||||||||
| Consolidated NOI | 78,637 | 81,234 | 155,095 | 164,057 | |||||||||||
| NOI attributable to unconsolidated real estate ventures at our share | 5,091 | 9,024 | 10,260 | 18,261 | |||||||||||
Non-cash rent adjustments (2) | (8,738 | ) | (1,237 | ) | (15,544 | ) | (2,333 | ) | |||||||
Other adjustments (3) | 3,758 | 3,623 | 7,083 | 7,839 | |||||||||||
| Total adjustments | 111 | 11,410 | 1,799 | 23,767 | |||||||||||
| NOI | $ | 78,748 | $ | 92,644 | $ | 156,894 | $ | 187,824 | |||||||
Less: out-of-service NOI loss (4) | (1,556 | ) | (1,456 | ) | (2,827 | ) | (2,264 | ) | |||||||
| Operating portfolio NOI | $ | 80,304 | $ | 94,100 | $ | 159,721 | $ | 190,088 | |||||||
Non-same store NOI (5) | 6,311 | 12,611 | 12,721 | 27,219 | |||||||||||
Same store NOI (6) | $ | 73,993 | $ | 81,489 | $ | 147,000 | $ | 162,869 | |||||||
| Change in same store NOI | (9.2 | )% | (9.7 | )% | |||||||||||
| Number of properties in same store pool | 55 | 55 | |||||||||||||
___________________
| (1) | Excludes parking income of $6.7 million and $6.6 million for the three months ended June 30, 2019 and 2018, and $13.1 million and $13.0 million for the six months ended June 30, 2019 and 2018. |
| (2) | Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization. |
| (3) | Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue. |
| (4) | Includes the results for our Under Construction assets and Future Development Pipeline. |
| (5) | Includes the results for properties that were not owned, operated and in service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. The decrease in non-same store NOI is primarily attributable to lost income from disposed assets. |
| (6) | Includes the results of the properties that are owned, operated and in service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. |
| Page 26 | |
| LEASING ACTIVITY - OFFICE | JUNE 30, 2019 (Unaudited) |
| square feet in thousands | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2019 | |||||
| Square feet leased: | |||||||
| At 100% share | 422 | 1,229 | |||||
| At JBG SMITH share | 395 | 1,180 | |||||
Initial rent (1) | $ | 44.82 | $ | 44.92 | |||
Straight-line rent (2) | $ | 45.35 | $ | 45.73 | |||
| Weighted average lease term (years) | 5.2 | 5.3 | |||||
| Weighted average free rent period (months) | 3.3 | 2.9 | |||||
| Second generation space: | 120 | 676 | |||||
| Square feet | 275 | 504 | |||||
| Cash basis: | |||||||
Initial rent (1) | $ | 44.04 | $ | 44.50 | |||
| Prior escalated rent | $ | 41.53 | $ | 44.62 | |||
| % change | 6.0 | % | (0.3 | )% | |||
| GAAP basis: | |||||||
Straight-line rent (2) | $ | 42.85 | $ | 44.37 | |||
| Prior straight-line rent | $ | 37.30 | $ | 42.20 | |||
| % change | 14.9 | % | 5.1 | % | |||
| Tenant improvements: | |||||||
| Per square foot | $ | 24.80 | $ | 34.45 | |||
| Per square foot per annum | $ | 4.80 | $ | 6.50 | |||
| % of initial rent | 10.7 | % | 14.5 | % | |||
| Leasing commissions: | |||||||
| Per square foot | $ | 6.32 | $ | 4.94 | |||
| Per square foot per annum | $ | 1.22 | $ | 0.93 | |||
| % of initial rent | 2.7 | % | 2.1 | % | |||
___________________
Note: At JBG SMITH share, unless otherwise indicated. The leasing activity and related statistics are based on leases signed during the period and are not intended to coincide with the commencement of rental revenue in accordance with GAAP. Second generation space represents square footage that was vacant for less than nine months.
| (1) | Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to monthly base rent. Most leases include free rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot but are included in the GAAP basis deferred rent per square foot. |
| (2) | Represents the GAAP basis weighted average rent per square foot that is recognized over the term of the respective leases, and includes the effect of free rent and fixed step-ups in rent. |
| Page 27 | |
| NET EFFECTIVE RENT - OFFICE | JUNE 30, 2019 (Unaudited) |
| square feet in thousands, dollars per square feet, at JBG SMITH share | Trailing Five Quarter Average | Three Months Ended | |||||||||||||||||||||
| June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | |||||||||||||||||||
| Square feet | 523 | 395 | 785 | 741 | 378 | 319 | |||||||||||||||||
| Weighted average lease term (years) | 7.3 | 5.2 | 5.4 | 10.2 | 7.0 | 8.6 | |||||||||||||||||
Initial rent (1) | $ | 46.36 | $ | 44.82 | $ | 44.97 | $ | 45.08 | $ | 42.89 | $ | 54.01 | |||||||||||
Base rent per annum (2) | $ | 53.97 | $ | 50.73 | $ | 49.34 | $ | 57.48 | $ | 44.43 | $ | 67.89 | |||||||||||
| Tenant improvements per annum | (5.98 | ) | (4.80 | ) | (7.32 | ) | (6.54 | ) | (3.77 | ) | (7.46 | ) | |||||||||||
| Leasing commissions per annum | (1.32 | ) | (1.22 | ) | (0.79 | ) | (1.93 | ) | (0.61 | ) | (2.03 | ) | |||||||||||
| Free rent per annum | (3.12 | ) | (2.42 | ) | (1.89 | ) | (3.69 | ) | (3.55 | ) | (4.05 | ) | |||||||||||
| Net Effective Rent | $ | 43.56 | $ | 42.29 | $ | 39.34 | $ | 45.32 | $ | 36.50 | $ | 54.35 | |||||||||||
| DC | |||||||||||||||||||||||
| Square feet | 78 | 21 | 33 | 72 | 88 | 175 | |||||||||||||||||
Initial rent (1) | $ | 62.19 | $ | 65.10 | $ | 53.40 | $ | 76.45 | $ | 49.73 | $ | 66.29 | |||||||||||
| Net effective rent | $ | 56.68 | $ | 66.17 | $ | 39.41 | $ | 70.85 | $ | 42.34 | $ | 64.65 | |||||||||||
| VA | |||||||||||||||||||||||
| Square feet | 422 | 338 | 717 | 658 | 282 | 115 | |||||||||||||||||
Initial rent (1) | $ | 41.71 | $ | 43.38 | $ | 44.03 | $ | 41.83 | $ | 41.08 | $ | 38.20 | |||||||||||
| Net effective rent | $ | 36.69 | $ | 38.96 | $ | 38.18 | $ | 41.85 | $ | 33.86 | $ | 30.61 | |||||||||||
| MD | |||||||||||||||||||||||
| Square feet | 24 | 36 | 35 | 10 | 8 | 28 | |||||||||||||||||
Initial rent (1) | $ | 41.94 | $ | 46.62 | $ | 56.36 | $ | 32.24 | $ | 31.75 | $ | 42.70 | |||||||||||
| Net effective rent | $ | 36.73 | $ | 40.22 | $ | 58.53 | $ | 27.21 | $ | 20.30 | $ | 37.38 | |||||||||||
____________________
Note: Leasing activity and related statistics are based on leases signed during the period and are not intended to coincide with the commencement of rental revenue in accordance with GAAP. Second generation space represents square footage that was vacant for less than nine months.
| (1) | Represents the cash basis weighted average starting rent per square foot, which is generally indicative of market rents. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to monthly base rent. Most leases include free rent and periodic step-ups in rent which are not included in the initial cash basis rent per square foot. |
| (2) | Represents the weighted average base rent before free rent, plus estimated tenant reimbursements that is recognized over the term of the respective leases, including the effect of fixed step-ups in rent, divided by square feet, and divided by years of lease term. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to base rent. Tenant reimbursements are estimated by escalating tenant reimbursements as of the respective reporting period, or management’s estimate thereof, by 2.75% annually through the lease expiration year. |
| Page 28 | |
| LEASE EXPIRATIONS | JUNE 30, 2019 (Unaudited) |
| At JBG SMITH Share | ||||||||||||||||||||||||
| Year of Lease Expiration | Number of Leases | Square Feet | % of Total Square Feet | Annualized Rent (in thousands) | % of Total Annualized Rent | Annualized Rent Per Square Foot | Estimated Annualized Rent Per Square Foot at Expiration (1) | |||||||||||||||||
| Month-to-Month | 52 | 168,317 | 1.8 | % | $ | 5,322 | 1.3 | % | $ | 31.62 | $ | 31.62 | ||||||||||||
| 2019 | 66 | 377,399 | 3.9 | % | 14,437 | 3.4 | % | 38.25 | 38.72 | |||||||||||||||
| 2020 | 146 | 1,064,207 | 11.1 | % | 44,383 | 10.5 | % | 41.71 | 42.40 | |||||||||||||||
| 2021 | 118 | 911,841 | 9.5 | % | 42,656 | 10.1 | % | 46.78 | 47.83 | |||||||||||||||
| 2022 | 105 | 1,488,100 | 15.5 | % | 65,815 | 15.6 | % | 44.23 | 46.25 | |||||||||||||||
| 2023 | 91 | 534,185 | 5.6 | % | 23,078 | 5.5 | % | 43.20 | 47.41 | |||||||||||||||
| 2024 | 96 | 1,006,116 | 10.5 | % | 46,523 | 11.0 | % | 46.24 | 50.32 | |||||||||||||||
| 2025 | 55 | 419,407 | 4.4 | % | 16,731 | 4.0 | % | 39.89 | 45.06 | |||||||||||||||
| 2026 | 56 | 287,893 | 3.0 | % | 12,592 | 3.0 | % | 43.74 | 51.68 | |||||||||||||||
| 2027 | 47 | 436,644 | 4.6 | % | 18,875 | 4.5 | % | 43.23 | 51.87 | |||||||||||||||
| Thereafter | 119 | 2,878,082 | 30.1 | % | 132,552 | 31.1 | % | 46.06 | 59.69 | |||||||||||||||
| Total / Weighted Average | 951 | 9,572,191 | 100.0 | % | $ | 422,964 | 100.0 | % | $ | 44.19 | $ | 50.32 | ||||||||||||
____________________
Note: Includes all in-place leases as of June 30, 2019 for office and retail space within JBG SMITH's operating portfolio and assuming no exercise of renewal options or early termination rights. The weighted average remaining lease term for the entire portfolio is 6.2 years.
| (1) | Represents monthly base rent before free rent, plus tenant reimbursements, as of lease expiration multiplied by 12 and divided by square feet. Triple net leases are converted to a gross basis by adding tenant reimbursements to monthly base rent. Tenant reimbursements at lease expiration are estimated by escalating tenant reimbursements as of June 30, 2019, or management’s estimate thereof, by 2.75% annually through the lease expiration year. |
| Page 29 | |
| SIGNED BUT NOT YET COMMENCED LEASES | JUNE 30, 2019 (Unaudited) |
| dollars in thousands, at JBG SMITH share | ||||||||||||||||||||||||||||||
Total Annualized Estimated Rent (3) | Estimated Rent (1) for the Quarter Ending | |||||||||||||||||||||||||||||
| Assets | C/U (2) | September 30, 2019 | December 31, 2019 | March 31, 2020 | June 30, 2020 | September 30, 2020 | December 31, 2020 | |||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||||||
| Operating | C | $ | 23,209 | $ | 685 | $ | 2,292 | $ | 4,767 | $ | 5,112 | $ | 5,802 | $ | 5,802 | |||||||||||||||
| Operating | U | 1,315 | 101 | 225 | 329 | 329 | 329 | 329 | ||||||||||||||||||||||
Under construction (4) | C | 30,403 | 314 | 3,056 | 4,211 | 4,211 | 4,211 | 6,326 | ||||||||||||||||||||||
| Under construction | U | 10,785 | — | 319 | 1,175 | 1,610 | 1,610 | 2,219 | ||||||||||||||||||||||
| Total | $ | 65,712 | $ | 1,100 | $ | 5,892 | $ | 10,482 | $ | 11,262 | $ | 11,952 | $ | 14,676 | ||||||||||||||||
| Multifamily | ||||||||||||||||||||||||||||||
| Operating | C | $ | 95 | $ | — | $ | 24 | $ | 24 | $ | 24 | $ | 24 | $ | 24 | |||||||||||||||
| Under construction | C | 3,625 | 31 | 292 | 663 | 861 | 906 | 906 | ||||||||||||||||||||||
| Under construction | U | 499 | — | — | — | 24 | 36 | 125 | ||||||||||||||||||||||
| Total | $ | 4,219 | $ | 31 | $ | 316 | $ | 687 | $ | 909 | $ | 966 | $ | 1,055 | ||||||||||||||||
| Total | $ | 69,931 | $ | 1,131 | $ | 6,208 | $ | 11,169 | $ | 12,171 | $ | 12,918 | $ | 15,731 | ||||||||||||||||
____________________
Note: Includes only leases for office and retail spaces that were vacant as of June 30, 2019.
| (1) | Represents contractual monthly base rent before free rent, plus estimated tenant reimbursements for the month in which the lease is estimated to commence, multiplied by the applicable number of months for each quarter based on the lease’s estimated commencement date. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to monthly base rent. |
| (2) | “C” denotes a consolidated interest. “U” denotes an unconsolidated interest. |
| (3) | Represents contractual monthly base rent before free rent, plus estimated tenant reimbursements for the month in which the lease is expected to commence, multiplied by 12. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to monthly base rent. |
| (4) | Commercial under construction consolidated includes annualized estimated rent of $4.8 million from JBG SMITH's lease at 4747 Bethesda Avenue, estimated to commence in Q4 2019. |
| Page 30 | |
| TENANT CONCENTRATION | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | At JBG SMITH Share | |||||||||||||||||
| Tenant | Number of Leases | Square Feet | % of Total Square Feet | Annualized Rent | % of Total Annualized Rent | |||||||||||||
| 1 | U.S. Government (GSA) | 65 | 2,416,292 | 25.2 | % | $ | 95,995 | 22.7 | % | |||||||||
| 2 | Gartner, Inc | 1 | 348,847 | 3.6 | % | 22,720 | 5.4 | % | ||||||||||
| 3 | Family Health International | 3 | 295,977 | 3.1 | % | 15,287 | 3.6 | % | ||||||||||
| 4 | Lockheed Martin Corporation | 2 | 232,598 | 2.4 | % | 11,262 | 2.7 | % | ||||||||||
| 5 | WeWork (1) | 2 | 205,565 | 2.1 | % | 11,053 | 2.6 | % | ||||||||||
| 6 | Amazon Services Inc | 2 | 238,861 | 2.5 | % | 10,826 | 2.6 | % | ||||||||||
| 7 | Arlington County | 3 | 237,001 | 2.5 | % | 9,908 | 2.3 | % | ||||||||||
| 8 | Accenture LLP | 2 | 130,716 | 1.4 | % | 7,618 | 1.8 | % | ||||||||||
| 9 | Greenberg Traurig LLP | 1 | 101,602 | 1.1 | % | 7,138 | 1.7 | % | ||||||||||
| 10 | Public Broadcasting Service | 1 | 140,885 | 1.5 | % | 5,971 | 1.4 | % | ||||||||||
| 11 | Chemonics International | 2 | 111,520 | 1.2 | % | 4,489 | 1.1 | % | ||||||||||
| 12 | Evolent Health LLC | 1 | 90,905 | 0.9 | % | 4,328 | 1.0 | % | ||||||||||
| 13 | U.S. Green Building Council | 1 | 54,675 | 0.6 | % | 3,996 | 0.9 | % | ||||||||||
| 14 | Conservation International Foundation | 1 | 86,981 | 0.9 | % | 3,983 | 0.9 | % | ||||||||||
| 15 | The International Justice Mission | 1 | 74,481 | 0.8 | % | 3,886 | 0.9 | % | ||||||||||
| 16 | Booz Allen Hamilton Inc | 2 | 94,794 | 1.0 | % | 3,884 | 0.9 | % | ||||||||||
| 17 | Cushman & Wakefield U.S. Inc | 1 | 58,641 | 0.6 | % | 3,875 | 0.9 | % | ||||||||||
| 18 | DRS Tech Inc dba Finmeccanica | 2 | 82,852 | 0.9 | % | 3,767 | 0.9 | % | ||||||||||
| 19 | The Urban Institute | 1 | 68,620 | 0.7 | % | 3,702 | 0.9 | % | ||||||||||
| 20 | American Diabetes Association | 1 | 80,998 | 0.8 | % | 3,355 | 0.8 | % | ||||||||||
| Other | 856 | 4,419,380 | 46.2 | % | 185,921 | 44.0 | % | |||||||||||
| Total | 951 | 9,572,191 | 100.0 | % | $ | 422,964 | 100.0 | % | ||||||||||
_______________
Note: Includes all in-place leases as of June 30, 2019 for office and retail space within JBG SMITH's operating portfolio. As signed but not yet commenced leases commence and tenants take occupancy, our tenant concentration will change.
(1) Excludes the WeLive lease at 2221 S. Clark Street.
| Page 31 | |
| INDUSTRY DIVERSITY | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | At JBG SMITH Share | |||||||||||||||||
| Industry | Number of Leases | Square Feet | % of Total Square Feet | Annualized Rent | % of Total Annualized Rent | |||||||||||||
| 1 | Government | 79 | 2,716,114 | 28.4 | % | $ | 108,768 | 25.7 | % | |||||||||
| 2 | Business Services | 142 | 1,536,346 | 16.1 | % | 76,473 | 18.1 | % | ||||||||||
| 3 | Government Contractors | 95 | 1,572,883 | 16.4 | % | 70,968 | 16.8 | % | ||||||||||
| 4 | Member Organizations | 79 | 926,495 | 9.7 | % | 44,052 | 10.4 | % | ||||||||||
| 5 | Real Estate | 48 | 479,369 | 5.0 | % | 22,778 | 5.4 | % | ||||||||||
| 6 | Legal Services | 34 | 259,050 | 2.7 | % | 14,555 | 3.4 | % | ||||||||||
| 7 | Health Services | 47 | 352,271 | 3.7 | % | 14,163 | 3.3 | % | ||||||||||
| 8 | Food and Beverage | 116 | 251,734 | 2.6 | % | 13,840 | 3.3 | % | ||||||||||
| 9 | Communications | 12 | 196,175 | 2.0 | % | 8,217 | 1.9 | % | ||||||||||
| 10 | Educational Services | 16 | 99,090 | 1.0 | % | 4,328 | 1.0 | % | ||||||||||
| Other | 283 | 1,182,664 | 12.4 | % | 44,822 | 10.7 | % | |||||||||||
| Total | 951 | 9,572,191 | 100.0 | % | $ | 422,964 | 100.0 | % | ||||||||||
_______________
Note: Includes all in-place leases as of June 30, 2019 for office and retail space within JBG SMITH's operating portfolio.
| Page 32 | |
| PORTFOLIO SUMMARY | JUNE 30, 2019 (Unaudited) |
| Number of Assets | Rentable Square Feet | Number of Units (1) | Estimated Potential Development Density (2) | |||||||||
| Wholly Owned | ||||||||||||
| Operating | 45 | 13,935,188 | 4,213 | — | ||||||||
| Under construction | 5 | 1,285,516 | 721 | — | ||||||||
| Future development | 24 | — | — | 17,913,500 | ||||||||
| Total | 74 | 15,220,704 | 4,934 | 17,913,500 | ||||||||
| Real Estate Ventures | ||||||||||||
| Operating | 17 | 4,456,929 | 2,108 | — | ||||||||
| Under construction | 3 | 966,550 | 755 | — | ||||||||
| Future development | 16 | — | — | 4,007,700 | ||||||||
| Total | 36 | 5,423,479 | 2,863 | 4,007,700 | ||||||||
| Total Portfolio | 110 | 20,644,183 | 7,797 | 21,921,200 | ||||||||
| Total Portfolio (at JBG SMITH Share) | 110 | 16,922,022 | 5,835 | 18,667,300 | ||||||||
____________________
Note: At 100% share, unless otherwise indicated.
| (1) | For assets under construction, represents estimated number of units based on current design plans. |
| (2) | Includes estimated potential office, multifamily and retail development density. |
| Page 33 | |
| PROPERTY TABLE - COMMERCIAL | JUNE 30, 2019 (Unaudited) |
| Commercial Assets | Submarket | % Ownership | C/U (1) | Same Store (2): Q2 2018-2019 / YTD 2018-2019 | Year Built / Renovated | Total Square Feet | Office Square Feet | Retail Square Feet | % Leased | Office % Occupied | Retail % Occupied | Annualized Rent (in thousands) | Office Annualized Rent Per Square Foot (3) | Retail Annualized Rent Per Square Foot (4) | |||||||||||||
| DC | |||||||||||||||||||||||||||
| Universal Buildings | Uptown | 100.0 | % | C | Y / Y | 1956 / 1990 | 659,896 | 568,821 | 91,075 | 98.4 | % | 98.2 | % | 99.6 | % | $ | 32,947 | $ | 50.07 | $ | 55.01 | ||||||
| 2101 L Street | CBD | 100.0 | % | C | Y / Y | 1975 / 2007 | 378,869 | 347,549 | 31,320 | 94.6 | % | 94.8 | % | 92.6 | % | 21,950 | 61.72 | 55.99 | |||||||||
1730 M Street (5) | CBD | 100.0 | % | C | Y / Y | 1964 / 1998 | 204,748 | 196,730 | 8,018 | 88.5 | % | 87.3 | % | 100.0 | % | 8,602 | 47.78 | 49.50 | |||||||||
1600 K Street (6) | CBD | 100.0 | % | C | Y / Y | 1950 / 2000 | 82,653 | 70,262 | 12,391 | 92.0 | % | 90.6 | % | 100.0 | % | 4,206 | 52.93 | 67.39 | |||||||||
| 1700 M Street | CBD | 100.0 | % | C | N / N | N/A | 34,000 | — | — | — | — | — | — | — | — | ||||||||||||
L’Enfant Plaza Office-East (5) | Southwest | 49.0 | % | U | Y / Y | 1972 / 2012 | 397,296 | 397,296 | — | 89.5 | % | 89.5 | % | — | 17,587 | 49.48 | — | ||||||||||
| L’Enfant Plaza Office-North | Southwest | 49.0 | % | U | Y / Y | 1969 / 2014 | 298,445 | 278,971 | 19,474 | 96.1 | % | 90.6 | % | 85.9 | % | 11,980 | 46.33 | 16.38 | |||||||||
L’Enfant Plaza Retail (5) | Southwest | 49.0 | % | U | Y / Y | 1968 / 2014 | 119,361 | 16,596 | 102,765 | 74.7 | % | 100.0 | % | 70.6 | % | 4,541 | 36.50 | 54.25 | |||||||||
| The Foundry | Georgetown | 9.9 | % | U | Y / Y | 1973 / 2017 | 221,124 | 214,270 | 6,854 | 85.9 | % | 83.5 | % | 100.0 | % | 8,827 | 47.73 | 41.24 | |||||||||
| 1101 17th Street | CBD | 55.0 | % | U | Y / Y | 1964 / 1999 | 211,193 | 201,435 | 9,758 | 87.4 | % | 78.8 | % | 82.7 | % | 8,680 | 51.13 | 70.08 | |||||||||
| VA | |||||||||||||||||||||||||||
Courthouse Plaza 1 and 2 (5) | Clarendon/Courthouse | 100.0 | % | C | Y / Y | 1989 / 2013 | 633,256 | 576,063 | 57,193 | 83.2 | % | 81.5 | % | 99.6 | % | $ | 22,683 | $ | 44.04 | $ | 35.00 | ||||||
Central Place Tower (5) | Rosslyn | 100.0 | % | C | N / N | 2018 / N/A | 552,540 | 524,537 | 28,003 | 93.0 | % | 92.6 | % | 100.0 | % | 32,202 | 64.14 | 37.17 | |||||||||
| 2121 Crystal Drive | National Landing | 100.0 | % | C | Y / Y | 1985 / 2006 | 505,349 | 505,349 | — | 84.3 | % | 84.3 | % | — | 20,203 | 47.43 | — | ||||||||||
| 2345 Crystal Drive | National Landing | 100.0 | % | C | Y / Y | 1988 / N/A | 502,719 | 498,513 | 4,206 | 78.8 | % | 78.6 | % | 95.6 | % | 18,152 | 45.97 | 31.65 | |||||||||
| 2231 Crystal Drive | National Landing | 100.0 | % | C | Y / Y | 1987 / 2009 | 467,043 | 416,083 | 50,960 | 88.0 | % | 86.5 | % | 100.0 | % | 17,131 | 42.40 | 36.63 | |||||||||
1550 Crystal Drive (7) | National Landing | 100.0 | % | C | Y / Y | 1980 / 2001 | 451,673 | 451,673 | — | 96.0 | % | 87.7 | % | — | 15,700 | 39.62 | — | ||||||||||
RTC-West (7) | Reston | 100.0 | % | C | Y / Y | 1988 / 2014 | 431,021 | 431,021 | — | 93.1 | % | 90.3 | % | — | 15,072 | 38.74 | — | ||||||||||
| RTC-West Retail | Reston | 100.0 | % | C | N / N | 2017 / N/A | 40,025 | — | 40,025 | 91.9 | % | — | 91.9 | % | 2,404 | — | 65.33 | ||||||||||
| 2011 Crystal Drive | National Landing | 100.0 | % | C | Y / Y | 1984 / 2006 | 439,466 | 432,704 | 6,762 | 88.6 | % | 87.5 | % | 49.7 | % | 16,270 | 42.48 | 56.74 | |||||||||
| 2451 Crystal Drive | National Landing | 100.0 | % | C | Y / Y | 1990 / N/A | 398,329 | 386,639 | 11,690 | 71.7 | % | 71.0 | % | 95.5 | % | 12,001 | 42.23 | 36.60 | |||||||||
| 1235 S. Clark Street | National Landing | 100.0 | % | C | Y / Y | 1981 / 2007 | 383,910 | 335,564 | 48,346 | 91.9 | % | 86.1 | % | 100.0 | % | 12,915 | 41.32 | 20.05 | |||||||||
| 241 18th Street S. | National Landing | 100.0 | % | C | Y / Y | 1977 / 2013 | 359,596 | 333,106 | 26,490 | 92.9 | % | 66.6 | % | 91.5 | % | 9,139 | 38.38 | 25.58 | |||||||||
| 251 18th Street S. | National Landing | 100.0 | % | C | Y / Y | 1975 / 2013 | 342,295 | 293,124 | 49,171 | 99.3 | % | 100.0 | % | 95.0 | % | 13,951 | 42.24 | 33.56 | |||||||||
| 1215 S. Clark Street | National Landing | 100.0 | % | C | Y / Y | 1983 / 2002 | 336,159 | 333,546 | 2,613 | 100.0 | % | 100.0 | % | 100.0 | % | 10,864 | 32.31 | 33.51 | |||||||||
| 201 12th Street S. | National Landing | 100.0 | % | C | Y / Y | 1987 / N/A | 329,813 | 318,688 | 11,125 | 91.4 | % | 91.1 | % | 100.0 | % | 10,772 | 35.53 | 40.79 | |||||||||
| 800 North Glebe Road | Ballston | 100.0 | % | C | Y / Y | 2012 / N/A | 303,644 | 277,397 | 26,247 | 100.0 | % | 100.0 | % | 100.0 | % | 15,598 | 51.64 | 48.51 | |||||||||
| 2200 Crystal Drive | National Landing | 100.0 | % | C | Y / Y | 1968 / 2006 | 282,920 | 282,920 | — | 71.5 | % | 45.6 | % | — | 5,790 | 44.84 | — | ||||||||||
| 1901 South Bell Street | National Landing | 100.0 | % | C | Y / Y | 1968 / 2008 | 276,987 | 275,063 | 1,924 | 96.2 | % | 96.1 | % | 100.0 | % | 10,573 | 39.92 | 8.95 | |||||||||
| 1225 S. Clark Street | National Landing | 100.0 | % | C | Y / Y | 1982 / 2013 | 276,966 | 264,116 | 12,850 | 94.8 | % | 49.5 | % | 100.0 | % | 5,193 | 37.79 | 19.28 | |||||||||
| Page 34 | |
| PROPERTY TABLE - COMMERCIAL | JUNE 30, 2019 (Unaudited) |
| Commercial Assets | Submarket | % Ownership | C/U (1) | Same Store (2): Q2 2018-2019 / YTD 2018-2019 | Year Built / Renovated | Total Square Feet | Office Square Feet | Retail Square Feet | % Leased | Office % Occupied | Retail % Occupied | Annualized Rent (in thousands) | Office Annualized Rent Per Square Foot (3) | Retail Annualized Rent Per Square Foot (4) | |||||||||||||
| Crystal City Marriott (345 Rooms) | National Landing | 100.0 | % | C | Y / Y | 1968 / 2013 | 266,000 | — | — | — | — | — | $ | — | $ | — | $ | — | |||||||||
| 2100 Crystal Drive | National Landing | 100.0 | % | C | Y / Y | 1968 / 2006 | 249,281 | 249,281 | — | 97.4 | % | 97.4 | % | — | 10,184 | 41.94 | — | ||||||||||
| 1800 South Bell Street | National Landing | 100.0 | % | C | N / N | 1969 / 2007 | 215,828 | 191,349 | 24,479 | 100.0 | % | 100.0 | % | 100.0 | % | 8,732 | 44.41 | 9.58 | |||||||||
| 200 12th Street S. | National Landing | 100.0 | % | C | Y / Y | 1985 / 2013 | 202,736 | 202,736 | — | 86.7 | % | 81.7 | % | — | 7,372 | 44.53 | — | ||||||||||
2001 Richmond Highway (7) (8) | National Landing | 100.0 | % | C | N / N | 1967 / N/A | 83,905 | 83,905 | — | 100.0 | % | 100.0 | % | — | 2,937 | 35.00 | — | ||||||||||
| Crystal City Shops at 2100 | National Landing | 100.0 | % | C | Y / Y | 1968 / 2006 | 59,574 | — | 59,574 | 89.6 | % | — | 89.6 | % | 784 | — | 14.69 | ||||||||||
| Crystal Drive Retail | National Landing | 100.0 | % | C | Y / Y | 2003 / N/A | 56,965 | — | 56,965 | 85.1 | % | — | 85.1 | % | 2,753 | — | 56.76 | ||||||||||
| Vienna Retail* | Vienna | 100.0 | % | C | Y / Y | 1981 / N/A | 8,584 | — | 8,584 | 100.0 | % | — | 100.0 | % | 468 | — | 54.58 | ||||||||||
| Stonebridge at Potomac Town Center* | Prince William County | 10.0 | % | U | Y / Y | 2012 / N/A | 503,613 | — | 503,613 | 93.9 | % | — | 93.9 | % | 15,675 | — | 33.14 | ||||||||||
| Pickett Industrial Park | Eisenhower Avenue | 10.0 | % | U | Y / Y | 1973 / N/A | 246,145 | 246,145 | — | 100.0 | % | 100.0 | % | — | 3,960 | 16.09 | — | ||||||||||
| Rosslyn Gateway-North | Rosslyn | 18.0 | % | U | Y / Y | 1996 / 2014 | 143,506 | 130,752 | 12,754 | 88.9 | % | 84.7 | % | 96.0 | % | 4,979 | 41.69 | 29.68 | |||||||||
| Rosslyn Gateway-South | Rosslyn | 18.0 | % | U | Y / Y | 1961 / N/A | 102,131 | 94,547 | 7,584 | 88.4 | % | 92.3 | % | 40.4 | % | 2,381 | 25.70 | 45.10 | |||||||||
| MD | |||||||||||||||||||||||||||
| 7200 Wisconsin Avenue | Bethesda CBD | 100.0 | % | C | Y / Y | 1986 / 2015 | 268,272 | 251,320 | 16,952 | 83.1 | % | 76.0 | % | 100.0 | % | $ | 10,232 | $ | 48.42 | $ | 57.84 | ||||||
One Democracy Plaza* (5) | Bethesda‑Rock Spring | 100.0 | % | C | Y / Y | 1987 / 2013 | 212,894 | 210,756 | 2,138 | 96.9 | % | 96.9 | % | 100.0 | % | 6,639 | 32.19 | 29.60 | |||||||||
| 4749 Bethesda Avenue Retail | Bethesda CBD | 100.0 | % | C | Y / Y | 2016 / N/A | 7,999 | — | 7,999 | 47.9 | % | — | 47.9 | % | 1,011 | — | 264.00 | ||||||||||
| 11333 Woodglen Drive | Rockville Pike Corridor | 18.0 | % | U | Y / Y | 2004 / N/A | 62,650 | 54,077 | 8,573 | 97.6 | % | 97.2 | % | 100.0 | % | 2,159 | 33.93 | 43.82 | |||||||||
| Total / Weighted Average | 12,611,379 | 10,942,904 | 1,368,475 | 90.6 | % | 86.5 | % | 92.4 | % | $ | 466,199 | $ | 44.09 | $ | 38.77 | ||||||||||||
| Recently Delivered | |||||||||||||||||||||||||||
| DC | |||||||||||||||||||||||||||
| 500 L'Enfant Plaza | Southwest | 49.0 | % | U | N / N | 2019 / N/A | 215,194 | 215,194 | — | 79.3 | % | 74.3 | % | — | 8,730 | 54.58 | — | ||||||||||
| Operating - Total / Weighted Average | 12,826,573 | 11,158,098 | 1,368,475 | 90.4 | % | 86.2 | % | 92.4 | % | $ | 474,929 | $ | 44.26 | $ | 38.77 | ||||||||||||
| Under Construction | |||||||||||||||||||||||||||
| DC | |||||||||||||||||||||||||||
1900 N Street (5) (9) | CBD | 55.0 | % | U | 271,433 | 258,931 | 12,502 | 69.9 | % | ||||||||||||||||||
| VA | |||||||||||||||||||||||||||
| 1770 Crystal Drive | National Landing | 100.0 | % | C | 271,572 | 258,299 | 13,273 | 97.8 | % | ||||||||||||||||||
| Central District Retail | National Landing | 100.0 | % | C | 108,825 | — | 108,825 | 70.7 | % | ||||||||||||||||||
| Page 35 | |
| PROPERTY TABLE - COMMERCIAL | JUNE 30, 2019 (Unaudited) |
| Commercial Assets | Submarket | % Ownership | C/U (1) | Same Store (2): Q2 2018-2019 / YTD 2018-2019 | Year Built / Renovated | Total Square Feet | Office Square Feet | Retail Square Feet | % Leased | Office % Occupied | Retail % Occupied | Annualized Rent (in thousands) | Office Annualized Rent Per Square Foot (3) | Retail Annualized Rent Per Square Foot (4) | |||||||||||||
| MD | |||||||||||||||||||||||||||
4747 Bethesda Avenue (10) | Bethesda CBD | 100.0 | % | C | 291,414 | 285,251 | 6,163 | 83.3 | % | ||||||||||||||||||
| Under Construction - Total / Weighted Average | 943,244 | 802,481 | 140,763 | 82.2 | % | ||||||||||||||||||||||
| Total / Weighted Average | 13,769,817 | 11,960,579 | 1,509,238 | 89.8 | % | ||||||||||||||||||||||
| Totals at JBG SMITH Share | |||||||||||||||||||||||||||
| In service assets | 10,973,761 | 9,855,160 | 818,601 | 90.4 | % | 86.1 | % | 93.3 | % | $ | 411,463 | $ | 44.78 | $ | 41.29 | ||||||||||||
| Recently delivered assets | 105,435 | 105,435 | — | 79.3 | % | 74.3 | % | — | $ | 4,277 | $ | 54.58 | $ | — | |||||||||||||
| Operating assets | 11,079,196 | 9,960,595 | 818,601 | 90.3 | % | 86.0 | % | 93.3 | % | $ | 415,740 | $ | 44.87 | $ | 41.29 | ||||||||||||
| Under construction assets | 821,099 | 685,962 | 135,137 | 84.0 | % | ||||||||||||||||||||||
| 1,074,682.0 | |||||||||||||||||||||||||||
| Number of Assets and Total Square Feet Reconciliation | |||||||||
| Number of Assets | At 100% Share | At JBG SMITH Share | |||||||
| Operating Assets | Square Feet | Square Feet | |||||||
| Q1 2019 | 45 | 12,542,688 | 10,904,102 | ||||||
Placed into service (11) | 1 | 361,401 | 251,642 | ||||||
| Dispositions | — | — | — | ||||||
Out-of-service adjustment (12) | — | (75,933 | ) | (75,933 | ) | ||||
| Building re-measurements | — | (1,583 | ) | (615 | ) | ||||
| Q2 2019 | 46 | 12,826,573 | 11,079,196 | ||||||
See footnotes on page 37.
| Page 36 | |
| PROPERTY TABLE - COMMERCIAL | JUNE 30, 2019 (Unaudited) |
Footnotes
Note: At 100% share, unless otherwise noted. Excludes our 10% subordinated interest in three commercial buildings held through a real estate venture in which we have no economic interest.
* Not Metro-Served.
| (1) | “C” denotes a consolidated interest. “U” denotes an unconsolidated interest. |
| (2) | “Y” denotes an asset as same store and “N” denotes an asset as non-same store. |
| (3) | Represents annualized office rent divided by occupied office square feet; annualized retail rent and retail square feet are excluded from this metric. Occupied office square footage may differ from leased office square footage because leased office square footage includes leases that have been signed but have not yet commenced. |
| (4) | Represents annualized retail rent divided by occupied retail square feet. Occupied retail square footage may differ from leased retail square footage because leased retail square footage includes leases that have been signed but have not yet commenced. |
| (5) | The following assets are subject to ground leases: |
| Commercial Asset | Ground Lease Expiration Date | |
| 1730 M Street | 4/30/2061 | |
| L'Enfant Plaza Office - East | 11/23/2064 | |
| L'Enfant Plaza Retail | 11/23/2064 | |
| Courthouse Plaza 1 and 2 | 1/19/2062 | |
| Central Place Tower* | 6/2/2102 | |
| One Democracy Plaza | 11/17/2084 | |
| 1900 N Street** | 5/31/2106 | |
* We have an option to purchase the ground lease at a fixed price. The ground lease has been recorded as a financing lease for accounting purposes; therefore, any expense is recorded as interest expense and excluded from NOI.
** Only a portion of the asset is subject to a ground lease.
| (6) | In July 2019, we sold 1600 K Street for $43.0 million. |
| (7) | The following assets contain space that is held for development or not otherwise available for lease. This out-of-service square footage is excluded from area, leased, and occupancy metrics. |
| Commercial Asset | In-Service | Not Available for Lease | |||
| 1550 Crystal Drive | 451,673 | 43,655 | |||
| RTC - West | 431,021 | 17,988 | |||
| 2001 Richmond Highway | 83,905 | 75,933 | |||
| (8) | In Q2 2019, 2001 Jefferson Davis Highway was renamed 2001 Richmond Highway. |
| (9) | Ownership percentage reflects expected dilution of JBG SMITH as contributions are funded during the construction of the asset. As of June 30, 2019, JBG SMITH's ownership interest was 59.9%. |
| (10) | Includes JBG SMITH’s lease for approximately 84,400 square feet. |
| (11) | In Q1 2019, we completed the construction of 500 L'Enfant Plaza. In Q2 2019, we placed 146,207 SF in service at 1800 South Bell Street due to the commenced Amazon lease. |
| (12) | In Q2 2019, we took 75,933 SF out of service at 2001 Richmond Highway. |
| Page 37 | |
| PROPERTY TABLE - MULTIFAMILY | JUNE 30, 2019 (Unaudited) |
| Multifamily Assets | Submarket | % Ownership | C/U (1) | Same Store (2): Q2 2018-2019 / YTD 2018-2019 | Year Built / Renovated | Number of Units | Total Square Feet | Multifamily Square Feet | Retail Square Feet | % Leased | Multifamily % Occupied | Retail % Occupied | Annualized Rent (in thousands) | Monthly Rent Per Unit (3) (4) | Monthly Rent Per Square Foot (4) (5) | ||||||||||||||
| DC | |||||||||||||||||||||||||||||
| Fort Totten Square | Brookland/Fort Totten | 100.0 | % | C | Y / Y | 2015 / N/A | 345 | 384,956 | 254,292 | 130,664 | 97.8 | % | 95.4 | % | 100.0 | % | $ | 9,154 | $ | 1,762 | $ | 2.39 | |||||||
| WestEnd25 | West End | 100.0 | % | C | Y / Y | 2009 / N/A | 283 | 273,264 | 273,264 | — | 98.3 | % | 93.3 | % | — | 11,099 | 3,503 | 3.63 | |||||||||||
| 1221 Van Street | Ballpark/Southeast | 100.0 | % | C | N / N | 2018 / N/A | 291 | 225,530 | 202,715 | 22,815 | 93.7 | % | 89.7 | % | 93.1 | % | 8,583 | 2,396 | 3.44 | ||||||||||
| North End Retail | U Street/Shaw | 100.0 | % | C | Y / Y | 2015 / N/A | — | 27,355 | — | 27,355 | 100.0 | % | N/A | 100.0 | % | 1,518 | N/A | N/A | |||||||||||
| The Gale Eckington | H Street/NoMa | 5.0 | % | U | Y / Y | 2013 / 2017 | 603 | 466,716 | 465,516 | 1,200 | 95.4 | % | 92.5 | % | 100.0 | % | 13,827 | 2,059 | 2.67 | ||||||||||
| Atlantic Plumbing | U Street/Shaw | 64.0 | % | U | Y / Y | 2015 / N/A | 310 | 245,527 | 221,788 | 23,739 | 98.5 | % | 94.2 | % | 100.0 | % | 10,028 | 2,540 | 3.55 | ||||||||||
| VA | |||||||||||||||||||||||||||||
| RiverHouse Apartments | National Landing | 100.0 | % | C | Y / Y | 1960 / 2013 | 1,676 | 1,327,551 | 1,324,889 | 2,662 | 97.9 | % | 95.1 | % | 100.0 | % | $ | 34,180 | $ | 1,783 | $ | 2.26 | |||||||
| The Bartlett | National Landing | 100.0 | % | C | Y / Y | 2016 / N/A | 699 | 619,372 | 577,295 | 42,077 | 98.4 | % | 95.7 | % | 100.0 | % | 22,835 | 2,668 | 3.23 | ||||||||||
| 220 20th Street | National Landing | 100.0 | % | C | Y / Y | 2009 / N/A | 265 | 271,476 | 269,913 | 1,563 | 98.5 | % | 94.7 | % | 100.0 | % | 7,948 | 2,621 | 2.57 | ||||||||||
| 2221 S. Clark Street | National Landing | 100.0 | % | C | Y / Y | 1964 / 2016 | 216 | 164,743 | 164,743 | — | 100.0 | % | 100.0 | % | — | 3,516 | N/A | N/A | |||||||||||
| Fairway Apartments* | Reston | 10.0 | % | U | Y / Y | 1969 / 2005 | 346 | 370,850 | 370,850 | — | 97.9 | % | 95.1 | % | — | 6,665 | 1,688 | 1.58 | |||||||||||
| MD | |||||||||||||||||||||||||||||
| Falkland Chase-South & West | Downtown Silver Spring | 100.0 | % | C | Y / Y | 1938 / 2011 | 268 | 222,797 | 222,797 | — | 99.5 | % | 97.0 | % | — | $ | 5,258 | $ | 1,685 | $ | 2.03 | ||||||||
| Falkland Chase-North | Downtown Silver Spring | 100.0 | % | C | Y / Y | 1938 / 1986 | 170 | 112,229 | 112,229 | — | 97.2 | % | 94.7 | % | — | 2,849 | 1,475 | 2.23 | |||||||||||
| Galvan | Rockville Pike Corridor | 1.8 | % | U | Y / Y | 2015 / N/A | 356 | 390,641 | 295,033 | 95,608 | 97.8 | % | 96.6 | % | 96.8 | % | 10,968 | 1,785 | 2.15 | ||||||||||
The Alaire (6) | Rockville Pike Corridor | 18.0 | % | U | Y / Y | 2010 / N/A | 279 | 266,673 | 251,691 | 14,982 | 98.4 | % | 95.0 | % | 100.0 | % | 6,085 | 1,742 | 1.93 | ||||||||||
The Terano (6) (7) | Rockville Pike Corridor | 1.8 | % | U | Y / Y | 2015 / N/A | 214 | 195,864 | 183,496 | 12,368 | 96.9 | % | 93.9 | % | 76.2 | % | 4,485 | 1,744 | 2.03 | ||||||||||
| Operating - Total / Weighted Average | 6,321 | 5,565,544 | 5,190,511 | 375,033 | 97.8 | % | 94.8 | % | 98.0 | % | $ | 158,998 | $ | 2,070 | $ | 2.52 | |||||||||||||
| Under Construction | |||||||||||||||||||||||||||||
| DC | |||||||||||||||||||||||||||||
| West Half | Ballpark/Southeast | 100.0 | % | C | 465 | 388,174 | 346,415 | 41,759 | |||||||||||||||||||||
965 Florida Avenue (8) | U Street/Shaw | 96.1 | % | C | 433 | 336,092 | 290,296 | 45,796 | |||||||||||||||||||||
| Atlantic Plumbing C | U Street/Shaw | 100.0 | % | C | 256 | 225,531 | 206,057 | 19,474 | |||||||||||||||||||||
| Page 38 | |
| PROPERTY TABLE - MULTIFAMILY | JUNE 30, 2019 (Unaudited) |
| Multifamily Assets | Submarket | % Ownership | C/U (1) | Same Store (2): Q2 2018-2019 / YTD 2018-2019 | Year Built / Renovated | Number of Units | Total Square Feet | Multifamily Square Feet | Retail Square Feet | % Leased | Multifamily % Occupied | Retail % Occupied | Annualized Rent (in thousands) | Monthly Rent Per Unit (3) (4) | Monthly Rent Per Square Foot (4) (5) | ||||||||||||||
| MD | |||||||||||||||||||||||||||||
| 7900 Wisconsin Avenue | Bethesda CBD | 50.0 | % | U | 322 | 359,025 | 338,990 | 20,035 | |||||||||||||||||||||
| Under Construction - Total | 1,476 | 1,308,822 | 1,181,758 | 127,064 | |||||||||||||||||||||||||
| Total | 7,797 | 6,874,366 | 6,372,269 | 502,097 | |||||||||||||||||||||||||
| Totals at JBG SMITH Share | |||||||||||||||||||||||||||||
| Operating assets | 4,537 | 3,905,390 | 3,658,360 | 247,029 | 98.0 | % | 95.0 | % | 99.3 | % | 116,090 | 2,144 | 2.65 | ||||||||||||||||
| Under construction assets | 1,298 | 1,116,337 | 1,001,058 | 115,279 | |||||||||||||||||||||||||
| Number of Assets and Total Square Feet/Units Reconciliation | |||||||||
| Number of Assets | At 100% Share | At JBG SMITH Share | |||||||
| Operating Assets | Square Feet/Units | Square Feet/Units | |||||||
| Q1 2019 | 16 | 5,559,959 SF/ 6,315 Units | 3,899,805 SF/ 4,531 Units | ||||||
| Placed into service | — | 5,585 SF SF/ 6 Units | 5,585 SF SF/ 6 Units | ||||||
| Out-of-service adjustment | — | — | — | ||||||
| Building re-measurements | — | — | — | ||||||
| Q2 2019 | 16 | 5,565,544 SF/ 6,321 Units | 3,905,390 SF/ 4,537 Units | ||||||
| Leasing Activity - Multifamily | ||||||||||||||||||||||||||||
| Number of Assets | Number of Units | Monthly Rent Per Unit (3) | Multifamily % Occupied | Annualized Rent (in thousands) | ||||||||||||||||||||||||
| Q2 2019 | Q2 2018 | % Change | Q2 2019 | Q2 2018 | % Change | Q2 2019 | Q2 2018 | % Change | ||||||||||||||||||||
| DC | 4 | 857 | $ | 2,521 | $ | 2,552 | (1.2 | )% | 94.3 | % | 94.5 | % | (0.2 | )% | $ | 24,442 | $ | 24,798 | (1.4 | )% | ||||||||
| VA | 4 | 2,675 | 2,097 | 2,077 | 1.0 | % | 95.2 | % | 94.7 | % | 0.5 | % | 64,091 | 63,017 | 1.7 | % | ||||||||||||
| MD | 5 | 498 | 1,622 | 1,656 | (2.1 | )% | 96.0 | % | 95.2 | % | 0.8 | % | 9,313 | 9,277 | 0.4 | % | ||||||||||||
| Total / Weighted Average | 13 | 4,030 | $ | 2,127 | $ | 2,127 | — | 95.1 | % | 94.4 | % | 0.7 | % | $ | 97,846 | $ | 97,092 | 0.8 | % | |||||||||
| Note: At JBG SMITH share. Includes assets placed in service prior to April 1, 2018. Excludes North End Retail and 2221 S. Clark Street (WeLive). | ||||||||||||||||||||||||||||
See footnotes on page 40.
| Page 39 | |
| PROPERTY TABLE - MULTIFAMILY | JUNE 30, 2019 (Unaudited) |
Footnotes
Note: At 100% share.
* Not Metro-Served.
| (1) | “C” denotes a consolidated interest. “U” denotes an unconsolidated interest. |
| (2) | “Y” denotes an asset as same store and “N” denotes an asset as non-same store. |
| (3) | Represents multifamily rent divided by occupied multifamily units; retail rent is excluded from this metric. Occupied units may differ from leased units because leased units include leases that have been signed but have not yet commenced. |
| (4) | Excludes North End Retail and 2221 S. Clark Street (WeLive). |
| (5) | Represents multifamily rent divided by occupied multifamily square feet; retail rent and retail square feet are excluded from this metric. Occupied multifamily square footage may differ from leased multifamily square footage because leased multifamily square footage includes leases that have been signed but have not yet commenced. |
| (6) | The following assets are subject to ground leases: |
| Multifamily Asset | Ground Lease Expiration Date | |
| The Alaire | 3/27/2107 | |
| The Terano | 8/5/2112 | |
| (7) | The following asset contains space that is held for development or not otherwise available for lease. This out-of-service square footage is excluded from area, leased, and occupancy metrics. |
| Multifamily Asset | In-Service | Not Available for Lease | |||
| The Terano | 195,864 | 3,904 | |||
| (8) | Ownership percentage reflects expected dilution of JBG SMITH's real estate venture partner as contributions are funded during the construction of the asset. As of June 30, 2019, JBG SMITH's ownership interest was 93.1%. |
| Page 40 | |
| PROPERTY TABLE - UNDER CONSTRUCTION | JUNE 30, 2019 (Unaudited) |
| dollars in thousands, except per square foot data | % Ownership | Estimated Square Feet | % Pre-Leased | Pre-Lease Rent Per Square Foot (1) | Estimated Number of Units | Schedule (2) | At JBG SMITH Share | |||||||||||||||||||
| Construction Start Date | Estimated Completion Date | Estimated Stabilization Date | Historical Cost (3) | Estimated Incremental Investment | Estimated Total Investment | |||||||||||||||||||||
| Asset | Submarket | |||||||||||||||||||||||||
| Commercial | ||||||||||||||||||||||||||
| DC | ||||||||||||||||||||||||||
1900 N Street (4) | CBD | 55.0% | 271,433 | 69.9 | % | $ | 86.53 | — | Q2 2017 | Q2 2020 | Q4 2022 | $ | 103,920 | $ | 19,969 | $ | 123,889 | |||||||||
| VA | ||||||||||||||||||||||||||
1770 Crystal Drive (5) | National Landing | 100.0% | 271,572 | 97.8 | % | 46.05 | — | Q4 2018 | Q2 2021 | Q2 2021 | 53,369 | 66,573 | 119,942 | |||||||||||||
Central District Retail (5) | National Landing | 100.0% | 108,825 | 70.7 | % | 47.35 | — | Q4 2018 | Q2 2021 | Q4 2021 | 26,385 | 90,741 | 117,126 | |||||||||||||
| MD | ||||||||||||||||||||||||||
4747 Bethesda Avenue (6) | Bethesda CBD | 100.0% | 291,414 | 83.3 | % | 61.78 | — | Q2 2017 | Q4 2019 | Q2 2021 | 121,309 | 39,311 | 160,620 | |||||||||||||
| Total/weighted average | 943,244 | 82.2 | % | $ | 61.02 | — | Q1 2018 | Q3 2020 | Q3 2021 | $ | 304,983 | $ | 216,594 | $ | 521,577 | |||||||||||
| Multifamily | ||||||||||||||||||||||||||
| DC | ||||||||||||||||||||||||||
| West Half | Ballpark/Southeast | 100.0% | 388,174 | — | — | 465 | Q1 2017 | Q1 2020 | Q1 2021 | $ | 201,869 | $ | 26,500 | $ | 228,369 | |||||||||||
965 Florida Avenue (7) | U Street/Shaw | 96.1% | 336,092 | — | — | 433 | Q4 2017 | Q4 2020 | Q1 2022 | 88,072 | 64,547 | 152,619 | ||||||||||||||
| Atlantic Plumbing C | U Street/Shaw | 100.0% | 225,531 | — | — | 256 | Q1 2017 | Q4 2019 | Q3 2020 | 139,089 | 19,564 | 158,653 | ||||||||||||||
| MD | ||||||||||||||||||||||||||
| 7900 Wisconsin Avenue | Bethesda CBD | 50.0% | 359,025 | — | — | 322 | Q2 2017 | Q3 2020 | Q4 2021 | 58,795 | 35,620 | 94,415 | ||||||||||||||
| Total/weighted average | 1,308,822 | — | — | 1,476 | Q2 2017 | Q2 2020 | Q2 2021 | $ | 487,825 | $ | 146,231 | $ | 634,056 | |||||||||||||
Under Construction - Total / Weighted Average (8) | 2,252,066 | 82.2 | % | $ | 61.02 | 1,476 | Q3 2017 | Q2 2020 | Q3 2021 | $ | 792,808 | $ | 362,825 | $ | 1,155,633 | |||||||||||
Under Construction - Total / Weighted Average at JBG SMITH Share (8) | 1,937,435 | 84.0 | % | $ | 57.86 | 1,298 | ||||||||||||||||||||
| Commercial | Multifamily | Total | ||||||||||||||||||||||||
| Weighted average projected NOI yield at JBG SMITH share: | ||||||||||||||||||||||||||
Estimated total project cost (9) | 6.5 | % | 6.4 | % | 6.4 | % | Consol | 307,236 | ||||||||||||||||||
| Estimated total investment | 6.3 | % | 6.0 | % | 6.1 | % | Unconsol | 55,589 | ||||||||||||||||||
| Estimated incremental investment | 15.0 | % | 25.9 | % | 19.4 | % | ||||||||||||||||||||
| Estimated Stabilized NOI at JBG SMITH Share (dollars in millions) | $ | 32.9 | $ | 37.9 | $ | 70.8 | ||||||||||||||||||||
____________________
Note: At 100% share, unless otherwise noted.
| (1) | Based on leases signed as of June 30, 2019 and calculated as contractual monthly base rent before free rent, plus estimated tenant reimbursements for the month in which the lease commences, multiplied by 12. Triple net leases are converted to a gross basis by adding estimated tenant reimbursements to contractual monthly base rent. |
| (2) | Average dates are weighted by JBG SMITH share of estimated square feet. |
| (3) | Historical cost excludes certain GAAP adjustments, such as capitalized payroll, interest and ground lease costs. See definition of historical cost on page 51. |
| (4) | Ownership percentage reflects expected dilution of JBG SMITH as contributions are funded during the construction of the asset. As of June 30, 2019, JBG SMITH's ownership interest was 59.9%. |
| (5) | Historical cost of 1770 Crystal Drive and Central District Retail includes $4.4 million and $4.3 million of prior design costs not related to the current planned development. |
| (6) | Includes JBG SMITH’s lease for approximately 84,400 square feet. |
| (7) | Ownership percentage reflects expected dilution of JBG SMITH's real estate venture partner as contributions are funded during the construction of the asset. As of June 30, 2019, JBG SMITH's ownership interest was 93.1%. |
| (8) | Multifamily assets are excluded from the weighted average percent pre-leased and pre-lease rent per square foot metrics. |
| (9) | Estimated total project cost is estimated total investment excluding purchase price allocation adjustments recognized as a result of the Formation Transaction. |
| Page 41 | |
| PROPERTY TABLE - FUTURE DEVELOPMENT | JUNE 30, 2019 (Unaudited) (Unaudited) |
| dollars in thousands, except per square foot data, at JBG SMITH share | Estimated Commercial SF / Multifamily Units to be Replaced (1) | Estimated Capitalized Cost of SF / Units to Be Replaced (4) | Estimated Capitalized Cost of Ground Rent Payments (5) | Estimated Total Investment per SF | ||||||||||||||||||||||||||||||||||||||
| Number of Assets | Estimated Remaining Acquisition Cost (3) | Estimated Total Investment | ||||||||||||||||||||||||||||||||||||||||
| Estimated Potential Development Density (SF) | Historical Cost (2) | |||||||||||||||||||||||||||||||||||||||||
| Region | Total | Office | Multifamily | Retail | ||||||||||||||||||||||||||||||||||||||
| Owned | ||||||||||||||||||||||||||||||||||||||||||
| DC | ||||||||||||||||||||||||||||||||||||||||||
| DC | 8 | 1,678,400 | 312,100 | 1,357,300 | 9,000 | — | $ | 106,404 | N/A | $ | — | $ | — | $ | 106,404 | $ | 63.40 | |||||||||||||||||||||||||
| VA | ||||||||||||||||||||||||||||||||||||||||||
| National Landing | 11 | 6,910,400 | 2,135,000 | 4,655,700 | 119,700 | 299,733 SF | 156,091 | N/A | 34,733 | — | 190,824 | 27.61 | ||||||||||||||||||||||||||||||
| Reston | 4 | 2,589,200 | 924,800 | 1,462,400 | 202,000 | 15 units | 73,022 | N/A | 3,353 | — | 76,375 | 29.50 | ||||||||||||||||||||||||||||||
| Other VA | 4 | 199,600 | 88,200 | 102,100 | 9,300 | 21,556 SF | 1,442 | N/A | 4,884 | 2,480 | 8,806 | 44.12 | ||||||||||||||||||||||||||||||
| 19 | 9,699,200 | 3,148,000 | 6,220,200 | 331,000 | 321,289 SF / 15 units | 230,555 | N/A | 42,970 | 2,480 | 276,005 | 28.46 | |||||||||||||||||||||||||||||||
| MD | ||||||||||||||||||||||||||||||||||||||||||
| Silver Spring | 1 | 1,276,300 | — | 1,156,300 | 120,000 | 170 units | 15,060 | N/A | 33,933 | — | 48,993 | 38.39 | ||||||||||||||||||||||||||||||
| Greater Rockville | 4 | 126,500 | 19,200 | 88,600 | 18,700 | — | 3,270 | N/A | — | 664 | 3,934 | 31.10 | ||||||||||||||||||||||||||||||
| 5 | 1,402,800 | 19,200 | 1,244,900 | 138,700 | 170 units | 18,330 | N/A | 33,933 | 664 | 52,927 | 37.73 | |||||||||||||||||||||||||||||||
| Total / weighted average | 32 | 12,780,400 | 3,479,300 | 8,822,400 | 478,700 | 321,289 SF / 185 units | $ | 355,289 | N/A | $ | 76,903 | $ | 3,144 | $ | 435,336 | $ | 34.06 | |||||||||||||||||||||||||
Optioned (6) | ||||||||||||||||||||||||||||||||||||||||||
| DC | ||||||||||||||||||||||||||||||||||||||||||
| DC | 3 | 1,793,600 | 78,800 | 1,498,900 | 215,900 | — | $ | 18,872 | $ | 25,051 | $ | — | $ | 71,113 | $ | 115,036 | $ | 64.14 | ||||||||||||||||||||||||
| VA | ||||||||||||||||||||||||||||||||||||||||||
| Other VA | 1 | 11,300 | — | 10,400 | 900 | — | 100 | 995 | — | — | 1,095 | 96.90 | ||||||||||||||||||||||||||||||
| Total / weighted average | 4 | 1,804,900 | 78,800 | 1,509,300 | 216,800 | — | $ | 18,972 | $ | 26,046 | $ | — | $ | 71,113 | $ | 116,131 | $ | 64.34 | ||||||||||||||||||||||||
| Held for Sale | ||||||||||||||||||||||||||||||||||||||||||
| VA | ||||||||||||||||||||||||||||||||||||||||||
National Landing (7) | 4 | 4,082,000 | 4,082,000 | — | — | — | $ | 167,019 | N/A | $ | — | $ | — | $ | 167,019 | $ | 40.92 | |||||||||||||||||||||||||
| Total / Weighted Average | 40 | 18,667,300 | 7,640,100 | 10,331,700 | 695,500 | 321,289 SF / 185 units | $ | 541,280 | $ | 26,046 | $ | 76,903 | $ | 74,257 | $ | 718,486 | $ | 38.49 | ||||||||||||||||||||||||
____________________
| (1) | Represents management's estimate of the total office and/or retail rentable square feet and multifamily units that would need to be redeveloped to access some of the estimated potential development density. |
| (2) | Historical cost includes certain intangible assets, such as option and transferable density rights values; and excludes certain GAAP adjustments, such as capitalized payroll, interest and ground lease costs. See definition of historical cost on page 51. |
| (3) | Represents management's estimate of remaining deposits, option payments, and option strike prices as of June 30, 2019. |
| (4) | Capitalized value of estimated commercial square feet / multifamily units to be replaced, which generated approximately $1.2 million of NOI for the three months ended June 30, 2019 (included in the NOI of the applicable operating segment), at a 6.0% capitalization rate. The annualized NOI for 1800 South Bell Street is excluded from this calculation. |
| (5) | Capitalized value of stabilized annual ground rent payments associated with leasehold assets at a 5.0% capitalization rate. Two owned parcels and one optioned parcel are leasehold interests with estimated annual stabilized ground rent payments totaling $3.7 million. |
| (6) | June 30, 2019, the weighted average remaining term for the optioned future development assets is 5.0 years. |
| (7) | Includes 4.1 million square feet of estimated potential development density that JBG SMITH has sold to Amazon pursuant to executed purchase and sale agreements. Subject to customary closing conditions, Amazon is expected to pay $293.9 million for the assets. |
| Page 42 | |
| DISPOSITION ACTIVITY | JUNE 30, 2019 (Unaudited) |
| dollars in thousands, at JBG SMITH share | Total Square Feet/ Estimated Potential Development Density | Gross Sales Price | Net Cash Proceeds | Book Gain | |||||||||||
| Assets | Ownership Percentage | Asset Type | Location | Date Disposed | |||||||||||
| Q1 2019 | |||||||||||||||
Commerce Executive / Commerce Metro Land (1) | 100.0% | Commercial / Future Development | Reston, VA | February 4, 2019 | 388,562 / 894,000 | $ | 114,950 | $ | 117,676 | $ | 39,033 | ||||
| Q2 2019 | |||||||||||||||
| None | |||||||||||||||
_______________
Note: The disposed assets generated $7,000 of NOI for the three months ended June 30, 2019 and $0.5 million of NOI for the six months ended June 30, 2019. As of June 30, 2019, Pen Place and Metropolitan 6, 7 and 8 were classified as held for sale in our condensed consolidated balance sheet. In March 2019, we entered into agreements for the sale of Pen Place and Metropolitan 6, 7 and 8, Future Development assets having an aggregate estimated potential development density of up to approximately 4.1 million square feet, with Amazon for its additional headquarters. In July 2019, we sold 1600 K Street for $43.0 million, which generated $0.6 million of NOI for the three months ended June 30, 2019 and $1.1 million of NOI for the six months ended June 30, 2019.
| (1) | Cash proceeds include the reimbursement of $4.0 million of tenant improvement costs and leasing commissions paid by us prior to the closing. |
| Page 43 | |
| DEBT SUMMARY | JUNE 30, 2019 (Unaudited) |
| dollars in thousands, at JBG SMITH share | 2019 | 2020 | 2021 | 2022 | 2023 | Thereafter | Total | ||||||||||||||||||||||
| Consolidated and Unconsolidated Principal Balance | |||||||||||||||||||||||||||||
| Unsecured Debt: | |||||||||||||||||||||||||||||
| Revolving credit facility ($1 billion commitment) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Term loans ($400 million commitment) | — | — | — | — | 100,000 | 200,000 | 300,000 | ||||||||||||||||||||||
| Total unsecured debt | — | — | — | — | 100,000 | 200,000 | 300,000 | ||||||||||||||||||||||
| Secured Debt: | |||||||||||||||||||||||||||||
| Consolidated principal balance | — | 97,141 | 331,058 | 107,500 | 175,870 | 652,408 | 1,363,977 | ||||||||||||||||||||||
| Unconsolidated principal balance | 14,644 | 150,217 | — | 74,235 | 20,769 | 53,634 | 313,499 | ||||||||||||||||||||||
| Total secured debt | 14,644 | 247,358 | 331,058 | 181,735 | 196,639 | 706,042 | 1,677,476 | ||||||||||||||||||||||
Total Consolidated and Unconsolidated Principal Balance | $ | 14,644 | $ | 247,358 | $ | 331,058 | $ | 181,735 | $ | 296,639 | $ | 906,042 | $ | 1,977,476 | |||||||||||||||
| % of total debt maturing | 0.7 | % | 12.5 | % | 16.7 | % | 9.2 | % | 15.0 | % | 45.9 | % | 100.0 | % | |||||||||||||||
% floating rate (1) | 100.0 | % | 55.6 | % | 4.2 | % | 35.2 | % | — | 1.0 | % | 12.1 | % | ||||||||||||||||
% fixed rate (2) | — | 44.4 | % | 95.8 | % | 64.8 | % | 100.0 | % | 99.0 | % | 87.9 | % | ||||||||||||||||
| Weighted Average Interest Rates | |||||||||||||||||||||||||||||
| Variable rate | 3.49 | % | 5.99 | % | 4.05 | % | 3.90 | % | — | 4.22 | % | 5.10 | % | ||||||||||||||||
| Fixed rate | — | 3.32 | % | 4.09 | % | 3.60 | % | 4.48 | % | 4.26 | % | 4.16 | % | ||||||||||||||||
| Total Weighted Average Interest Rates | 3.49 | % | 4.81 | % | 4.09 | % | 3.70 | % | 4.48 | % | 4.26 | % | 4.27 | % | |||||||||||||||
| Credit Facility | |||||||||||||||||||||||||||||
| Revolving Credit Facility | Tranche A-1 Term Loan | Tranche A-2 Term Loan | Total/Weighted Average | 1,663,977 | |||||||||||||||||||||||||
| Credit limit | $ | 1,000,000 | $ | 200,000 | $ | 200,000 | $ | 1,400,000 | 2.12 | % | |||||||||||||||||||
| Outstanding principal balance | $ | — | $ | 100,000 | $ | 200,000 | $ | 300,000 | |||||||||||||||||||||
| Letters of credit | $ | 5,794 | $ | — | $ | — | $ | 5,794 | |||||||||||||||||||||
| Undrawn capacity | $ | 994,206 | $ | 100,000 | $ | — | $ | 1,094,206 | |||||||||||||||||||||
Interest rate spread (3) | 1.10 | % | 1.20 | % | 1.55 | % | 1.43 | % | |||||||||||||||||||||
All-In interest rate (4) | 3.50 | % | 3.32 | % | 4.34 | % | 4.00 | % | |||||||||||||||||||||
| Initial maturity date | Jul-21 | Jan-23 | Jul-24 | — | |||||||||||||||||||||||||
| Delayed draw availability period | — | Jul-20 | — | — | |||||||||||||||||||||||||
____________________
| (1) | Floating rate debt includes floating rate loans with interest rate caps. |
| (2) | Fixed rate debt includes floating rate loans with interest rate swaps. |
| (3) | The interest rate for the revolving credit facility excludes a 0.15% facility fee. The interest rate spread on the Tranche A-2 Term Loan was reduced to 1.15% as of July 17, 2019. |
| (4) | The all-in interest rate is inclusive of interest rate swaps. As of July 17, 2019, the interest rate for Tranche A-2 Term Loan was reduced by 40 basis points. As of June 30, 2019, the notional amount of the Tranche A-1 Term Loan and the Tranche A-2 Term Loan interest rate swap was $100.0 million and $137.6 million. |
| Page 44 | |
| DEBT BY INSTRUMENT | JUNE 30, 2019 (Unaudited) |
dollars in thousands Asset | % Ownership | Principal Balance | Stated Interest Rate | Interest Rate Hedge | Current Annual Interest Rate (1) | Initial Maturity Date | Extended Maturity Date (2) | ||||||
| Consolidated | |||||||||||||
| RTC - West | 100.0 | % | $ | 97,141 | L + 1.50% | Swap | 3.33 | % | 04/12/20 | 04/12/21 | |||
| Courthouse Plaza 1 and 2 | 100.0 | % | — | L + 1.60% | — | 4.00 | % | 05/10/20 | 05/10/21 | ||||
| WestEnd25 | 100.0 | % | 97,058 | 4.88% | Fixed | 4.88 | % | 06/01/21 | 06/01/21 | ||||
| Credit Facility - Revolving Credit Facility | 100.0 | % | — | L + 1.10% | — | 3.50 | % | 07/16/21 | 07/16/22 | ||||
| Credit Facility -Tranche A-1 Term Loan | 100.0 | % | 100,000 | L + 1.20% | Swap | 3.32 | % | 01/18/23 | 01/18/23 | ||||
| 2121 Crystal Drive | 100.0 | % | 135,363 | 5.51% | Fixed | 5.51 | % | 03/01/23 | 03/01/23 | ||||
| Falkland Chase - South & West | 100.0 | % | 40,507 | 3.78% | Fixed | 3.78 | % | 06/01/23 | 06/01/23 | ||||
Central Place Tower (3) | 100.0 | % | 234,000 | L + 1.65% | Swap | 3.76 | % | 11/07/21 | 11/07/23 | ||||
| 800 North Glebe Road | 100.0 | % | 107,500 | L + 1.60% | Swap | 3.60 | % | 06/30/22 | 06/30/24 | ||||
Credit Facility - Tranche A-2 Term Loan (4) | 100.0 | % | 200,000 | L + 1.55% | Swap | 4.34 | % | 07/18/24 | 07/18/24 | ||||
| 2101 L Street | 100.0 | % | 135,879 | 3.97% | Fixed | 3.97 | % | 08/15/24 | 08/15/24 | ||||
| 201 12th Street S., 200 12th Street S., and 251 18th Street S. | 100.0 | % | 83,319 | 7.94% | Fixed | 7.94 | % | 01/01/25 | 01/01/25 | ||||
| RiverHouse Apartments | 100.0 | % | 307,710 | L + 1.28% | Swap | 3.47 | % | 04/01/25 | 04/01/25 | ||||
| 1730 M Street | 100.0 | % | 47,500 | L + 1.25% | Swap | 3.92 | % | 12/21/25 | 12/21/25 | ||||
| 1235 S. Clark Street | 100.0 | % | 78,000 | 3.94% | Fixed | 3.94 | % | 11/01/27 | 11/01/27 | ||||
| Total Consolidated Principal Balance | 1,663,977 | ||||||||||||
| Premium / (discount) recognized as a result of the Formation Transaction | 1,161 | ||||||||||||
| Deferred financing costs - mortgage loans | (4,671 | ) | #REF! | ||||||||||
Deferred financing costs - credit facility (5) | (6,929 | ) | #REF! | ||||||||||
| Total Consolidated Indebtedness | $ | 1,653,538 | #REF! | ||||||||||
| Total Consolidated Indebtedness (net of premium / (discount) and deferred financing costs) | |||||||||||||
| Mortgages payable | $ | 1,360,467 | |||||||||||
| Revolving credit facility | — | — | 3,881 | ||||||||||
| Deferred financing costs, net - credit facility (included in other assets) | (3,881 | ) | |||||||||||
| Unsecured term loan | 296,952 | ||||||||||||
| Total Consolidated Indebtedness | $ | 1,653,538 | |||||||||||
| Page 45 | |
| DEBT BY INSTRUMENT | JUNE 30, 2019 (Unaudited) |
dollars in thousands Asset | % Ownership | Principal Balance | Stated Interest Rate | Interest Rate Hedge | Current Annual Interest Rate (1) | Initial Maturity Date | Extended Maturity Date (2) | ||||||
| Unconsolidated | |||||||||||||
| 11333 Woodglen Drive | 18.0 | % | $ | 12,588 | L + 1.90% | Swap | 3.52 | % | 01/01/20 | 01/01/20 | |||
| Galvan | 1.8 | % | 89,500 | L + 1.75% | Cap | 4.15 | % | 03/06/20 | 03/06/21 | ||||
| Rosslyn Gateway - North, Rosslyn Gateway - South | 18.0 | % | 49,500 | L + 2.00% | Cap | 3.00 | % | 11/17/19 | 11/17/21 | ||||
| The Foundry | 9.9 | % | 58,000 | L + 1.85% | Cap | 4.25 | % | 12/12/19 | 12/12/21 | ||||
L'Enfant Plaza Office - North, L'Enfant Plaza Office - East, L'Enfant Plaza Retail (6) | 49.0 | % | 212,090 | L + 3.65% | Cap | 5.97 | % | 05/08/20 | 05/08/22 | ||||
| 500 L'Enfant Plaza | 49.0 | % | 65,242 | L + 3.75% | Cap | 6.15 | % | 05/08/20 | 05/08/22 | ||||
| Atlantic Plumbing | 64.0 | % | 100,000 | L + 1.50% | — | 3.90 | % | 11/08/22 | 11/08/22 | ||||
| Stonebridge at Potomac Town Center | 10.0 | % | 104,611 | L + 1.70% | Swap | 3.25 | % | 12/10/20 | 12/10/22 | ||||
| The Alaire | 18.0 | % | 48,000 | L + 1.82% | Cap | 4.22 | % | 03/01/25 | 03/01/25 | ||||
| 1101 17th Street | 55.0 | % | 60,000 | L + 1.25% | Swap | 4.13 | % | 06/13/25 | 06/13/25 | ||||
| Fairway Apartments | 10.0 | % | 46,936 | L + 1.50% | Swap | 3.60 | % | 07/01/22 | 07/01/25 | ||||
| 7900 Wisconsin Avenue | 50.0 | % | 18,044 | 4.82% | Fixed | 4.82 | % | 07/15/25 | 07/15/25 | ||||
| The Gale Eckington | 5.0 | % | 110,813 | L + 1.60% | Swap | 3.56 | % | 07/31/22 | 07/31/25 | ||||
| Pickett Industrial Park | 10.0 | % | 23,600 | L + 1.45% | Swap | 3.56 | % | 09/04/25 | 09/04/25 | ||||
| The Terano | 1.8 | % | 34,000 | L + 1.35% | Swap | 4.45 | % | 11/09/25 | 11/09/25 | ||||
| Wardman Park | 16.7 | % | 124,617 | 4.77% | Fixed | 4.77 | % | 02/01/23 | 02/01/28 | ||||
| Total Unconsolidated Principal Balance | 1,157,541 | ||||||||||||
| Deferred financing costs | (1,945 | ) | |||||||||||
| Total Unconsolidated Indebtedness | $ | 1,155,596 | |||||||||||
| Principal Balance at JBG SMITH Share | |||||||||||||
| Consolidated principal balance at JBG SMITH share | $ | 1,663,977 | 87.9 | % | |||||||||
| Unconsolidated principal balance at JBG SMITH share | 313,499 | 67 | % | ||||||||||
| Total Consolidated and Unconsolidated Principal Balance at JBG SMITH Share | $ | 1,977,476 | |||||||||||
| Indebtedness at JBG SMITH Share (net of premium / (discount) and deferred financing costs) | |||||||||||||
| Consolidated indebtedness at JBG SMITH Share | $ | 1,653,538 | 1,653,538 | ||||||||||
| Unconsolidated indebtedness at JBG SMITH Share | 312,686 | ||||||||||||
| Total Consolidated and Unconsolidated Indebtedness at JBG SMITH Share | $ | 1,966,224 | 1.97 | ||||||||||
____________________
| (1) | June 30, 2019 one-month LIBOR of 2.40% applied to loans which are denoted as floating (no swap) or floating with a cap, except as otherwise noted. |
| (2) | Represents the maturity date based on execution of all extension options. Many of these extensions are subject to lender covenant tests. |
| (3) | The notional amount of the Central Place Tower interest rate swap as of June 30, 2019 was $220.0 million. |
| (4) | As of July 17, 2019, the interest rate for Tranche A-2 Term Loan was reduced by 40 basis points to L+1.15%. As of June 30, 2019, the notional amount of the Tranche A-2 Term Loan interest rate swap was $137.6 million. |
| (5) | As of June 30, 2019, net deferred financing costs related to our revolving credit facility totaling $3.9 million were included in "Other assets, net" in our condensed consolidated balance sheet. |
| (6) | The base rate for this loan is three-month LIBOR, which was 2.32% as of June 30, 2019. |
| Page 46 | |
| CONSOLIDATED REAL ESTATE VENTURES | JUNE 30, 2019 (Unaudited) |
| Asset Type | City | Submarket | % Ownership | Total Square Feet | |||
| MRP Realty | |||||||
965 Florida Avenue (1) | Multifamily | Washington, DC | U Street/Shaw | 96.1 | % | 336,092 | |
| Total Consolidated Real Estate Ventures | 336,092 | ||||||
____________________
Note: Total square feet at 100% share.
| (1) | Ownership percentage reflects expected dilution of JBG SMITH's real estate venture partner as contributions are funded during the construction of the asset. As of June 30, 2019, JBG SMITH's ownership interest was 93.1%. |
| Page 47 | |
UNCONSOLIDATED REAL ESTATE VENTURES | JUNE 30, 2019 (Unaudited) |
| Asset Type | City | Submarket | % Ownership | Total Square Feet | |||
| Landmark | |||||||
| L'Enfant Plaza Office - East | Commercial | Washington, DC | Southwest | 49.0 | % | 397,296 | |
| L'Enfant Plaza Office - North | Commercial | Washington, DC | Southwest | 49.0 | % | 298,445 | |
| 500 L'Enfant Plaza | Commercial | Washington, DC | Southwest | 49.0 | % | 215,194 | |
| L'Enfant Plaza Retail | Commercial | Washington, DC | Southwest | 49.0 | % | 119,361 | |
| Rosslyn Gateway - North | Commercial | Arlington, VA | Rosslyn | 18.0 | % | 143,506 | |
| Rosslyn Gateway - South | Commercial | Arlington, VA | Rosslyn | 18.0 | % | 102,131 | |
| 11333 Woodglen Drive | Commercial | Rockville, MD | Rockville Pike Corridor | 18.0 | % | 62,650 | |
| Galvan | Multifamily | Rockville, MD | Rockville Pike Corridor | 1.8 | % | 390,641 | |
| The Alaire | Multifamily | Rockville, MD | Rockville Pike Corridor | 18.0 | % | 266,673 | |
| The Terano | Multifamily | Rockville, MD | Rockville Pike Corridor | 1.8 | % | 195,864 | |
| NoBe II Land | Future Development | Rockville, MD | Rockville Pike Corridor | 18.0 | % | 589,000 | |
| Rosslyn Gateway - South Land | Future Development | Arlington, VA | Rosslyn | 18.0 | % | 498,500 | |
| Rosslyn Gateway - North Land | Future Development | Arlington, VA | Rosslyn | 18.0 | % | 311,000 | |
| L'Enfant Plaza Office - Center | Future Development | Washington, DC | Southwest | 49.0 | % | 350,000 | |
| Courthouse Metro Land | Future Development | Arlington, VA | Clarendon/Courthouse | 18.0 | % | 286,500 | |
| Courthouse Metro Land - Option | Future Development | Arlington, VA | Clarendon/Courthouse | 18.0 | % | 62,500 | |
| 5615 Fishers Drive | Future Development | Rockville, MD | Rockville Pike Corridor | 18.0 | % | 106,500 | |
| 12511 Parklawn Drive | Future Development | Rockville, MD | Rockville Pike Corridor | 18.0 | % | 6,500 | |
| Woodglen | Future Development | Rockville, MD | Rockville Pike Corridor | 18.0 | % | — | |
| 4,402,261 | |||||||
| CBREI Venture | |||||||
| Stonebridge at Potomac Town Center | Commercial | Woodbridge, VA | Prince William County | 10.0 | % | 503,613 | |
| Pickett Industrial Park | Commercial | Alexandria, VA | Eisenhower Avenue | 10.0 | % | 246,145 | |
| The Foundry | Commercial | Washington, DC | Georgetown | 9.9 | % | 221,124 | |
| The Gale Eckington | Multifamily | Washington, DC | H Street/NoMa | 5.0 | % | 466,716 | |
| Fairway Apartments | Multifamily | Reston, VA | Reston | 10.0 | % | 370,850 | |
| Atlantic Plumbing | Multifamily | Washington, DC | U Street/Shaw | 64.0 | % | 245,527 | |
| Fairway Land | Future Development | Reston, VA | Reston | 10.0 | % | 526,200 | |
| Stonebridge at Potomac Town Center - Land | Future Development | Woodbridge, VA | Prince William County | 10.0 | % | 22,900 | |
| 2,603,075 | |||||||
| Page 48 | |
UNCONSOLIDATED REAL ESTATE VENTURES | JUNE 30, 2019 (Unaudited) |
| Asset Type | City | Submarket | % Ownership | Total Square Feet | |||
| Canadian Pension Plan Investment Board | |||||||
1900 N Street (1) | Commercial | Washington, DC | CBD | 55.0 | % | 271,433 | |
| 1101 17th Street | Commercial | Washington, DC | CBD | 55.0 | % | 211,193 | |
| 482,626 | |||||||
| Forest City | |||||||
| Waterfront Station | Future Development | Washington, DC | Southwest | 2.5 | % | 662,600 | |
| Brandywine | |||||||
| 1250 1st Street | Future Development | Washington, DC | NoMa | 30.0 | % | 265,800 | |
| 51 N Street | Future Development | Washington, DC | NoMa | 30.0 | % | 177,500 | |
| 50 Patterson Street | Future Development | Washington, DC | NoMa | 30.0 | % | 142,200 | |
| 585,500 | |||||||
| Berkshire Group | |||||||
| 7900 Wisconsin Avenue | Multifamily | Bethesda, MD | Bethesda CBD | 50.0 | % | 359,025 | |
| CIM Group / Pacific Life Insurance Company | |||||||
| Wardman Park | Future Development | Washington, DC | Woodley Park | 16.7 | % | — | |
| Total Unconsolidated Real Estate Ventures | 9,095,087 | ||||||
____________________
Note: Total square feet at 100% share.
| (1) | Ownership percentage reflects expected dilution of JBG SMITH as contributions are funded during the construction of the asset. As of June 30, 2019, JBG SMITH's ownership interest was 59.9%. |
| Page 49 | |
| DEFINITIONS | JUNE 30, 2019 |
Annualized Rent
“Annualized rent” is defined as (i) for commercial assets, or the retail component of a mixed-use asset, the in-place monthly base rent before free rent, plus tenant reimbursements as of June 30, 2019, multiplied by 12, with triple net leases converted to a gross basis by adding estimated tenant reimbursements to monthly base rent, and (ii) for multifamily assets, or the multifamily component of a mixed-use asset, the in-place monthly base rent before free rent as of June 30, 2019, multiplied by 12. Annualized rent excludes rent from signed but not yet commenced leases.
Annualized Rent Per Square Foot
“Annualized rent per square foot” is defined as (i) for commercial assets, annualized office rent divided by occupied office square feet and annualized retail rent divided by occupied retail square feet; and (ii) for multifamily assets, monthly multifamily rent divided by occupied multifamily square feet; annualized retail rent and retail square feet are excluded from this metric. Occupied square footage may differ from leased square footage because leased square footage includes leases that have been signed but have not yet commenced.
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), EBITDA for Real Estate ("EBITDAre") and Adjusted EBITDA
Management uses EBITDA and EBITDAre, non-GAAP financial measures, as supplemental operating performance measures and believes they help investors and lenders meaningfully evaluate and compare our operating performance from period-to-period by removing from our operating results the impact of our capital structure (primarily interest charges from our outstanding debt and the impact of our interest rate swaps) and certain non-cash expenses (primarily depreciation and amortization on our assets). EBITDAre is computed in accordance with the definition established by NAREIT. NAREIT defines EBITDAre as GAAP net income (loss) adjusted to exclude interest expense, income taxes, depreciation and amortization expenses, gains on sales of real estate and impairment losses of real estate, 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,” a non-GAAP financial measure, represents EBITDAre adjusted for items we believe are not representative of ongoing operating results, such as transaction and other costs, gain (loss) on the extinguishment of debt, distributions in excess of our investment in unconsolidated real estate ventures, gain on the bargain purchase of a business, lease liability adjustments 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. A reconciliation of net income (loss) to EBITDA, EBITDAre and Adjusted EBITDA is presented on page 15.
Estimated Potential Development Density
‘‘Estimated potential development density’’ reflects management’s estimate of developable gross square feet based on our current business plans with respect to real estate owned or controlled as of June 30, 2019. 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.
Free Rent
‘‘Free rent’’ means the amount of base rent and tenant reimbursements that are abated according to the applicable lease agreement(s).
Funds from Operations ("FFO"), Core FFO and Funds Available for Distribution ("FAD")
FFO is a non-GAAP financial measure computed in accordance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018. NAREIT defines FFO as “net income (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity."
"Core FFO" represents FFO adjusted to exclude items (net of tax) which we believe are not representative of ongoing operating results, such as transaction and other costs, gains (or losses) on extinguishment of debt, gain on the bargain purchase of a business, 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, amortization of the management contracts intangible and the mark-to-market of derivative instruments.
"FAD" is a non-GAAP financial measure and represents FFO less recurring tenant improvements, leasing commissions and other capital expenditures, net deferred rent activity, third-party lease liability assumption payments, 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. 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 and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO, Core FFO and FAD do not represent cash generated from operating activities and
| Page 50 | |
| DEFINITIONS | JUNE 30, 2019 |
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. A reconciliation of net income to FFO, Core FFO and FAD is presented on pages 16-17.
Future Development
“Future development” refers to assets that are development opportunities on which we do not intend to commence construction within 18 months of June 30, 2019 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.
Historical Cost, Estimated Incremental Investment, Estimated Total Investment and Estimated Total Project Cost
“Historical cost” is a non-GAAP measure which includes the total historical cost incurred by JBG SMITH with respect to the development of an asset, including any acquisition costs, hard costs, soft costs, tenant improvements (excluding free rent converted to tenant improvement allowances), leasing costs and other similar costs, but excluding any financing costs, ground rent expenses and capitalized payroll costs incurred as of June 30, 2019.
“Estimated incremental investment” means management’s estimate of the remaining cost to be incurred in connection with the development of an asset as of June 30, 2019, including all remaining acquisition costs, hard costs, soft costs, tenant improvements (excluding free rent converted to tenant improvement allowances), leasing costs and other similar costs to develop and stabilize the asset but excluding any financing costs, ground rent expenses and capitalized payroll costs.
“Estimated total investment” means, with respect to the development of an asset, the sum of the historical cost in such asset and the estimated incremental investment for such asset.
"Estimated total project cost" is estimated total investment excluding purchase price allocation adjustments recognized as a result of the Formation Transaction.
Actual incremental investment, actual total investment and actual total project cost may differ substantially from our estimates due to numerous factors, including unanticipated expenses, delays in the estimated start and/or completion date, changes in design and other contingencies.
In Service
‘‘In service’’ refers to commercial or multifamily assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of June 30, 2019.
Metro-Served
“Metro-served” means locations, submarkets or assets that are generally nearby and within walking distance of a Metro station, defined as being within 0.5 miles of an existing or planned Metro station.
Monthly Rent Per Unit
For multifamily assets, represents multifamily rent for the month ended June 30, 2019 divided by occupied units; retail rent is excluded from this metric.
Near-Term Development
‘‘Near-term development’’ refers to assets that have substantially completed the entitlement process and on which we intend to commence construction within 18 months following June 30, 2019, subject to market conditions.
Net Operating Income ("NOI"), Adjusted Annualized NOI, Estimated Stabilized NOI and Projected NOI Yield
“NOI” is a non-GAAP financial measure management uses to measure the operating performance of our assets and consists of property-related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent, if applicable. 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 amortization of acquired above-market leases and below-market ground lease intangibles. Annualized NOI, for all assets except Crystal City Marriott, represents NOI for the three months ended June 30, 2019 multiplied by four. Due to seasonality in the hospitality business, annualized NOI for Crystal City Marriott represents the trailing 12-month NOI as of June 30, 2019. 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 Investor Package. There can be no assurance that the annualized NOI shown will reflect our actual results of operations over any 12-month period. We also report adjusted annualized NOI which includes signed but not yet commenced leases and incremental revenue from recently delivered assets assuming stabilization. While we believe adjusted annualized NOI provides useful information regarding potential future NOI from our assets, it does not account for any decrease in NOI for lease terminations, defaults or other negative events that could affect NOI and therefore, should not be relied upon as indicative of future NOI.
This Investor Package also contains management’s estimate of stabilized NOI and projections of NOI yield for under construction and near-term development assets, which are based on management’s estimates of property-related revenue and operating expenses for each asset. These estimates are inherently uncertain and represent management’s plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. The property-related revenues and operating expenses for our assets may differ materially from the estimates included in this Investor Package.
| Page 51 | |
| DEFINITIONS | JUNE 30, 2019 |
Management’s projections of NOI yield are not projections of our overall financial performance or cash flow, and there can be no assurance that the projected NOI yield set forth in this Investor Package will be achieved.
“Projected NOI yield” means our estimated stabilized NOI reported as a percentage of (i) estimated total project costs, (ii) estimated total investment and (iii) estimated incremental investment. Actual initial full year stabilized NOI yield may vary from the projected NOI yield based on the actual incremental investment to complete the asset and its actual initial full year stabilized NOI, and there can be no assurance that we will achieve the projected NOI yields described in this Investor Package.
The Company does not provide reconciliations for non-GAAP estimates on a future basis, including adjusted annualized NOI and estimated stabilized NOI because it is unable to provide a meaningful or accurate calculation or estimate of reconciling items and the information is not available without unreasonable effort. This inability is due to the inherent difficulty of forecasting the timing and/or amounts of various items that would impact net income. Additionally, no reconciliation of projected NOI yield to the most directly comparable GAAP measure is included in this Investor Package because we are unable to quantify certain amounts that would be required to be included in the comparable GAAP financial measures without unreasonable efforts because such data is not currently available or cannot be currently estimated with confidence. Accordingly, we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors.
Management uses each of these measures as supplemental performance measures for its assets and believes they provide useful information to investors because they reflect only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets.
However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. Moreover, our method of calculating NOI may differ from other real estate companies and, accordingly, may not be comparable. NOI should be considered only as a supplement to net operating income (loss) (computed in accordance with GAAP) as a measure of the operating performance of our assets.
Percent Leased
‘‘Percent leased’’ is based on leases signed as of June 30, 2019, and is calculated as total rentable square feet less rentable square feet available for lease divided by total rentable square feet expressed as a percentage. Out-of-service square feet are excluded from this calculation.
Percent Pre-Leased
‘‘Percent pre-leased’’ is based on leases signed as of June 30, 2019, and is calculated as the estimated rentable square feet leased divided by estimated total rentable square feet expressed as a percentage.
Percent Occupied
‘‘Percent occupied’’ is based on occupied rentable square feet/units as of June 30, 2019, and is calculated as (i) for office and retail space, total rentable square feet less unoccupied square feet divided by total rentable square feet, (ii) for multifamily space, total units less unoccupied units divided by total units, expressed as a percentage. Out-of-service square feet are excluded from this calculation.
Pro Rata Adjusted General and Administrative (“G&A”) Expenses
"Pro Rata Adjusted G&A expenses", a non-GAAP financial measure, represents G&A expenses adjusted for share-based compensation expense related to the Formation Transaction and special equity awards and the G&A expenses of our third-party asset management and real estate services business that are directly reimbursed. We believe that adjusting such items not considered part of our comparable operations provides a meaningful measure to assess our G&A expenses as compared to similar real estate companies and in general.
Recently Delivered
“Recently delivered” refers to commercial and multifamily assets that are below 90% leased and have been delivered within the 12 months ended June 30, 2019.
Same Store and Non-Same Store
“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.
“Non-same store” refers to all operating assets excluded from the same store pool.
Second Generation Lease
“Second generation lease” is a lease on space that had been vacant for less than nine months.
| Page 52 | |
| DEFINITIONS | JUNE 30, 2019 |
Signed But Not Yet Commenced Leases
“Signed but not yet commenced leases” means leases for assets in JBG SMITH’s portfolio that, as of June 30, 2019, have been executed but for which the contractual lease term had not yet begun, and no rental payments had yet been charged to the tenant.
Square Feet
‘‘Square feet’’ or ‘‘SF’’ refers to the area that can be rented to tenants, defined as (i) for commercial assets, rentable square footage defined in the current lease and for vacant space the rentable square footage defined in the previous lease for that space, (ii) for multifamily assets, management’s estimate of approximate rentable square feet, (iii) for assets under construction and near-term development assets, management’s estimate of approximate rentable square feet based on current design plans as of June 30, 2019, or (iv) for future development assets, management’s estimate of developable gross square feet based on its current business plans with respect to real estate owned or controlled as of June 30, 2019.
Transaction and Other Costs
Transaction and other costs include amounts incurred for transition services provided by our former parent, integration costs, severance costs, costs incurred in connection with recapitalization transactions and disposition costs and costs related to other completed, potential and pursued transactions.
Under Construction
‘‘Under construction’’ refers to assets that were under construction during the three months ended June 30, 2019.
| Page 53 | |
APPENDIX - EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| Three Months Ended | ||||||||||||||||
| dollars in thousands | Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | |||||||||||
| EBITDA, EBITDAre and Adjusted EBITDA | �� | |||||||||||||||
| Net income (loss) | $ | (3,328 | ) | $ | 28,248 | $ | 994 | $ | 26,382 | $ | 24,023 | |||||
| Depreciation and amortization expense | 45,995 | 48,719 | 67,556 | 46,603 | 48,117 | |||||||||||
Interest expense (1) | 13,107 | 17,174 | 18,184 | 18,979 | 18,027 | |||||||||||
| Income tax (expense) benefit | 51 | (1,172 | ) | 698 | (841 | ) | 313 | |||||||||
| Unconsolidated real estate ventures allocated share of above adjustments | 10,357 | 7,806 | 10,253 | 10,986 | 10,602 | |||||||||||
| Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures | (4 | ) | (1 | ) | (182 | ) | — | 129 | ||||||||
EBITDA (2) | $ | 66,178 | $ | 100,774 | $ | 97,503 | $ | 102,109 | $ | 101,211 | ||||||
| Gain on sale of real estate | — | (39,033 | ) | (6,394 | ) | (11,938 | ) | (33,396 | ) | |||||||
| Gain on sale of unconsolidated real estate assets | (335 | ) | — | (20,554 | ) | (15,488 | ) | — | ||||||||
EBITDAre (2) | $ | 65,843 | $ | 61,741 | $ | 70,555 | $ | 74,683 | $ | 67,815 | ||||||
Transaction and other costs (3) | 2,974 | 4,895 | 15,572 | 4,126 | 3,787 | |||||||||||
| Loss on extinguishment of debt | 1,889 | — | 617 | 79 | 4,457 | |||||||||||
| Reduction of gain on bargain purchase | — | — | — | — | 7,606 | |||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 11,131 | 9,118 | 8,387 | 9,097 | |||||||||||
Earnings (losses) and distributions in excess of our investment in unconsolidated real estate venture (4) | (232 | ) | (6,441 | ) | (7,374 | ) | (890 | ) | (5,412 | ) | ||||||
| Unconsolidated real estate ventures allocated share of above adjustments | — | — | 1,542 | — | — | |||||||||||
| Lease liability adjustments | — | — | (7,422 | ) | (2,543 | ) | — | |||||||||
| Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures | — | — | — | — | (124 | ) | ||||||||||
Adjusted EBITDA (2) | $ | 79,997 | $ | 71,326 | $ | 82,608 | $ | 83,842 | $ | 87,226 | ||||||
Net Debt to Annualized Adjusted EBITDA (5) | 5.2x | 7.1x | 6.5x | 6.7x | 6.3x | |||||||||||
| June 30, 2019 | March 31, 2019 | December 31, 2018 | September 30, 2018 | June 30, 2018 | ||||||||||||
| Net Debt (at JBG SMITH Share) | ||||||||||||||||
Consolidated indebtedness (6) | $ | 1,653,538 | $ | 2,128,803 | $ | 2,130,704 | $ | 2,103,589 | $ | 2,033,183 | ||||||
Unconsolidated indebtedness (6) | 312,686 | 303,397 | 298,588 | 442,669 | 440,177 | |||||||||||
| Total consolidated and unconsolidated indebtedness | 1,966,224 | 2,432,200 | 2,429,292 | 2,546,258 | 2,473,360 | |||||||||||
| Less: cash and cash equivalents | 289,554 | 405,646 | 273,611 | 284,012 | 276,629 | |||||||||||
| Net Debt (at JBG SMITH Share) | $ | 1,676,670 | $ | 2,026,554 | $ | 2,155,681 | $ | 2,262,246 | $ | 2,196,731 | ||||||
____________________
Note: All EBITDA measures as shown above are attributable to operating partnership common units.
| (1) | Interest expense includes the amortization of deferred financing costs and the ineffective portion of any interest rate swaps or caps, net of capitalized interest. |
| (2) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $2.2 million, $1.5 million and $1.5 million for Q4 2018, Q3 2018 and Q2 2018). |
| (3) | Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs and severance costs), costs related to the pursuit of Amazon's additional headquarters, demolition costs and costs related to other completed, potential and pursued transactions. |
| (4) | As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized. |
| (5) | Net Debt to Annualized Adjusted EBITDA for Q2 2019 includes $472.8 million of net proceeds from the underwritten public offering completed in April 2019. Adjusted EBITDA for each quarter is annualized by multiplying by four. |
| (6) | Net of premium/discount and deferred financing costs. |
| Page 54 | |
APPENDIX - FFO, CORE FFO AND FAD (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| Three Months Ended | |||||||||||||||
| in thousands, except per share data | Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | ||||||||||
| FFO and Core FFO | |||||||||||||||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 24,861 | $ | 710 | $ | 22,830 | $ | 20,574 | ||||
| Net income (loss) attributable to redeemable noncontrolling interests | (288 | ) | 3,387 | 178 | 3,552 | 3,574 | |||||||||
| Net loss attributable to noncontrolling interests | — | — | 106 | — | (125 | ) | |||||||||
| Net income (loss) | (3,328 | ) | 28,248 | 994 | 26,382 | 24,023 | |||||||||
| Gain on sale of real estate | — | (39,033 | ) | (6,394 | ) | (11,938 | ) | (33,396 | ) | ||||||
| Gain on sale of unconsolidated real estate assets | (335 | ) | — | (20,554 | ) | (15,488 | ) | — | |||||||
| Real estate depreciation and amortization | 43,308 | 46,035 | 64,891 | 43,945 | 45,587 | ||||||||||
| Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures | 4,804 | 4,653 | 6,079 | 6,345 | 6,179 | ||||||||||
| Net (income) loss attributable to noncontrolling interests in consolidated real estate ventures | (4 | ) | (1 | ) | (182 | ) | — | 129 | |||||||
FFO Attributable to Operating Partnership Common Units (1) | $ | 44,445 | $ | 39,902 | $ | 44,834 | $ | 49,246 | $ | 42,522 | |||||
| FFO attributable to redeemable noncontrolling interests | (5,014 | ) | (4,783 | ) | (5,741 | ) | (6,631 | ) | (6,299 | ) | |||||
FFO attributable to common shareholders (1) | $ | 39,431 | $ | 35,119 | $ | 39,093 | $ | 42,615 | $ | 36,223 | |||||
| FFO attributable to the operating partnership common units | $ | 44,445 | $ | 39,902 | $ | 44,834 | $ | 49,246 | $ | 42,522 | |||||
Transaction and other costs, net of tax (2) | 2,847 | 4,626 | 14,509 | 3,586 | 3,394 | ||||||||||
| (Gain) loss from mark-to-market on derivative instruments | 524 | (476 | ) | (542 | ) | 152 | (432 | ) | |||||||
| Share of (gain) loss from mark-to-market on derivative instruments held by unconsolidated real estate ventures | 1,153 | 227 | 379 | (49 | ) | (90 | ) | ||||||||
| Loss on extinguishment of debt, net of noncontrolling interests | 1,889 | — | 2,159 | 79 | 4,333 | ||||||||||
Earnings (losses) and distributions in excess of our investment in unconsolidated real estate venture (3) | (232 | ) | (6,441 | ) | (7,374 | ) | (890 | ) | (5,412 | ) | |||||
| Reduction of gain on bargain purchase | — | — | — | — | 7,606 | ||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 11,131 | 9,118 | 8,387 | 9,097 | ||||||||||
| Lease liability adjustments | — | — | (7,422 | ) | (2,543 | ) | — | ||||||||
| Amortization of management contracts intangible, net of tax | 1,288 | 1,287 | 1,287 | 1,288 | 1,287 | ||||||||||
Core FFO Attributable to Operating Partnership Common Units (1) | $ | 61,437 | $ | 50,256 | $ | 56,948 | $ | 59,256 | $ | 62,305 | |||||
| Core FFO attributable to redeemable noncontrolling interests | (6,931 | ) | (6,024 | ) | (7,292 | ) | (7,978 | ) | (9,229 | ) | |||||
Core FFO attributable to common shareholders (1) | $ | 54,506 | $ | 44,232 | $ | 49,656 | $ | 51,278 | $ | 53,076 | |||||
| FFO per diluted common share | $ | 0.30 | $ | 0.28 | $ | 0.32 | $ | 0.36 | $ | 0.31 | |||||
| Core FFO per diluted common share | $ | 0.41 | $ | 0.36 | $ | 0.41 | $ | 0.43 | $ | 0.45 | |||||
| Weighted average diluted shares | 131,754 | 123,423 | 120,917 | 119,835 | 117,955 | ||||||||||
See footnotes on page 56.
| Page 55 | |
APPENDIX - FFO, CORE FFO AND FAD (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| Three Months Ended | |||||||||||||||
| in thousands, except per share data | Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | ||||||||||
| FAD | |||||||||||||||
| Core FFO attributable to the operating partnership common units | $ | 61,437 | $ | 50,256 | $ | 56,948 | $ | 59,256 | $ | 62,305 | |||||
| Recurring capital expenditures and second generation tenant improvements and leasing commissions | (20,076 | ) | (22,297 | ) | (35,836 | ) | (19,123 | ) | (11,057 | ) | |||||
Straight-line and other rent adjustments (4) | (8,739 | ) | (6,808 | ) | (6,692 | ) | (1,368 | ) | (1,216 | ) | |||||
| Share of straight-line rent from unconsolidated real estate ventures | (1,473 | ) | (135 | ) | 680 | 180 | 189 | ||||||||
| Third-party lease liability assumption payments | (1,183 | ) | (1,136 | ) | (1,130 | ) | (912 | ) | (619 | ) | |||||
| Share-based compensation expense | 5,694 | 5,330 | 4,666 | 4,879 | 5,941 | ||||||||||
| Amortization of debt issuance costs | 875 | 970 | 1,140 | 1,155 | 1,201 | ||||||||||
| Share of amortization of debt issuance costs from unconsolidated real estate ventures | 69 | 48 | 67 | 66 | 66 | ||||||||||
| Non-real estate depreciation and amortization | 916 | 912 | 893 | 886 | 758 | ||||||||||
FAD available to the Operating Partnership Common Units (A) (5) | $ | 37,520 | $ | 27,140 | $ | 20,736 | $ | 45,019 | $ | 57,568 | |||||
Distributions to common shareholders and unitholders (6) (B) | $ | 34,006 | $ | 31,284 | $ | 31,284 | $ | 31,196 | $ | 31,197 | |||||
| FAD Payout Ratio (B÷A) | 90.6 | % | 115.3 | % | 150.9 | % | 69.3 | % | 54.2 | % | |||||
| Capital Expenditures | |||||||||||||||
| Maintenance and recurring capital expenditures | $ | 7,252 | $ | 5,495 | $ | 14,445 | $ | 7,113 | $ | 3,989 | |||||
| Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures | 252 | 88 | 978 | 444 | 250 | ||||||||||
| Second generation tenant improvements and leasing commissions | 12,357 | 16,155 | 19,211 | 10,603 | 6,273 | ||||||||||
| Share of second generation tenant improvements and leasing commissions from unconsolidated real estate ventures | 215 | 559 | 1,202 | 963 | 545 | ||||||||||
| Recurring capital expenditures and second generation tenant improvements and leasing commissions | 20,076 | 22,297 | 35,836 | 19,123 | 11,057 | ||||||||||
| First generation tenant improvements and leasing commissions | 18,996 | 6,197 | 8,215 | 4,443 | 6,676 | ||||||||||
| Share of first generation tenant improvements and leasing commissions from unconsolidated real estate ventures | 419 | 233 | 17 | 169 | 1,391 | ||||||||||
| Non-recurring capital expenditures | 5,470 | 6,722 | 15,375 | 2,895 | 3,765 | ||||||||||
| Share of non-recurring capital expenditures from unconsolidated joint ventures | 30 | — | 112 | 300 | 142 | ||||||||||
| Non-recurring capital expenditures | 24,915 | 13,152 | 23,719 | 7,807 | 11,974 | ||||||||||
| Total JBG SMITH Share of Capital Expenditures | $ | 44,991 | $ | 35,449 | $ | 59,555 | $ | 26,930 | $ | 23,031 | |||||
_______________
| (1) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $2.2 million, $1.5 million and $1.5 million for Q4 2018, Q3 2018 and Q2 2018). |
| (2) | Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs, and severance costs), costs related to the pursuit of Amazon's additional headquarters, demolition costs and costs related to other completed, potential and pursued transactions. |
| (3) | As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized. |
| (4) | Includes straight-line rent, above/below market lease amortization and lease incentive amortization. |
| (5) | Since Q4 2018, FAD available to the Operating Partnership Common Units has been adversely impacted by increases in second generation tenant improvements and leasing commissions from the early renewal of several leases during the quarters. Additionally, Q4 2018 was further impacted by increases in recurring capital expenditures, which is consistent with historical seasonality trends. |
| (6) | The distribution for Q1 2019 excludes a special dividend of $0.10 per common share that was paid in January 2019. |
| Page 56 | |
APPENDIX - NOI RECONCILIATIONS (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| dollars in thousands | Three Months Ended | ||||||||||||||
| Q2 2019 | Q1 2019 | Q4 2018 | Q3 2018 | Q2 2018 | |||||||||||
| Net income (loss) attributable to common shareholders | $ | (3,040 | ) | $ | 24,861 | $ | 710 | $ | 22,830 | $ | 20,574 | ||||
| Add: | |||||||||||||||
| Depreciation and amortization expense | 45,995 | 48,719 | 67,556 | 46,603 | 48,117 | ||||||||||
| General and administrative expense: | |||||||||||||||
Corporate and other (1) | 11,559 | 12,314 | 8,512 | 8,219 | 8,603 | ||||||||||
| Third-party real estate services | 28,710 | 28,066 | 25,274 | 20,754 | 21,189 | ||||||||||
| Share-based compensation related to Formation Transaction and special equity awards | 9,523 | 11,131 | 9,118 | 8,387 | 9,097 | ||||||||||
| Transaction and other costs | 2,974 | 4,895 | 15,572 | 4,126 | 3,787 | ||||||||||
| Interest expense | 13,107 | 17,174 | 18,184 | 18,979 | 18,027 | ||||||||||
| Loss on extinguishment of debt | 1,889 | — | 617 | 79 | 4,457 | ||||||||||
| Reduction of gain on bargain purchase | — | — | — | — | 7,606 | ||||||||||
| Income tax expense (benefit) | 51 | (1,172 | ) | 698 | (841 | ) | 313 | ||||||||
| Net income (loss) attributable to redeemable noncontrolling interests | (288 | ) | 3,387 | 178 | 3,552 | 3,574 | |||||||||
| Less: | |||||||||||||||
| Third-party real estate services, including reimbursements | 29,487 | 27,691 | 26,421 | 23,788 | 24,160 | ||||||||||
Other income (2) | 2,114 | 1,640 | 1,454 | 1,708 | 2,080 | ||||||||||
| Income (loss) from unconsolidated real estate ventures, net | (1,810 | ) | 3,601 | 23,991 | 13,484 | 3,836 | |||||||||
| Interest and other income, net | 2,052 | 951 | 9,991 | 4,091 | 513 | ||||||||||
| Gain on sale of real estate | — | 39,033 | 6,394 | 11,938 | 33,396 | ||||||||||
| Net (income) loss attributable to noncontrolling interests | — | — | (106 | ) | — | 125 | |||||||||
Consolidated NOI (3) | 78,637 | 76,459 | 78,274 | 77,679 | 81,234 | ||||||||||
| NOI attributable to unconsolidated real estate ventures at our share | 5,091 | 5,386 | 8,847 | 9,722 | 9,011 | ||||||||||
Non-cash rent adjustments (4) | (8,738 | ) | (6,808 | ) | (6,691 | ) | (1,369 | ) | (1,237 | ) | |||||
Other adjustments (1) (5) | 3,758 | 3,353 | 3,915 | 3,205 | 3,635 | ||||||||||
| Total adjustments | 111 | 1,931 | 6,071 | 11,558 | 11,409 | ||||||||||
NOI (3) | $ | 78,748 | $ | 78,390 | $ | 84,345 | $ | 89,237 | $ | 92,643 | |||||
Less: out-of-service NOI loss (6) | (1,556 | ) | (1,271 | ) | $ | (1,195 | ) | $ | (1,692 | ) | $ | (1,992 | ) | ||
Operating portfolio NOI (3) | $ | 80,304 | $ | 79,661 | $ | 85,540 | $ | 90,929 | $ | 94,635 | |||||
Non-same store NOI (7) | 6,311 | 6,088 | 8,742 | 20,910 | 24,449 | ||||||||||
Same store NOI (8) | $ | 73,993 | $ | 73,573 | $ | 76,798 | $ | 70,019 | $ | 70,186 | |||||
___________________
Note: NOI, non-same store NOI and same store NOI are presented as originally reported in the respective quarter.
| (1) | Adjusted for property management fees of $4.2 million and $4.0 million for Q3 2018 and Q2 2018. |
| (2) | Excludes operating parking income of $6.7 million and $6.5 million in Q2 2019 and Q1 2019. |
| (3) | Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $2.2 million, $1.5 million and $1.5 million for Q4 2018, Q3 2018 and Q2 2018). |
| (4) | Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization. |
| (5) | Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue. |
| (6) | Includes the results for our Under Construction assets and Future Development Pipeline. |
| (7) | Includes the results for properties that were not owned, operated and in service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. |
| (8) | Includes the results of the properties that are owned, operated and in service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. |
| Page 57 | |
APPENDIX - NOI RECONCILIATIONS (NON-GAAP) | JUNE 30, 2019 (Unaudited) |
| Page 58 | |