JBG SMITH Announces Second Quarter 2024 Results

Rhea-AI Summary

JBG SMITH (NYSE: JBGS) reported its Q2 2024 financial results. Key highlights include:

- Net loss of $24.4 million ($0.27 per diluted share)
- FFO of $14.3 million ($0.16 per diluted share)
- Core FFO of $16.1 million ($0.18 per diluted share)
- Annualized NOI decreased to $286.4 million
- Same Store NOI increased 3.2% quarter-over-quarter to $71.4 million
- Multifamily portfolio 96.9% leased, 94.3% occupied
- Commercial portfolio 82.3% leased, 80.6% occupied
- Executed 248,000 sq ft of office leases in Q2
- Two multifamily assets under construction (1,583 units)
- 18 assets in development pipeline (9.3 million sq ft)
- Repurchased 4.7 million common shares for $68.7 million
- Declared quarterly dividend of $0.175 per common share

Positive

• Same Store NOI increased 3.2% quarter-over-quarter to $71.4 million
• Multifamily portfolio achieved 96.9% leased rate and 94.3% occupancy
• Executed 248,000 sq ft of office leases in Q2, with 166,000 sq ft of new leases
• Second-generation leases generated 2.0% cash rental rate increase and 12.7% GAAP rental rate increase
• Multifamily effective rents increased by 4.6% blended across new and renewal leases
• Repurchased 4.7 million common shares for $68.7 million, enhancing shareholder value

Negative

• Net loss of $24.4 million ($0.27 per diluted share) in Q2 2024, compared to $10.5 million loss in Q2 2023
• FFO decreased to $14.3 million ($0.16 per diluted share) from $33.4 million ($0.30 per diluted share) in Q2 2023
• Core FFO decreased to $16.1 million ($0.18 per diluted share) from $39.8 million ($0.36 per diluted share) in Q2 2023
• Annualized NOI decreased to $286.4 million from $307.5 million in Q1 2024
• Commercial portfolio occupancy decreased to 80.6% from 83.1% in Q1 2024
• Net Debt to annualized Adjusted EBITDA ratio increased to 11.9x

Insights

Financial Analyst

JBG SMITH's Q2 2024 results reveal a mixed financial picture with some concerning trends. The company reported a net loss of $24.4 million ($0.27 per diluted share) for the quarter, compared to a loss of $10.5 million in Q2 2023. This significant increase in losses is a red flag for investors.

However, the company's Funds From Operations (FFO) and Core FFO, which are more relevant metrics for REITs, showed some resilience. Core FFO was $16.1 million ($0.18 per diluted share), though this represents a substantial decrease from $39.8 million ($0.36 per diluted share) in Q2 2023.

The company's Annualized Net Operating Income (NOI) declined from $307.5 million in Q1 2024 to $286.4 million in Q2 2024. This 6.9% quarter-over-quarter decrease is concerning and suggests operational challenges.

On a positive note, Same Store NOI increased by 3.2% quarter-over-quarter, indicating some improvement in the performance of stabilized assets. The multifamily portfolio showed strength with a 96.9% lease rate and impressive rent increases of 4.6% blended across new and renewal leases.

The office portfolio, however, is struggling with occupancy dropping from 83.1% to 80.6% quarter-over-quarter. This reflects the ongoing challenges in the office real estate market.

The company's balance sheet shows some strain, with a Net Debt to Annualized Adjusted EBITDA ratio of 11.9x, which is quite high for a REIT. This high leverage could limit financial flexibility and increase risk.

Overall, while JBG SMITH is showing resilience in its multifamily portfolio, the office segment and overall financial performance are concerning. Investors should closely monitor the company's ability to improve its office occupancy and manage its debt levels in the coming quarters.

Real Estate Market Analyst

JBG SMITH's Q2 2024 results offer valuable insights into the Washington, DC real estate market dynamics. The divergence between the company's multifamily and commercial portfolios is particularly noteworthy.

The multifamily sector shows robust performance, with a high occupancy rate of 94.3% and an impressive 96.9% lease rate. The ability to increase effective rents by 4.6% blended across new and renewal leases and 8.6% upon renewal, indicates strong demand in the DC residential market. This trend aligns with the broader national shift towards urban living post-pandemic.

However, the commercial portfolio paints a different picture. The decrease in leased space from 84.6% to 82.3% quarter-over-quarter reflects the ongoing challenges in the office market. This trend is not unique to DC but mirrors national patterns as companies continue to adapt to hybrid work models.

The 2.0% rental rate increase on a cash basis for second-generation office leases is positive, but modest. It suggests that while JBG SMITH can still command slight premiums, the office market remains under pressure.

The company's development pipeline, with 18 assets comprising 9.3 million square feet of potential development density, indicates a long-term bet on the DC market's growth. The focus on multifamily development, as seen with the 1900 Crystal Drive project, aligns with current market strengths.

The decline in Annualized NOI, particularly due to tenant vacates and higher non-reimbursable operating expenses in the commercial portfolio, underscores the challenges facing office landlords in adapting to the new normal of work.

Overall, JBG SMITH's results reflect a tale of two markets within DC: a thriving multifamily sector and a struggling office sector. This dichotomy is likely to persist in the near term, shaping the company's strategy and the broader DC real estate landscape.

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, 2024 and reported its financial results.

Additional information regarding our results of operations, properties, and tenants can be found in our Second Quarter 2024 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 2024 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, 2024							June 30, 2023							June 30, 2024							June 30, 2023
			Amount			Per Diluted Share				Amount			Per Diluted Share				Amount			Per Diluted Share				Amount			Per Diluted Share
	Net income (loss) (1) (2)		$	(24.4	)	$	(0.27	)		$	(10.5	)	$	(0.10	)		$	(56.6	)	$	(0.63	)		$	10.6		$	0.09
	FFO (2)		$	14.3		$	0.16			$	33.4		$	0.30			$	25.0		$	0.27			$	66.4		$	0.59
	Core FFO		$	16.1		$	0.18			$	39.8		$	0.36			$	43.0		$	0.47			$	76.9		$	0.69

_____________

(1)	Includes gain on the sale of real estate totaling $286,000 and $40.7 million recorded during the six months ended June 30, 2024 and 2023.
(2)	Includes impairment loss of $1.0 million and $18.2 million related to non-depreciable real estate assets recorded during the three and six months ended June 30, 2024.

• Annualized Net Operating Income ("NOI") for the three months ended June 30, 2024 was $286.4 million, compared to $307.5 million for the three months ended March 31, 2024, at our share. Excluding the assets that were sold or taken out of service, Annualized NOI for the three months ended June 30, 2024 was $283.9 million, compared to $292.6 million for the three months ended March 31, 2024, at our share.
  • The decrease in Annualized NOI excluding the assets that were sold or taken out of service was substantially attributable to (i) tenant vacates and higher non-reimbursable operating expenses, partially offset by higher parking revenue and lower bad debt reserves in our commercial portfolio; and (ii) higher repair and maintenance expense, unit turn costs, and marketing expense as a result of higher expirations due to the seasonality in multifamily leasing, partially offset by higher revenue in our multifamily portfolio.
• Same Store NOI ("SSNOI") at our share increased 3.2% quarter-over-quarter to $71.4 million for the three months ended June 30, 2024.
  • The increase in SSNOI was substantially attributable to (i) higher rents and occupancy and lower concessions, partially offset by higher operating expenses in our multifamily portfolio; and (ii) lower real estate taxes and operating expenses, partially offset by lower occupancy in our commercial portfolio.

Operating Portfolio

• The operating multifamily portfolio was 96.9% leased and 94.3% occupied as of June 30, 2024, compared to 95.9% and 94.3% as of March 31, 2024.
• In our multifamily portfolio, we increased effective rents by 4.6% blended across new and renewal leases and 8.6% upon renewal for second quarter lease expirations while achieving a 50.9% renewal rate.
• The operating commercial portfolio was 82.3% leased and 80.6% occupied as of June 30, 2024, compared to 84.6% and 83.1% as of March 31, 2024, at our share.
• Executed approximately 248,000 square feet of office leases at our share during the three months ended June 30, 2024, including approximately 166,000 square feet of new leases. Second-generation leases generated a 2.0% rental rate increase on a cash basis and a 12.7% rental rate increase on a GAAP basis.
• Executed approximately 347,000 square feet of office leases at our share during the six months ended June 30, 2024, including approximately 197,000 square feet of new leases. Second-generation leases generated a 1.6% rental rate increase on a cash basis and a 10.0% rental rate increase on a GAAP basis.

Development Portfolio

Under-Construction

• As of June 30, 2024, we had two multifamily assets under construction consisting of 1,583 units at our share, including 1900 Crystal Drive comprising two towers, The Grace and Reva, which delivered in the second quarter and was 49.5% leased as of July 28, 2024.

Development Pipeline

• As of June 30, 2024, we had 18 assets in the development pipeline consisting of 9.3 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, 2024, revenue from third-party real estate services, including reimbursements, was $17.4 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 $8.1 million, primarily driven by $5.1 million of property and asset management fees, $1.3 million of other service revenue and $1.1 million of leasing fees.

Balance Sheet

• As of June 30, 2024, our total enterprise value was approximately $4.1 billion, comprising 101.1 million common shares and units valued at $1.5 billion, and debt (net of premium / (discount) and deferred financing costs) at our share of $2.7 billion, less cash and cash equivalents at our share of $169.3 million.
• As of June 30, 2024, we had $163.5 million of cash and cash equivalents ($169.3 million of cash and cash equivalents at our share), and $694.3 million of availability under our revolving credit facility.
• Net Debt to annualized Adjusted EBITDA at our share for the three months ended June 30, 2024 was 11.9x, and our Net Debt / total enterprise value was 62.1% as of June 30, 2024.

Investing and Financing Activities

• We repurchased and retired 4.7 million common shares for $68.7 million, a weighted average purchase price per share of $14.62. In July 2024, through the date of this release, we repurchased and retired 0.9 million common shares for $14.0 million, a weighted average purchase price per share of $15.55, pursuant to a repurchase plan under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended.

Dividends

• On July 24, 2024, our Board of Trustees declared a quarterly dividend of $0.175 per common share, payable on August 21, 2024 to shareholders of record as of August 7, 2024.

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, most notably National Landing. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, DC metropolitan area. Approximately 75.0% 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 our retail and digital placemaking initiatives and public infrastructure improvements. JBG SMITH's dynamic portfolio currently comprises 13.4 million square feet of high-growth multifamily, office and retail assets at share, 98% of which are Metro-served. It also maintains a development pipeline encompassing 9.3 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: 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; 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; and our plans to maintain carbon neutral operations annually.

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, 2023 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 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 caps) 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 non-depreciable real estate, 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, litigation settlement 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 non-depreciable real estate, 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, litigation settlement 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 adjusted for 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 represents NOI for the three months ended June 30, 2024 multiplied by four. 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, 2024. 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 multifamily or commercial 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, 2024.

"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, excluding 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, and severance and other costs.

"Under-Construction" refers to assets that were under construction during the three months ended June 30, 2024.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
	in thousands		June 30, 2024				December 31, 2023
	ASSETS
	Real estate, at cost:
	Land and improvements		$	1,196,065			$	1,194,737
	Buildings and improvements			4,323,620				4,021,322
	Construction in progress, including land			425,653				659,103
				5,945,338				5,875,162
	Less: accumulated depreciation			(1,418,923	)			(1,338,403	)
	Real estate, net			4,526,415				4,536,759
	Cash and cash equivalents			163,536				164,773
	Restricted cash			42,366				35,668
	Tenant and other receivables			31,427				44,231
	Deferred rent receivable			181,295				171,229
	Investments in unconsolidated real estate ventures			101,043				264,281
	Deferred leasing costs, net			80,179				81,477
	Intangible assets, net			52,421				56,616
	Other assets, net			146,434				163,481
	TOTAL ASSETS		$	5,325,116			$	5,518,515
	LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
	Liabilities:
	Mortgage loans, net		$	1,876,459			$	1,783,014
	Revolving credit facility			40,000				62,000
	Term loans, net			717,610				717,172
	Accounts payable and accrued expenses			107,810				124,874
	Other liabilities, net			111,982				138,869
	Total liabilities			2,853,861				2,825,929
	Commitments and contingencies
	Redeemable noncontrolling interests			436,673				440,737
	Total equity			2,034,582				2,251,849
	TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY		$	5,325,116			$	5,518,515

_____________

Note: For complete financial statements, please refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
in thousands, except per share data		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
REVENUE
Property rental		$	112,536			$	120,592			$	235,172			$	244,625
Third-party real estate services, including reimbursements			17,397				22,862				35,265				45,646
Other revenue			5,387				8,641				10,067				14,786
Total revenue			135,320				152,095				280,504				305,057
EXPENSES
Depreciation and amortization			51,306				49,218				108,161				102,649
Property operating			36,254				35,912				71,533				71,524
Real estate taxes			14,399				14,424				28,194				29,648
General and administrative:
Corporate and other			17,001				15,093				31,974				31,216
Third-party real estate services			18,650				22,105				40,977				45,928
Share-based compensation related to Formation Transaction and special equity awards			—				—				—				351
Transaction and other costs			824				3,492				2,338				5,964
Total expenses			138,434				140,244				283,177				287,280
OTHER INCOME (EXPENSE)
Income (loss) from unconsolidated real estate ventures, net			(226	)			510				749				943
Interest and other income, net			3,432				2,281				5,532				6,358
Interest expense			(31,973	)			(25,835	)			(62,133	)			(52,677	)
Gain on the sale of real estate, net			89				—				286				40,700
Loss on the extinguishment of debt			—				(450	)			—				(450	)
Impairment loss			(1,025	)			—				(18,236	)			—
Total other income (expense)			(29,703	)			(23,494	)			(73,802	)			(5,126	)
INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT			(32,817	)			(11,643	)			(76,475	)			12,651
Income tax (expense) benefit			(597	)			(611	)			871				(595	)
NET INCOME (LOSS)			(33,414	)			(12,254	)			(75,604	)			12,056
Net (income) loss attributable to redeemable noncontrolling interests			3,454				1,398				7,988				(1,965	)
Net loss attributable to noncontrolling interests			5,587				311				10,967				535
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS		$	(24,373	)		$	(10,545	)		$	(56,649	)		$	10,626
EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED		$	(0.27	)		$	(0.10	)		$	(0.63	)		$	0.09
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED			91,030				109,695				91,832				111,862

_____________

Note: For complete financial statements, please refer to our Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

EBITDA, EBITDAre AND ADJUSTED EBITDA RECONCILIATIONS (NON-GAAP)
(Unaudited)
	dollars in thousands	Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
	EBITDA, EBITDAre and Adjusted EBITDA
	Net income (loss)	$	(33,414	)		$	(12,254	)		$	(75,604	)		$	12,056
	Depreciation and amortization expense		51,306				49,218				108,161				102,649
	Interest expense		31,973				25,835				62,133				52,677
	Income tax expense (benefit)		597				611				(871	)			595
	Unconsolidated real estate ventures allocated share of above adjustments		1,830				4,618				4,382				8,282
	EBITDA attributable to noncontrolling interests		—				(32	)			—				(2	)
	EBITDA	$	52,292			$	67,996			$	98,201			$	176,257
	Gain on the sale of real estate, net		(89	)			—				(286	)			(40,700	)
	Gain on the sale of unconsolidated real estate assets		—				—				(480	)			—
	EBITDAre	$	52,203			$	67,996			$	97,435			$	135,557
	Transaction and other costs, net of noncontrolling interests (1)		824				3,492				2,338				5,964
	(Income) loss from investments, net		(614	)			526				(672	)			(1,335	)
	Impairment loss related to non-depreciable real estate		1,025				—				18,236				—
	Loss on the extinguishment of debt		—				450				—				450
	Share-based compensation related to Formation Transaction and special equity awards		—				—				—				351
	Earnings and distributions in excess of our investment in unconsolidated real estate venture		(458	)			(341	)			(671	)			(508	)
	Lease liability adjustments		—				(154	)			—				(154	)
	Unconsolidated real estate ventures allocated share of above adjustments		—				—				—				2
	Adjusted EBITDA	$	52,980			$	71,969			$	116,666			$	140,327
	Net Debt to Annualized Adjusted EBITDA (2)		11.9		x		8.3		x		10.8		x		8.5		x
										June 30, 2024				June 30, 2023
	Net Debt (at JBG SMITH Share)
	Consolidated indebtedness (3)									$	2,625,329			$	2,454,311
	Unconsolidated indebtedness (3)										66,553				87,886
	Total consolidated and unconsolidated indebtedness										2,691,882				2,542,197
	Less: cash and cash equivalents										169,278				165,834
	Net Debt (at JBG SMITH Share)									$	2,522,604			$	2,376,363

_____________

Note: All EBITDA measures as shown above are attributable to common limited partnership units ("OP Units") and certain fully vested incentive equity awards that may be 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, 2024 and 2023 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,
		2024				2023				2024				2023
	FFO and Core FFO
	Net income (loss) attributable to common shareholders	$	(24,373	)		$	(10,545	)		$	(56,649	)		$	10,626
	Net income (loss) attributable to redeemable noncontrolling interests		(3,454	)			(1,398	)			(7,988	)			1,965
	Net loss attributable to noncontrolling interests		(5,587	)			(311	)			(10,967	)			(535	)
	Net income (loss)		(33,414	)			(12,254	)			(75,604	)			12,056
	Gain on the sale of real estate, net of tax		(89	)			—				(1,498	)			(40,700	)
	Gain on the sale of unconsolidated real estate assets		—				—				(480	)			—
	Real estate depreciation and amortization		49,631				47,502				104,818				99,113
	Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures		799				3,111				2,290				5,871
	FFO attributable to noncontrolling interests		—				311				—				535
	FFO Attributable to OP Units	$	16,927			$	38,670			$	29,526			$	76,875
	FFO attributable to redeemable noncontrolling interests		(2,592	)			(5,247	)			(4,513	)			(10,450	)
	FFO Attributable to Common Shareholders	$	14,335			$	33,423			$	25,013			$	66,425
	FFO attributable to OP Units	$	16,927			$	38,670			$	29,526			$	76,875
	Transaction and other costs, net of tax and noncontrolling interests (1)		840				3,337				1,984				5,710
	(Income) loss from investments, net of tax		(465	)			404				(509	)			(1,001	)
	Impairment loss related to non-depreciable real estate		1,025				—				18,236				—
	Loss from mark-to-market on derivative instruments, net of noncontrolling interests		28				2,601				70				5,142
	Loss on the extinguishment of debt		—				450				—				450
	Earnings and distributions in excess of our investment in unconsolidated real estate venture		(458	)			(341	)			(671	)			(508	)
	Share-based compensation related to Formation Transaction and special equity awards		—				—				—				351
	Lease liability adjustments		—				(154	)			—				(154	)
	Amortization of management contracts intangible, net of tax		1,065				1,024				2,119				2,130
	Unconsolidated real estate ventures allocated share of above adjustments		—				5				—				41
	Core FFO Attributable to OP Units	$	18,962			$	45,996			$	50,755			$	89,036
	Core FFO attributable to redeemable noncontrolling interests		(2,904	)			(6,241	)			(7,753	)			(12,103	)
	Core FFO Attributable to Common Shareholders	$	16,058			$	39,755			$	43,002			$	76,933
	FFO per common share - diluted	$	0.16			$	0.30			$	0.27			$	0.59
	Core FFO per common share - diluted	$	0.18			$	0.36			$	0.47			$	0.69
	Weighted average shares - diluted (FFO and Core FFO)		91,154				109,708				91,989				111,868

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,
			2024				2023				2024				2023
	FAD
	Core FFO attributable to OP Units		$	18,962			$	45,996			$	50,755			$	89,036
	Recurring capital expenditures and Second-generation tenant improvements and leasing commissions (2)			(12,095	)			(11,602	)			(21,130	)			(19,396	)
	Straight-line and other rent adjustments (3)			(2,509	)			(6,311	)			(3,939	)			(14,688	)
	Third-party lease liability assumption (payments) refunds			(25	)			(25	)			(25	)			70
	Share-based compensation expense			10,864				9,137				20,243				18,485
	Amortization of debt issuance costs			4,031				1,343				7,933				2,650
	Unconsolidated real estate ventures allocated share of above adjustments			201				641				660				1,043
	Non-real estate depreciation and amortization			299				341				593				696
	FAD available to OP Units (A)		$	19,728			$	39,520			$	55,090			$	77,896
	Distributions to common shareholders and unitholders (B)		$	19,012			$	27,684			$	38,010			$	57,303
	FAD Payout Ratio (B÷A) (4)			96.4		%		70.1		%		69.0		%		73.6		%
	Capital Expenditures
	Maintenance and recurring capital expenditures		$	4,362			$	4,707			$	5,557			$	7,680
	Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures			14				35				16				35
	Second-generation tenant improvements and leasing commissions			7,719				6,805				15,536				11,547
	Share of Second-generation tenant improvements and leasing commissions from unconsolidated real estate ventures			—				55				21				134
	Recurring capital expenditures and Second-generation tenant improvements and leasing commissions			12,095				11,602				21,130				19,396
	Non-recurring capital expenditures			3,268				10,904				6,790				20,597
	Share of non-recurring capital expenditures from unconsolidated real estate ventures			14				3				28				5
	First-generation tenant improvements and leasing commissions			2,322				4,174				5,217				7,299
	Share of First-generation tenant improvements and leasing commissions from unconsolidated real estate ventures			36				240				87				553
	Non-recurring capital expenditures			5,640				15,321				12,122				28,454
	Total JBG SMITH Share of Capital Expenditures		$	17,735			$	26,923			$	33,252			$	47,850

_____________

(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 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,
			2024				2023				2024				2023
	Net income (loss) attributable to common shareholders		$	(24,373	)		$	(10,545	)		$	(56,649	)		$	10,626
	Net income (loss) attributable to redeemable noncontrolling interests			(3,454	)			(1,398	)			(7,988	)			1,965
	Net loss attributable to noncontrolling interests			(5,587	)			(311	)			(10,967	)			(535	)
	Net income (loss)			(33,414	)			(12,254	)			(75,604	)			12,056
	Add:
	Depreciation and amortization expense			51,306				49,218				108,161				102,649
	General and administrative expense:
	Corporate and other			17,001				15,093				31,974				31,216
	Third-party real estate services			18,650				22,105				40,977				45,928
	Share-based compensation related to Formation Transaction and special equity awards			—				—				—				351
	Transaction and other costs			824				3,492				2,338				5,964
	Interest expense			31,973				25,835				62,133				52,677
	Loss on the extinguishment of debt			—				450				—				450
	Impairment loss			1,025				—				18,236				—
	Income tax expense (benefit)			597				611				(871	)			595
	Less:
	Third-party real estate services, including reimbursements revenue			17,397				22,862				35,265				45,646
	Other revenue			2,126				3,846				13,389				5,572
	Income (loss) from unconsolidated real estate ventures, net			(226	)			510				749				943
	Interest and other income, net			3,432				2,281				5,532				6,358
	Gain on the sale of real estate, net			89				—				286				40,700
	Consolidated NOI			65,144				75,051				132,123				152,667
	NOI attributable to unconsolidated real estate ventures at our share			1,168				5,175				4,215				9,604
	Non-cash rent adjustments (1)			(2,509	)			(6,311	)			(3,939	)			(14,688	)
	Other adjustments (2)			5,450				5,163				10,684				12,008
	Total adjustments			4,109				4,027				10,960				6,924
	NOI		$	69,253			$	79,078			$	143,083			$	159,591
	Less: out-of-service NOI loss (3)			(2,341	)			(902	)			(5,374	)			(1,611	)
	Operating Portfolio NOI		$	71,594			$	79,980			$	148,457			$	161,202
	Non-Same Store NOI (4)			225				10,853				3,389				23,317
	Same Store NOI (5)		$	71,369			$	69,127			$	145,068			$	137,885
	Change in Same Store NOI			3.2		%						5.2		%
	Number of properties in Same Store pool			40								40

_____________

(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/20240730384942/en/

Kevin Connolly

Executive Vice President, Portfolio Management & Investor Relations

(240) 333‑3837

kconnolly@jbgsmith.com

Source: JBG SMITH

FAQ

What was JBG SMITH's (JBGS) net income for Q2 2024?

JBG SMITH (JBGS) reported a net loss of $24.4 million, or $0.27 per diluted share, for Q2 2024.

How did JBG SMITH's (JBGS) Funds From Operations (FFO) perform in Q2 2024?

JBG SMITH's (JBGS) FFO for Q2 2024 was $14.3 million, or $0.16 per diluted share, down from $33.4 million, or $0.30 per diluted share, in Q2 2023.

What was the occupancy rate of JBG SMITH's (JBGS) multifamily portfolio in Q2 2024?

JBG SMITH's (JBGS) multifamily portfolio was 96.9% leased and 94.3% occupied as of June 30, 2024.

How many office leases did JBG SMITH (JBGS) execute in Q2 2024?

JBG SMITH (JBGS) executed approximately 248,000 square feet of office leases at their share during Q2 2024, including about 166,000 square feet of new leases.

What was JBG SMITH's (JBGS) dividend declaration for Q2 2024?

JBG SMITH (JBGS) declared a quarterly dividend of $0.175 per common share, payable on August 21, 2024, to shareholders of record as of August 7, 2024.