Toggle SGML Header (+)


Section 1: 8-K (8-K)

Document


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
November 7, 2018

395679465_logoverticaltransbluea02.jpg
JBG SMITH PROPERTIES
________________________________________________________________________________
(Exact name of Registrant as specified in its charter)
Maryland
No. 001-37994
81‑4307010

(State or other jurisdiction of
incorporation or organization)
(Commission file number)
(I.R.S. Employer
Identification No.)
4445 Willard Avenue, Suite 400
Chevy Chase, MD
 
20815
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (240) 333‑3600  
Former name or former address, if changed since last report:


_______________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2.):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o
 





Item 2.02     Results of Operations and Financial Condition

On November 7, 2018, JBG SMITH Properties (the “Company”) announced its financial results for the three and nine months ended September 30, 2018. The Company also released a Quarterly Investor Package, which contains a shareholder letter, the earnings press release and supplemental information. A copy of the Quarterly Investor Package is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” with the Securities and Exchange Commission for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to liabilities of that section, nor incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act.

Item 9.01    Financial Statements and Exhibits

(d) Exhibits
99.1     Quarterly Investor Package for the quarter ended September 30, 2018.
        






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
JBG SMITH PROPERTIES
 
November 7, 2018
 
By:
/s/ STEPHEN W. THERIOT
 
 
 
 
Name: Stephen W. Theriot
 
 
 
 
Title: Chief Financial Officer
 
         (Principal Financial and Accounting Officer)



(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit
395679465_cover3q18pkg.jpg



395679465_toc3q18pkg.jpg



395679465_managementletterdivider3q18p.jpg



395679465_logovwhitebluergb.jpg
November 7, 2018

To Our Fellow Shareholders:

We are pleased to report on our performance for the third quarter of 2018. For details regarding our financial and operating results, please see our third quarter earnings release and supplemental information, which follow this letter.
During the third quarter, we continued to make progress on delivering our Under Construction assets on-time and on-budget, stabilizing our operating portfolio at income levels consistent with our published NOI bridge and market rent expectations, maturing and harvesting opportunities in our Future Development Pipeline, and capitalizing on the current environment to dispose of assets where we can achieve or exceed our estimated NAV pricing for select assets within the portfolio.
Our plans for the highly anticipated Central District Retail in Crystal City passed the critically important milestone of Arlington County zoning approval in October. We intend to commence construction on this project in the fourth quarter of 2018. It will comprise approximately 130,000 gross square feet and will serve as the foundation of anchor amenities from which future phases of placemaking development will emanate in the submarket. The primary anchors of the project will be a 49,000 square foot Alamo Drafthouse Cinema and a specialty grocer. The strength of Alamo Drafthouse Cinema, which was recently ranked the number one North American movie theater chain in a Market Force Information poll, combined with the strong demand that we have seen from other local retail operators, validates our merchandising strategy and provides a catalyst for our placemaking efforts in the market. As we continue to execute on our strategy to reposition the submarket, Central District Retail will set the tone for our long-term vision and reflect our obsessive focus on place and walkability.
Washington, DC Market Update
All data and related information in the following market update has been provided by JLL.
The DC Metro area experienced its highest job growth in more than a decade in the trailing 12 months ended August 2018, with a gain of 64,100 jobs, 49% higher than the preceding 12 months. This strong employment growth points to an accelerating recovery in a market that has lagged other gateway cities in the past several years. We have seen this employment growth and the potential for future growth manifest in several ways: increased federal government budgets for defense sector and government technology initiatives; consistent growth in office tenant demand in transit-oriented locations; multifamily rent growth; an uptick in real estate capital markets volume; and a tightening of pricing.
Office
This stronger economic engine has fueled more dynamic, tighter, office markets for the year, slightly offset by a weak third quarter. Overall regional occupancy decreased by 20 basis points to 83.5% during the quarter, largely due to additional sublease space coming on the market. Despite that occupancy decrease, net absorption remained positive for 2018 with nearly 1.3 million square feet of absorption through the third quarter. The pockets of

1



weakness in the market were concentrated in suburbs outside the Beltway, with expected downsizing and move-outs on the Toll Road in Northern Virginia and Rockville Pike in Suburban Maryland. Amenity-rich, Metro-served locations were the net beneficiaries of these move-outs, as has been the trend for many years. Looking to the future, we see positive signs for continued growth. In the second quarter alone, 53% of leases larger than 20,000 square feet exhibited tenants growing their footprint, followed by 44% of such leases in the third quarter. Those leases will generate 1.7 million square feet of future occupancy gains in the coming quarters which, translated into net absorption, exceed the absorption gains we have seen through the third quarter.
Heading into 2019, the forces that have weighed on the Downtown office market will remain. Continued high vacancy in the downtown commodity Class A market has driven net effective rent declines due to growing TI packages and landlord capital investments aimed at making these ageing buildings more appealing to tenants. Suburban, off-Metro submarkets throughout the region will also remain challenged due to lack of new demand and a flight of existing tenants to locations with transit and better amenities. As of the third quarter, JBG SMITH-focused submarkets commanded a 23% rent premium to the broader market, while rents in the submarkets where JBG SMITH has no office presence were 21% lower than the broader market. As long as the job market continues to grow, we expect this divide to widen, as better locations absorb at the expense of their farther flung suburban counterparts.
Multifamily
As we predicted at our launch in the summer of 2017, multifamily supply increases are slowing from peaks in recent years. From 2014 through the third quarter of 2018, an estimated 12,310 units delivered to the market each year. In 2019 and 2020, an estimated 9,500 units will deliver each year, a 23% decline. With the supply pipeline slowing from its peak in 2017, rents have begun to move up, particularly in value-focused product, and rents are stabilizing in new product delivered in 2017 and early 2018. Within the infill, urban submarkets on which JBG SMITH focuses, rent growth remains strong and has rebounded through the first nine months of 2018 with 4.7% growth. This growth was more than 100 basis points higher than rent growth achieved in non-JBG SMITH submarkets, which grew only 3.6% in the first nine months of 2018.
Capital Markets
Office investment sales totaled $1.7 billion in the third quarter, up slightly from the second quarter, with the majority of this activity concentrated downtown. In the Trophy market, high demand and low supply have continued to drive pricing upward. Four of the 13 sales that have broken the historic $900 per square foot top-of-market threshold in DC occurred in 2018. As Trophy sales remained few and far between, the Class B market picked up the slack, accounting for 40% of investment sales volume. As Class B leasing fundamentals tighten, investors have begun to look at Class B assets as more than redevelopment plays, and pricing reflects that shift. Average pricing for stabilized Class B buildings has grown from $370 per square foot during the 2008 to 2013 period to $534 per square foot from 2014 to 2018. In the suburbs, assets with transit access continued to attract the most investment activity. This trend was extremely pronounced in Northern Virginia, where 75% of sales volume was concentrated in Silver Line submarkets stretching from Rosslyn to Herndon.
Multifamily investment sales totaled slightly over $4.0 billion through the third quarter of 2018, putting the market on track to easily exceed sales volume of $4.2 billion reached in 2017 and set a new post-recession peak. While sales volume has climbed to new highs, the weighted average price per unit settled near $203,000, a decline of 7% compared to 2017. The decline in average unit pricing has come as investment volume has shifted toward the lower quality end of the market. Nearly 65% of sales volume in 2018 has come from trades of Class B and Class C product, predominantly in suburban submarkets. Washington, DC continued to command a significant premium over

2



the rest of the region, with pricing averaging over $235,000 per unit, compared to slightly under $151,000 per unit in Suburban Maryland. Northern Virginia, which has driven 46% of overall sales volume in 2018, averaged roughly $223,000 per unit.
Aided by strong investment activity for both office and multifamily assets in 2017, debt capital markets hit a record peak in 2017 with $11.1 billion in financing volume. While activity so far in 2018 has fallen short of the previous year, nearly $4.5 billion of debt financing has closed through the third quarter. The debt markets continue to be very liquid, and it is a good time to be a borrower, especially for cash flowing assets. Base rates continued to rise with the 10-year treasury yield edging above 3% in the third quarter, but that increase has largely been offset by tightening spreads across the board, which have lessened pressure on all-in rates.
Operating Portfolio
Our 11.5 million square foot operating office portfolio (at share) generated $281.2 million of annualized NOI and was 87.1% leased and 85.4% occupied as of the end of the third quarter. Year to date, we have sold several office assets including Summit I and II, the Bowen Building, Executive Tower, 1233 20th Street, and our interest in the Investment Building, all helping to reduce our exposure to the most challenged sectors of the office market. During the third quarter, we completed 42 office lease transactions in our operating office portfolio totaling over 378,000 square feet (at share), including 66,000 square feet of new leases and 312,000 square feet of renewals. For second-generation leases, the rental rate mark-to-market was (5.6%) on a cash basis and (2.6%) on a GAAP basis. This mark-down is within a range that is consistent with our long-term (5%) mark-to-market assumption and is primarily the result of three GSA renewals. Like last quarter, we renewed several leases early to ensure the tenants did not move to other buildings. While these “blend and extend” lease renewals often require a free rent component and, therefore, impact near term NOI and same-store NOI growth, we believe signing these deals is a prudent defensive leasing strategy given the alternative of downtime and re-leasing costs associated with losing these tenants. In addition, we are seeing a trend of existing GSA tenants forgoing market tenant improvement allowances and instead using the value of the improvement allowance to reduce their contractual rental rate prior to signing the lease, rather than amortizing these dollars over the lease term. While these leases cause spikes in our reported negative mark-to-market rent adjustments, the true impact on a net effective rent basis is negligible. To provide a transparent picture of net effective rents over time, we include a schedule of net effective rents in our financial supplemental information.
We have received several inquiries about our approach to flexible space and coworking trends. Our goal is to provide a broad spectrum of real estate solutions to our commercial tenants that meet their needs in ways that work best for them. We intend to maximize value across our portfolio by providing tenants with a range of options while also ensuring that we receive a fair return on investment for each space in our portfolio. Our strategy in this area is to provide best-in-class customer service on economic terms that adequately compensate us for our up-front capital expense and our long-term exposure to credit risk and the market cycle.
Third-party coworking is an important component of our strategy reflected in leases totaling approximately 300,000 square feet with eight different providers. This is a fast-growing user base, and we find coworking tenants can help drive demand from non-traditional tenants for more traditional space across our portfolio. Coworking also provides an opportunity for easily accessible expansion space for other existing tenants in our buildings. Additionally, there is the potential to partner with coworking providers to provide a greater level of service and amenities. While an important part of our strategy, at the end of the third quarter, coworking tenants comprised less than 3% of our portfolio by both square footage and rental revenue - WeWork is the largest of those tenants. We have constructed our leases purposefully to diversify our exposure across our portfolio and to include several different coworking

3



providers to limit downside risk in the event of an economic downturn or consolidation within the sector. While we anticipate entering into other leases with coworking and flexible space providers where appropriate across our portfolio, we remain focused on lease security and downside protection to guard against any potential volatility in that industry.
In addition to our relationships with coworking providers, we continue to execute a robust, internally managed “spec suite” program in which we provide already-built, turnkey spaces for tenants requiring space quickly. While some tenants seek a shorter-term lease structure for these spaces, we find that the lease term for these spaces often ranges between 5 and 7 years. A premium rent is often achieved given the speed and turnkey buildout these spaces offer. We have also seen multiple tenants graduate from our spec suites into more traditional space in our portfolio with longer term leases. This program is another important element of meeting the needs of our customers in an ever-evolving marketplace.
Our operating multifamily portfolio, comprising approximately 4,523 units (at share), generated $77.9 million of annualized NOI and ended the third quarter at 96.1% leased, up slightly from 95.9% leased in the second quarter. We saw particularly strong performance at Falkland Chase, The Bartlett, and RiverHouse Apartments. In addition, we have seen continued strong leasing activity at 1221 Van Street, a recently delivered multifamily asset in the Ballpark/Southeast submarket. As of the date of this letter, the multifamily portion of 1221 Van Street was 80% leased, and the retail portion was over 90% leased to several high-end, amenity-based retailers.
Development Portfolio
Under Construction
At the end of the third quarter, we had seven assets Under Construction, all of which had guaranteed maximum price construction contracts in place. These assets have a weighted average estimated completion date of the first quarter of 2020, a weighted average estimated stabilization date of the second quarter of 2021, and a projected NOI yield based on Estimated Total Project Cost of 6.8%. Based on projected stabilized NOI (at share), our Under Construction portfolio is 60.9% multifamily and 39.1% office. The office assets represent 546,133 square feet (at share), of which 63.9% is pre-leased.
Near Term Development
We do not have any assets in the Near Term Development Pipeline as of the third quarter. As a reminder, we only place assets into our Near Term Development Pipeline when they have substantially completed the entitlement process and for which we intend to commence construction within 18 months, subject to market conditions.
Future Development Pipeline
Our Future Development Pipeline comprises 19.0 million square feet (at share), with an Estimated Total Investment of approximately $42 per square foot. As of the third quarter, approximately 1.8% of this pipeline was in the DC mature markets, 18.3% was in the DC emerging markets, 27.2% was in Pentagon City, 15.7% was in Crystal City, 18.3% was in Reston, 11.4% was in Other VA, 6.7% was in Silver Spring, and 0.6% was in Greater Rockville. We believe our Future Development Pipeline is a substantial source of value that can be unlocked through new development, land sales, and/or ground leases, and we will continue to explore attractive opportunities to harvest value from land sites as part of our capital recycling and development efforts. As indicated at the beginning of this letter, we expect to commence construction on Central District Retail in Crystal City before year end, which means that asset will move from our Future Development Pipeline into our Under Construction assets in the fourth quarter. In addition to Central District Retail, we are pursuing final entitlements for a multifamily project located at 1900 Crystal Drive, which will include two apartment towers and additional important placemaking retail on the ground

4



level. We expect to receive final entitlements later in 2019, and this asset is another potential candidate for development under the right market conditions.
Amazon
This is our fifth quarterly investor letter since the Amazon HQ2 search began in September of 2017. As we outlined in our third quarter 2017 letter, Amazon would be a game changer for our local economy and would breathe new life into a market that is still recovering from the headwinds of BRAC, the global financial crisis and sequestration. As a growth engine, Amazon would lead to the healthy diversification of our local economy and would catalyze the development of a technology ecosystem that has long searched for its footing in our region. HQ2 would serve as an incredible catalyst to accelerate the repositioning of our assets in Crystal City and our long-term placemaking strategy in the submarket. Since Amazon’s search for a second headquarters began, our team and our region have put forward a compelling case for any large employer in search of a deep and broad talent base in a business-conducive environment with plenty of room to grow. Whether we are ultimately selected or not, this process has generated extremely valuable attention and interest in all that our region has to offer. The JBG SMITH team has invested considerable time and energy pursuing this once-in-a-generation opportunity. With a decision promised by year end, we are in the home stretch and we continue to hope for the best.
Third-Party Asset Management and Real Estate Services Business
Our share of revenue from the third-party asset management and real estate services business was $14.3 million in the third quarter, primarily driven by $5.9 million in property management fees and $3.6 million in asset management fees. The portion of the total fees associated with the legacy JBG Funds was $6.4 million. The legacy JBG Funds continued to dispose of assets in accordance with their underlying business plans. We continue to expect the fees from the third-party management business to remain relatively stable after the legacy JBG Fund business winds down over the next 4-7 years.
Capital Allocation
Acquisitions
The acquisitions market in Washington, DC continues to be competitive, and we remain cautious. Any near-term acquisition activity will be focused on assets with redevelopment potential in emerging growth neighborhoods, as well as assets adjacent to our existing holdings where the combination of sites can add unique value to any new investment. Where there are opportunities to trade out of higher risk assets with extensive capital needs or those outside of our geographic footprint, we will consider 1031 exchanges.
Dispositions
During the third quarter, we made further progress on our goal to raise $700 million of capital through asset sales and recapitalizations, which we intend to use to deleverage and create balance sheet capacity for future investment opportunities. Year-to-date, we have closed over $553 million of asset sales and recapitalizations, which include 1900 N Street, Summit I and II, the Bowen Building, Executive Tower,1233 20th Street, the Investment Building, and the out-of-service portion of Falkland Chase - North. In July, the deposit related to the $115 million sale of Commerce Executive became non-refundable, which, assuming it closes, brings our aggregate dispositions and recapitalizations to approximately $668 million. Our Future Development Pipeline remains a substantial source of value that can be unlocked through new development, land sales, and/or ground leases. We plan to provide a summary of the impact that our capital recycling efforts have had on our portfolio and our balance sheet, as well as lay out our capital recycling goals for 2019 in conjunction with our year-end investor letter.


5



Given the continued fervor in the private capital markets, we are exploring additional opportunities to capitalize on attractive market conditions to raise capital through additional sales and recapitalizations. Where appropriate, we will consider 1031 exchanges for low basis assets to improve risk-adjusted returns and upgrade asset quality, location or use type. Over the long term, we expect our capital recycling efforts to reduce our exposure to office and increase our exposure to multifamily in the emerging growth submarkets in which we are concentrated.
Development
We are continuing to advance the entitlement process for assets in our Future Development Pipeline because we believe bringing land to shovel-ready condition is the best way to maximize optionality and value. Some of these assets will be sold or ground leased, and some may be future development opportunities for us. We expect our next development projects to be Central District Retail and additional ground-up multifamily assets in Crystal City. As with all new construction, any future development opportunities will be evaluated on their strength relative to other investment alternatives while maintaining prudent balance sheet capacity.
Balance Sheet
As of September 30, 2018, we had approximately $253.1 million of cash on a GAAP reporting basis, $284.0 million of cash (at share), and $1.1 billion of capacity under our $1.4 billion credit facility. We have $396 million of Estimated Incremental Investment (at share) to complete our seven Under Construction assets, which can be fully funded with cash, in place construction loans, and available draws on our term loan facilities.
During the third quarter, we repaid $88.6 million of mortgage debt and the outstanding $35.7 million balance on our revolving credit facility. We also drew the $200 million term loan, due in 2024, in accordance with the delayed draw provisions of our credit facility. Subsequent to quarter-end, in conjunction with the sale of 1233 20th Street, we repaid the related $41.9 million mortgage. As of September 30, 2018, our fixed-rate debt represents 75% of our total debt, in-line with our target range of 70% to 80% fixed.
As of September 30, 2018, our Net Debt/Adjusted EBITDA ratio was 6.7x, and our Net Debt/Total Enterprise Value was 30.8%. We expect the proceeds from asset sales and recapitalizations to substantially offset the increased leverage that otherwise would have resulted from the incremental investment in our Under Construction assets. Due to our successful capital recycling efforts, we expect to end 2018 with a Net Debt/Adjusted EBITDA ratio of approximately 7.0x and in the low 30’s from a Net Debt/Total Enterprise Value perspective using our stock price at September 30, 2018. It is our goal to create additional capacity to execute on our redevelopment plans in Crystal City and take advantage of acquisition opportunities when the real estate cycle turns.
Environmental, Social and Governance
In September, we achieved a 4-star rating from the Global Real Estate Sustainability Benchmark (GRESB) in the 2018 Real Estate Assessment, ranking second among 25 global participants with mixed-use office and multifamily portfolios. In our first year participating in the GRESB assessment, we outperformed the average score of other first year participants by 23 points with a total score of 82. Each year GRESB assesses and benchmarks the environmental, social and governance (ESG) performance of real assets worldwide and monitors the sector’s progress toward global sustainability goals. GRESB assessments are guided by what investors, and the industry, consider to be material issues in the sustainability performance of real asset investments.
We take our responsibility to contribute to the long-term sustainability of our customers, our region, and our planet seriously. By fully integrating environmental sustainability, social responsibility, and strong governance practices throughout our organization, we believe we can enhance our communities and conserve resources while growing shareholder value. Our investment strategy focuses on aligning long-term business plans with sustainable

6



development goals, positioning assets to meet market demands for sustainability and achieving long-term targets for conserving resources and reducing carbon emissions. Our portfolio of LEED and ENERGY STAR certified properties demonstrates our commitment to sustainable design and performance. Our emphasis on placemaking and development of high-quality, urban, metro-served real estate is a core aspect of reducing our collective environmental footprint.
In October, we began fundraising for the Washington Housing Initiative Impact Pool, which was created to provide capital for the acquisition and development of affordable workforce housing. As a reminder, we launched the Washington Housing Initiative (WHI) in partnership with the Federal City Council earlier this year. WHI is a transformational, market-driven approach to producing and preserving affordable workforce housing. Its goal is to preserve or build up to 3,000 units of affordable workforce housing in high-impact locations in the Washington, DC region over the next decade. We intend to invest $10 million alongside third-party capital in the WHI and leverage our size and scale to manage the WHI assets. We expect the WHI to begin making investments in 2019.
We are excited to announce the addition of Carey Goldberg, our new Executive Vice President of Human Resources & Inclusion. Carey will serve as a strategic advisor to the executive management team, while overseeing our human resource strategy and direction. Her background building employee experiences and talent development across multiple Fortune 500 companies will serve us well as we strengthen our workplace culture and continue to promote diversity, inclusion, and employee growth.
Finally, we have added a new feature to the News section of our website to share third-party information, such as newsworthy articles, market research reports, or other information on the commercial real estate market that we believe key stakeholders will find valuable. This information can be found at www.jbgsmith.com.
* * *
Thank you for taking the time to read our quarterly investor letter. We will continue to focus on long-term value creation and maximizing net asset value per share. We are excited about the opportunities ahead of our organization, and we will work hard to maintain your trust and confidence as we execute on our growth plans.
395679465_mattsignature.jpg
W. Matthew Kelly
Chief Executive Officer



7



395679465_earningsreleasedivider3q18pk.jpg



FOR IMMEDIATE RELEASE            395679465_logovwhitebluergb.jpg
CONTACT
Jaime Marcus
SVP, Investor Relations
(240) 333-3643
jmarcus@jbgsmith.com
JBG SMITH ANNOUNCES THIRD QUARTER 2018 RESULTS

Chevy Chase, MD (November 7, 2018) - 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 September 30, 2018 and reported its financial results.
Additional information regarding our results of operations, properties and tenants can be found in our Third Quarter 2018 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com.
Third Quarter 2018 Financial Results
Net income attributable to common shareholders was $22.8 million, or $0.19 per diluted share.
Funds From Operations (“FFO”) attributable to common shareholders was $42.6 million, or $0.36 per diluted share.
Core Funds From Operations (“Core FFO”) attributable to common shareholders was $51.3 million, or $0.43 per diluted share.

Nine Months Ended September 30, 2018 Financial Results
Net income attributable to common shareholders was $39.2 million, or $0.33 per diluted share.
FFO attributable to common shareholders was $120.0 million, or $1.01 per diluted share.
Core FFO attributable to common shareholders was $156.5 million, or $1.32 per diluted share.

Operating Portfolio Highlights
Annualized Net Operating Income (“NOI”) for the three months ended September 30, 2018 was $364.9 million, compared to $378.5 million for the three months ended June 30, 2018, at our share.
The operating office portfolio was 87.1% leased and 85.4% occupied as of September 30, 2018, compared to 87.4% and 86.0% as of June 30, 2018, at our share.
The operating multifamily portfolio was 96.1% leased and 94.3% occupied as of September 30, 2018, compared to 95.9% and 92.6% as of June 30, 2018, at our share.
The operating other portfolio (excluding the Crystal City Marriott) was 98.8% leased and 98.6% occupied as of September 30, 2018, compared to 93.4% leased and 91.1% occupied as of June 30, 2018, at our share.
Executed approximately 378,000 square feet of office leases at our share in the third quarter, comprising approximately 60,000 square feet of new leases, and approximately 318,000 square feet of second generation leases, which generated a 2.6% rental rate decrease on a GAAP basis and a 5.6% rental rate decrease on a cash basis.
Executed approximately 1.0 million square feet of office leases at our share during the nine months ended September 30, 2018, comprising approximately 277,000 square feet of new leases, and approximately 742,000

1



square feet of second generation leases, which generated a 0.3% rental rate increase on a GAAP basis and a 6.4% rental rate decrease on a cash basis.
Same Store Net Operating Income (“SSNOI”) decreased 0.7% to $70.0 million for the three months ended September 30, 2018, compared to $70.5 million for the three months ended September 30, 2017. SSNOI increased 4.6% to $203.1 million for the nine months ended September 30, 2018, compared to $194.2 million for the nine months ended September 30, 2017. The decrease in SSNOI for the three months ended September 30, 2018 is largely attributable to the conversion of unused tenant incentive allowances to free rent, rental abatement and anticipated tenant move-outs. The increase in SSNOI for the nine months ended September 30, 2018, is mainly driven by the burn off of rent abatements, partially offset by rent abatements given to tenants in 2018. The reported same store pool as of September 30, 2018 includes only the assets that were in service for the entirety of both periods being compared and does not include the JBG Assets acquired in our Formation Transaction. The JBG Assets will be included in reported SSNOI in the fourth quarter of 2018. Including the JBG Assets, SSNOI would have increased 0.7% and 4.9% for the three and nine months ended September 30, 2018.
 
Development Portfolio Highlights
Under Construction
During the quarter ended September 30, 2018, there were seven assets under construction (three office assets and four multifamily assets), consisting of 546,133 square feet and 1,284 units, both at our share.

Near-Term Development
As of September 30, 2018, there were no assets in near-term development.

Future Development Pipeline
As of September 30, 2018, there were 43 future development assets consisting of 19.0 million square feet of estimated potential density at our share.

Third-Party Asset Management and Real Estate Services Business
For the three months ended September 30, 2018, revenue from third-party real estate services, including reimbursements, was $23.8 million. Excluding reimbursements and service revenue from our interests in consolidated and unconsolidated real estate ventures, revenue from our third-party asset management and real estate services business was $14.3 million, of which $5.9 million came from property management fees, $3.6 million came from asset management fees, $1.5 million came from leasing fees, $2.3 million came from development fees, $0.6 million came from construction management fees and $0.4 million came from other service revenue.
The general and administrative expenses allocated to the third-party asset management and real estate services business were $10.1 million for the three months ended September 30, 2018.

Balance Sheet
We had $2.1 billion of debt ($2.6 billion including our share of debt of unconsolidated real estate ventures) as of September 30, 2018. Of the $2.6 billion of debt at our share, approximately 75% was fixed-rate, and rate caps were in place for approximately 6%.
The weighted average interest rate of our debt at share was 4.20% as of September 30, 2018.
At September 30, 2018, our total enterprise value was approximately $7.3 billion, comprising 137.7 million common shares and units valued at $5.1 billion and debt (net of premium / (discount) and deferred financing costs) at our share of $2.5 billion, less cash and cash equivalents of $284.0 million.
As of September 30, 2018, we had $253.1 million of cash and cash equivalents on a GAAP basis and $284.0 million of cash and cash equivalents at our share, and $1.1 billion of capacity under our credit facility.

2



Net Debt / Adjusted EBITDA at our share for the three and nine months ended September 30, 2018 was 6.7x and 6.6x and our Net Debt / Total Enterprise Value was 30.8% as of September 30, 2018.

Financing and Investing Activities
Drew $200.0 million under the Tranche A-2 Term Loan, in accordance with the delayed draw provisions of the credit facility. We also repaid all outstanding revolving credit facility balances.
Repaid an aggregate of $88.6 million of mortgage debt comprising the $78.0 million loan on 7200 Wisconsin Avenue and a $10.6 million partial repayment on RTC - West in exchange for modified loan terms.
Sold Executive Tower, an office building located in Washington, DC, for $121.4 million.
Sold our 5.0% interest in the real estate venture that owned the Investment Building, an office building located in Washington, DC, for $24.6 million. 
Filed a universal shelf registration statement, which provides us with the ability to efficiently access the public equity markets.
In July 2018, the buyer’s deposit related to the contract to sell Commerce Executive for $115.0 million became non-refundable. The sale is expected to close in early 2019.

Subsequent to September 30, 2018:

Sold 1233 20th Street, an office building located in Washington, DC, for $65.0 million. In connection with the sale, we repaid the related $41.9 million mortgage loan.
Sold the out-of-service portion of Falkland Chase - North, a multifamily building located in Downtown Silver Spring, Maryland, for $3.8 million.
Including these sales and firm contracts, our aggregate disposition and recapitalization activity is $668 million for 2018, assuming those assets subject to firm contracts close.

Dividends
In May 2018 and August 2018, we paid dividends totaling $0.45 per common share. In November 2018, our Board of Trustees declared a dividend of $0.225 per common share, an indicated annual dividend of $0.90 per common share. The dividend is payable on November 26, 2018 to common shareholders of record as of November 13, 2018.
About JBG SMITH
JBG SMITH is an S&P 400 company that owns, operates, invests in and develops assets concentrated in leading urban infill submarkets in and around Washington, DC. Our mixed-use operating portfolio comprises approximately 19 million square feet of high-quality office, multifamily and retail assets, 98% at our share of which are Metro-served. With a focus on placemaking, we drive synergies across the portfolio and create amenity-rich, walkable neighborhoods. JBG SMITH’s future development pipeline includes 19.0 million square feet of potential development density at our share. For additional 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”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this earnings release. We also note the following forward-looking statements: our anticipated dispositions, our indicated annual dividend per share and dividend yield, annualized net operating income; in the case of our construction and near-term development assets, estimated square feet, estimated number of units and in the case of our future development assets, estimated potential development density. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or

3



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” and the Cautionary Statement Concerning Forward-Looking Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 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.
Pro Rata Information
We present certain financial information and metrics in this release “at JBG SMITH Share,” which refers to our ownership percentage of consolidated and unconsolidated assets in real estate ventures (collectively, “real estate ventures”) as applied to these financial measures and metrics. Financial information “at JBG SMITH Share” is calculated on an asset-by-asset basis by applying our percentage economic interest to each applicable line item of that asset’s financial information. “At JBG SMITH Share” information, which we also refer to as being “at share,” “our pro rata share” or “our share,” is not, and is not intended to be, a presentation in accordance with GAAP. Given that a substantial portion of our assets are held through real estate ventures, we believe this form of presentation, which presents our economic interests in the partially owned entities, provides investors valuable information regarding a significant component of our portfolio, its composition, performance and capitalization.
We do not control the unconsolidated real estate ventures and do not have a legal claim to our co-venturers’ share of assets, liabilities, revenue and expenses. The operating agreements of the unconsolidated real estate ventures generally allow each co-venturer to receive cash distributions to the extent there is available cash from operations. The amount of cash each investor receives is based upon specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions.
With respect to any such third-party arrangement, we would not be in a position to exercise sole decision-making authority regarding the property, real estate venture or other entity, and may, under certain circumstances, be exposed to economic risks not present were a third-party not involved. We and our respective co-venturers may each have the right to trigger a buy-sell or forced sale arrangement, which could cause us to sell our interest, or acquire our co-venturers’ interests, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. Our real estate ventures may be subject to debt, and the repayment or refinancing of such debt may require equity capital calls. To the extent our co-venturers do not meet their obligations to us or our real estate ventures or they act inconsistent with the interests of the real estate venture, we may be adversely affected. Because of these limitations, the non-GAAP “at JBG SMITH Share” financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.
Non-GAAP Financial Measures
This release includes non-GAAP financial measures. For these measures, we have provided an explanation of how these non-GAAP measures are calculated and why JBG SMITH’s management believes that the presentation of these measures provides useful information to investors regarding JBG SMITH’s financial condition and results of operations. Reconciliations of certain non-GAAP measures to the most directly comparable GAAP financial measure are included in this earnings release. Our presentation of non-GAAP financial measures may not be comparable to similar non-GAAP measures used by other companies. In addition to "at share" financial information, the following non-GAAP measures are included in this release:

4



Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), EBITDA for Real Estate ("EBITDAre") and Adjusted EBITDA
Management uses EBITDA and EBITDAre, non-GAAP financial measures, as supplemental operating performance measures and believes they 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 consolidated outstanding debt and the impact of our interest rate swaps) and certain non-cash expenses (primarily depreciation and amortization on our assets). EBITDAre is computed in accordance with the definition established by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines EBITDAre as GAAP net income (loss) adjusted to exclude interest expense, income taxes, depreciation and amortization expenses, gains on sales of depreciated real estate and impairment losses of depreciable real estate, 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,” a non-GAAP financial measure, represents EBITDAre adjusted for items we believe are not representative of ongoing operating results, such as non-recurring transaction and other costs, gain (loss) on the extinguishment of debt, gain on sale of non-operating real estate, distributions in excess of our net investment in consolidated real estate ventures, gain on the bargain purchase of a business and share-based compensation expense related to the Formation Transaction. 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")
FFO is a non-GAAP financial measure computed in accordance with the definition established by NAREIT. NAREIT defines FFO as “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.”
"Core FFO" represents FFO adjusted to exclude items (net of tax) which we believe are not representative of ongoing operating results, such as transaction and other costs, gains (or losses) on extinguishment of debt, gain on the bargain purchase of a business, gain on sale of non-operating real estate, distributions in excess of our net investment in consolidated real estate ventures, share-based compensation expense related to the Formation Transaction, amortization of the management contracts intangible and the mark-to-market of interest rate swaps.
"FAD" is a non-GAAP financial measure and represents FFO less recurring tenant improvements, leasing commissions and other capital expenditures, net deferred rent activity, third-party lease liability assumption payments, recurring share-based compensation expense, accretion of acquired below-market leases, net of amortization of acquired above-market leases, amortization of debt issuance costs and other non-cash income and charges. FAD is presented solely as a supplemental disclosure that management believes provides useful information as it relates to our ability to fund dividends.
We believe FFO, Core FFO and FAD are meaningful non‑GAAP financial measures useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because these non‑GAAP measures exclude real estate depreciation and amortization expense and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO, Core FFO and FAD do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as a performance measure or cash flow as a liquidity measure. FFO, Core FFO and FAD may not be comparable to similarly titled measures used by other companies.

5



Net Operating Income ("NOI") and Annualized NOI
“NOI” is a non-GAAP financial measure management uses to measure the operating performance of our assets and consists of 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, 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 amortization of acquired above-market leases and below-market ground lease intangibles. Annualized NOI, for all assets except Crystal City Marriott, represents NOI for the three months ended September 30, 2018 multiplied by four. Due to seasonality in the hospitality business, annualized NOI for Crystal City Marriott represents the trailing twelve-month NOI as of September 30, 2018. Management believes Annualized NOI provides useful information in understanding JBG SMITH’s 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 JBG SMITH’s actual results of operations over any 12-month period.
Management uses each of these measures as supplemental performance measures for its assets and believes they provide useful information to investors because they reflect only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets.
However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of this measure of the operating performance of our assets is limited. Moreover, our method of calculating NOI may differ from other real estate companies and, accordingly, may not be comparable. NOI should be considered only as a supplement to net operating income (loss) (computed in accordance with GAAP) as a measure of the operating performance of our assets.

Same Store and Non-Same Store
“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. No JBG Assets are included in the same store pool.
“Non-same store” refers to all operating assets excluded from the same store pool.

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

Formation Transaction
"Formation Transaction" refers collectively to the spin-off on July 17, 2017 of substantially all of the assets and liabilities of Vornado’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.

JBG Assets
"JBG Assets" refers to the management business and certain assets and liabilities of The JBG Companies acquired on July 18, 2017 by JBG SMITH.


6



CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
in thousands
September 30, 2018
 
December 31, 2017
 
 
 
 
ASSETS
 
Real estate, at cost:
 
 
 
Land and improvements
$
1,366,154

 
$
1,368,294

Buildings and improvements
3,678,335

 
3,670,268

Construction in progress, including land
649,056

 
978,942

 
5,693,545

 
6,017,504

Less accumulated depreciation
(1,020,596
)
 
(1,011,330
)
Real estate, net
4,672,949

 
5,006,174

Cash and cash equivalents
253,148

 
316,676

Restricted cash
127,061

 
21,881

Tenant and other receivables, net
40,409

 
46,734

Deferred rent receivable, net
137,200

 
146,315

Investments in and advances to unconsolidated real estate ventures
361,014

 
261,811

Other assets, net
281,958

 
263,923

Assets held for sale
137,455

 
8,293

TOTAL ASSETS
$
6,011,194

 
$
6,071,807

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Liabilities:
 
 
 
Mortgages payable, net
$
1,769,938

 
$
2,025,692

Revolving credit facility

 
115,751

Unsecured term loans, net
296,981

 
46,537

Accounts payable and accrued expenses
147,211

 
138,607

Other liabilities, net
119,552

 
161,277

Liabilities related to assets held for sale
45,657

 

Total liabilities
2,379,339

 
2,487,864

Commitments and contingencies

 

Redeemable noncontrolling interests
562,318

 
609,129

Total equity
3,069,537

 
2,974,814

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
$
6,011,194

 
$
6,071,807

_______________

Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.


7



CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
in thousands, except per share data
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
REVENUE
 
 
 
 
 
 
 
Property rentals
$
123,203

 
$
116,458

 
$
375,094

 
$
316,899

Tenant reimbursements
9,744

 
9,593

 
28,651

 
27,161

Third-party real estate services, including reimbursements
23,788

 
25,141

 
72,278

 
38,881

Other income
1,708

 
1,158

 
4,904

 
3,701

Total revenue
158,443

 
152,350

 
480,927

 
386,642

EXPENSES
 
 
 
 
 
 
 
Depreciation and amortization
46,603

 
43,951

 
143,880

 
109,726

Property operating
34,167

 
29,634

 
95,462

 
77,341

Real estate taxes
16,905

 
17,194

 
54,024

 
47,978

General and administrative:
 
 
 
 
 
 
 
Corporate and other
12,415

 
10,593

 
37,759

 
35,536

Third-party real estate services
20,754

 
21,178

 
64,552

 
30,362

Share-based compensation related to Formation Transaction
8,387

 
14,445

 
26,912

 
14,445

Transaction and other costs
4,126

 
104,095

 
12,134

 
115,173

Total operating expenses
143,357

 
241,090

 
434,723

 
430,561

OPERATING INCOME (LOSS)
15,086

 
(88,740
)
 
46,204

 
(43,919
)
Income (loss) from unconsolidated real estate ventures, net
13,484

 
(1,679
)
 
15,418

 
(1,365
)
Interest and other income (loss), net
4,091

 
(379
)
 
5,177

 
1,366

Interest expense
(18,979
)
 
(15,309
)
 
(56,263
)
 
(43,813
)
Gain on sale of real estate
11,938

 

 
45,789

 

Loss on extinguishment of debt
(79
)
 
(689
)
 
(4,536
)
 
(689
)
Gain (reduction of gain) on bargain purchase

 
27,771

 
(7,606
)
 
27,771

INCOME (LOSS) BEFORE INCOME TAX BENEFIT
25,541

 
(79,025
)
 
44,183

 
(60,649
)
Income tax benefit
841

 
1,034

 
1,436

 
317

NET INCOME (LOSS)
26,382

 
(77,991
)
 
45,619

 
(60,332
)
Net (income) loss attributable to redeemable noncontrolling
interests
(3,552
)
 
8,160

 
(6,532
)
 
2,481

Net loss attributable to noncontrolling interests

 

 
127

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
22,830

 
$
(69,831
)
 
$
39,214

 
$
(57,851
)
EARNINGS (LOSS) PER COMMON SHARE:
 
 
 
 
 
 
 
Basic
$
0.19

 
$
(0.61
)
 
$
0.33

 
$
(0.55
)
Diluted
$
0.19

 
$
(0.61
)
 
$
0.33

 
$
(0.55
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING :
 
 
 
 
 
 
 
Basic
119,835

 
114,744

 
118,588

 
105,347

Diluted
119,835

 
114,744

 
118,588

 
105,347

___________________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.


8



EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)
(Unaudited)
 
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
 
 
 
 
EBITDA, EBITDAre and Adjusted EBITDA
 
 
 
 
Net income

$
26,382

 
$
45,619

Depreciation and amortization expense
 
46,603

 
143,880

Interest expense (1)
 
18,979

 
56,263

Income tax benefit (expense)
 
(841
)
 
(1,436
)
Unconsolidated real estate ventures allocated share of above adjustments
 
10,986

 
31,763

Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures
 

 
129

EBITDA
 
$
102,109

 
$
276,218

Gain on sale of interest in unconsolidated real estate venture
 
(15,488
)
 
(15,488
)
Gain on sale of operating real estate
 
(11,938
)
 
(45,334
)
EBITDAre
 
$
74,683

 
$
215,396

Gain on sale of non-operating real estate
 

 
(455
)
Transaction and other costs (2)
 
4,126

 
12,134

Loss on extinguishment of debt
 
79

 
4,536

Reduction of gain on bargain purchase
 

 
7,606

Share-based compensation related to Formation Transaction
 
8,387

 
26,912

Distributions in excess of our net investment in unconsolidated real estate venture (3)
 
(890
)
 
(6,302
)
Unconsolidated real estate ventures allocated share of above adjustments
 

 
30

Lease liability adjustments
 
(2,543
)
 
(2,543
)
Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures
 

 
(124
)
Adjusted EBITDA
 
$
83,842

 
$
257,190

 
 
 
 
 
Net Debt to Adjusted EBITDA (4)
 
6.7x

 
6.6x

 
 
 
 
 
 
 
September 30, 2018
 
 
Net Debt (at JBG SMITH Share)
 
 
 
 
Consolidated indebtedness (5) (6)
 
$
2,103,589

 
 
Unconsolidated indebtedness (5)
 
442,669

 
 
Total consolidated and unconsolidated indebtedness
2,546,258

 
 
Less: cash and cash equivalents
 
284,012

 
 
Net Debt (at JBG SMITH Share)
 
$
2,262,246

 
 
 
 
$
(0.28
)
 
 

____________________
(1)
Interest expense includes the amortization of deferred financing costs and the marking-to-market of interest rate swaps and caps, net of capitalized interest.
(2)
Includes amounts incurred for transition services provided by our former parent, integration costs, severance costs, costs incurred in connection with recapitalization transactions and disposition and dead deal costs.
(3)
Related to our investment in the real estate venture that owns 1101 17th Street. In June 2018, the mortgage loan payable that was collateralized by 1101 17th Street was refinanced eliminating the principal guaranty provisions that had been included in the prior loan. Distributions and our share of the cumulative earnings of the venture exceeded our investment in the venture by $5.4 million, which resulted in a negative investment balance. After the elimination of the principal guaranty provisions in the prior mortgage loan, we recognized the $5.4 million negative investment balance as income within “Income from unconsolidated real estate ventures, net” in our statements of operations for the nine months ended September 30, 2018. We have also suspended the equity method of accounting for this venture and recognized as income in the three and nine months ended September 30, 2018, $890,000 related to cash distributions.
(4)
Adjusted EBITDA for the three months ended September 30, 2018 is annualized by multiplying by four. Adjusted EBITDA for the nine months ended September 30, 2018 is annualized by multiplying by 1.33.
(5)
Net of premium/discount and deferred financing costs.
(6)
Includes mortgage loan related to assets held for sale.


9



FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
in thousands, except per share data
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
 
 
 
FFO and Core FFO
 
 
 
Net income attributable to common shareholders
$
22,830

 
$
39,214

Net income attributable to redeemable noncontrolling interests
3,552

 
6,532

Net loss attributable to noncontrolling interests

 
(127
)
Net income
26,382

 
45,619

Gain on sale of interest in unconsolidated real estate venture
(15,488
)
 
(15,488
)
Gain on sale of operating real estate
(11,938
)
 
(45,334
)
Real estate depreciation and amortization
43,945

 
136,171

Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures
6,345

 
18,960

Net loss attributable to consolidated real estate ventures

 
129

FFO Attributable to Operating Partnership Common Units
$
49,246

 
$
140,057

FFO attributable to redeemable noncontrolling interests
(6,631
)
 
(20,057
)
FFO attributable to common shareholders
$
42,615

 
$
120,000

 
 
 
 
FFO attributable to the operating partnership common units
$
49,246

 
$
140,057

Gain on sale of non-operating real estate

 
(455
)
Transaction and other costs, net of tax (1)
3,586

 
11,116

Mark-to-market on derivative instruments
152

 
(1,399
)
Share of gain from mark-to-market on derivative instruments held by unconsolidated real estate ventures
(49
)
 
(481
)
Loss on extinguishment of debt, net of noncontrolling interests
79

 
4,412

Distributions in excess of our net investment in unconsolidated real estate venture (2)
(890
)
 
(6,302
)
Reduction of gain on bargain purchase

 
7,606

Share-based compensation related to Formation Transaction
8,387

 
26,912

Lease liability adjustments
(2,543
)
 
(2,543
)
Amortization of management contracts intangible, net of tax
1,288

 
3,861

Core FFO Attributable to Operating Partnership Common Units
$
59,256

 
$
182,784

Core FFO attributable to redeemable noncontrolling interests
(7,978
)
 
(26,244
)
Core FFO attributable to common shareholders
$
51,278

 
$
156,540

FFO per diluted common share
$
0.36

 
$
1.01

Core FFO per diluted common share
$
0.43

 
$
1.32

Weighted average diluted shares
119,835

 
118,588

 
 
 
 


See footnotes on page 11.

10



FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
in thousands, except per share data
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
 
 
 
FAD
 
 
 
Core FFO attributable to the operating partnership common units
$
59,256

 
$
182,784

Recurring capital expenditures and second generation tenant improvements and leasing commissions
(19,123
)
 
(36,277
)
Straight-line and other rent adjustments (3)
(1,368
)
 
(3,659
)
Share of straight-line rent from unconsolidated real estate ventures
180

 
528

Third-party lease liability assumption payments
(912
)
 
(2,003
)
Share of third party lease liability assumption payments for unconsolidated real estate ventures

 
(50
)
Share-based compensation expense
4,879

 
15,096

Amortization of debt issuance costs
1,155

 
3,520

Share of amortization of debt issuance costs from unconsolidated real estate ventures
66

 
201

Non-real estate depreciation and amortization
886

 
2,393

FAD available to the Operating Partnership Common Units (A)
$
45,019

 
$
162,533

Distributions to common shareholders and unitholders (4) (B)
$
31,196

 
$
93,816

FAD Payout Ratio (B÷A) (5)
69.3
%
 
57.7
%

Capital Expenditures
 
 
 
Maintenance and recurring capital expenditures
$
7,113

 
$
13,785

Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures
444

 
1,843

Second generation tenant improvements and leasing commissions
10,603

 
18,769

Share of second generation tenant improvements and leasing commissions from unconsolidated real estate ventures
963

 
1,880

Recurring capital expenditures and second generation tenant improvements and leasing commissions
19,123

 
36,277

First generation tenant improvements and leasing commissions
4,443

 
15,304

Share of first generation tenant improvements and leasing commissions from unconsolidated real estate ventures
169

 
2,555

Non-recurring capital expenditures
2,895

 
10,026

Share of non-recurring capital expenditures from unconsolidated joint ventures
300

 
1,062

Non-recurring capital expenditures
7,807

 
28,947

Total JBG SMITH Share of Capital Expenditures
$
26,930

 
$
65,224


_______________

(1)
Includes amounts incurred for transition services provided by our former parent, integration costs, severance costs, costs incurred in connection with recapitalization transactions and disposition and dead deal costs
(2)
Related to our investment in the real estate venture that owns 1101 17th Street. In June 2018, the mortgage loan payable that was collateralized by 1101 17th Street was refinanced eliminating the principal guaranty provisions that had been included in the prior loan. Distributions and our share of the cumulative earnings of the venture exceeded our investment in the venture by $5.4 million, which resulted in a negative investment balance. After the elimination of the principal guaranty provisions in the prior mortgage loan, we recognized the $5.4 million negative investment balance as income within “Income from unconsolidated real estate ventures, net” in our statements of operations for the nine months ended September 30, 2018. We have also suspended the equity method of accounting for this venture and recognized as income in the three and nine months ended September 30, 2018, $890,000 related to cash distributions.
(3)
Includes straight-line rent, above/below market lease amortization and lease incentive amortization.
(4)
In November 2018, our Board of Trustees declared a dividend of $0.225 per share, payable on November 26, 2018.
(5)
The FAD payout ratio on a quarterly basis is not necessarily indicative of an amount for the full year due to fluctuation in timing of capital expenditures, the commencement of new leases and the seasonality of our operations.


11



NOI RECONCILIATIONS (NON-GAAP)
(Unaudited)

dollars in thousands
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
 
 
Net income (loss) attributable to common shareholders
$
22,830

 
$
(69,831
)
 
$
39,214

 
$
(57,851
)
Add:
 
 
 
 
 
 
 
Depreciation and amortization expense
46,603

 
43,951

 
143,880

 
109,726

General and administrative expense:
 
 
 
 
 
 
 
Corporate and other
12,415

 
10,593

 
37,759

 
35,536

Third-party real estate services
20,754

 
21,178

 
64,552

 
30,362

Share-based compensation related to Formation Transaction
8,387

 
14,445

 
26,912

 
14,445

Transaction and other costs
4,126

 
104,095

 
12,134

 
115,173

Interest expense
18,979

 
15,309

 
56,263

 
43,813

Loss on extinguishment of debt
79

 
689

 
4,536

 
689

Reduction of gain (gain) on bargain purchase

 
(27,771
)
 
7,606

 
(27,771
)
Income tax benefit
(841
)
 
(1,034
)
 
(1,436
)
 
(317
)
Net (income) loss attributable to redeemable noncontrolling interests
3,552

 
(8,160
)
 
6,532

 
(2,481
)
Less:
 
 
 
 
 
 
 
Third-party real estate services, including reimbursements
23,788

 
25,141

 
72,278

 
38,881

Other income
1,708

 
1,158

 
4,904

 
3,701

Income (loss) from unconsolidated real estate ventures, net
13,484

 
(1,679
)
 
15,418

 
(1,365
)
Interest and other income (loss), net
4,091

 
(379
)
 
5,177

 
1,366

Gain on sale of real estate
11,938

 

 
45,789

 

Net loss attributable to noncontrolling interests

 

 
127

 

Consolidated NOI
81,875

 
79,223

 
254,259

 
218,741

NOI attributable to consolidated JBG Assets (1)

 
2,136

 

 
24,670

Proportionate NOI attributable to unconsolidated JBG Assets (1)

 
792

 

 
8,648

Proportionate NOI attributable to unconsolidated real estate ventures
9,722

 
7,505

 
27,949

 
12,965

Non-cash rent adjustments (2)
(1,369
)
 
(1,575
)
 
(3,659
)
 
(7,508
)
Other adjustments (3)
701

 
1,493

 
3,434

 
1,318

Total adjustments
9,054

 
10,351

 
27,724

 
40,093

NOI
$
90,929

 
$
89,574

 
$
281,983

 
$
258,834

Non-same store NOI (4)
20,910

 
19,048

 
78,862

 
64,643

Same store NOI (5)
$
70,019

 
$
70,526

 
$
203,121

 
$
194,191

 
 
 
 
 
 
 
 
Growth in same store NOI
(0.7
)%
 
 
 
4.6
%
 
 
Number of properties in same store pool
34

 
 
 
33

 
 

___________________

(1)
Includes financial information for the JBG Assets as if the July 18, 2017 acquisition of the JBG Assets had been completed as of the beginning of the period presented.
(2)
Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization.
(3)
Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties, and exclude incidental income generated by development assets and commercial lease termination revenue.
(4)
Includes the results for properties that were not owned, operated and in service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.
(5)
Includes the results of the properties that are owned, operated and in service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.



12



395679465_suppdivider3q18pkg.jpg



395679465_suppcover3q18pkg.jpg


TABLE OF CONTENTS
SEPTEMBER 30, 2018

 
Page
Overview
 
Disclosures
3-4
Company Profile
5-6
Financial Highlights
Portfolio Overview
8-9
Financial Information
 
Condensed Consolidated Balance Sheets
Condensed Consolidated and Combined Statements of Operations
Unconsolidated Real Estate Ventures - Balance Sheet and Operating Information
Other Tangible Assets and Liabilities, Net
EBITDA, EBITDAre and Adjusted EBITDA (Non-GAAP)
FFO, Core FFO and FAD (Non-GAAP)
15-16
Third-Party Asset Management and Real Estate Services Business (Non-GAAP)
Pro Rata Adjusted General and Administrative Expenses (Non-GAAP)
Operating Assets
Summary & Same Store NOI (Non-GAAP)
20-21
Summary NOI (Non-GAAP)
Summary NOI - Office (Non-GAAP)
Summary NOI - Multifamily (Non-GAAP)
NOI Reconciliations (Non-GAAP)
Leasing Activity
 
Leasing Activity - Office
Net Effective Rent - Office
Lease Expirations
Signed But Not Yet Commenced Leases
Tenant Concentration
Industry Diversity

Property Data
 
Portfolio Summary
Property Tables:
 
Office
33-36
Multifamily
37-39
Other
40-41
Under Construction
Future Development
Disposition & Recapitalization Activity
Debt
 
Debt Summary
Debt by Instrument
46-47
Real Estate Ventures
 
Consolidated Real Estate Ventures
Unconsolidated Real Estate Ventures
49-50
Definitions
51-54

395679465_logoverticaltransbluea03.jpg
 
Page 2


DISCLOSURES
SEPTEMBER 30, 2018


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”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this document. We also note the following forward-looking statements: our indicated annual dividend per share and dividend yield, annualized net operating income; in the case of our construction and near-term development assets, estimated square feet, estimated number of units, the estimated completion date, estimated stabilization date, estimated incremental investment, estimated total investment, projected net operating income yield and estimated stabilized net operating income; and in the case of our future development assets, estimated potential development density, estimated commercial SF/multifamily units to be replaced, estimated remaining acquisition cost, estimated capitalized cost and estimated total investment. 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” and the Cautionary Statement Concerning Forward-Looking Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 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 issuance of this Investor Package.

Organization and Basis of Presentation
JBG SMITH was formed by Vornado Realty Trust (“Vornado”) for the purpose of receiving via the spin-off on July 17, 2017, substantially all of the assets and liabilities of Vornado’s Washington, DC segment, which operated as Vornado / Charles E. Smith, (the “Vornado Included Assets”). On July 18, 2017, JBG SMITH acquired the management business and certain assets (the “JBG Assets”) of The JBG Companies (“JBG”). The spin-off from Vornado and combination with JBG are collectively referred to as the "Formation Transaction." The Vornado Included Assets are considered the accounting predecessor. As a result, the financial results of the JBG Assets are only included in the combined company’s financial statements from July 18, 2017 forward and are not reflected in the combined company’s historical financial statements for any prior period. Consequently, our results for the periods before and after the Formation Transaction are not directly comparable. We believe, however, that presenting certain supplemental adjusted financial and operational information at the property-level that is "adjusted" to include the results of the JBG Assets for periods prior to the acquisition date may be useful to investors. No other adjustments have been made to this supplemental adjusted information, which is purely informational and does not purport to be indicative of what would have happened had the acquisition of the JBG Assets occurred at the beginning of the periods presented.

The information contained in this Investor Package does not purport to disclose all items required by the accounting principles generally accepted in the United States of America (“GAAP”) and is unaudited information, unless otherwise indicated.

Pro Rata Information
We present certain financial information and metrics in this Investor Package “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

395679465_logoverticaltransbluea03.jpg
 
Page 3


DISCLOSURES
SEPTEMBER 30, 2018


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.
Definitions
See pages 51-54 for definitions of terms used in this Investor Package.
Non-GAAP Measures
This Investor Package includes non-GAAP 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 Investor Package. 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 Investor Package:
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA")
EBITDA For Real Estate ("EBITDAre")
Adjusted EBITDA
Funds from Operations ("FFO")
Core FFO
Funds Available for Distribution ("FAD")
Net Operating Income ("NOI")
Annualized NOI
Adjusted Annualized NOI
Estimated Stabilized NOI
Projected NOI Yield
Same Store NOI
Adjusted Consolidated and Unconsolidated Indebtedness
Net Debt
Pro Rata Adjusted General and Administrative Expenses


395679465_logoverticaltransbluea03.jpg
 
Page 4


COMPANY PROFILE
SEPTEMBER 30, 2018
(Unaudited)



Company Overview

JBG SMITH is an S&P 400 company that owns, operates, invests in and develops assets concentrated in leading urban infill submarkets in and around Washington, DC. We own and operate a portfolio of high-quality office and multifamily assets, many of which are amenitized with ancillary retail. Our portfolio reflects our longstanding strategy of owning and operating assets within the Metro-served submarkets in the Washington, DC metropolitan area that have high barriers to entry and key urban amenities, including being within walking distance of a Metro station. Our revenues are derived primarily from leases with office and multifamily tenants, including fixed rents and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance. In addition to our portfolio, we have a third-party real estate services business that provides fee-based real estate services to our real estate ventures, the legacy funds formerly organized by JBG and other third parties.

Q3 2018 Financial Results

Net income attributable to common shareholders was $22.8 million, or $0.19 per diluted share.
FFO attributable to common shareholders was $42.6 million, or $0.36 per diluted share.
Core FFO attributable to common shareholders was $51.3 million, or $0.43 per diluted share.

Q3 2018 to Q2 2018 Comparison

Below are the key highlights regarding quarter over quarter changes in the JBG SMITH portfolio.

Operating Assets
Annualized NOI for the operating portfolio for the three months ended September 30, 2018 was $364.9 million, compared to $378.5 million for the three months ended June 30, 2018, at our share.
The operating office portfolio was 87.1% leased and 85.4% occupied as of September 30, 2018, compared to 87.4% and 86.0% as of June 30, 2018 at our share.
The operating multifamily portfolio was 96.1% leased and 94.3% occupied as of September 30, 2018, compared to 95.9% and 92.6% as of June 30, 2018 at our share.
The operating other portfolio (excluding the Crystal City Marriott) was 98.8% leased and 98.6% occupied as of September 30, 2018, compared to 93.4% leased and 91.1% occupied as of June 30, 2018.
Same store NOI decreased 0.7% to $70.0 million for the three months ended September 30, 2018, compared to $70.5 million for the three months ended September 30, 2017. Same store NOI increased 4.6% to $203.1 million for the nine months ended September 30, 2018, compared to $194.2 million for the nine months ended September 30, 2017. The decrease in same store NOI for the three months ended September 30, 2018 is largely attributable to the conversion of unused tenant incentive allowances to free rent, rental abatement and anticipated tenant move-outs. The increase in same store NOI for the nine months ended September 30, 2018, is mainly driven by the burn off of rent abatements, partially offset by rent abatements given to tenants in 2018. The reported same store pool as of September 30, 2018 includes only the assets that were in service for the entirety of both periods being compared and does not include any JBG Assets acquired in the Formation Transaction. The JBG Assets will be included in reported same store NOI in the fourth quarter of 2018. Including the JBG Assets, same store NOI would have increased 0.7% and 4.9% for the three and nine months ended September 30, 2018. See page 53 for the definition of same store.

Under Construction
During the quarter ended September 30, 2018, there were seven assets under construction (three office assets and four multifamily assets), consisting of 546,133 square feet and 1,284 units, both at our share.

Near-Term Development
As of September 30, 2018, there were no assets in near-term development.


395679465_logoverticaltransbluea03.jpg
 
Page 5


COMPANY PROFILE
SEPTEMBER 30, 2018
(Unaudited)




Company Overview

Future Development
As of September 30, 2018, there were 43 future development assets consisting of 19.0 million square feet of estimated potential density at our share.

Dispositions

During the quarter we closed on the sale of two operating office assets.
Sold our 5.0% interest in the real estate venture that owned the Investment Building, a 401,000 square foot (20,069 square feet at our share) office building located in Washington, DC, for $24.6 million.
Sold Executive Tower, an office building located in Washington, DC, for $121.4 million.
Executive Officers & Key Employees
 
Company Snapshot as of September 30, 2018
 
 
 
 
 
W. Matthew Kelly
Chief Executive Officer and Trustee
 
Exchange/ticker
NYSE: JBGS
Robert A. Stewart
Executive Vice Chairman and Trustee
 
Insider ownership *
more than 10%
David P. Paul
President and Chief Operating Officer
 
Indicated annual dividend per share
$0.90
Stephen W. Theriot
Chief Financial Officer
 
Dividend yield
2.4%
James L. Iker
Chief Investment Officer
 
 
 
Brian P. Coulter
Co-Chief Development Officer
 
Total Enterprise Value (dollars in billions, except share price)
 
Kevin P. Reynolds
Co-Chief Development Officer
 
Share price
$36.83
Steven A. Museles
Chief Legal Officer
 
Shares and units outstanding (in millions)
137.74
Patrick J. Tyrrell
Chief Administrative Officer
 
Total market capitalization
$5.07
Angela F. Valdes
Chief Accounting Officer
 
Total consolidated and unconsolidated indebtedness at JBG SMITH share
2.55
 
 
 
Less: cash and cash equivalents at JBG SMITH share
(0.28)
 
 
 
Net debt
$2.27
 
 
 
Total Enterprise Value
$7.34
 
 
 
 
 
 
 
 
Net Debt / Total Enterprise Value
30.8%
 
 
 
 
 
 
*
Represents the percentage of all outstanding common shares of JBG SMITH Properties owned or represented by the Company’s trustees and executive officers as of March 15, 2018 assuming that all OP Units are redeemed for shares.


 
 
 
 
 
$
2,262,246

 
 
 
 
30.821
%


395679465_logoverticaltransbluea03.jpg
 
Page 6


FINANCIAL HIGHLIGHTS
SEPTEMBER 30, 2018
(Unaudited)



dollars in thousands, except per share data
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
 
 
 
Summary Financial Results
 
 
 
Total revenue
$
158,443

 
$
480,927

Net income attributable to common shareholders
$
22,830

 
$
39,214

Per diluted common share
$
0.19

 
$
0.33

NOI
$
90,929

 
$
281,983

FFO attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
49,246

 
$
140,057

Per operating partnership common unit
$
0.36

 
$
1.01

Core FFO attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
59,256

 
$
182,784

Per operating partnership common unit
$
0.43

 
$
1.32

FAD attributable to the operating partnership common units (including units owned by JBG SMITH Properties)
$
45,019

 
$
162,533

FAD payout ratio
69.3
%
 
57.7
%
EBITDA attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
102,109

 
$
276,218

EBITDAre attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
74,683

 
$
215,396

Adjusted EBITDA attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
83,842

 
$
257,190

Net debt / annualized adjusted EBITDA
6.7x

 
6.6x

 
 
 
 
 
September 30, 2018
 
 
 
 
 
 
Debt Summary and Key Ratios (at JBG SMITH Share)
 
 
 
Total consolidated indebtedness (1)
$
2,103,589

 
 
Total consolidated and unconsolidated indebtedness (1)
$
2,546,258

 
 
Weighted average interest rates:
 
 
 
Variable rate debt
4.40
%
 
 
Fixed rate debt
4.13
%
 
 
Total debt
4.20
%
 
 
Cash and cash equivalents
$
284,012

 
 

____________________
(1)
Net of premium/discount and deferred financing costs.


395679465_logoverticaltransbluea03.jpg
 
Page 7


PORTFOLIO OVERVIEW

SEPTEMBER 30, 2018
(Unaudited)



 
 
 
 
100% Share
 
At JBG SMITH Share
 
 
Number of Assets
 
Square Feet/Units
 
Square Feet/Units
 
   %
Leased
 
% Occupied
 
Annualized
Rent
(in thousands)
 
Annualized Rent per Square Foot/Monthly Rent Per Unit (1)
Annualized NOI
(in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In service
 
45

 
12,399,166

 
10,917,374

 
87.5
%
 
85.9
%
 
$
418,205

 
$
44.80

$
268,200

Recently delivered
 
1

 
552,540

 
552,540

 
77.9
%
 
75.8
%
 
25,257

 
61.15

13,044

Total / weighted average
 
46

 
12,951,706

 
11,469,914

 
87.1
%
 
85.4
%
 
$
443,462

 
$
45.52

$
281,244

Multifamily
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In service
 
14

 
6,016

 
4,232

 
97.5
%
 
95.9
%
 
$
106,398

 
$
2,135

$
75,672

Recently delivered
 
1

 
291

 
291

 
73.9
%
 
70.4
%
 
6,461

 
2,347

2,216

Total / weighted average
 
15

 
6,307

 
4,523

 
96.1
%
 
94.3
%
 
$
112,859

 
$
2,146

$
77,888

Other (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In service
 
4

 
805,700

 
352,385

 
98.8
%
 
98.6
%
 
$
3,408

 
$
40.03

$
5,783

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating - Total / Weighted Average
 
65

 
13,757,406 SF/ 6,307 Units

 
11,822,299 SF/ 4,523 Units

 
89.4
%
 
87.7
%
 
$
559,729

 
$45.47 per SF/ $2,146 per unit

$
364,915

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under Construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Office (4)
 
3

 
778,032

 
546,133

 
63.9
%
 
 
 
 
 
 
 
Multifamily
 
4

 
1,476

 
1,284

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development - Total
 
7

 
778,032 SF/
1,476 Units

 
546,133 SF/
1,284 Units

 
63.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future Development
 
43

 
22,444,400

 
19,001,700

 
 
 
 
 
 
 
 
 


See footnotes on page 9.

395679465_logoverticaltransbluea03.jpg
 
Page 8


PORTFOLIO OVERVIEW

SEPTEMBER 30, 2018
(Unaudited)




Footnotes

(1)
For office assets, represents annualized office rent divided by occupied office square feet; annualized retail rent and retail square feet are excluded from this metric. For multifamily assets, represents monthly multifamily rent divided by occupied units; retail rent is excluded from this metric. For other assets, represents annualized rent divided by occupied square feet; the Crystal City Marriott is excluded from annualized rent per square foot metrics. Occupied square footage may differ from leased square footage because leased square footage includes leases that have been signed but have not yet commenced.
(2)
Includes three standalone retail assets and the Crystal City Marriott, a standalone hotel totaling 266,000 square feet and 345 rooms. The Crystal City Marriott is excluded from percent leased, percent occupied, annualized rent, and annualized rent per square foot metrics.
(3)
Refer to pages 42-43 for detail on under construction and future development assets.
(4)
Includes JBG SMITH’s lease for approximately 84,400 square feet at 4747 Bethesda Avenue.


395679465_logoverticaltransbluea03.jpg
 
Page 9


CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2018
(Unaudited)





in thousands
September 30,
2018
 
December 31,
2017
 
 
 
 
ASSETS
 
Real estate, at cost:
 
 
 
Land and improvements
$
1,366,154

 
$
1,368,294

Buildings and improvements
3,678,335

 
3,670,268

Construction in progress, including land
649,056

 
978,942

 
5,693,545

 
6,017,504

Less accumulated depreciation
(1,020,596
)
 
(1,011,330
)
Real estate, net
4,672,949

 
5,006,174

Cash and cash equivalents
253,148

 
316,676

Restricted cash
127,061

 
21,881

Tenant and other receivables, net
40,409

 
46,734

Deferred rent receivable, net
137,200

 
146,315

Investments in and advances to unconsolidated real estate ventures
361,014

 
261,811

Other assets, net
281,958

 
263,923

Assets held for sale
137,455

 
8,293

TOTAL ASSETS
$
6,011,194

 
$
6,071,807

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Liabilities:
 
 
 
Mortgages payable, net
$
1,769,938

 
$
2,025,692

Revolving credit facility

 
115,751

Unsecured term loans, net
296,981

 
46,537

Accounts payable and accrued expenses
147,211

 
138,607

Other liabilities, net
119,552

 
161,277

Liabilities related to assets held for sale
45,657

 

Total liabilities
2,379,339

 
2,487,864

Commitments and contingencies

 

Redeemable noncontrolling interests
562,318

 
609,129

Total equity
3,069,537

 
2,974,814

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
$
6,011,194

 
$
6,071,807


_______________

Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.

395679465_logoverticaltransbluea03.jpg
 
Page 10


CONDENSED CONSOLIDATED AND COMBINED
   STATEMENTS OF OPERATIONS
SEPTEMBER 30, 2018
(Unaudited)


(Unaudited)
(In thousands)


in thousands, except per share data
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
2018
 
2017
REVENUE
 
 
 
 
 
 
 
Property rentals
$
123,203

 
$
116,458

 
$
375,094

 
$
316,899

Tenant reimbursements
9,744

 
9,593

 
28,651

 
27,161

Third-party real estate services, including reimbursements
23,788

 
25,141

 
72,278

 
38,881

Other income
1,708

 
1,158

 
4,904

 
3,701

Total revenue
158,443

 
152,350

 
480,927

 
386,642

EXPENSES
 
 
 
 
 
 
 
Depreciation and amortization
46,603

 
43,951

 
143,880

 
109,726

Property operating
34,167

 
29,634

 
95,462

 
77,341

Real estate taxes
16,905

 
17,194

 
54,024

 
47,978

General and administrative:
 
 
 
 
 
 
 
Corporate and other
12,415

 
10,593

 
37,759

 
35,536

Third-party real estate services
20,754

 
21,178

 
64,552

 
30,362

Share-based compensation related to Formation Transaction
8,387

 
14,445

 
26,912

 
14,445

Transaction and other costs
4,126

 
104,095

 
12,134

 
115,173

Total operating expenses
143,357

 
241,090

 
434,723

 
430,561

OPERATING INCOME (LOSS)
15,086

 
(88,740
)
 
46,204

 
(43,919
)
Income (loss) from unconsolidated real estate ventures, net
13,484

 
(1,679
)
 
15,418

 
(1,365
)
Interest and other income (loss), net
4,091

 
(379
)
 
5,177

 
1,366

Interest expense
(18,979
)
 
(15,309
)
 
(56,263
)
 
(43,813
)
Gain on sale of real estate
11,938

 

 
45,789

 

Loss on extinguishment of debt
(79
)
 
(689
)
 
(4,536
)
 
(689
)
Gain (reduction of gain) on bargain purchase

 
27,771

 
(7,606
)
 
27,771

INCOME (LOSS) BEFORE INCOME TAX BENEFIT
25,541

 
(79,025
)
 
44,183

 
(60,649
)
Income tax benefit
841

 
1,034

 
1,436

 
317

NET INCOME (LOSS)
26,382

 
(77,991
)
 
45,619

 
(60,332
)
Net (income) loss attributable to redeemable noncontrolling interests
(3,552
)
 
8,160

 
(6,532
)
 
2,481

Net loss attributable to noncontrolling interests

 

 
127

 

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
22,830

 
$
(69,831
)
 
$
39,214

 
$
(57,851
)
EARNINGS (LOSS) PER COMMON SHARE:
 
 
 
 
 
 
 
Basic
$
0.19

 
$
(0.61
)
 
$
0.33

 
$
(0.55
)
Diluted
$
0.19

 
$
(0.61
)
 
$
0.33

 
$
(0.55
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING :
 
 
 
 
 
 
 
Basic
119,835

 
114,744

 
118,588

 
105,347

Diluted
119,835

 
114,744

 
118,588

 
105,347

___________________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2018.

395679465_logoverticaltransbluea03.jpg
 
Page 11


UNCONSOLIDATED REAL ESTATE VENTURES
 
SEPTEMBER 30, 2018
(Unaudited)




in thousands, at JBG SMITH share
 
BALANCE SHEET INFORMATION
September 30, 2018
 
 
Total real estate, at cost
$
843,337

Less accumulated depreciation
(79,939
)
Real estate, net
763,398

Cash and cash equivalents
30,887

Other assets, net
64,092

Total assets
$
858,377

Mortgage debt payable, net
$
442,669

Other liabilities, net
37,496

Total liabilities
$
480,165


OPERATING INFORMATION
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
Total revenue
$
18,962

 
59,267

Expenses:
 
 
 
Depreciation and amortization
6,457

 
19,306

Property operating
7,917

 
25,387

Real estate taxes
2,421

 
7,749

Total operating expenses
16,795

 
52,442

Operating income
2,167

 
6,825

Interest expense
(4,641
)
 
(12,818
)
Interest and other income, net
(6
)
 
(238
)
Loss before income tax expense
(2,480
)
 
(6,231
)
Income tax expense
(4
)
 
(14
)
Net loss
$
(2,484
)
 
$
(6,245
)
Gain on the sale of unconsolidated real estate venture
15,488

 
15,488

Basis difference with our unconsolidated real estate partners
112

 
327

Distributions in excess of our net investment in unconsolidated real estate ventures
890

 
6,302

Other
(522
)
 
(454
)
Income from unconsolidated real estate ventures, net
$
13,484

 
$
15,418




395679465_logoverticaltransbluea03.jpg
 
Page 12


OTHER TANGIBLE ASSETS AND LIABILITIES, NET
SEPTEMBER 30, 2018
(Unaudited)


in thousands, at JBG SMITH share
September 30, 2018
 
 
Other Tangible Assets, Net (1)
 
Restricted cash
$
131,585

Tenant and other receivables, net
43,901

Other assets, net
67,113

Total Other Tangible Assets, Net
$
242,599

 
 
Other Tangible Liabilities, Net (2)
 
Accounts payable and accrued liabilities
$
170,799

Other liabilities
107,246

Total Other Tangible Liabilities, Net
$
278,045


____________________
(1)
Excludes cash and cash equivalents.
(2)
Excludes debt.


395679465_logoverticaltransbluea03.jpg
 
Page 13


EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)
SEPTEMBER 30, 2018
(Unaudited)



dollars in thousands
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
 
 
 
 
EBITDA, EBITDAre and Adjusted EBITDA
 
 
 
 
Net income

$
26,382

 
$
45,619

Depreciation and amortization expense
 
46,603

 
143,880

Interest expense (1)
 
18,979

 
56,263

Income tax benefit (expense)
 
(841
)
 
(1,436
)
Unconsolidated real estate ventures allocated share of above adjustments
 
10,986

 
31,763

Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures
 

 
129

EBITDA
 
$
102,109

 
$
276,218

Gain on sale of interest in unconsolidated real estate venture
 
(15,488
)
 
(15,488
)
Gain on sale of operating real estate
 
(11,938
)
 
(45,334
)
EBITDAre
 
$
74,683

 
$
215,396

Gain on sale of non-operating real estate
 

 
(455
)
Transaction and other costs (2)
 
4,126

 
12,134

Loss on extinguishment of debt
 
79

 
4,536

Reduction of gain on bargain purchase
 

 
7,606

Share-based compensation related to Formation Transaction
 
8,387

 
26,912

Distributions in excess of our net investment in unconsolidated real estate venture (3)
 
(890
)
 
(6,302
)
Unconsolidated real estate ventures allocated share of above adjustments
 

 
30

Lease liability adjustments
 
(2,543
)
 
(2,543
)
Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures
 

 
(124
)
Adjusted EBITDA
 
$
83,842

 
$
257,190

 
 
 
 
 
Net Debt to Adjusted EBITDA (4)
 
6.7x

 
6.6x

 
 
 
 
 
 
 
September 30, 2018
 
 
Net Debt (at JBG SMITH Share)
 
 
 
 
Consolidated indebtedness (5) (6)
 
$
2,103,589

 
 
Unconsolidated indebtedness (5)
 
442,669