JBG SMITH Announces Fourth Quarter and Full Year 2021 Results

Rhea-AI Summary

JBG SMITH (NYSE: JBGS) reported its 2021 financial results, revealing a net loss of $0.63 per diluted share, affected by $49 million in impairment losses. The Funds From Operations (FFO) was $1.22 per diluted share, marking a decrease from $1.36 in 2020. For Q4 2021, the net loss was $0.45 per share, while Core FFO was $0.31. The company saw a 20.9% increase in NOI and executed 1.7 million square feet in leases for the year. The total enterprise value was approximately $6.6 billion. Subsequent developments include a $198 million property sale and the acquisition of a $205 million multifamily asset.

Positive

• Fourth Quarter 2021 NOI increased 20.9% year-over-year to $86.8 million.
• Executed 1.7 million square feet of office leases in 2021, showing a 2.8% rental rate increase on a GAAP basis.
• Total enterprise value reported at approximately $6.6 billion.

Negative

• 2021 net loss attributable to common shareholders was $0.63 per diluted share, an increase from a loss of $0.49 in 2020.
• Impairment losses of $49 million negatively impacted financial results.
• Same Store Net Operating Income (SSNOI) decreased 0.9% year-over-year.

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, 2021 and reported its financial results. Additional information regarding our results of operations, properties and tenants can be found in our Fourth Quarter 2021 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 2021 Highlights

• For the three months ended December 31, 2021, net loss attributable to common shareholders of $0.45 per diluted share, Funds From Operations ("FFO") attributable to common shareholders of $0.33 per diluted share and Core Funds From Operations ("Core FFO") attributable to common shareholders of $0.31 per diluted share.
• For the year ended December 31, 2021, net loss attributable to common shareholders of $0.63 per diluted share, FFO attributable to common shareholders of $1.22 per diluted share and Core FFO attributable to common shareholders of $1.36 per diluted share.

FOURTH QUARTER AND FULL YEAR COMPARISON
in millions, except per share amounts		Three Months Ended														Year Ended
		December 31, 2021							December 31, 2020							December 31, 2021							December 31, 2020
		Amount			Per Diluted Share				Amount			Per Diluted Share				Amount			Per Diluted Share				Amount			Per Diluted Share
Net loss (1)		$	(56.4	)	$	(0.45	)		$	(45.7	)	$	(0.36	)		$	(79.3	)	$	(0.63	)		$	(62.3	)	$	(0.49	)
FFO		$	43.1		$	0.33			$	23.1		$	0.17			$	159.4		$	1.22			$	115.9		$	0.87
Core FFO		$	40.4		$	0.31			$	32.7		$	0.25			$	177.5		$	1.36			$	159.1		$	1.19

____________________
Note: All the above are attributable to common shareholders.
(1)		Includes impairment losses recorded in connection with the preparation and review of our 2021 annual consolidated financial statements totaling $25.1 million related to non-core assets, which were written down to their estimated fair value, and an impairment loss recorded by one of our unconsolidated real estate ventures, of which our proportionate share was $23.9 million. Excluding these impairment losses and related tax effect, our net loss would have been $13.9 million and $36.8 million for the three months and year ended December 31, 2021.

• Annualized Net Operating Income ("NOI") for the three months ended December 31, 2021 was $345.8 million, compared to $324.0 million for the three months ended September 30, 2021, at our share.
• Same Store Net Operating Income ("SSNOI") at our share increased 9.5% to $78.4 million for the three months ended December 31, 2021 compared to the three months ended December 31, 2020.
  • The increase in SSNOI for the three months ended December 31, 2021 was substantially attributable to (i) higher occupancy and rents and lower concessions in our multifamily portfolio and (ii) a decrease in uncollectable operating lease receivables and rent deferrals across our portfolio.
• SSNOI at our share decreased 0.9% year-over-year to $299.7 million for the year ended December 31, 2021.
  • We believe the decrease in SSNOI for the year ended December 31, 2021 was substantially attributable to the COVID-19 pandemic, which commenced at the end of the first quarter of 2020, including (i) higher concessions and lower rents in our multifamily portfolio and (ii) lower occupancy and a decline in parking revenue in our commercial portfolio. These declines were partially offset by a decrease in uncollectable operating lease receivables and rent deferrals.
• NOI for our operating portfolio increased 20.9% year-over-year to $86.8 million, and Adjusted EBITDA increased 14.2% year-over-year to $66.2 million for the three months ended December 31, 2021.

Operating Portfolio

• The operating commercial portfolio was 84.9% leased and 82.9% occupied as of December 31, 2021, compared to 84.9% and 82.6% as of September 30, 2021, at our share.
• The operating multifamily portfolio was 93.6% leased and 91.8% occupied as of December 31, 2021, compared to 94.0% and 92.4% as of September 30, 2021, at our share. Our multifamily portfolio in-service assets were 95.4% leased and 93.4% occupied as of December 31, 2021, compared to 96.3% and 94.5% as of September 30, 2021, at our share.
• Executed approximately 467,000 square feet of office leases at our share during the three months ended December 31, 2021, comprising approximately 117,000 square feet of first-generation leases and approximately 350,000 square feet of second-generation leases, which generated a 0.1% rental rate increase on a GAAP basis and a 2.0% rental rate increase on a cash basis.
• Executed approximately 1.7 million square feet of office leases at our share during the year ended December 31, 2021, comprising approximately 291,000 square feet of first-generation leases and approximately 1.4 million square feet of second-generation leases, which generated a 2.8% rental rate increase on a GAAP basis and a 0.6% rental rate increase on a cash basis.

Development Portfolio

Under-Construction

• As of December 31, 2021, we had one multifamily asset under construction consisting of 808 units at our share.
• In January 2022, we commenced construction on 2000 South Bell Street and 2001 South Bell Street ("2000/2001 South Bell Street") in National Landing, a 775-unit multifamily asset. The land underlying 2000/2001 South Bell Street was leased to a ground lessee which engaged us to be the development manager for the construction, and separately, we are the lessee in a master lease of the asset. We have an option to acquire the asset until a specified period after completion. 2000/2001 South Bell Street was in the near-term development pipeline as of December 31, 2021.

Near-Term Development Pipeline

• As of December 31, 2021, we had 11 near-term development pipeline assets consisting of 5.0 million square feet of estimated potential development density at our share.

Future Development Pipeline

• As of December 31, 2021, we had 25 future development pipeline assets consisting of 11.6 million square feet of estimated potential development density at our share, including the 2.1 million square feet held for sale to Amazon.com, Inc. ("Amazon").

Third-Party Asset Management and Real Estate Services Business

• For the three months ended December 31, 2021, revenue from third-party real estate services, including reimbursements, was $23.3 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 $12.0 million, primarily driven by $6.2 million of property and asset management fees, $2.8 million of development fees, $1.7 million of leasing fees and $1.2 million of other service revenue.

Balance Sheet

• As of December 31, 2021, our total enterprise value was approximately $6.6 billion, comprising 142.3 million common shares and units valued at $4.1 billion, and debt (net of premium / (discount) and deferred financing costs) at our share of $2.8 billion, less cash and cash equivalents at our share of $282.1 million.
• As of December 31, 2021, we had $264.4 million of cash and cash equivalents ($282.1 million of cash and cash equivalents at our share), and $699.1 million of capacity under our credit facility.
• Net debt to annualized Adjusted EBITDA at our share for the three months ended December 31, 2021 was 9.6x and our net debt / total enterprise value was 38.5% as of December 31, 2021. Net debt to annualized Adjusted EBITDA would have been 8.9x in Q4 2021, after adjusting for $198.0 million of gross proceeds from the sale of Pen Place that is expected to close in Q2 2022. We intend to use the proceeds from the sale in a like-kind exchange for The Batley, which was acquired in November 2021. In December 2021, we finalized the agreement for the sale of Pen Place for $198.0 million, which represents a $48.1 million increase over the previously estimated contract value.

Investing and Financing Activities

• We acquired The Batley, a 432-unit multifamily asset in the Union Market submarket of Washington, DC, for a purchase price of $205.3 million.
• We drew $300.0 million under our revolving credit facility.
• We entered into a mortgage loan with a principal balance of $105.0 million, collateralized by 1215 S. Clark Street. The mortgage loan has a five-year term and an interest rate of LIBOR plus 1.25% per annum.
• We repurchased and retired 2.4 million common shares for $69.6 million, a weighted average purchase price per share of $28.56.

Subsequent to December 31, 2021:

• On February 11, 2022, we entered into a definitive agreement with affiliates of Fortress Investment Group LLC ("Fortress") to form an unconsolidated real estate venture. The real estate venture will acquire a 1.6 million square foot portfolio of four commercial assets valued at $580 million from us. The assets include 7200 Wisconsin Avenue, 1730 M Street, RTC-West and Courthouse Plaza 1 and 2. The transaction is expected to close in the first half of 2022, subject to financing and customary closing conditions.
• Effective as of January 14, 2022, the Tranche A-1 Term Loan was amended to extend the maturity date to January 2025 with two one-year extension options, and to amend the leverage-based pricing grid, reducing the interest rate 15 basis points to Secured Overnight Financing Rate (including a credit spread adjustment) plus 1.05%, based upon our current leverage level.

Dividends

• On December 10, 2021, our Board of Trustees declared a quarterly dividend of $0.225 per common share, which was paid on January 14, 2022 to shareholders of record as of December 30, 2021.

About JBG SMITH

JBG SMITH owns, operates, invests in and develops a dynamic portfolio of mixed-use properties in the 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. Over half of JBG SMITH’s holdings are in the National Landing submarket in Northern Virginia, where it serves as the developer for Amazon’s new headquarters, and where Virginia Tech’s $1 billion Innovation Campus is under construction. JBG SMITH's portfolio currently comprises 17.4 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 16.6 million square feet of mixed-use development opportunities. JBG SMITH is committed to the operation and development of green, smart, and healthy buildings and plans to maintain carbon neutral operations annually. For more information on JBG SMITH please visit www.jbgsmith.com.

Forward-Looking Statements

Certain statements contained herein may constitute "forward-looking statements" as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results 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. One of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the current pandemic of the novel coronavirus, or COVID-19, and the ensuing economic turmoil on the Company, our financial condition, results of operations, cash flows, performance, our tenants, the real estate market, and the global economy and financial markets. The extent to which COVID-19 continues to impact us and our tenants depends on future developments, many of which are highly uncertain and cannot be predicted with confidence. These developments include: the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the speed of the vaccine distribution, the effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and vaccine efficacy against variants of COVID-19, the extent and effectiveness of other containment measures taken, and the response of the overall economy, the financial markets and the population (including the potential effects of inflation), particularly in areas in which we operate and whether the residential market in the Washington, DC area and any of our properties will be materially impacted by the various moratoriums on residential evictions, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. We also note the following forward-looking statements: the 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, uncollectable 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 resulting from COVID-19; 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 near-term development pipeline assets, estimated square feet, estimated number of units and in the case of our future development pipeline assets, estimated potential development density are accurate; expected key Amazon transaction terms and timeframes for closing any Amazon transactions not yet closed; planned infrastructure and educational improvements related to Amazon's additional headquarters and the Virginia Tech Innovation Campus; the economic impact, job growth, expansion of public transportation and related demand for multifamily and commercial properties of Amazon's additional headquarters on the DC area and National Landing and the speed with which such impact occurs and Amazon’s plans for accelerated hiring and in-person work requirements; the impact of our role as the developer, property manager and retail leasing agent in connection with Amazon's new headquarters; our development plans related to Amazon's additional headquarters; our ability to satisfy environmental, social or governance standards set by various constituencies; whether we can access agency debt secured by our currently unencumbered multifamily assets timely, on reasonable terms or at all; whether our contemplated like-kind exchange of the Batley for the sale of Pen Place will occur; whether our sale of Pen Place will generate the amount of proceeds anticipated; whether the transactions contemplated by our agreement with affiliates of Fortress Investment Group LLC will occur on the anticipated timing or at all; 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, including in relation to COVID-19, 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, 2021 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.

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 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 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 investment funds, 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 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 (net of tax) 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 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 investment funds, 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 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 Debt" is a non-GAAP financial measurement. Net Debt represents our total consolidated and unconsolidated indebtedness less cash and cash equivalents at our share. Net Debt is an important component in the calculations of Net Debt to Annualized Adjusted EBITDA and Net Debt / total enterprise value. We believe that Net Debt is a meaningful non-GAAP financial measure useful to investors because we review Net Debt as part of the management of our overall financial flexibility, capital structure and leverage. We may utilize a considerable portion of our cash and cash equivalents at any given time for purposes other than debt reduction. In addition, cash and cash equivalents at our share may not be solely controlled by us. The deduction of cash and cash equivalents at our share from consolidated and unconsolidated indebtedness in the calculation of Net Debt, therefore, should not be understood to mean that it is available exclusively for debt reduction at any given time.

Net Operating Income ("NOI") and "Annualized NOI" are non-GAAP financial measures management uses to assess a segment's performance. The most directly comparable GAAP measure is net income (loss) attributable to common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of Free Rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable. NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure of our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. Annualized NOI, for all assets except Crystal City Marriott, represents NOI for the three months ended December 31, 2021 multiplied by four. Due to seasonality in the hospitality business, Annualized NOI for Crystal City Marriott represents the trailing 12-month NOI as of December 31, 2021. Management believes Annualized NOI provides useful information in understanding our financial performance over a 12-month period, however, investors and other users are cautioned against attributing undue certainty to our calculation of Annualized NOI. Actual NOI for any 12-month period will depend on a number of factors beyond our ability to control or predict, including general capital markets and economic conditions, any bankruptcy, insolvency, default or other failure to pay rent by one or more of our tenants and the destruction of one or more of our assets due to terrorist attack, natural disaster or other casualty, among others. We do not undertake any obligation to update our calculation to reflect events or circumstances occurring after the date of this earnings release. There can be no assurance that the Annualized NOI shown will reflect our actual results of operations over any 12-month period.

"Non-Same Store" refers to all operating assets excluded from the same store pool.

"Same Store" refers to the pool of assets that were in-service for the entirety of both periods being compared, which excludes assets for which significant redevelopment, renovation, or repositioning occurred during either of the periods being compared.

Definitions

“First-generation” is a lease on space that had been vacant for at least nine months or a lease on newly delivered space.

"Formation Transaction" refers collectively to the spin-off on July 17, 2017 of substantially all of the assets and liabilities of Vornado Realty Trust's Washington, DC segment, which operated as Vornado / Charles E. Smith, and the acquisition of the management business and certain assets and liabilities of The JBG Companies.

"Free Rent" means the amount of base rent and tenant reimbursements that are abated according to the applicable lease agreement(s).

"Future Development Pipeline" refers to assets that are development opportunities on which we do not intend to commence construction within the next three years 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.

"GAAP" refers to accounting principles generally accepted in the United States of America.

"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 December 31, 2021.

"Near-Term Development Pipeline" refers to select assets that have the potential to commence construction over the next three years, subject to receipt of full entitlements, completion of design and market conditions.

"Second-Generation" is a lease on space that had been vacant for less than nine months.

"Transaction and Other Costs" include demolition costs, integration and severance costs, pursuit costs related to other completed, potential and pursued transactions, as well as other expenses.

"Under-Construction" refers to assets that were under construction during the three months ended December 31, 2021.

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
in thousands		December 31, 2021				December 31, 2020
ASSETS
Real estate, at cost:
Land and improvements		$	1,378,218			$	1,391,472
Buildings and improvements			4,513,606				4,341,103
Construction in progress, including land			344,652				268,056
			6,236,476				6,000,631
Less: accumulated depreciation			(1,368,003	)			(1,232,690	)
Real estate, net			4,868,473				4,767,941
Cash and cash equivalents			264,356				225,600
Restricted cash			37,739				37,736
Tenant and other receivables			44,496				55,903
Deferred rent receivable			192,265				170,547
Investments in unconsolidated real estate ventures			462,885				461,369
Other assets, net			442,116				286,575
Assets held for sale			73,876				73,876
TOTAL ASSETS		$	6,386,206			$	6,079,547
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgages payable, net		$	1,777,699			$	1,593,738
Revolving credit facility			300,000				—
Unsecured term loans, net			398,664				397,979
Accounts payable and accrued expenses			106,136				103,102
Other liabilities, net			342,565				247,774
Total liabilities			2,925,064				2,342,593
Commitments and contingencies
Redeemable noncontrolling interests			522,725				530,748
Total equity			2,938,417				3,206,206
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY		$	6,386,206			$	6,079,547
____________________
Note: For complete financial statements, please refer to our Annual Report on Form 10-K for the year ended December 31, 2021.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
in thousands, except per share data		Three Months Ended December 31,								Year Ended December 31,
		2021				2020				2021				2020
REVENUE
Property rental		$	128,626			$	104,439			$	499,586			$	458,958
Third-party real estate services, including reimbursements			23,309				30,069				114,003				113,939
Other revenue			5,472				14,121				20,773				29,826
Total revenue			157,407				148,629				634,362				602,723
EXPENSES
Depreciation and amortization			58,173				64,170				236,303				221,756
Property operating			40,709				39,758				150,638				145,625
Real estate taxes			15,696				17,536				70,823				70,958
General and administrative:
Corporate and other			15,344				9,156				53,819				46,634
Third-party real estate services			27,124				28,569				107,159				114,829
Share-based compensation related to Formation Transaction and special equity awards			3,459				6,246				16,325				31,678
Transaction and other costs			1,518				1,144				10,429				8,670
Total expenses			162,023				166,579				645,496				640,150
OTHER INCOME (EXPENSE)
Loss from unconsolidated real estate ventures, net			(25,583	)			(3,194	)			(2,070	)			(20,336	)
Interest and other income (loss), net			8,672				(1,646	)			8,835				(625	)
Interest expense			(17,649	)			(17,661	)			(67,961	)			(62,321	)
Gain on sale of real estate			—				—				11,290				59,477
Loss on extinguishment of debt			—				(29	)			—				(62	)
Impairment loss			(25,144	)			(10,232	)			(25,144	)			(10,232	)
Total other income (expense)			(59,704	)			(32,762	)			(75,050	)			(34,099	)
LOSS BEFORE INCOME TAX (EXPENSE) BENEFIT			(64,320	)			(50,712	)			(86,184	)			(71,526	)
Income tax (expense) benefit			986				544				(3,541	)			4,265
NET LOSS			(63,334	)			(50,168	)			(89,725	)			(67,261	)
Net loss attributable to redeemable noncontrolling interests			6,256				4,513				8,728				4,958
Net loss attributable to noncontrolling interests			632				—				1,740				—
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	(56,446	)		$	(45,655	)		$	(79,257	)		$	(62,303	)
LOSS PER COMMON SHARE - BASIC AND DILUTED		$	(0.45	)		$	(0.36	)		$	(0.63	)		$	(0.49	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED			129,009				132,042				130,839				133,451
____________________
Note: For complete financial statements, please refer to our Annual Report on Form 10-K for the year ended December 31, 2021.

EBITDA, EBITDAre AND ADJUSTED EBITDA RECONCILIATIONS (NON-GAAP) (Unaudited)
dollars in thousands		Three Months Ended December 31,								Year Ended December 31,
		2021				2020				2021				2020
EBITDA, EBITDAre and Adjusted EBITDA
Net loss		$	(63,334	)		$	(50,168	)		$	(89,725	)		$	(67,261	)
Depreciation and amortization expense			58,173				64,170				236,303				221,756
Interest expense			17,649				17,661				67,961				62,321
Income tax expense (benefit)			(986	)			(544	)			3,541				(4,265	)
Unconsolidated real estate ventures allocated share of above adjustments			9,696				10,072				40,588				41,588
EBITDA attributable to noncontrolling interests			546				(2	)			1,522				(9	)
EBITDA		$	21,744			$	41,189			$	260,190			$	254,130
Gain on sale of real estate			—				—				(11,290	)			(59,477	)
(Gain) loss on sale of unconsolidated real estate assets			—				(826	)			(28,326	)			2,126
Real estate impairment loss (1)			25,144				7,805				25,144				7,805
Impairment related to unconsolidated real estate ventures (2)			23,883				—				25,263				6,522
EBITDAre		$	70,771			$	48,168			$	270,981			$	211,106
Transaction and other costs (3)			888				1,144				8,691				8,670
Business interruption insurance proceeds			(4,517	)			—				(4,517	)			—
Income from investment funds, net			(3,620	)			—				(3,620	)			—
Impairment loss related to right-of-use asset (1)			—				2,427				—				2,427
Loss on extinguishment of debt			—				29				—				62
Share-based compensation related to Formation Transaction and special equity awards			3,459				6,246				16,325				31,678
Losses and distributions in excess of our investment in unconsolidated real estate venture			(181	)			(152	)			(883	)			(459	)
Lease liability adjustments			(134	)			—				(134	)			—
Unconsolidated real estate ventures allocated share of above adjustments			(497	)			90				(327	)			1,555
Adjusted EBITDA		$	66,169			$	57,952			$	286,516			$	255,039
Net Debt to Annualized Adjusted EBITDA (4)		9.6x				9.2x				8.9x				8.4x
										December 31, 2021				December 31, 2020
Net Debt (at JBG SMITH Share)
Consolidated indebtedness (5)										$	2,464,927			$	1,985,061
Unconsolidated indebtedness (5)											370,743				395,550
Total consolidated and unconsolidated indebtedness											2,835,670				2,380,611
Less: cash and cash equivalents											282,097				241,066
Net Debt (at JBG SMITH Share)										$	2,553,573			$	2,139,545

____________________
Note: All EBITDA measures as shown above are attributable to common limited partnership units ("OP Units").
(1)		In connection with the preparation and review of our annual financial statements, we determined that certain assets were impaired and recorded impairment losses in the three months and year ended December 31, 2021 and 2020 totaling $25.1 million and $10.2 million ($7.8 million related to real estate and $2.4 million related to the right-of-use asset associated with a ground lease).
(2)		Includes an impairment on real estate assets taken by an unconsolidated real estate venture and impairments of our investment in unconsolidated real estate ventures related to decreases in the value of the underlying assets.
(3)		Includes demolition costs, integration and severance costs, pursuit costs related to other completed, potential and pursued transactions, as well as other expenses. For the three months and year ended December 31, 2021, excludes $0.6 million and $1.7 million of transaction costs attributable to noncontrolling interests. For the year ended December 31, 2020, includes a charitable commitment of $4.0 million to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington, DC metropolitan area.
(4)		Calculated using the Net Debt below. Quarterly Adjusted EBITDA is annualized by multiplying by four. Net Debt to Annualized Adjusted EBITDA would have been 8.9x and 8.2x for the three months and year ended December 31, 2021, after adjusting for $198.0 million of gross proceeds from the sale of Pen Place that is expected to close in the second quarter of 2022.
(5)		Net of premium/discount and deferred financing costs.

FFO, CORE FFO AND FAD RECONCILIATIONS (NON-GAAP) (Unaudited)
in thousands, except per share data		Three Months Ended December 31,								Year Ended December 31,
		2021				2020				2021				2020
FFO and Core FFO
Net loss attributable to common shareholders		$	(56,446	)		$	(45,655	)		$	(79,257	)		$	(62,303	)
Net loss attributable to redeemable noncontrolling interests			(6,256	)			(4,513	)			(8,728	)			(4,958	)
Net loss attributable to noncontrolling interests			(632	)			—				(1,740	)			—
Net loss			(63,334	)			(50,168	)			(89,725	)			(67,261	)
Gain on sale of real estate			—				—				(11,290	)			(59,477	)
(Gain) loss on sale of unconsolidated real estate assets			—				(826	)			(28,326	)			2,126
Real estate depreciation and amortization			55,902				61,865				227,424				211,455
Real estate impairment loss, net of tax (1)			24,301				7,805				24,301				7,805
Impairment related to unconsolidated real estate ventures (2)			23,883				—				25,263				6,522
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures			6,626				7,219				28,216				28,949
FFO attributable to noncontrolling interests			546				(2	)			1,522				(9	)
FFO Attributable to OP Units		$	47,924			$	25,893			$	177,385			$	130,110
FFO attributable to redeemable noncontrolling interests			(4,792	)			(2,810	)			(18,034	)			(14,163	)
FFO Attributable to Common Shareholders		$	43,132			$	23,083			$	159,351			$	115,947
FFO attributable to OP Units		$	47,924			$	25,893			$	177,385			$	130,110
Transaction and other costs, net of tax (3)			865				1,071				8,586				8,247
Business interruption insurance proceeds			(4,517	)			—				(4,517	)			—
Income from investment funds, net			(2,711	)			—				(2,711	)			—
Impairment loss related to right-of-use asset (1)			—				2,427				—				2,427
(Gain) loss from mark-to-market on derivative instruments			(292	)			11				(342	)			184
Loss on extinguishment of debt			—				29				—				62
Losses and distributions in excess of our investment in unconsolidated real estate venture			(181	)			(152	)			(883	)			(459	)
Share-based compensation related to Formation Transaction and special equity awards			3,459				6,246				16,325				31,678
Lease liability adjustments			(134	)			—				(134	)			—
Amortization of management contracts intangible, net of tax			1,073				1,073				4,290				4,360
Unconsolidated real estate ventures allocated share of above adjustments			(543	)			36				(435	)			1,884
Core FFO Attributable to OP Units		$	44,943			$	36,634			$	197,564			$	178,493
Core FFO attributable to redeemable noncontrolling interests			(4,494	)			(3,976	)			(20,106	)			(19,433	)
Core FFO Attributable to Common Shareholders		$	40,449			$	32,658			$	177,458			$	159,060
FFO per common share - diluted		$	0.33			$	0.17			$	1.22			$	0.87
Core FFO per common share - diluted		$	0.31			$	0.25			$	1.36			$	1.19
Weighted average shares - diluted (FFO and Core FFO)			129,009				132,628				130,839				134,022
See footnotes under table below.

FFO, CORE FFO AND FAD RECONCILIATIONS (NON-GAAP) (Unaudited)
in thousands, except per share data		Three Months Ended December 31,								Year Ended December 31,
		2021				2020				2021				2020
FAD
Core FFO attributable to OP Units		$	44,943			$	36,634			$	197,564			$	178,493
Recurring capital expenditures and second-generation tenant improvements and leasing commissions (4)			(21,773	)			(15,284	)			(56,554	)			(49,373	)
Straight-line and other rent adjustments (5)			(2,985	)			15,433				(15,539	)			5,535
Third-party lease liability assumption payments			—				(836	)			(1,803	)			(3,860	)
Share-based compensation expense			9,663				6,496				34,583				33,625
Amortization of debt issuance costs			1,142				1,059				4,469				3,183
Unconsolidated real estate ventures allocated share of above adjustments			(1,332	)			1,265				(5,469	)			(2,615	)
Non-real estate depreciation and amortization			795				829				2,975				4,300
FAD available to OP Units (A)		$	30,453			$	45,596			$	160,226			$	169,288
Distributions to common shareholders and unitholders (B)		$	33,137			$	33,362			$	135,771			$	135,086
FAD Payout Ratio (B÷A) (6)			108.8		%		73.2		%		84.7		%		79.8	%
Capital Expenditures
Maintenance and recurring capital expenditures		$	8,121			$	6,325			$	23,827			$	18,520
Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures			168				186				804				1,022
Second-generation tenant improvements and leasing commissions			12,815				8,773				30,095				28,108
Share of second-generation tenant improvements and leasing commissions from unconsolidated real estate ventures			669				—				1,828				1,723
Recurring capital expenditures and second-generation tenant improvements and leasing commissions			21,773				15,284				56,554				49,373
Non-recurring capital expenditures			15,008				6,380				28,081				23,647
Share of non-recurring capital expenditures from unconsolidated real estate ventures			145				160				429				554
First-generation tenant improvements and leasing commissions			6,229				8,910				11,370				36,643
Share of First-generation tenant improvements and leasing commissions from unconsolidated real estate ventures			987				747				2,471				2,408
Non-recurring capital expenditures			22,369				16,197				42,351				63,252
Total JBG SMITH Share of Capital Expenditures		$	44,142			$	31,481			$	98,905			$	112,625

____________________
(1)		In connection with the preparation and review of our annual financial statements, we determined that certain assets were impaired and recorded impairment losses in the three months and year ended December 31, 2021 and 2020 totaling $25.1 million ($24.3 million after tax) and $10.2 million ($7.8 million related to real estate and $2.4 million related to the right-of-use asset associated with a ground lease).
(2)		Includes an impairment on real estate assets taken by an unconsolidated real estate venture and impairments of our investment in unconsolidated real estate ventures related to decreases in the value of the underlying assets.
(3)		Includes demolition costs, integration and severance costs, pursuit costs related to other completed, potential and pursued transactions, as well as other expenses. For the three months and year ended December 31, 2021, excludes $0.6 million and $1.7 million of transaction costs attributable to noncontrolling interests. For the year ended December 31, 2020, includes a charitable commitment of $4.0 million to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington, DC metropolitan area.
(4)		Includes amounts, at JBG SMITH Share, related to unconsolidated real estate ventures.
(5)		Includes straight-line rent, above/below market lease amortization and lease incentive amortization.
(6)		The quarterly FAD payout ratio is not necessarily indicative of an amount for the full year due to fluctuation in the timing of capital expenditures, the commencement of new leases and the seasonality of our operations.

NOI RECONCILIATIONS (NON-GAAP) (Unaudited)
dollars in thousands		Three Months Ended December 31,								Year Ended December 31,
		2021				2020				2021				2020
Net loss attributable to common shareholders		$	(56,446	)		$	(45,655	)		$	(79,257	)		$	(62,303	)
Add:
Depreciation and amortization expense			58,173				64,170				236,303				221,756
General and administrative expense:
Corporate and other			15,344				9,156				53,819				46,634
Third-party real estate services			27,124				28,569				107,159				114,829
Share-based compensation related to Formation Transaction and special equity awards			3,459				6,246				16,325				31,678
Transaction and other costs			1,518				1,144				10,429				8,670
Interest expense			17,649				17,661				67,961				62,321
Loss on extinguishment of debt			—				29				—				62
Impairment loss			25,144				10,232				25,144				10,232
Income tax expense (benefit)			(986	)			(544	)			3,541				(4,265	)
Net loss attributable to redeemable noncontrolling interests			(6,256	)			(4,513	)			(8,728	)			(4,958	)
Net loss attributable to noncontrolling interests			(632	)			—				(1,740	)			—
Less:
Third-party real estate services, including reimbursements revenue			23,309				30,069				114,003				113,939
Other revenue			2,013				9,934				7,671				15,372
Loss from unconsolidated real estate ventures, net			(25,583	)			(3,194	)			(2,070	)			(20,336	)
Interest and other income (loss), net			8,672				(1,646	)			8,835				(625	)
Gain on sale of real estate			—				—				11,290				59,477
Consolidated NOI			75,680				51,332				291,227				256,829
NOI attributable to unconsolidated real estate ventures at our share			6,289				7,521				29,232				27,693
Non-cash rent adjustments (1)			(2,985	)			15,433				(15,539	)			5,535
Other adjustments (2)			6,107				(3,284	)			20,732				6,058
Total adjustments			9,411				19,670				34,425				39,286
NOI		$	85,091			$	71,002			$	325,652			$	296,115
Less: out-of-service NOI loss (3)			(1,745	)			(801	)			(6,382	)			(5,789	)
Operating Portfolio NOI		$	86,836			$	71,803			$	332,034			$	301,904
Non-Same Store NOI (4)			8,455				206				32,326				(427	)
Same Store NOI (5)		$	78,381			$	71,597			$	299,708			$	302,331
Change in Same Store NOI			9.5	%							(0.9	)%
Number of properties in Same Store pool			56								55

____________________
(1)		Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization.
(2)		Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and allocated corporate general and administrative expenses to operating properties.
(3)		Includes the results of our Under-Construction assets, and Near-Term and Future Development Pipelines.
(4)		Includes the results of properties that were not 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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220222006042/en/

Barbat Rodgers

Senior Vice President, Investor Relations

(240) 333-3805

brodgers@jbgsmith.com

Source: JBG SMITH

FAQ

What were JBG SMITH's 2021 financial results?

JBG SMITH reported a net loss of $0.63 per diluted share for 2021, with an FFO of $1.22 per diluted share.

How much did JBG SMITH's NOI increase in Q4 2021?

The NOI for Q4 2021 increased 20.9% year-over-year to $86.8 million.

What is the total enterprise value of JBG SMITH as of December 31, 2021?

The total enterprise value of JBG SMITH was approximately $6.6 billion.

What was the impairment loss reported by JBG SMITH?

JBG SMITH reported impairment losses totaling $49 million related to non-core assets.

What rental rate increase did JBG SMITH achieve in 2021?

JBG SMITH achieved a 2.8% rental rate increase on a GAAP basis for 1.7 million square feet of office leases executed in 2021.