JBG SMITH Declares a Quarterly Common Dividend of $0.175 Per Share

Rhea-AI Summary

JBG SMITH (JBGS) announces a 22.2% reduction in quarterly dividend to $0.175 per common share, aiming to strengthen financial flexibility and capitalize on opportunities like share repurchases.

Insights

Financial Analyst

The announcement of a dividend cut by JBG SMITH reflects a strategic decision by the company to reallocate its capital more efficiently. The reduction of the dividend by 22.2% is a significant move that will likely be scrutinized by investors for its implications on the company's financial health and future prospects. Dividends are typically a signal of a company's confidence in its cash flow; thus, a cut could be interpreted as a cautionary measure. However, it's important to note that the decision is framed within the context of a capital recycling strategy and the anticipation of capital requirements for the company's commercial portfolio, suggesting a proactive approach to managing resources.

In the short term, investors who rely on dividend income might view this decision negatively, potentially leading to a sell-off of shares. Over the long term, however, if the redirected funds are used effectively to enhance the company's net asset value (NAV) through measures such as share repurchases, especially at a discount to NAV, the decision could be accretive to shareholder value. The company's buyback program, which has seen the repurchase of 32% of shares and operating partnership (OP) units, has also reduced its annual dividend obligations by roughly $33.8 million, potentially improving its dividend coverage ratio and financial stability.

Real Estate Investment Trust (REIT) Analyst

As a REIT, JBG SMITH is required by law to distribute at least 90% of its taxable income to shareholders in the form of dividends. The board's decision to reduce the dividend while still covering the taxable income distribution requirements suggests a careful balancing act between maintaining regulatory compliance and preserving capital for growth and operational needs. The reference to the upcoming delivery of multifamily units is particularly noteworthy. Upon completion, these assets will contribute to the Funds From Operations (FFO), a key metric for REIT performance evaluation, as capitalized interest, which is currently a cost, will cease, thus potentially improving profitability.

Furthermore, the reduction in dividends may be a strategic move to bolster the company's financial flexibility in the face of macroeconomic uncertainties or upcoming large-scale investments. The emphasis on financial flexibility hints at a conservative approach to financial management, prioritizing long-term growth and sustainability over short-term distribution. This could appeal to investors who are more interested in the company's long-term capital appreciation rather than immediate income.

Market Research Analyst

The dividend reduction by JBG SMITH comes at a time when the real estate market, particularly in the Washington, DC area, is facing various challenges such as changes in work-from-home policies and urbanization trends. Investors will be interested in how these macroeconomic and regional factors might influence the company's asset performance, especially its commercial portfolio. The company's focus on capital recycling—selling non-core assets to reinvest in higher-yielding opportunities—could be a response to market conditions, aiming to optimize its asset mix in anticipation of future trends.

It's also important to consider the competitive landscape within the REIT sector. A dividend cut may affect investor perception of the company relative to its peers, especially if those peers continue to maintain or increase their dividends. However, if JBG SMITH's strategy leads to stronger financial outcomes and an enhanced asset portfolio, it could set a precedent for strategic capital allocation that other REITs might follow, especially in a market that rewards long-term value creation over short-term payouts.

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 announced that its Board of Trustees has declared a quarterly dividend of $0.175 per common share, a new indicated annual rate of $0.70 per share, a 22.2% reduction to the prior dividend. The dividend will be paid on March 15, 2024 to common shareholders of record as of March 1, 2024.

Our Board of Trustees, in consultation with management, elected to reduce the dividend taking into consideration several factors, including (i) our on-going capital recycling strategy, (ii) the expected performance and capital requirements of our commercial portfolio, and (iii) the upcoming delivery of our 1,583 under-construction multifamily units (upon delivery, capitalized interest ceases which reduces FAD and taxable income).

We believe the reduced dividend rate will help preserve JBG SMITH’s financial flexibility, reinforce our already strong financial position, continue to cover our taxable income distribution requirements, and enhance the Company’s ability to take advantage of compelling opportunities, such as share repurchases, as they arise. Share buybacks are a form of capital return to investors, as are dividends. At our current discount to NAV, we believe buybacks are more accretive to our long-term NAV per share than excess (above taxable income) dividends. Having bought back approximately 32% of the shares and OP units that were outstanding when we began our buyback program, we have eliminated approximately $33.8 million in annual dividends on those securities at the current dividend level.

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 14.7 million square feet of high-growth office, multifamily, and retail assets at share, 99% 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 press release. We also note the following forward-looking statements: our expected annual dividend rate, the expected continuation of our capital recycling strategy, the expected performance and capital requirements of our commercial portfolio, the upcoming delivery of under-construction multifamily units, our ability to preserve JBG SMITH’s financial flexibility, reinforce our already strong financial position, continue to cover our taxable income distribution requirements, and our ability to take advantage of compelling opportunities.

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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240214207648/en/

Kevin Connolly

JBG SMITH

Executive Vice President, Portfolio Management & Investor Relations

(240) 333-3837

kconnolly@jbgsmith.com

Source: JBG SMITH

FAQ

What is the new indicated annual rate of dividend per share announced by JBG SMITH (JBGS)?

The new indicated annual rate of dividend per share announced by JBG SMITH (JBGS) is $0.70.

When will the dividend declared by JBG SMITH (JBGS) be paid?

The dividend declared by JBG SMITH (JBGS) will be paid on March 15, 2024.

Why did JBG SMITH (JBGS) decide to reduce the dividend?

JBG SMITH (JBGS) decided to reduce the dividend considering factors such as their capital recycling strategy, expected performance and capital requirements of their commercial portfolio, and the delivery of under-construction multifamily units.

What is the impact of reducing the dividend rate on JBG SMITH's (JBGS) financial position?

The reduced dividend rate is expected to help preserve JBG SMITH's (JBGS) financial flexibility, reinforce their strong financial position, cover taxable income distribution requirements, and enhance the Company's ability to pursue opportunities like share repurchases.

How much in annual dividends has JBG SMITH (JBGS) eliminated through share buybacks?

JBG SMITH (JBGS) has eliminated approximately $33.8 million in annual dividends through share buybacks at the current dividend level.