BETHESDA, Md.–(BUSINESS WIRE)–JBG SMITH (NYSE: JBGS), a leading owner and developer of high-quality, mixed-use properties in the Washington, DC market, today filed its Form 10-K for the year ended December 31, 2022 and reported its financial results.
Additional information regarding our results of operations, properties, and tenants can be found in our Fourth Quarter 2022 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com. We encourage investors to consider the information presented here with the information in that document.
Fourth Quarter 2022 Highlights
For the three months and year ended December 31, 2022, net income (loss), Funds From Operations (“FFO”) and Core FFO attributable to common shareholders were:
FOURTH QUARTER AND FULL YEAR COMPARISON
in millions, except per share amounts
Three Months Ended
Year Ended
December 31, 2022
December 31, 2021
December 31, 2022
December 31, 2021
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Amount
Per Diluted Share
Net income (loss)
$
(18.6)
$
(0.17)
$
(56.4)
$
(0.45)
$
85.4
$
0.70
$
(79.3)
$
(0.63)
FFO
$
31.1
$
0.27
$
43.1
$
0.33
$
156.0
$
1.31
$
159.4
$
1.22
Core FFO
$
34.3
$
0.30
$
40.4
$
0.31
$
155.3
$
1.30
$
177.5
$
1.36
Annualized Net Operating Income (“NOI”) for the three months ended December 31, 2022 was $322.3 million, compared to $322.0 million for the three months ended September 30, 2022, at our share.
The slight increase in Annualized NOI was substantially attributable to (i) additional NOI resulting from the purchase of our partners’ ownership interests in Atlantic Plumbing and 8001 Woodmont, (ii) real estate tax refunds received during the quarter, (iii) higher parking revenue in our commercial portfolio, and (iv) lower utilities due to seasonality, offset by (v) an increase in abatements as a result of certain previously executed lease renewals and (vi) the exclusion of our interest in L’Enfant Plaza.
Same Store NOI (“SSNOI”) at our share increased 7.4% year-over-year to $77.2 million for the three months ended December 31, 2022. SSNOI at our share increased 12.1% year-over-year to $302.3 million for the year ended December 31, 2022.
The increase in SSNOI was substantially attributable to (i) higher occupancy and rents, and lower concessions in our multifamily portfolio, (ii) higher occupancy and average daily rates at the Crystal City Marriott, (iii) an increase in parking revenue in our commercial portfolio and (iv) abatement burn-off at certain assets, partially offset by (v) higher utilities and cleaning expenses.
Operating Portfolio
The operating commercial portfolio was 88.5% leased and 85.1% occupied as of December 31, 2022, compared to 88.3% and 85.9% as of September 30, 2022, at our share.
The operating multifamily portfolio was 94.5% leased and 93.6% occupied as of December 31, 2022, compared to 95.5% and 93.7% as of September 30, 2022, at our share. (Excluding 8001 Woodmont, which is in lease-up, our multifamily portfolio ended the quarter at 95.3% leased and 94.2% occupied.)
Executed approximately 193,000 square feet of office leases at our share during the three months ended December 31, 2022, comprising approximately 72,000 square feet of first-generation leases and approximately 121,000 square feet of second-generation leases, which generated a 3.9% rental rate increase on a GAAP basis and a 0.1% rental rate decrease on a cash basis.
Executed approximately 936,000 square feet of office leases at our share during the year ended December 31, 2022, comprising approximately 238,000 square feet of first-generation leases and approximately 698,000 square feet of second-generation leases, which generated a 3.9% rental rate decrease on a GAAP basis and a 7.2% rental rate decrease on a cash basis.
Development Portfolio
Under-Construction
As of December 31, 2022, we had two multifamily assets under construction consisting of 1,583 units at our share.
Development Pipeline
As of December 31, 2022, we had 20 assets in the development pipeline consisting of 9.7 million square feet of estimated potential development density at our share.
Third-Party Asset Management and Real Estate Services Business
For the three months ended December 31, 2022, revenue from third-party real estate services, including reimbursements, was $21.1 million. Excluding reimbursements and service revenue from our interests in real estate ventures, revenue from our third-party asset management and real estate services business was $10.1 million, primarily driven by $6.1 million of property and asset management fees, $1.4 million of leasing fees, $1.3 million of other service revenue and $1.2 million of development fees.
Balance Sheet
As of December 31, 2022, our total enterprise value was approximately $4.7 billion, comprising 129.1 million common shares and units valued at $2.4 billion, and debt (net of premium / (discount) and deferred financing costs) at our share of $2.5 billion, less cash and cash equivalents at our share of $253.7 million.
As of December 31, 2022, we had $241.1 million of cash and cash equivalents ($253.7 million of cash and cash equivalents at our share), and $1.0 billion of capacity under our credit facility inclusive of our capacity under the term loan.
Net Debt to annualized Adjusted EBITDA at our share for the three months ended December 31, 2022 was 8.6x and our Net Debt / total enterprise value was 47.7% as of December 31, 2022.
Investing and Financing Activities
In October 2022, we repaid the $100.0 million outstanding balance under our revolving credit facility.
As previously announced, in October 2022, we acquired an additional 3.7% ownership interest in The Wren, a multifamily asset owned by a consolidated real estate venture, for $9.5 million, increasing our ownership interest to 99.7%.
As previously announced, in October 2022, we acquired the remaining 50.0% ownership interest in 8001 Woodmont, a multifamily asset owned by an unconsolidated real estate venture, for $115.0 million, including the assumption of $51.9 million of debt at our share. The asset was encumbered by a $103.8 million mortgage loan, which was consolidated as of the date of acquisition.
In December 2022, one of our unconsolidated real estate ventures sold The Gale Eckington for $10.8 million at our share.
In December 2022, we sold a land option for $6.2 million.
Subsequent to December 31, 2022:
In January 2023, we entered into a $187.6 million loan facility, collateralized by The Wren and F1RST Residences. The loan has a seven-year term and a fixed interest rate of 5.13%. This loan is the initial advance under a Fannie Mae multifamily credit facility, which provides flexibility for collateral substitutions, future advances tied to performance, ability to mix fixed and floating rates, as well as stagger maturities. Proceeds from the loan were used to repay the mortgage loan on 2121 Crystal Drive, which had a fixed interest rate of 5.51%.
In February 2023, we purchased the remaining 0.3% ownership interest in The Wren, a multifamily asset that was owned by a consolidated real estate venture, for $0.6 million, increasing our ownership interest to 100.0%.
Dividends
On December 15, 2022, our Board of Trustees declared a quarterly dividend of $0.225 per common share, which was paid on January 12, 2023 to shareholders of record as of December 29, 2022.
About JBG SMITH
JBG SMITH owns, operates, invests in, and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, DC. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, DC metropolitan area. Approximately two-thirds of JBG SMITH’s holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon’s new headquarters, which is being developed by JBG SMITH; Virginia Tech’s under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and JBG SMITH’s deployment of next-generation public and private 5G digital infrastructure. JBG SMITH’s dynamic portfolio currently comprises 15.3 million square feet of high-growth office, multifamily, and retail assets at share, 98% of which are metro-served. It also maintains a development pipeline encompassing 9.7 million square feet of mixed-use development opportunities. JBG SMITH’s capital allocation strategy is to shift the majority of its portfolio to multifamily and concentrate its office assets in National Landing. JBG SMITH is committed to the operation and development of green, smart, and healthy buildings and plans to maintain carbon neutral operations annually. For more information on JBG SMITH please visit www.jbgsmith.com.
Forward-Looking Statements
Certain statements contained herein may constitute “forward-looking statements” as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results, financial condition and business of JBG SMITH Properties (“JBG SMITH”, the “Company”, “we”, “us”, “our” or similar terms) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximate”, “hypothetical”, “potential”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this earnings release. We also note the following forward-looking statements: the potential impact of COVID-19 and the ensuing economic turmoil on our Company, NOI, SSNOI, net asset value, share price, occupancy rates, revenue from our multifamily and commercial portfolios, operating costs, deferrals of rent, uncollectible operating lease receivables, parking revenue, and burn-off of rent abatement; the impact of disruptions to the credit and capital markets on our ability to access capital, including refinancing maturing debt; changes to the amount and manner in which tenants use space; whether we incur additional costs or make additional concessions or offer other incentives to existing or prospective tenants to reconfigure space; whether the Washington, DC area will be more resilient than other parts of the country in any recession; whether we will recognize currently estimated unrecognized development fee revenue on the anticipated timing or at all; our annual dividend per share and dividend yield; whether in the case of our under-construction and assets in the development pipeline, estimated square feet, estimated number of units and estimated potential development density are accurate; expected timing, completion, modifications and delivery dates for the projects we are developing for Amazon; the ability of any or all of our demand drivers to materialize and their effect on economic impact, job growth, expansion of public transportation and related demand in the National Landing submarket; planned infrastructure and educational improvements related to Amazon’s additional headquarters and the Virginia Tech Innovation Campus; our development plans related to National Landing; whether we will be able to successfully shift the majority of our portfolio to multifamily; our ability to satisfy environmental, social or governance standards set by various constituencies; and whether we can access agency debt secured by our currently unencumbered multifamily assets timely, on reasonable terms or at all; whether our estimated borrowing capacity is accurate; and whether the allocation of capital to our share repurchase plan has any impact on our share price.
Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. These factors include, among others: adverse economic conditions in the Washington, DC metropolitan area, the timing of and costs associated with development and property improvements, financing commitments, and general competitive factors. For further discussion of factors that could materially affect the outcome of our forward-looking statements and other risks and uncertainties, see “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Cautionary Statement Concerning Forward-Looking Statements in the Company’s Annual Report on Form 10‑K for the year ended December 31, 2022 and other periodic reports the Company files with the Securities and Exchange Commission. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date hereof.
Pro Rata Information
We present certain financial information and metrics in this release “at JBG SMITH Share,” which refers to our ownership percentage of consolidated and unconsolidated assets in real estate ventures (collectively, “real estate ventures”) as applied to these financial measures and metrics. Financial information “at JBG SMITH Share” is calculated on an asset-by-asset basis by applying our percentage economic interest to each applicable line item of that asset’s financial information. “At JBG SMITH Share” information, which we also refer to as being “at share,” “our pro rata share” or “our share,” is not, and is not intended to be, a presentation in accordance with GAAP. Given that a substantial portion of our assets are held through real estate ventures, we believe this form of presentation, which presents our economic interests in the partially owned entities, provides investors valuable information regarding a significant component of our portfolio, its composition, performance and capitalization.
We do not control the unconsolidated real estate ventures and do not have a legal claim to our co-venturers’ share of assets, liabilities, revenue and expenses. The operating agreements of the unconsolidated real estate ventures generally allow each co-venturer to receive cash distributions to the extent there is available cash from operations. The amount of cash each investor receives is based upon specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions.
With respect to any such third-party arrangement, we would not be in a position to exercise sole decision-making authority regarding the property, real estate venture or other entity, and may, under certain circumstances, be exposed to economic risks not present were a third-party not involved. We and our respective co-venturers may each have the right to trigger a buy-sell or forced sale arrangement, which could cause us to sell our interest, or acquire our co-venturers’ interests, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. Our real estate ventures may be subject to debt, and the repayment or refinancing of such debt may require equity capital calls. To the extent our co-venturers do not meet their obligations to us or our real estate ventures or they act inconsistent with the interests of the real estate venture, we may be adversely affected. Because of these limitations, the non-GAAP “at JBG SMITH Share” financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.
Occupancy, non-GAAP financial measures, leverage metrics, operating assets and operating metrics presented in our investor package exclude our 10.0% subordinated interest in one commercial building, our 33.5% subordinated interest in four commercial buildings, and our 49.0% interest in three commercial buildings, as well as the associated non-recourse mortgage loans, held through unconsolidated real estate ventures, as our investment in each real estate venture is zero, we do not anticipate receiving any near-term cash flow distributions from the real estate ventures and we have not guaranteed their obligations or otherwise committed to providing financial support.
Non-GAAP Financial Measures
This release includes non-GAAP financial measures. For these measures, we have provided an explanation of how these non-GAAP measures are calculated and why JBG SMITH’s management believes that the presentation of these measures provides useful information to investors regarding JBG SMITH’s financial condition and results of operations. Reconciliations of certain non-GAAP measures to the most directly comparable GAAP financial measure are included in this earnings release. Our presentation of non-GAAP financial measures may not be comparable to similar non-GAAP measures used by other companies. In addition to “at share” financial information, the following non-GAAP measures are included in this release:
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”), EBITDA for Real Estate (“EBITDAre”) and “Adjusted EBITDA” are non-GAAP financial measures. EBITDA and EBITDAre are used by management as supplemental operating performance measures, which we believe help investors and lenders meaningfully evaluate and compare our operating performance from period-to-period by removing from our operating results the impact of our capital structure (primarily interest charges from our outstanding debt and the impact of our interest rate swaps) and certain non-cash expenses (primarily depreciation and amortization expense on our assets). EBITDAre is computed in accordance with the definition established by the National Association of Real Estate Investment Trusts (“Nareit”). Nareit defines EBITDAre as GAAP net income (loss) adjusted to exclude interest expense, income taxes, depreciation and amortization expense, gains and losses on sales of real estate and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments of unconsolidated real estate ventures. These supplemental measures may help investors and lenders understand our ability to incur and service debt and to make capital expenditures. EBITDA and EBITDAre are not substitutes for net income (loss) (computed in accordance with GAAP) and may not be comparable to similarly titled measures used by other companies.
Adjusted EBITDA represents EBITDAre adjusted for items we believe are not representative of ongoing operating results, such as Transaction and Other Costs, impairment write-downs of right-of-use assets associated with leases in which we are a lessee, gain (loss) on the extinguishment of debt, earnings (losses) and distributions in excess of our investment in unconsolidated real estate ventures, lease liability adjustments, income from investments, business interruption insurance proceeds and share-based compensation expense related to the Formation Transaction and special equity awards. We believe that adjusting such items not considered part of our comparable operations, provides a meaningful measure to evaluate and compare our performance from period-to-period.
Because EBITDA, EBITDAre and Adjusted EBITDA have limitations as analytical tools, we use EBITDA, EBITDAre and Adjusted EBITDA to supplement GAAP financial measures. Additionally, we believe that users of these measures should consider EBITDA, EBITDAre and Adjusted EBITDA in conjunction with net income (loss) and other GAAP measures in understanding our operating results.
Funds from Operations (“FFO”), “Core FFO” and Funds Available for Distribution (“FAD”) are non-GAAP financial measures. FFO is computed in accordance with the definition established by Nareit in the Nareit FFO White Paper – 2018 Restatement. Nareit defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization expense related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures.
Core FFO represents FFO adjusted to exclude items which we believe are not representative of ongoing operating results, such as Transaction and Other Costs, impairment write-downs of right-of-use assets associated with leases in which we are a lessee, gains (or losses) on the extinguishment of debt, earnings (losses) and distributions in excess of our investment in unconsolidated real estate ventures, share-based compensation expense related to the Formation Transaction and special equity awards, lease liability adjustments, income from investments, business interruption insurance proceeds, amortization of the management contracts intangible and the mark-to-market of derivative instruments, including our share of such adjustments for unconsolidated real estate ventures.
FAD represents Core FFO less recurring tenant improvements, leasing commissions and other capital expenditures, net deferred rent activity, third-party lease liability assumption payments, recurring share-based compensation expense, accretion of acquired below-market leases, net of amortization of acquired above-market leases, amortization of debt issuance costs and other non-cash income and charges, including our share of such adjustments for unconsolidated real estate ventures. FAD is presented solely as a supplemental disclosure that management believes provides useful information as it relates to our ability to fund dividends.
We believe FFO, Core FFO and FAD are meaningful non‑GAAP financial measures useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because these non‑GAAP measures exclude real estate depreciation and amortization expense, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions, and other non-comparable income and expenses. FFO, Core FFO and FAD do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as a performance measure or cash flow as a liquidity measure. FFO, Core FFO and FAD may not be comparable to similarly titled measures used by other companies.
“Net
Contacts
Barbat Rodgers
Senior Vice President, Investor Relations
(240) 333‑3805
brodgers@jbgsmith.com