Market Overview

JBG SMITH Announces Second Quarter 2018 Results

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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, 2018 and reported its financial
results.

Additional information regarding our results of operations, properties
and tenants can be found in our Second Quarter 2018 Investor Report,
which is posted in the Investor Relations section of our website at www.jbgsmith.com.

Second Quarter 2018 Financial Results

  • Net income attributable to common shareholders was $20.6 million, or
    $0.17 per diluted share.
  • Funds From Operations ("FFO") attributable to common shareholders was
    $36.2 million, or $0.31 per diluted share.
  • Core Funds From Operations ("Core FFO") attributable to common
    shareholders was $53.1 million, or $0.45 per diluted share.

Six Months Ended June 30, 2018 Financial Results

  • Net income attributable to common shareholders was $16.4 million, or
    $0.14 per diluted share.
  • FFO attributable to common shareholders was $77.4 million, or $0.66
    per diluted share.
  • Core FFO attributable to common shareholders was $105.3 million, or
    $0.89 per diluted share.

Operating Portfolio Highlights

  • Annualized Net Operating Income ("NOI") for the three months ended
    June 30, 2018 was $378.5 million, compared to $371.3 million for the
    three months ended March 31, 2018, at our share.
  • The operating office portfolio was 87.4% leased and 86.0% occupied as
    of June 30, 2018, compared to 87.8% and 87.0% as of March 31, 2018, at
    our share. The decreases are due in part to the movement of CEB Tower
    at Central Place into our recently delivered operating assets during
    the quarter. The in service operating office portfolio was 88.0%
    leased and 86.6% occupied as of June 30, 2018, compared to 87.9%
    leased and 87.0% occupied as of March 31, 2018.
  • The operating multifamily portfolio was 95.9% leased and 92.6%
    occupied as of June 30, 2018, compared to 96.1% and 94.2% as of
    March 31, 2018, at our share. The decreases are due in part to the
    movement of 1221 Van Street into our recently delivered operating
    assets during the quarter. The in service operating multifamily
    portfolio was 98.0% leased and 95.0% occupied as of June 30, 2018,
    compared to 96.1% leased and 94.2% occupied as of March 31, 2018.
  • The operating other portfolio (excluding the Crystal City Marriott)
    was 93.4% leased and 91.1% occupied as of June 30, 2018, compared to
    both 94.2% leased and occupied as of March 31, 2018, at our share.
  • Executed approximately 319,000 square feet of office leases at our
    share in the second quarter, comprising approximately 83,000 square
    feet of new leases, and approximately 236,000 square feet of second
    generation leases, which generated a 2.3% rental rate increase on a
    GAAP basis and an 8.7% rental rate decrease on a cash basis.
  • Executed approximately 641,000 square feet of office leases at our
    share during the six months ended June 30, 2018, comprising
    approximately 217,000 square feet of new leases, and approximately
    424,000 square feet of second generation leases, which generated a
    2.0% rental rate increase on a GAAP basis and a 6.8% rental rate
    decrease on a cash basis.
  • Same Store Net Operating Income ("SSNOI") increased 6.2% to $70.2
    million for the three months ended June 30, 2018, compared to $66.1
    million for the three months ended June 30, 2017. SSNOI increased 8.0%
    to $139.5 million for the six months ended June 30, 2018, compared to
    $129.1 million for the six months ended June 30, 2017. The increase in
    SSNOI is largely attributable to a reduction in real estate tax
    expense resulting from real estate tax refunds and reduced
    assessments, and the expiration of payments associated with the
    assumption of lease liabilities. The same store pool as of June 30,
    2018 includes only the assets that were in service for the entirety of
    both periods being compared and does not include the JBG Assets
    acquired in our Formation Transaction.

Development Portfolio Highlights

Under Construction

  • During the quarter ended June 30, 2018, there were eight assets under
    construction (three office assets, four multifamily assets and one
    other asset), consisting of 0.5 million square feet and 1,282 units,
    both at our share.
  • During the quarter ended June 30, 2018, we delivered Stonebridge at
    Potomac Town Center-Phase II, a 41,050 square foot building located in
    Prince William County in Virginia, in which we have a 10.0% ownership
    interest. This asset delivered ahead of schedule.

Near-Term Development

  • As of June 30, 2018, there were no assets in near-term development.

Future Development Pipeline

  • As of June 30, 2018, there were 42 future development assets
    consisting of 17.2 million square feet of estimated potential density
    at our share.

Third-Party Asset Management and Real Estate
Services Business

  • For the three months ended June 30, 2018, revenue from third-party
    real estate services, including reimbursements, was $24.2 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
    $15.1 million, of which $5.5 million came from property management
    fees, $3.7 million came from asset management fees, $1.5 million came
    from leasing fees, $2.5 million came from development fees, $1.1
    million came from construction management fees and $0.9 million came
    from other service revenue.
  • The general and administrative expenses allocated to the third-party
    asset management and real estate services business were $10.4 million
    for the three months ended June 30, 2018.

Balance Sheet

  • We had $2.0 billion of debt ($2.5 billion including our share of debt
    of unconsolidated real estate ventures) as of June 30, 2018. Of the
    $2.5 billion of debt at our share, approximately 78% was fixed-rate,
    and rate caps were in place for approximately 17%.
  • The weighted average interest rate of our debt at share was 4.19% at
    June 30, 2018.
  • At June 30, 2018, our total enterprise value was approximately $7.2
    billion, comprising 137.7 million common shares and units valued at
    $5.0 billion and debt at our share of $2.5 billion, less cash and cash
    equivalents.
  • As of June 30, 2018, we had $239.4 million of cash and cash
    equivalents on a GAAP basis and $276.6 million of cash and cash
    equivalents at our share, and $1.3 billion of capacity under our
    credit facility.
  • Net Debt / Adjusted EBITDA at our share for the three and six months
    ended June 30, 2018 was 6.3x for both periods and our Net Debt / Total
    Enterprise Value was 30.5% as of June 30, 2018.

Financing and Investing Activities

  • Closed on a $33.0 million loan at our share at 1101 17th Street, an
    office asset, located in Washington, DC.
  • Repaid an aggregate total of $98.2 million of secured mortgages
    including Summit I and II, Falkland Chase - North and West Half.
  • Modified the existing $107.7 million loan on RTC West, an office asset
    located in Reston, Virginia, and the existing $73.6 million loan on
    Fort Totten Square, a multifamily asset located in Washington, DC.
  • Sold Summit I and II for $95.0 million. The sale consisted of two 100%
    occupied office buildings located in Reston, Virginia, including
    700,000 square feet of estimated potential development density. In
    connection with the sale, we repaid the related $59.0 million mortgage
    loan. We had previously closed on the sale of land and temporary
    construction easements for $2.2 million in the first quarter.
  • Sold the Bowen Building, an office building located in Washington, DC,
    for $140.0 million. In connection with the sale, repaid $115.0 million
    of the then outstanding balance on our unsecured revolving credit
    facility.

Subsequent to June 30, 2018:

  • Borrowed $200.0 million under the Tranche A-2 Term Loan, in accordance
    with the delayed draw provisions of the credit facility. We also
    repaid the outstanding revolving credit facility balance of $35.7
    million.
  • Filed a universal shelf registration statement, which provides us with
    the ability to efficiently access the public equity markets.
  • Entered into firm contracts to sell assets totaling approximately $136
    million, bringing our total dispositions and recapitalizations to
    approximately $474 million, assuming those transactions close.

Dividends

In May 2018, we paid a dividend of $0.225 per common share. In August
2018, our Board of Trustees declared a dividend of $0.225 per common
share, an indicated annual dividend of $0.90 per common share. The
dividend is payable on August 27, 2018 to common shareholders of record
as of August 14, 2018.

About JBG SMITH

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. Our mixed-use operating portfolio comprises
approximately 20 million square feet of high-quality office, multifamily
and retail assets, 98% of which are Metro-served. With a focus on
placemaking, we drive synergies across the portfolio and create
amenity-rich, walkable neighborhoods. JBG SMITH's future development
pipeline includes 17.2 million square feet of potential development
density at our share. For additional information on JBG SMITH, please
visit www.jbgsmith.com.

Forward Looking Statements

Certain statements contained herein may constitute "forward-looking
statements" as such term is defined in Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. Forward-looking statements are not guarantees of
performance. They represent our intentions, plans, expectations and
beliefs and are subject to numerous assumptions, risks and
uncertainties. Consequently, the future results of JBG SMITH Properties
("JBG SMITH" or the "Company") 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", "believes",
"expects", "anticipates", "estimates", "intends", "plans", "would",
"may" or similar expressions in this earnings release. We also note the
following forward-looking statements: 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. 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, 2017 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.

Pro Rata Information

We present certain financial information and metrics in this release "at
JBG SMITH Share," which refers to our ownership percentage of
consolidated and unconsolidated assets in real estate ventures
(collectively, "real estate ventures") as applied to these financial
measures and metrics. Financial information "at JBG SMITH Share" is
calculated on an asset-by-asset basis by applying our percentage
economic interest to each applicable line item of that asset's financial
information. "At JBG SMITH Share" information, which we also refer to as
being "at share," "our pro rata share" or "our share," is not, and is
not intended to be, a presentation in accordance with GAAP. Given that a
substantial portion of our assets are held through real estate ventures,
we believe this form of presentation, which presents our economic
interests in the partially owned entities, provides investors valuable
information regarding a significant component of our portfolio, its
composition, performance and capitalization.

We do not control the unconsolidated real estate ventures and do not
have a legal claim to our co-venturers' share of assets, liabilities,
revenue and expenses. The operating agreements of the unconsolidated
real estate ventures generally allow each co-venturer to receive cash
distributions to the extent there is available cash from operations. The
amount of cash each investor receives is based upon specific provisions
of each operating agreement and varies depending on certain factors
including the amount of capital contributed by each investor and whether
any investors are entitled to preferential distributions.

With respect to any such third-party arrangement, we would not be in a
position to exercise sole decision-making authority regarding the
property, real estate venture or other entity, and may, under certain
circumstances, be exposed to economic risks not present were a
third-party not involved. We and our respective co-venturers may each
have the right to trigger a buy-sell or forced sale arrangement, which
could cause us to sell our interest, or acquire our co-venturers'
interests, or to sell the underlying asset, either on unfavorable terms
or at a time when we otherwise would not have initiated such a
transaction. Our real estate ventures may be subject to debt, and the
repayment or refinancing of such debt may require equity capital calls.
To the extent our co-venturers do not meet their obligations to us or
our real estate ventures or they act inconsistent with the interests of
the real estate venture, we may be adversely affected. Because of these
limitations, the non-GAAP "at JBG SMITH Share" financial information
should not be considered in isolation or as a substitute for our
financial statements as reported under GAAP.

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
consolidated 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 depreciated real estate and impairment
losses of depreciable 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 non-recurring transaction and other costs,
gain (loss) on the extinguishment of debt, gain on sale of non-operating
real estate, distributions in excess of our net investment in
consolidated real ventures, gain on the bargain purchase of a business
and share-based compensation expense related to the Formation
Transaction. 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. NAREIT defines FFO as "net income
(computed in accordance with GAAP), excluding gains (or losses) from
sales of, or impairment charges related to, depreciable operating
properties, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures."

"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, gain on sale of
non-operating real estate, distributions in excess of our net investment
in consolidated real ventures, share-based compensation expense related
to the Formation Transaction, amortization of the management contracts
intangible and the mark-to-market of interest rate swaps.

"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 represents NOI for the three months ended
June 30, 2018 multiplied by four. Management believes Annualized NOI
provides useful information in understanding JBG SMITH's financial
performance over a 12-month period, however, investors and other users
are cautioned against attributing undue certainty to our calculation of
Annualized NOI. Actual NOI for any 12-month period will depend on a
number of factors beyond our ability to control or predict, including
general capital markets and economic conditions, any bankruptcy,
insolvency, default or other failure to pay rent by one or more of our
tenants and the destruction of one or more of our assets due to
terrorist attack, natural disaster or other casualty, among others. We
do not undertake any obligation to update our calculation to reflect
events or circumstances occurring after the date of this earnings
release. There can be no assurance that the annualized NOI shown will
reflect JBG SMITH's 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 this
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. No JBG Assets are included in the
same store pool.

"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.

JBG Assets

"JBG Assets" refers to the management business and certain assets and
liabilities of The JBG Companies acquired on July 18, 2017 by JBG SMITH.

 
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
   
in thousands

June 30,
2018

December 31,
2017

         
ASSETS    
Real estate, at cost:
Land and improvements $ 1,444,872 $ 1,368,294
Buildings and improvements 3,832,013 3,670,268
Construction in progress, including land 595,063   978,942  
5,871,948 6,017,504
Less accumulated depreciation (1,045,632 ) (1,011,330 )
Real estate, net 4,826,316 5,006,174
Cash and cash equivalents 239,440 316,676
Restricted cash 22,248 21,881
Tenant and other receivables, net 37,860 46,734
Deferred rent receivable, net 144,837 146,315
Investments in and advances to unconsolidated real estate ventures 368,308 261,811
Other assets, net 273,722 263,923
Assets held for sale   2,218     8,293  
TOTAL ASSETS   $ 5,914,949     $ 6,071,807  
         
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY        
Liabilities:
Mortgages payable, net $ 1,906,402 $ 2,025,692
Revolving credit facility 35,729 115,751
Unsecured term loan, net 96,833 46,537
Accounts payable and accrued expenses 130,431 138,607
Other liabilities, net 126,265   161,277  
Total liabilities 2,295,660   2,487,864  
Commitments and contingencies
Redeemable noncontrolling interests 665,623 609,129
Total equity   2,953,666     2,974,814  
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY   $ 5,914,949     $ 6,071,807  
_______________
 
Note: For complete financial statements, please refer to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2018.
 
 
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
   
in thousands, except per share data Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
REVENUE
Property rentals $ 125,240 $ 100,747 $ 251,891 $ 199,771
Tenant reimbursements 7,967 8,947 18,907 17,488
Third-party real estate services, including reimbursements 24,160 6,794 48,490 13,919
Other income 2,080   1,532   3,196   3,114  
Total revenue 159,447   118,020   322,484   234,292  
EXPENSES
Depreciation and amortization 48,117 31,993 97,277 65,775
Property operating 30,416 23,955 61,277 47,736
Real estate taxes 17,509 15,582 37,119 30,754
General and administrative:
Corporate and other 12,651 11,552 25,362 24,944
Third-party real estate services 21,189 4,486 43,798 9,184
Share-based compensation related to Formation Transaction 9,097 18,525
Transaction and other costs 3,787   5,237   8,008   11,078  
Total operating expenses 142,766   92,805   291,366   189,471  
OPERATING INCOME 16,681 25,215 31,118 44,821
Income from unconsolidated real estate ventures, net 3,836 105 1,934 314
Interest and other income, net 513 970 1,086 1,745
Interest expense (18,027 ) (14,586 ) (37,284 ) (28,504 )
Gain on sale of real estate 33,396 33,851
Loss on extinguishment of debt (4,457 ) (4,457 )
Reduction of gain on bargain purchase (7,606 )   (7,606 )  
INCOME BEFORE INCOME TAX (EXPENSE) BENEFIT 24,336 11,704 18,642 18,376
Income tax (expense) benefit (313 ) (363 ) 595   (717 )
NET INCOME 24,023 11,341 19,237 17,659
Net income attributable to redeemable noncontrolling interests (3,574 ) (2,980 )
Net loss attributable to noncontrolling interests   125         127      
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS   $ 20,574     $ 11,341     $ 16,384     $ 17,659  
EARNINGS PER COMMON SHARE:
Basic $ 0.17 $ 0.11 $ 0.14 $ 0.18
Diluted $ 0.17 $ 0.11 $ 0.14 $ 0.18
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING :
Basic 117,955 100,571 117,955 100,571
Diluted 117,955 100,571 117,955 100,571
___________________
 
Note: For complete financial statements, please refer to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 2018.
 
 
EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)
(Unaudited)
 

Three Months Ended
June 30, 2018

Six Months Ended
June 30, 2018

             
EBITDA, EBITDAre and Adjusted EBITDA            
Net income $ 24,023 $ 19,237
Depreciation and amortization expense 48,117 97,277
Interest expense (1) 18,027 37,284
Income tax benefit (expense) 313 (595 )
Unconsolidated real estate ventures allocated share of above
adjustments
10,602 20,777
Allocated share of above adjustments to noncontrolling interests in
consolidated real estate ventures
  129     129  
EBITDA   $ 101,211     $ 174,109  
Gain on sale of operating real estate   (33,396 )   (33,396 )
EBITDAre   $ 67,815     $ 140,713  
Gain on sale of non-operating real estate (455 )
Transaction and other costs (2) 3,787 8,008
Loss on extinguishment of debt 4,457 4,457
Reduction of gain on bargain purchase 7,606 7,606
Share-based compensation related to Formation Transaction 9,097 18,525
Distributions in excess of our net investment in unconsolidated real
estate venture (3)
(5,412 ) (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   $ 87,226     $ 173,348  
             
Net Debt to Adjusted EBITDA (4)   6.3x     6.3x  
 
June 30, 2018
Net Debt (at JBG SMITH Share)
Consolidated indebtedness (5) $ 2,033,183
Unconsolidated indebtedness (5) 440,177  
Total consolidated and unconsolidated indebtedness 2,473,360
Less: cash and cash equivalents 276,629  
Net Debt (at JBG SMITH Share) $ 2,196,731  
____________________
 
(1) Interest expense includes the amortization of deferred financing
costs and the mark-to-market of interest rate swaps and caps, net of
capitalized interest.
(2) Includes amounts incurred for transition services provided by our
former parent, integration costs, severance costs, costs incurred in
connection with recapitalization transactions and disposition and
dead deal costs.
(3) Related to our investment in the real estate venture that owns 1101
17th Street. In June 2018, the mortgage loan payable that was
collateralized by 1101 17th Street was refinanced eliminating the
principal guaranty provisions that had been included in the prior
loan. Distributions and our share of the cumulative earnings of the
venture exceeded our investment in the venture by $5.4 million,
which resulted in a negative investment balance. After the
elimination of the principal guaranty provisions in the prior
mortgage loan, we recognized the $5.4 million negative investment
balance as income within "Income from unconsolidated real estate
ventures, net" in our statements of operations for the three and six
months ended June 30, 2018.
(4)

Adjusted EBITDA for the three months ended June 30, 2018 is
annualized by multiplying by four. Adjusted EBITDA for the six
months ended June 30, 2018 is annualized by multiplying by two.

(5) Net of premium/discount and deferred financing costs.
 
 
FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
   
in thousands, except per share data

Three Months Ended
June 30, 2018

 

Six Months Ended
June 30, 2018

         
FFO and Core FFO        
Net income attributable to common shareholders $ 20,574 $ 16,384
Net income attributable to redeemable noncontrolling interests 3,574 2,980
Net loss attributable to noncontrolling interests (125 ) (127 )
Net income 24,023 19,237
Gain on sale of operating real estate (33,396 ) (33,396 )
Real estate depreciation and amortization 45,587 92,226
Pro rata share of real estate depreciation and amortization from
unconsolidated real estate ventures
6,179 12,615
Net loss attributable to consolidated real estate ventures   129     129  
FFO Attributable to Operating Partnership Common Units   $ 42,522     $ 90,811  
FFO attributable to redeemable noncontrolling interests (6,299 ) (13,426 )
FFO attributable to common shareholders $ 36,223   $ 77,385  
 
FFO attributable to the operating partnership common units $ 42,522 $ 90,811
Gain on sale of non-operating real estate (455 )
Transaction and other costs, net of tax (1) 3,394 7,530
Gain from mark-to-market on derivative instruments (432 ) (1,551 )
Share of gain from mark-to-market on derivative instruments held by
unconsolidated real estate ventures
(90 ) (432 )
Loss on extinguishment of debt, net of noncontrolling interests 4,333 4,333
Distributions in excess of our net investment in unconsolidated real
estate venture (2)
(5,412 ) (5,412 )
Reduction of gain on bargain purchase 7,606 7,606
Share-based compensation related to Formation Transaction 9,097 18,525
Amortization of management contracts intangible, net of tax   1,287     2,573  
Core FFO Attributable to Operating Partnership Common Units   $ 62,305     $ 123,528  
Core FFO attributable to redeemable noncontrolling interests (9,229 ) (18,266 )
Core FFO attributable to common shareholders $ 53,076   $ 105,262  
FFO per diluted common share $ 0.31 $ 0.66
Core FFO per diluted common share $ 0.45 $ 0.89
Weighted average diluted shares 117,955 117,955
 
 
FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
   
in thousands, except per share data

Three Months Ended
June 30, 2018

 

Six Months Ended
June 30, 2018

             
FAD            
Core FFO attributable to the operating partnership common units $ 62,305 $ 123,528
Recurring capital expenditures and second generation tenant
improvements and leasing commissions
(11,057 ) (17,154 )
Straight-line and other rent adjustments (3) (1,216 ) (2,291 )
Share of straight-line rent from unconsolidated real estate ventures 189 348
Third-party lease liability assumption payments (619 ) (1,091 )
Share of third party lease liability assumption payments for
unconsolidated real estate ventures
(50 )
Share-based compensation expense 5,941 10,217
Amortization of debt issuance costs 1,201 2,365
Share of amortization of debt issuance costs from unconsolidated
real estate ventures
66 135
Non-real estate depreciation and amortization   758     1,507  
FAD available to the Operating Partnership Common Units (A)   $ 57,568     $ 117,514  
Distributions to common shareholders and unitholders (4)
(B)
$ 31,197 $ 62,394
FAD Payout Ratio (B÷A) (5) 54.2 % 53.1 %
 
             
Capital Expenditures            
Maintenance and recurring capital expenditures $ 3,989 $ 6,672
Share of maintenance and recurring capital expenditures from
unconsolidated real estate ventures
250 1,399
Second generation tenant improvements and leasing commissions 6,273 8,166
Share of second generation tenant improvements and leasing
commissions from unconsolidated real estate ventures
545     917  
Recurring capital expenditures and second generation tenant
improvements and leasing commissions
11,057     17,154  
First generation tenant improvements and leasing commissions 6,676 10,861
Share of first generation tenant improvements and leasing
commissions from unconsolidated real estate ventures
1,391 2,386
Non-recurring capital expenditures 3,765 7,131
Share of non-recurring capital expenditures from unconsolidated
joint ventures
142     762  
Non-recurring capital expenditures   11,974       21,140  
Total JBG SMITH Share of Capital Expenditures   $ 23,031       $ 38,294  
_______________
 
(1)   Includes amounts incurred for transition services provided by our
former parent, integration costs, severance costs, costs incurred in
connection with recapitalization transactions and disposition and
dead deal costs
(2) Related to our investment in the real estate venture that owns 1101
17th Street. In June 2018, the mortgage loan payable that was
collateralized by 1101 17th Street was refinanced eliminating the
principal guaranty provisions that had been included in the prior
loan. Distributions and our share of the cumulative earnings of the
venture exceeded our investment in the venture by $5.4 million,
which resulted in a negative investment balance. After the
elimination of the principal guaranty provisions in the prior
mortgage loan, we recognized the $5.4 million negative investment
balance as income within "Income from unconsolidated real estate
ventures, net" in our statements of operations for the three and six
months ended June 30, 2018.
(3) Includes straight-line rent, above/below market lease amortization
and lease incentive amortization.
(4) In August 2018, our Board of Trustees declared a dividend of $0.225
per share, payable on August 27, 2018.
(5) 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. The FAD payout ratio for the
three and six months ended December 31, 2017 was 84.9% and 73.8%.
 
 
NOI RECONCILIATIONS (NON-GAAP)
(Unaudited)
   
dollars in thousands Three Months Ended June 30, Six Months Ended June 30,
2018   2017 2018   2017
 
Net income attributable to common shareholders $ 20,574 $ 11,341 $ 16,384 $ 17,659
Add:
Depreciation and amortization expense 48,117 31,993 97,277 65,775
General and administrative expense:
Corporate and other 12,651 11,552 25,362 24,944
Third-party real estate services 21,189 4,486 43,798 9,184
Share-based compensation related to Formation Transaction 9,097 18,525
Transaction and other costs 3,787 5,237 8,008 11,078
Interest expense 18,027 14,586 37,284 28,504
Loss on extinguishment of debt 4,457 4,457
Reduction of gain on bargain purchase 7,606 7,606
Income tax expense (benefit) 313 363 (595 ) 717
Net income attributable to redeemable noncontrolling interests 3,574 2,980
Less:
Third-party real estate services, including reimbursements 24,160 6,794 48,490 13,919
Other income 2,080 1,532 3,196 3,114
Income from unconsolidated real estate ventures, net 3,836 105 1,934 314
Interest and other income, net 513 970 1,086 1,745
Gain on sale of real estate 33,396 33,851
Net loss attributable to noncontrolling interests 125     127    
Consolidated NOI 85,282   70,157   172,402   138,769  
NOI attributable to consolidated JBG Assets (1) 11,345 22,395
Proportionate NOI attributable to unconsolidated JBG Assets (1) 4,141 7,856
Proportionate NOI attributable to unconsolidated real estate ventures 9,011 3,157 18,227 5,358
Non-cash rent adjustments (2) (1,237 ) (2,080 ) (2,333 ) (6,097 )
Other adjustments (3) 1,579   (59 ) 2,786     1,005  
Total adjustments   9,353     16,504     18,680     30,517  
NOI   $ 94,635     $ 86,661     $ 191,082     $ 169,286  
Non-same store NOI (4)   24,449     20,551     51,578     40,162  
Same store NOI (5)   $ 70,186     $ 66,110     $ 139,504     $ 129,124  
 
Growth in same store NOI 6.2 % 8.0 %
Number of properties in same store pool 35 35
___________________
 
(1)   Includes financial information for the JBG Assets as if the July 18,
2017 acquisition of the JBG Assets had been completed as of the
beginning of the period presented.
(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
exclude incidental income generated by development assets and
commercial lease termination revenue.
(4) 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.
(5) 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.
 

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