JBG SMITH Consolidates Impact Investing Operations Into LEO Impact Capital

Rhea-AI Summary

JBG SMITH (NYSE: JBGS) has launched LEO Impact Capital, a new platform focused on investing in and preserving middle-income housing in high-demand neighborhoods. LEO consolidates JBG SMITH’s existing impact investment activities, including managing the $115 million Washington Housing Initiative Impact Pool. The Impact Pool has successfully preserved over 3,000 housing units across DC, Maryland, and Virginia since 2020, exceeding its target ahead of schedule. AJ Jackson has been appointed as President of LEO Impact Capital. The initiative aims to support essential workers by providing affordable housing options, which is increasingly important as housing costs rise.

Positive

• Formation of LEO Impact Capital consolidates and streamlines JBG SMITH's impact investments.
• The Washington Housing Initiative Impact Pool surpassed its goal, preserving over 3,000 units since 2020.
• LEO Impact Capital aims to provide affordable housing for essential workers, addressing critical housing needs.
• The platform generates fee income for JBG SMITH, potentially boosting its financial performance.
• LEO Impact Capital strengthens JBG SMITH’s relationships within local communities.

Negative

• Rising housing costs could increase operational challenges and strain profitability.
• High competition in the affordable housing sector may impact LEO's future growth and investment returns.
• Dependence on external partners (both non-profit and for-profit) could pose risks for timely acquisitions and operations.

Insights

Financial Analyst

JBG SMITH's consolidation of its impact investing operations under the new platform, LEO Impact Capital, carries key financial implications. This strategic move is aimed at streamlining and enhancing efficiency in managing the significant capital already allocated to impact investing, particularly the $115 million Washington Housing Initiative Impact Pool. By centralizing these operations, JBG SMITH can potentially reduce operational costs and improve decision-making processes, leading to better utilization of the capital invested.

It's also noteworthy that LEO has exceeded its goal of creating and preserving more than 3,000 housing units ahead of the 2025 target. This outperformance could signal robust management and execution capabilities which might translate into increased investor confidence. Furthermore, generating fee income from these operations could provide a diversified revenue stream for JBG SMITH, potentially smoothing earnings volatility from other segments.

For retail investors, the consolidation implies a focused approach towards addressing the 'missing middle' housing concern, which is a significant issue in many rapidly growing urban areas. The strategy could foster long-term value creation, balancing social impact with financial returns. However, investors should remain cautious about the potential risks associated with market fluctuations in the real estate sector and the regulatory environment affecting housing policies.

Market Research Analyst

The formation of LEO Impact Capital addresses a critical market need for affordable middle-income housing, particularly in urban areas where housing costs are surging. The initiative strategically targets the 'missing middle' - a demographic that includes essential workers such as teachers and nurses, who are vital for community stability yet often struggle with housing affordability. This focus not only enhances JBG SMITH's market positioning but aligns with broader societal trends towards social responsibility and ESG (Environmental, Social, Governance) investing.

From a market dynamics perspective, the aggregation of impact investment activities under a specialized platform like LEO allows for greater scalability and a more integrated approach to tackling housing issues. By coordinating investment and asset management functions, JBG SMITH can potentially leverage economies of scale, leading to more effective deployment of resources and possibly yielding higher social and financial returns.

Moreover, the success of the Impact Pool in surpassing its unit creation goals ahead of schedule underscores a strong demand for such initiatives. This could indicate a robust pipeline of future projects, enhancing the attractiveness of JBG SMITH's investment proposition. However, market analysts should consider the ongoing challenges related to economic fluctuations, interest rate trends and regulatory changes that could impact housing affordability and investment returns.

Dedicated Platform Focusing on Creating and Preserving Middle Income Housing Integrates Investment and Asset Management Functions

BETHESDA, Md.--(BUSINESS WIRE)-- JBG SMITH (NYSE: JBGS) today announced the formation of LEO Impact Capital (LEO), its workforce housing investment management platform aimed at acquiring, operating, and preserving middle income housing in rapidly growing neighborhoods vulnerable to rising housing costs. LEO is a subsidiary of leading Washington, DC-region owner and developer JBG SMITH.

JBG SMITH’s existing impact investment activities have been consolidated under LEO, including management of the Washington Housing Initiative Impact Pool (the Impact Pool). The Impact Pool, launched in 2018, is an approximately $115 million investment vehicle that works with non-profit and for-profit mission driven sponsors to acquire privately owned and unsubsidized housing that’s affordable to everyday working households. Since making its first investment in 2020, the Impact Pool has helped create and preserve more than 3,000 units across DC, Maryland, and Virginia, outpacing its goal to deliver 3,000 units by 2025.

LEO’s formation comes at a time of increasing pressure for “missing middle” Americans such as teachers, nurses, firefighters, administrative assistants, and other workers whose services are vital to thriving communities and whose incomes are too high to qualify for housing subsidies but not high enough to afford average market rents for themselves and their families in many of the nation’s most populous cities. According to Harvard University’s Joint Center for Housing Studies, housing cost pressures are rising most rapidly among this group, with one third of missing middle renters in the U.S. currently devoting 30% or more of their incomes to rent.

AJ Jackson, who most recently served as Executive Vice President of Social Impact Investing at JBG SMITH, has been named President of LEO Impact Capital. “Our primary objective in creating LEO Impact Capital is to build on the successful track record of the Impact Pool and unlock access to opportunity for our investors, residents, and communities by helping people live in neighborhoods that set them up for success at rents they can afford,” said Jackson. “We have grown our impact investment operation significantly since launching our first social impact investment vehicle in 2018. As a result, consolidating our investment, asset, and portfolio management activities under a dedicated impact platform will allow us to continue to grow and best serve our residents, investors, and partners going forward.”

“LEO Impact Capital offers residents and our investment partners the best of both worlds,” said JBG SMITH CEO Matt Kelly. “LEO will benefit from a team of dedicated and experienced professionals focused on investing in and operating affordable workforce housing while generating fee income for JBG SMITH and strengthening its relationships in local communities. Access to affordable housing is as important to economic growth as education and job skills, and we are excited to continue to leverage our operating platform to address this critical need.”

About LEO Impact Capital

LEO Impact Capital unlocks access to opportunity by acquiring, operating, and investing in workforce housing in high-impact neighborhoods. Leveraging a data-backed double-bottom line approach, alongside the resources and deep experience of its NYSE-listed parent company, JBG SMITH, LEO seeks to deliver long-term value for investors, reduce risk, preserve affordability for residents, and drive measurable impact. For more information on LEO Impact Capital please visit www.LEOIC.com.

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 JBG SMITH’s deployment of 5G digital infrastructure. JBG SMITH's dynamic portfolio currently comprises 13.7 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 of JBG SMITH Properties (“JBG SMITH” or the “Company”) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximate”, “believes”, “expects”, “anticipates”, “intends”, “plans”, “would”, “may”, or similar expressions in this press release. We also note the following forward-looking statements: future investments; location of the affordable housing; range in affordability. Many of the factors that will determine the outcome of these and our other forward-looking statements, entitlements, and plans are beyond our ability to control or predict. These factors include, among others: adverse economic conditions and the political climate in the Washington, DC metropolitan area, the timing of and costs associated with development and property improvements, financing commitments, and general competitive factors. For further discussion of factors that could materially affect the outcome of our forward-looking statements and other risks and uncertainties, see “Risk Factors” and the Cautionary Statement Concerning Forward-Looking Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 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 after the date hereof.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240529415578/en/

Mittie Rooney

Rubenstein

Executive Vice President

(301) 602-8709

mrooney@rubenstein.com

Samantha Schmieder

JBG SMITH

Corporate Communications Manager

(240) 333-7706

sschmieder@jbgsmith.com

Source: JBG SMITH

FAQ

What is LEO Impact Capital?

LEO Impact Capital is a platform launched by JBG SMITH to invest in and preserve middle-income housing.

What is the Washington Housing Initiative Impact Pool?

The Washington Housing Initiative Impact Pool is a $115 million investment vehicle managed by LEO Impact Capital to acquire affordable housing units.

How many housing units has the Impact Pool preserved?

The Impact Pool has preserved over 3,000 housing units across DC, Maryland, and Virginia.

Who is the President of LEO Impact Capital?

AJ Jackson has been appointed as President of LEO Impact Capital.

What is the primary goal of LEO Impact Capital?

LEO Impact Capital aims to provide affordable housing options for essential workers and support community growth.

How does LEO Impact Capital benefit JBG SMITH financially?

LEO Impact Capital generates fee income for JBG SMITH, potentially boosting its financial performance.

What challenges might LEO Impact Capital face?

LEO Impact Capital may face operational challenges due to rising housing costs and competition in the affordable housing sector.