JBG SMITH Announces Second Quarter 2023 Results

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-Q for the quarter ended June 30, 2023 and reported its financial results.

Additional information regarding our results of operations, properties, and tenants can be found in our Second Quarter 2023 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com. We encourage investors to consider the information presented here with the information in that document.

Second Quarter 2023 Highlights

• Net income (loss), Funds From Operations ("FFO") and Core FFO attributable to common shareholders were:

		SECOND QUARTER AND YEAR-TO-DATE COMPARISON
in millions, except per share amounts			Three Months Ended										Six Months Ended
			June 30, 2023					June 30, 2022					June 30, 2023					June 30, 2022
			Amount		Per Diluted Share			Amount		Per Diluted Share			Amount		Per Diluted Share			Amount		Per Diluted Share
	Net income (loss)		$	(10.5)	$	(0.10)		$	123.3	$	1.02		$	10.6	$	0.09		$	123.2	$	0.99
	FFO		$	33.4	$	0.30		$	33.6	$	0.28		$	66.4	$	0.59		$	84.9	$	0.68
	Core FFO		$	39.8	$	0.36		$	37.1	$	0.31		$	76.9	$	0.69		$	79.8	$	0.64

• Annualized Net Operating Income ("NOI") for the three months ended June 30, 2023 was $317.5 million, compared to $327.5 million for the three months ended March 31, 2023, at our share. Excluding the assets that were sold or recapitalized, Annualized NOI for the three months ended June 30, 2023 was $317.6 million, compared to $316.6 million for the three months ended March 31, 2023, at our share.
  • The increase in Annualized NOI excluding the assets that were sold or recapitalized was substantially attributable to (i) higher occupancy at the Crystal City Marriott and higher parking revenue, offset by an increase in bad debt expense as a result of a recovery recognized in the prior quarter, and (ii) higher occupancy and rents across the multifamily portfolio.
• Same Store NOI ("SSNOI") at our share increased 0.1% year-over-year to $78.3 million for the three months ended June 30, 2023. SSNOI at our share decreased 0.7% year-over-year to $153.5 million for the six months ended June 30, 2023.
  • The decrease in SSNOI year-over-year for the six months ended June 30, 2023 was substantially attributable to (i) increased abatement and higher vacancy, partially offset by an increase in parking revenue in our commercial portfolio and (ii) higher occupancy and rents, partially offset by higher concessions and higher operating expenses, in our multifamily portfolio.

Operating Portfolio

• The operating commercial portfolio was 86.3% leased and 84.0% occupied as of June 30, 2023, compared to 87.6% and 85.2% as of March 31, 2023, at our share.
• The operating multifamily portfolio was 96.8% leased and 93.7% occupied as of June 30, 2023, compared to 95.0% and 92.9% as of March 31, 2023, at our share.
• Executed approximately 210,000 square feet of office leases at our share during the three months ended June 30, 2023, comprising approximately 23,000 square feet of first-generation leases and approximately 187,000 square feet of second-generation leases, which generated a 5.0% rental rate increase on a GAAP basis and a 2.7% rental rate increase on a cash basis.
• Executed approximately 323,000 square feet of office leases at our share during the six months ended June 30, 2023, comprising approximately 41,000 square feet of first-generation leases and approximately 282,000 square feet of second-generation leases, which generated a 4.8% rental rate increase on a GAAP basis and a 1.8% rental rate increase on a cash basis.

Development Portfolio

Under-Construction

• As of June 30, 2023, we had two multifamily assets under construction consisting of 1,583 units at our share.

Development Pipeline

• As of June 30, 2023, we had 20 assets in the development pipeline consisting of 9.8 million square feet of estimated potential development density at our share.

Third-Party Asset Management and Real Estate Services Business

• For the three months ended June 30, 2023, revenue from third-party real estate services, including reimbursements, was $22.9 million. Excluding reimbursements and service revenue from our interests in real estate ventures, revenue from our third-party asset management and real estate services business was $11.6 million, primarily driven by $6.0 million of property and asset management fees, $2.8 million of development fees, $1.3 million of leasing fees and $1.3 million of other service revenue.

Balance Sheet

• As of June 30, 2023, our total enterprise value was approximately $4.2 billion, comprising 119.3 million common shares and units valued at $1.8 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 $165.8 million.
• As of June 30, 2023, we had $156.6 million of cash and cash equivalents ($165.8 million of cash and cash equivalents at our share), and $687.5 million of capacity under our revolving credit facility.
• Net Debt to annualized Adjusted EBITDA at our share for the three months ended June 30, 2023 was 8.3x, and our Net Debt / total enterprise value was 57.0% as of June 30, 2023.

Investing and Financing Activities

• In May 2023, we drew the $50.0 million remaining advance under our Tranche A-2 Term Loan.
• During the second quarter of 2023, we borrowed $62.0 million under our revolving credit facility. In June 2023, we amended and extended the revolving credit facility, from January 2025 to June 2027 at an amended interest rate of SOFR plus 1.40% (based on our current leverage level). We have the option to increase the recast $750.0 million revolving credit facility or add term loans up to $500.0 million, and we also have the right to extend the maturity date beyond June 2027 via two six-month extension options.
• In June 2023, we entered into a $120.0 million term loan with a five-year term and an interest rate of SOFR plus 1.25% (based on our current leverage level). We also entered into an interest rate swap with a total notional value of $120.0 million, which fixes SOFR at an interest rate of 4.01% through the maturity date.
• In June 2023, we repaid mortgage loans with an aggregate principal balance of $142.4 million.
• We repurchased and retired 9.3 million common shares for $135.7 million, a weighted average purchase price per share of $14.54.

Subsequent to June 30, 2023:

• We repurchased and retired 2.0 million common shares for $31.5 million, a weighted average purchase price per share of $16.03, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Dividends

• On August 3, 2023, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on August 31, 2023 to shareholders of record as of August 17, 2023.

About JBG SMITH

JBG SMITH owns, operates, invests in, and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, DC. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, DC metropolitan area. Approximately two-thirds of JBG SMITH's holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon's new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and JBG SMITH’s deployment of next-generation public and private 5G digital infrastructure. JBG SMITH's dynamic portfolio currently comprises 15.0 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 9.8 million square feet of mixed-use, primarily multifamily, development opportunities. JBG SMITH is committed to the operation and development of green, smart, and healthy buildings and plans to maintain carbon neutral operations annually. For more information on JBG SMITH please visit www.jbgsmith.com.

Forward-Looking Statements

Certain statements contained herein may constitute "forward-looking statements" as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results, financial condition and business of JBG SMITH Properties ("JBG SMITH", the "Company", "we", "us", "our" or similar terms) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximate", "hypothetical", "potential", "believes", "expects", "anticipates", "estimates", "intends", "plans", "would", "may" or similar expressions in this earnings release. We also note the following forward-looking statements: changes to the amount and manner in which tenants use space; our annual dividend per share and dividend yield; whether in the case of our under-construction assets and assets in the development pipeline, estimated square feet, estimated number of units and estimated potential development density are accurate; expected timing, completion, modifications and delivery dates for the projects we are developing 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; 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, gain (loss) on the extinguishment of debt, earnings (losses) and distributions in excess of our investment in unconsolidated real estate ventures, share-based compensation expense related to the Formation Transaction and special equity awards, lease liability adjustments, income from investments, business interruption insurance proceeds, 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) refunds, recurring share-based compensation expense, accretion of acquired below-market leases, net of amortization of acquired above-market leases, amortization of debt issuance costs and other non-cash income and charges, including our share of such adjustments for unconsolidated real estate ventures. FAD is presented solely as a supplemental disclosure that management believes provides useful information as it relates to our ability to fund dividends.

We believe FFO, Core FFO and FAD are meaningful non‑GAAP financial measures useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because these non‑GAAP measures exclude real estate depreciation and amortization expense, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions, and other non-comparable income and expenses. FFO, Core FFO and FAD do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as a performance measure or cash flow as a liquidity measure. FFO, Core FFO and FAD may not be comparable to similarly titled measures used by other companies.

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

Net Operating Income ("NOI") and "Annualized NOI" are non-GAAP financial measures management uses to assess an asset's performance. The most directly comparable GAAP measure is net income (loss) attributable to common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue, net of Free Rent and payments associated with assumed lease liabilities) less operating expenses and ground rent for operating leases, if applicable. NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure of our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization expense and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income (loss) attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. Annualized NOI, for all assets except Crystal City Marriott, represents NOI for the three months ended June 30, 2023 multiplied by four. Due to seasonality in the hospitality business, Annualized NOI for Crystal City Marriott represents the trailing 12‑month NOI as of June 30, 2023. Management believes Annualized NOI provides useful information in understanding our financial performance over a 12‑month period, however, investors and other users are cautioned against attributing undue certainty to our calculation of Annualized NOI. Actual NOI for any 12‑month period will depend on a number of factors beyond our ability to control or predict, including general capital markets and economic conditions, any bankruptcy, insolvency, default or other failure to pay rent by one or more of our tenants and the destruction of one or more of our assets due to terrorist attack, natural disaster or other casualty, among others. We do not undertake any obligation to update our calculation to reflect events or circumstances occurring after the date of this earnings release. There can be no assurance that the Annualized NOI shown will reflect our actual results of operations over any 12‑month period.

Definitions

"Development Pipeline" refers to assets that have the potential to commence construction subject to receipt of full entitlements, completion of design and market conditions where we (i) own land or control the land through a ground lease or (ii) are under a long-term conditional contract to purchase, or enter into, a leasehold interest with respect to land.

"Estimated Potential Development Density" reflects management's estimate of developable gross square feet based on our current business plans with respect to real estate owned or controlled as of June 30, 2023. Our current business plans may contemplate development of less than the maximum potential development density for individual assets. As market conditions change, our business plans, and therefore, the Estimated Potential Development Density, could change accordingly. Given timing, zoning requirements and other factors, we make no assurance that Estimated Potential Development Density amounts will become actual density to the extent we complete development of assets for which we have made such estimates.

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

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

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

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

"In-Service" refers to commercial or multifamily operating assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of June 30, 2023.

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

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

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

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

"Under-Construction" refers to assets that were under construction during the three months ended June 30, 2023.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
in thousands		June 30, 2023				December 31, 2022
ASSETS
Real estate, at cost:
Land and improvements		$	1,267,379			$	1,302,569
Buildings and improvements			4,175,488				4,310,821
Construction in progress, including land			694,793				544,692
			6,137,660				6,158,082
Less: accumulated depreciation			(1,396,766	)			(1,335,000	)
Real estate, net			4,740,894				4,823,082
Cash and cash equivalents			156,639				241,098
Restricted cash			46,205				32,975
Tenant and other receivables			44,863				56,304
Deferred rent receivable			165,797				170,824
Investments in unconsolidated real estate ventures			309,219				299,881
Intangible assets, net			144,308				162,246
Other assets, net			175,677				117,028
TOTAL ASSETS		$	5,783,602			$	5,903,438
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgage loans, net		$	1,689,207			$	1,890,174
Revolving credit facility			62,000				—
Term loans, net			716,757				547,072
Accounts payable and accrued expenses			129,325				138,060
Other liabilities, net			139,445				132,710
Total liabilities			2,736,734				2,708,016
Commitments and contingencies
Redeemable noncontrolling interests			455,886				481,310
Total equity			2,590,982				2,714,112
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY		$	5,783,602			$	5,903,438

Note: For complete financial statements, please refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
in thousands, except per share data		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
REVENUE
Property rental		$	120,592			$	117,036			$	244,625			$	248,634
Third-party real estate services, including reimbursements			22,862				22,157				45,646				46,127
Other revenue			8,641				6,312				14,786				12,709
Total revenue			152,095				145,505				305,057				307,470
EXPENSES
Depreciation and amortization			49,218				49,479				102,649				107,541
Property operating			35,912				35,445				71,524				76,089
Real estate taxes			14,424				14,946				29,648				33,132
General and administrative:
Corporate and other			15,093				14,782				31,216				30,597
Third-party real estate services			22,105				24,143				45,928				51,192
Share-based compensation related to Formation Transaction and special equity awards			—				1,577				351				3,821
Transaction and other costs			3,492				1,987				5,964				2,886
Total expenses			140,244				142,359				287,280				305,258
OTHER INCOME (EXPENSE)
Income (loss) from unconsolidated real estate ventures, net			510				(2,107	)			943				1,038
Interest and other income, net			2,281				1,672				6,358				15,918
Interest expense			(25,835	)			(16,041	)			(52,677	)			(32,319	)
Gain on the sale of real estate, net			—				158,767				40,700				158,631
Loss on the extinguishment of debt			(450	)			(1,038	)			(450	)			(1,629	)
Total other income (expense)			(23,494	)			141,253				(5,126	)			141,639
INCOME (LOSS) BEFORE INCOME TAX EXPENSE			(11,643	)			144,399				12,651				143,851
Income tax expense			(611	)			(2,905	)			(595	)			(2,434	)
NET INCOME (LOSS)			(12,254	)			141,494				12,056				141,417
Net (income) loss attributable to redeemable noncontrolling interests			1,398				(18,248	)			(1,965	)			(18,258	)
Net loss attributable to noncontrolling interests			311				29				535				84
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	(10,545	)		$	123,275			$	10,626			$	123,243
EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED		$	(0.10	)		$	1.02			$	0.09			$	0.99
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED			109,695				121,316				111,862				123,984

Note: For complete financial statements, please refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.

EBITDA, EBITDAre AND ADJUSTED EBITDA RECONCILIATIONS (NON-GAAP)
(Unaudited)
dollars in thousands		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
EBITDA, EBITDAre and Adjusted EBITDA
Net income (loss)		$	(12,254	)		$	141,494			$	12,056			$	141,417
Depreciation and amortization expense			49,218				49,479				102,649				107,541
Interest expense			25,835				16,041				52,677				32,319
Income tax expense			611				2,905				595				2,434
Unconsolidated real estate ventures allocated share of above adjustments			4,618				9,494				8,282				19,323
EBITDA attributable to noncontrolling interests			(32	)			(47	)			(2	)			(73	)
EBITDA		$	67,996			$	219,366			$	176,257			$	302,961
Gain on the sale of real estate, net			—				(158,767	)			(40,700	)			(158,631	)
Gain on the sale of unconsolidated real estate assets			—				(936	)			—				(6,179	)
EBITDAre		$	67,996			$	59,663			$	135,557			$	138,151
Transaction and other costs, net of noncontrolling interests (1)			3,492				1,987				5,964				2,852
(Income) loss from investments, net			526				(1,217	)			(1,335	)			(15,288	)
Loss on the extinguishment of debt			450				1,038				450				1,629
Share-based compensation related to Formation Transaction and special equity awards			—				1,577				351				3,821
Earnings and distributions in excess of our investment in unconsolidated real estate venture			(341	)			(124	)			(508	)			(565	)
Lease liability adjustments			(154	)			—				(154	)			—
Unconsolidated real estate ventures allocated share of above adjustments			—				1,841				2				2,045
Adjusted EBITDA		$	71,969			$	64,765			$	140,327			$	132,645
Net Debt to Annualized Adjusted EBITDA (2)			8.3		x		8.1		x		8.5		x		7.9		x
										June 30, 2023				June 30, 2022
Net Debt (at JBG SMITH Share)
Consolidated indebtedness (3)										$	2,454,311			$	2,000,762
Unconsolidated indebtedness (3)											87,886				279,534
Total consolidated and unconsolidated indebtedness											2,542,197				2,280,296
Less: cash and cash equivalents											165,834				181,882
Net Debt (at JBG SMITH Share)										$	2,376,363			$	2,098,414

Note: All EBITDA measures as shown above are attributable to common limited partnership units ("OP Units") and certain fully-vested incentive equity awards that are convertible into OP Units.
(1)		Includes pursuit costs related to completed, potential and pursued transactions, demolition costs, severance and other costs.
(2)		Quarterly Adjusted EBITDA is annualized by multiplying by four. Adjusted EBITDA for the six months ended June 30, 2023 and 2022 is annualized by multiplying by two.
(3)		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 June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
FFO and Core FFO
Net income (loss) attributable to common shareholders	$	(10,545	)		$	123,275			$	10,626			$	123,243
Net income (loss) attributable to redeemable noncontrolling interests		(1,398	)			18,248				1,965				18,258
Net loss attributable to noncontrolling interests		(311	)			(29	)			(535	)			(84	)
Net income (loss)		(12,254	)			141,494				12,056				141,417
Gain on the sale of real estate, net of tax		—				(155,642	)			(40,700	)			(155,506	)
Gain on the sale of unconsolidated real estate assets		—				(936	)			—				(6,179	)
Real estate depreciation and amortization		47,502				47,242				99,113				102,759
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures		3,111				6,416				5,871				13,286
FFO attributable to noncontrolling interests		311				(47	)			535				(73	)
FFO Attributable to OP Units	$	38,670			$	38,527			$	76,875			$	95,704
FFO attributable to redeemable noncontrolling interests		(5,247	)			(4,966	)			(10,450	)			(10,843	)
FFO Attributable to Common Shareholders	$	33,423			$	33,561			$	66,425			$	84,861
FFO attributable to OP Units	$	38,670			$	38,527			$	76,875			$	95,704
Transaction and other costs, net of tax and noncontrolling interests (1)		3,337				1,892				5,710				2,735
(Income) loss from investments, net of tax		404				(957	)			(1,001	)			(11,495	)
(Gain) loss from mark-to-market on derivative instruments, net of noncontrolling interests		2,601				(2,027	)			5,142				(5,394	)
Loss on the extinguishment of debt		450				1,038				450				1,629
Earnings and distributions in excess of our investment in unconsolidated real estate venture		(341	)			(124	)			(508	)			(565	)
Share-based compensation related to Formation Transaction and special equity awards		—				1,577				351				3,821
Lease liability adjustments		(154	)			—				(154	)			—
Amortization of management contracts intangible, net of tax		1,024				1,106				2,130				2,211
Unconsolidated real estate ventures allocated share of above adjustments		5				1,593				41				1,545
Core FFO Attributable to OP Units	$	45,996			$	42,625			$	89,036			$	90,191
Core FFO attributable to redeemable noncontrolling interests		(6,241	)			(5,494	)			(12,103	)			(10,383	)
Core FFO Attributable to Common Shareholders	$	39,755			$	37,131			$	76,933			$	79,808
FFO per common share - diluted	$	0.30			$	0.28			$	0.59			$	0.68
Core FFO per common share - diluted	$	0.36			$	0.31			$	0.69			$	0.64
Weighted average shares - diluted (FFO and Core FFO)		109,708				121,327				111,868				123,990

See footnotes under table below.

FFO, CORE FFO AND FAD RECONCILIATIONS (NON-GAAP)
(Unaudited)
in thousands, except per share data		Three Months Ended June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
FAD
Core FFO attributable to OP Units		$	45,996			$	42,625			$	89,036			$	90,191
Recurring capital expenditures and Second-generation tenant improvements and leasing commissions (2)			(11,602	)			(13,300	)			(19,396	)			(27,002	)
Straight-line and other rent adjustments (3)			(6,311	)			(1,978	)			(14,688	)			(3,769	)
Third-party lease liability assumption (payments) refunds			(25	)			(25	)			70				(25	)
Share-based compensation expense			9,137				10,171				18,485				20,664
Amortization of debt issuance costs			1,343				1,135				2,650				2,311
Unconsolidated real estate ventures allocated share of above adjustments			641				(289	)			1,043				(937	)
Non-real estate depreciation and amortization			341				760				696				1,828
FAD available to OP Units (A)		$	39,520			$	39,099			$	77,896			$	83,261
Distributions to common shareholders and unitholders (B)		$	27,684			$	31,768			$	57,303			$	64,371
FAD Payout Ratio (B÷A) (4)			70.1	%			81.3	%			73.6	%			77.3	%
Capital Expenditures
Maintenance and recurring capital expenditures		$	4,707			$	6,091			$	7,680			$	10,911
Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures			35				312				35				394
Second-generation tenant improvements and leasing commissions			6,805				6,713				11,547				15,307
Share of Second-generation tenant improvements and leasing commissions from unconsolidated real estate ventures			55				184				134				390
Recurring capital expenditures and Second-generation tenant improvements and leasing commissions			11,602				13,300				19,396				27,002
Non-recurring capital expenditures			10,904				13,552				20,597				26,362
Share of non-recurring capital expenditures from unconsolidated real estate ventures			3				37				5				49
First-generation tenant improvements and leasing commissions			4,174				4,197				7,299				8,647
Share of First-generation tenant improvements and leasing commissions from unconsolidated real estate ventures			240				244				553				717
Non-recurring capital expenditures			15,321				18,030				28,454				35,775
Total JBG SMITH Share of Capital Expenditures		$	26,923			$	31,330			$	47,850			$	62,777

(1)		Includes pursuit costs related to completed, potential and pursued transactions, demolition costs, severance and other costs.
(2)		Includes amounts, at JBG SMITH Share, related to unconsolidated real estate ventures.
(3)		Includes straight-line rent, above/below market lease amortization and lease incentive amortization.
(4)		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 June 30,								Six Months Ended June 30,
		2023				2022				2023				2022
Net income (loss) attributable to common shareholders		$	(10,545	)		$	123,275			$	10,626			$	123,243
Add:
Depreciation and amortization expense			49,218				49,479				102,649				107,541
General and administrative expense:
Corporate and other			15,093				14,782				31,216				30,597
Third-party real estate services			22,105				24,143				45,928				51,192
Share-based compensation related to Formation Transaction and special equity awards			—				1,577				351				3,821
Transaction and other costs			3,492				1,987				5,964				2,886
Interest expense			25,835				16,041				52,677				32,319
Loss on the extinguishment of debt			450				1,038				450				1,629
Income tax expense			611				2,905				595				2,434
Net income (loss) attributable to redeemable noncontrolling interests			(1,398	)			18,248				1,965				18,258
Net loss attributable to noncontrolling interests			(311	)			(29	)			(535	)			(84	)
Less:
Third-party real estate services, including reimbursements revenue			22,862				22,157				45,646				46,127
Other revenue			3,846				1,798				5,572				3,994
Income (loss) from unconsolidated real estate ventures, net			510				(2,107	)			943				1,038
Interest and other income, net			2,281				1,672				6,358				15,918
Gain on the sale of real estate, net			—				158,767				40,700				158,631
Consolidated NOI			75,051				71,159				152,667				148,128
NOI attributable to unconsolidated real estate ventures at our share			5,175				8,321				9,604				15,268
Non-cash rent adjustments (1)			(6,311	)			(1,978	)			(14,688	)			(3,769	)
Other adjustments (2)			5,163				5,695				12,008				14,443
Total adjustments			4,027				12,038				6,924				25,942
NOI		$	79,078			$	83,197			$	159,591			$	174,070
Less: out-of-service NOI loss (3)			(902	)			(2,046	)			(1,611	)			(3,498	)
Operating Portfolio NOI		$	79,980			$	85,243			$	161,202			$	177,568
Non-Same Store NOI (4)			1,640				7,007				7,667				22,918
Same Store NOI (5)		$	78,340			$	78,236			$	153,535			$	154,650
Change in Same Store NOI			0.1	%							(0.7	)%
Number of properties in Same Store pool			50								49

(1)		Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization.
(2)		Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and related party management fees.
(3)		Includes the results of our Under-Construction assets and assets in the Development Pipeline.
(4)		Includes the results of properties that were not In-Service for the entirety of both periods being compared, including disposed properties, and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.
(5)		Includes the results of the properties that are owned, operated and In-Service for the entirety of both periods being compared.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230808942708/en/

Barbat Rodgers

Senior Vice President, Investor Relations

(240) 333‑3805

brodgers@jbgsmith.com

Source: JBG SMITH