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):
May 7, 2019
397838026_logoverticaltransbluea05.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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Shares, par value $0.01 per share
JBGS
New York Stock Exchange
 





Item 2.02     Results of Operations and Financial Condition

On May 7, 2019, JBG SMITH Properties (the “Company”) announced its financial results for the three months ended March 31, 2019. 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 March 31, 2019.
        






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
 
May 7, 2019
 
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
397838026_qtrlyinvestorpkg1q19.jpg



397838026_jbgsdivider.jpg



397838026_toc1q19.jpg



397838026_mgmtletter1q19.jpg



397838026_logovwhitebluergba01.jpg
May 7, 2019

To Our Fellow Shareholders:

We are pleased to report on our performance for the first quarter of 2019. For details regarding our financial and operating results, please see our first quarter earnings release and supplemental information, which follow this letter. In April, we held our first of two investor days for 2019 and posted the related presentation on our website. At the end of this letter are highlights from that presentation, including an updated estimated NOI bridge, Amazon’s potential NAV impact on our portfolio, and an illustrative timeline of important National Landing milestones.

Over the past five months, we executed definitive documentation for the initial Amazon leases and land sales, successfully closed a $472 million equity offering, completed the construction of 500 L’Enfant Plaza under budget and two quarters ahead of schedule, and closed a $115 million asset sale. We also reached an important milestone when Arlington County and the Commonwealth of Virginia enacted the Amazon-related incentive, infrastructure, and education legislation. In April, we announced a fourth lease with Amazon for approximately 48,000 square feet at 2345 Crystal Drive. This growth beyond their initial footprint demonstrates Amazon’s growing commitment to National Landing, as well as the strength of our public-private partnership with the County and the Commonwealth. Amazon’s decision to increase its footprint right on Crystal Drive also serves as further validation of our ongoing repositioning of this important retail main street in the submarket.

Equity Offering

In April, we successfully completed our first equity offering, issuing 11.5 million shares at $42.00 per share, and raising net proceeds of approximately $472 million, including an upsize and full exercise of the overallotment option. The positive investor response to our offering demonstrates a high level of support for JBG SMITH and our growth plans. The proceeds from the offering, combined with our ongoing capital recycling efforts, provide the capital to fund the approximately $457 million of estimated remaining investment in our nine Under Construction assets, as well as future development opportunities that we intend to accelerate as a result of Amazon’s presence in National Landing. Our strategy behind the timing, pricing, and sizing of the offering is detailed below.

Timing

The scale of Amazon-related internal investment opportunity in National Landing is significant and will require capital beyond our current 2019 capital recycling target of $400 million. Based on its strong growth during and after

1



the last recession, and the subsequent rapid growth of Amazon Web Services (AWS), we expect Amazon to grow its presence irrespective of the economic cycle. We further expect that our existing concentrated holdings in National Landing will significantly benefit from the placemaking impact of new development in the submarket. To capitalize on these opportunities in a timely fashion with prudent leverage will require ample liquidity. While we intend to continue individual asset sales for as long as the window remains open, the capital sourced in our recent equity offering enables us to execute our near-term Amazon-related growth opportunities without taking extended cap rate risk on future asset sales as a primary funding source. Although some of these investment opportunities are still several quarters away, we believe it is prudent to raise capital when you can, rather than when it is needed. All told, the balance sheet capacity created by the equity offering puts us in a stronger position to unlock value sooner and drive greater long-term NAV per share growth without straining our balance sheet.

Pricing
We evaluate every capital allocation decision through the lens of maximizing long-term NAV per share, and our recent offering was no exception. We believe the modest dilution associated with selling shares at a discount to our estimate of NAV will more than pay for itself over the long term by funding substantial additional internal growth while maintaining a strong balance sheet. While asset sales offer the prospect of sourcing capital at NAV, tax implications and borrowing capacity frequently require selling a greater value of assets for each dollar of desired liquidity. In addition, asset sales take time and depend on cap rates remaining low for the foreseeable future. As long as market conditions are supportive, we intend to continue to capitalize on sale opportunities, but sustained favorable conditions are not a given. Combining our ongoing capital recycling efforts with the immediate liquidity provided by the offering is a more balanced, lower risk means of maintaining balance sheet strength while not missing a beat when it comes to unlocking the future NAV growth embedded in our National Landing development portfolio.

Sizing
We sized the offering to fund the remaining spend related to our nine current Under Construction assets in a leverage neutral manner, and with careful attention to the balance between future growth opportunities and the impact of near-term dilution. Net proceeds from the offering reduced our Net Debt/Total Enterprise Value by 620 basis points and our Net Debt/Adjusted EBITDA by 1.7x on a proforma basis as of March 31, 2019. This allows additional investment in future growth opportunities now without the need to wait for the borrowing capacity that will come from the delivery and stabilization of our current Under Construction assets. While we would “never say never” when it comes to accessing the public equity markets for additional funding, we deliberately sized the offering at a level that would allow us to execute our current business plans without the need to return to the public markets for the foreseeable future.

Leverage Profile
Given that a high percentage of our assets are not income producing, consisting primarily of our Under Construction assets and Future Development Pipeline, we believe the most meaningful metric to evaluate our leverage is Net

2



Debt/Total Enterprise Value. We believe the appropriate stabilized range of Net Debt/Total Enterprise Value for JBG SMITH is between 25% and 35% and the appropriate stabilized Net Debt/Adjusted EBITDA is between 6x and 7x, with peak levels in the mid-8x’s during times of more active development. We have not changed our view on stabilized leverage levels, though we may operate at lower levels while building balance sheet capacity for future investment opportunities. At this point in the cycle, our bias is to operate at or below the low end of these ranges to ensure ample capacity for future investment opportunity when the cycle turns.

As of March 31, 2019, our pro forma Net Debt/Total Enterprise Value was 20.1% and our Net Debt/Adjusted EBITDA was 5.4x, adjusted for our recent equity offering. We expect our Net Debt/Adjusted EBITDA ratio to peak in the low 7.0x’s in the second half of this year, before declining, as we deliver our Under Construction assets. Future leverage levels will fluctuate based on the scale and timing of capital recycling and construction starts. That said, assuming the delivery of our nine Under Construction assets and 1900 Crystal Drive, as well as the successful execution of our $400 million capital recycling plan for 2019, we believe we have sufficient capacity to execute the entirety of our multifamily development pipeline in National Landing (approximately 4,000 to 5,000 units) over the next five years, while maintaining prudent leverage in accordance with our stated target levels.

Washington, DC Market Update
 
In the first quarter, the broad themes of office underperformance and positive multifamily momentum continued with little change. Looking forward, we expect continued downward momentum, particularly for commodity Class A office in DC proper, as more than 5 million square feet of new construction comes online over the next 12 to 24 months.

While it is still early days for Amazon’s impact in National Landing, signs of the submarket’s turnaround are here, and we maintain a bullish outlook on its long-term fundamentals. This view is shared by the brokerage community as evidenced by JLL’s recently increased estimate of average direct asking rents within National Landing to $43.97 per square foot - up from $37.66 per square foot in the fourth quarter, representing a 16.7% increase. Significantly, JLL’s estimate is also only slightly below the $44.60 per square foot average for the Rosslyn Ballston Corridor, which we believe indicates acceptance among the brokerage community that rent expectations for National Landing have reset in a post-Amazon environment.

Multifamily fundamentals remain more encouraging than office, showing positive rent growth over a trailing 12-month period with almost all JBG SMITH Class A submarkets posting above-inflationary same-store growth according to CoStar data. Half of the first quarter’s nearly 1,800 units of new deliveries were in the District - all in emerging markets. While it’s too early to speak definitively about the ultimate performance of these units, early signs are positive. In late April, CoStar reported that new deliveries (including some delivered after the close of the quarter) were nearly 40% leased on average, with only a half month of concessions, signaling continued strong demand for amenity-rich emerging markets even in the face of new supply.


3



On the investment sales front, headlines indicate continued strong volume across office and multifamily, but some notable trends have begun to emerge. In office, despite strong transaction volume in 2018, JLL noted that foreign buyer volume fell dramatically and is now negative, indicating foreign investors were net sellers through the first quarter of 2019. Reports from brokers other than JLL indicate that bidder pools are thinning, and pricing is wide of expectations on some recently marketed deals of which there are an increasing number. As JLL noted, while trophy deals are relatively thin, there is a wide variety of core plus and value-add deals currently on the market, which should provide an indication of pricing and investor depth soon. While it is too early to identify a definitive trend, these data points may be symptomatic of a cooling of the investment sales market, with the possible exception of National Landing.

In National Landing, while there are still very few comparable transactions, one recent example indicates that there is more investor demand for office assets than we have previously seen. Presidential Tower, an office asset located further south from Amazon’s new headquarters than the bulk of our holdings and a half mile from the Metro, is rumored to be under contract at a mid-to-high 5% cap rate, having attracted a deep pool of largely institutional buyers. The rumored pricing for this asset is noticeably more favorable than anything National Landing has seen in years.

According to CoStar data, multifamily volume stayed strong through the end of 2018, but was driven almost entirely by value-add opportunities in the Class B space. Class A volume has been consistently dropping since 2015, driven by a lack of investor depth in the market and the unwillingness of sellers to capitulate. As with the office market, we have seen the opposite trend in National Landing. As we noted last quarter, the Meridian at Pentagon City, a 2001 vintage building, recently went under contract to a private buyer at a 3.7% cap rate - substantially below the 4.6% average Arlington cap rate over the past three years. We believe this aggressive pricing was driven by substantial investor depth and the expectation of outsized rent growth fueled by Amazon-related demand.

Operating Portfolio

Our 10.9 million square foot operating commercial portfolio (at share) generated $240.2 million of annualized NOI and was 90.2% leased and 85.6% occupied as of the end of the first quarter. The 4.6% delta between the leased and occupied metrics for the overall operating commercial portfolio represents an additional $28.9 million of annualized estimated rent from signed but not yet commenced leases that will come on line over the next few years. A more comprehensive discussion of our total operating portfolio NOI, including our defensive leasing strategy, the impacts of our capital recycling efforts, and our development investments can be found at the end of this letter.

During the quarter we completed 32 office lease transactions totaling 785,000 square feet (at share), including 511,000 square feet in our operating portfolio and 274,000 square feet in our Under Construction portfolio. These amounts include 537,000 square feet of leasing related to Amazon. For second-generation leases, the rental rate mark-to-market was negative 6.8% on a cash basis. Although some quarters will be lower, and others will be

4



higher, this is in-line with our updated expectation of a negative 3.0% average mark-to-market through 2024, which we expect to be higher in the front-end of this time period and lower in the back-end.

Consistent with the expectations we outlined last year, same store NOI decreased 10.1% across our operating portfolio during the first quarter, predominately related to the previously discussed blend-and-extend lease renewals we executed in 2017 and 2018. These early blend-and-extend lease renewals significantly de-risk our DC assets at a time of increasing supply and downturn risk, as well as enhance the potential for asset sale or recapitalization on a more attractive basis. As a result of this defensive leasing strategy, we have significantly mitigated our renewal risk, with no private sector leases greater than 55,000 square feet rolling before the end of 2020. We expect the concessions associated with these early blend-and-extend lease renewals to result in negative same store NOI throughout 2019. As free rent in these leases burns off, we expect the temporary NOI decline associated with this strategy to reverse in the second half of 2019, with same store NOI turning positive again in 2020.

We are focusing on risk mitigation in our DC office holdings and positioning our commercial portfolio in National Landing for growth. In our DC portfolio, we have been aggressively reducing our rollover exposure as described above, executing on the lease-up of our Under Construction assets, which now stand at 82.1% pre-leased, and disposing of Commodity A office assets, generating proceeds at attractive pricing and reducing our exposure to this segment from 7% to 3% of our overall portfolio. In National Landing, we are positioning our portfolio to capture future rent growth through a combination of strategies, including shorter lease terms or longer-term leases with mid-term mark-to-market or fixed rent bump provisions on top of annual escalators. While still early, we have seen increased interest and inbound requests for tours from technology and higher education tenants interested in participating in the dynamic technology ecosystem we are creating. While Amazon’s growth will likely be gradual, we are encouraged by this increased level of interest.

Our operating multifamily portfolio, comprising approximately 4,531 units (at share), generated $81.4 million of annualized NOI and ended the first quarter at 97.0% leased.  We saw particularly strong occupancy gains at 1221 Van Street, which ended the first quarter at 89.2% leased. We believe this is a strong position to be in heading into the spring leasing market. In addition, our continued focus on customer service initiatives across our multifamily portfolio has produced an online customer review score that is 18% above the Reputation.com multifamily industry average.

Development Portfolio

Under Construction
At the end of the first quarter, we had nine assets under construction, all of which have guaranteed maximum price construction contracts in place. These assets have weighted average estimated completion and stabilization dates of the second quarter of 2020 and the second quarter of 2021, respectively, with a projected NOI yield based on

5



Estimated Total Project Cost of 6.4%. Commercial assets represent approximately 927,000 square feet (at share), of which 82.1% is pre-leased.

In the first quarter, we completed construction on 500 L’Enfant Plaza, under budget and two quarters ahead of schedule. The building is 74.3% pre-leased, from the bottom up, to Urban Institute and Noblis. This asset will move into our recently delivered operating commercial portfolio next quarter.

Near-Term Development
We do not have any assets in the Near-Term Development Pipeline as of March 31, 2019. As a reminder, we only place assets into our Near-Term Development Pipeline when they have substantially completed the entitlement process and when we intend to commence construction within 18 months, subject to market conditions. Based on our current plans, we expect to place 1900 Crystal Drive into Near-Term Development by the end of this year. While our initial zoning application for this site calls for multifamily development, it may be developed as either multifamily or office depending upon potential tenant demand. We remain on track with our entitlement efforts, and we expect to commence construction on 1900 Crystal Drive in 2020. In addition, as other National Landing multifamily opportunities receive final entitlements, we expect them to transition from our Future Development Pipeline into Near-Term Development.

Future Development Pipeline
Our Future Development Pipeline comprises 18.7 million square feet (at share), with an Estimated Total Investment per square foot of approximately $38.38. At the end of the first quarter approximately 58.8% of this pipeline was in National Landing, 18.6% was in DC, 13.9% was in Reston, and the remaining 8.7% was in other Virginia and Maryland submarkets. 78% of this pipeline is within a 20-minute commute of National Landing, the geography that we believe will most directly benefit from Amazon’s growth over time. Our DC holdings are concentrated in the fast-growing emerging submarkets of Union Market and the Ballpark, and our Reston holdings include one of the best development sites on the Metro, adjacent to Reston Town Center.

Of the 18.7 million square feet in our Future Development Pipeline, 4.1 million square feet is held for sale to Amazon, 3.6 million square feet is fully entitled, and the remaining 11.0 million square feet is zoned for our planned use, but still requires the final stage of design and/or entitlement. Of the 11.0 million square feet requiring final entitlement, we are actively advancing 8.8 million square feet, which we expect to be fully entitled within the next two years. The remaining 2.2 million square feet is either encumbered with existing lease term or encompasses land that we do not believe suitable for new development in the near term.
    
Approximately 63% or 6.9 million square feet of the 11.0 million square feet requiring final entitlements is in National Landing. This amount excludes the 4.1 million square feet currently held for sale to Amazon. Based on our current plans, we expect 2.2 million square feet to be office, which can be pre-leased to Amazon or other tenants seeking to

6



co-locate near Amazon, and 4.7 million square feet, totaling approximately 4,000 to 5,000 units, to be multifamily. Within the next year, we expect final entitlement approvals on the vast majority of these opportunities.

The following bar chart summarizes the data described above:
397838026_stackedbarchartv6.jpg
We believe the value of these development opportunities as a whole exceeds the sum of the values of each project because our placemaking plans will benefit our surrounding holdings and the entire National Landing submarket. As a result, accelerating the execution of these development opportunities will better enable us to achieve our goal of maximizing long-term NAV per share growth.

Third-Party Asset Management and Real Estate Services Business

Our share of revenue from our third-party asset management and real estate services business was $13.8 million in the first quarter, primarily driven by $5.1 million in property management fees and $3.4 million in asset management fees. The portion of total revenues associated with the JBG Legacy Funds was $6.2 million. The Funds continued to focus on disposing of assets in accordance with their underlying business plans. We expect Amazon to pay third-

7



party fees to JBG SMITH for development, construction management, retail leasing, and property management services at market rates, which we expect to offset the reduction in fees from the wind down of the JBG Legacy Fund business over the next 3-6 years. It is worth noting that we have been retained as the third-party property manager on approximately 23% (based on square feet at 100%) of the assets we have sold since the spin-off. This includes approximately 46% of all commercial assets sold.

Capital Allocation

Acquisitions
On the acquisition front, we remain cautious given aggressive pricing across asset classes. As part of the sale of Pen Place and Mets 6, 7, and 8 to Amazon, we preserved flexibility to facilitate 1031 exchange opportunities. We have already identified our first exchange candidate for the Mets sites - a stabilized DC multifamily asset which is expected to close later this year. We expect Pen Place to close in 2020, and we intend to seek a 1031 exchange with the proceeds from that sale. We are targeting acquisitions for these 1031 exchanges that will generate approximately $15 million of annualized NOI.

Dispositions
As we outlined earlier this year, we plan to continue to seek capital recycling opportunities where we can source capital at or above our estimated NAV. We are targeting approximately $400 million of asset sales and recapitalizations in 2019. In the first quarter, we closed the sale of Commerce Executive for $115 million, and we entered into firm contracts, subject to customary closing conditions, for the sale of 4.1 million square feet of land to Amazon for $294 million. Of the $294 million, we expect approximately $150 million associated with Mets 6, 7, and 8 to close in 2019. For low-basis sale candidates, such as the land we are selling to Amazon, we plan to seek 1031 exchanges that would allow us to trade out of low-return assets into higher-yielding development opportunities or acquisitions with better long-term growth profiles. In the current environment, these are more likely to be multifamily assets. We are also focused on additional opportunities to turn land assets into income streams via 1031 exchanges or ground leases.

Development
We continue to advance the entitlement and design of opportunities in our Future Development Pipeline. We expect multifamily development opportunities to remain attractive, particularly in light of potentially declining supply levels, especially in National Landing and other emerging growth submarkets with strong demand drivers. In these locations, we expect to be active developers in the face of new demand.


8



Balance Sheet

As of March 31, 2019, we had $395.6 million of cash ($405.6 million of cash at share), excluding the $472million of net proceeds from our equity offering, and $1.1 billion available on our credit facility. Adjusted for the offering, and using our share price at March 31, 2019, our pro forma Net Debt/Total Enterprise value was 20.1% and our pro forma Net Debt/Adjusted EBITDA was 5.4x. As expressed at the beginning of this letter, our leverage metrics include the debt incurred to date to develop our nine Under Construction assets but not the estimated NOI from those assets. Therefore, we believe Net Debt/Total Enterprise Value is the most meaningful measure to evaluate our leverage. Our long-term leverage targets remain unchanged at 25% to 35% Net Debt/Total Enterprise Value and between 6x and 7x Net Debt/Adjusted EBITDA, with peak levels in the mid-8x’s during times of more active development. We plan to continue to execute our 2019 capital recycling program, which we expect will strengthen our ability to pursue long-term growth opportunities without incurring ongoing funding or leverage risk.

As of March 31, 2019, our average debt maturity was 3.8 years, with approximately $441.2 million (at our share) coming due in the next two years. Consistent with our strategy to finance our business primarily with non-recourse, asset-level financing, 88% of our consolidated and unconsolidated debt is mortgage debt, of which only approximately $8.3 million is recourse to JBG SMITH. Subsequent to the end of the first quarter, we repaid mortgage debt totaling approximately $293.6 million at The Bartlett and Fort Totten Square. After these repayments, our debt is 78% fixed rate, and we have caps in place for 49% of our floating rate debt.

Environmental, Social, and Governance

In mid-2018, we launched the Washington Housing Initiative (WHI) in partnership with the Federal City Council to preserve or build up to 3,000 units of affordable workforce housing in the Washington, DC region over the next decade. The WHI consists of a third-party non-profit, the Washington Housing Conservancy, and the Impact Pool, a JBG SMITH-managed debt financing vehicle. In April, the Washington Housing Conservancy announced its formation, and the Impact Pool has received significant investor interest. As a reminder, the Impact Pool has a targeted size of $150 million, of which we expect to contribute between $10 and $15 million. The first closing on the Impact Pool is expected within days, which should enable the initiative to begin making investments in late 2019.

We are proactive about succession planning and the cultivation of talent. As a reflection of that effort we are excited to announce that Elizabeth Morrison assumed leadership of our Debt Capital Markets team and is responsible for sourcing and managing all aspects of our debt portfolio. Elizabeth is a Senior Vice President and has been part of our team since 2014.
* * *


9



As always, thank you for taking the time to read this letter and to better understand JBG SMITH. As significant shareholders, we are excited about the long-term value creation opportunities ahead of us, particularly in National Landing, and we will continue to work hard to maintain your trust and confidence as we execute our growth plans.

397838026_mattsignaturea01.jpg
W. Matthew Kelly
Chief Executive Officer

10



Investor Day Highlights
Last month, we hosted our first of two investor days for 2019 and posted the related presentation on our website, which can be found at http://investors.jbgsmith.com/presentations.

In our investor day presentation, we detailed our strategy and our 2018 accomplishments, including the pursuit and win of Amazon’s new headquarters, our capital recycling strategy, the improved profile of our commercial operating portfolio, the accelerated monetization of our Under Construction assets and Future Development Pipeline, and our ESG efforts throughout the organization. Our presentation also describes our growth and capitalization plans through 2024, including an updated estimated NOI bridge and the potential NAV impact of Amazon’s arrival on our holdings in National Landing.

Estimated NOI Bridge
There are three main drivers of change in our updated estimated NOI bridge since it was last published - 1) improved portfolio composition from our capital recycling efforts and the delivery of four Under Construction assets; 2) the defensive leasing strategy we have pursued over the past two years in our commercial operating portfolio; and 3) the impact we expect from Amazon’s presence in National Landing given the significant concentration of our holdings around its new headquarters. We estimated our annualized NOI through the fourth quarter of 2024, which matches the estimated stabilization period of 1900 Crystal Drive. As detailed in our estimated NOI bridge, after adjusting for assets already sold, our fourth quarter 2018 annualized NOI was $320 million. We expect this to grow to $550 million by the fourth quarter of 2024, which is an implied 9.4% NOI CAGR over this period. We expect our estimated NOI growth to be back-end weighted and to come from the following three sources:

1)
$116 million of expected NOI growth from our operating portfolio, which represents a 5.3% NOI CAGR. As a reminder, we expect our NOI to decline during 2019, due to free rent associated with our defensive blend-and-extend leasing activity. We expect this to be a temporary NOI decline that will reverse in 2020 as concessions burn off. The $116 million of growth comprises the following:
$83 million (72%) from anticipated 3% base rental revenue growth across both the commercial and multifamily portfolios. This assumes a negative 3% weighted average mark-to-market on office rents for renewals and second-generation leases versus the negative 5% we previously assumed.
$33 million (28%) from the expected lease-lease-up
up of our operating portfolio. While our lease-up assumptions for the multifamily portfolio remain unchanged at 95% occupancy, our target lease-up assumption for the commercial portfolio has increased to 93% versus the 91.5% we previously assumed.
The primary driver behind these increases is anticipated Amazon-related demand in National Landing.
80% of our operating portfolio NOI growth is commercial, 20% is multifamily, and approximately 53% is from our assets in National Landing.


11



2)
$99 million of expected NOI growth from the delivery and stabilization of our nine Under Construction assets and 1900 Crystal Drive, expected to commence construction in 2020. As of the fourth quarter of 2018, we plan to invest over $880 million in these 10 assets over the next four years. Assuming 1900 Crystal Drive is a multifamily project, the expected NOI from these 10 assets is 63% multifamily and 37% commercial, of which approximately 82.1% is pre-leased.

3)
$15 million of expected NOI growth from the exchange of proceeds from the Amazon land sale into stabilized multifamily assets. We have executed two Purchase and Sale Agreements with Amazon to purchase the Pen Place and Mets 6, 7, and 8 land for $294 million, subject to customary closing conditions. We have identified an exchange candidate for the proceeds from the expected sale of the Mets sites - a stabilized DC multifamily asset which is expected to close later this year. We anticipate closing on the sale of the Mets sites later this year and Pen Place by the second quarter of 2020.

It is important to note that our estimated annualized fourth quarter 2024 NOI does not account for any additional value we may create from monetizing the remaining 13.9 million square feet in our Future Development Pipeline, aside from the land held for sale to Amazon and 1900 Crystal Drive. It also does not take into consideration our $400 million capital recycling goal for 2019 or any additional asset sales. It is also important to note that there are numerous assumptions built into our estimated NOI bridge, which may or may not prove to be accurate, and we urge you to review the more detailed presentation of the assumptions, as well as cautionary disclosures about forward-looking statements, included in the investor presentation on our website.

NAV Impact from Amazon in National Landing
As outlined in our investor day presentation, we anticipate the potential NAV impact Amazon could have on our holdings in National Landing to range from $5.25 to $8.25 per share. This NAV impact is anticipated to come from two main drivers. First, we expect our operating portfolio NAV to increase by approximately $2.50 to $3.75 as a result of cap rate compression from Amazon-related demand in National Landing. Our expected cap rates are based on comparisons of assets located in Washington, DC, Seattle, and recent transactions in National Landing. As the data in our investor presentation demonstrates, assets in Washington, DC and Seattle have traded at lower cap rates than those in Northern Virginia, especially office assets, driven by greater depth of investor demand and higher expectations for growth. Recent transactions in National Landing have attracted deep buyer pools, underwriting higher growth, resulting in meaningful cap rate compression. For more detail on recent transactions see our Washington, DC Market Update on page 3 of this letter.

Second, we estimate increases in the per square foot land values and developable density of our Future Development Pipeline will contribute between $2.75 to $4.50 per share. Land comparisons for National Landing assets are harder to come by, as the only recent trades are our pending land sales to Amazon at $72 per square foot, which we believe is more reflective of pre-Amazon land values. Land values vary widely because locations with good views and proximity to the Metro command significant premiums to inferior locations. We have estimated

12



a range of $70 to $100 per square foot, which could be conservative for the best sites. In addition to the per square foot increase in land value, we have also increased the square footage of our expected development potential for certain development sites. We only include the “in the money” density in our Future Development Pipeline, and we are realistic about the density we believe market demand will support, which is often less than what the maximum zoning density will allow. That said, with Amazon as a new demand driver, we have increased the planned density of certain sites in our development pipeline by an aggregate 2.1 million square feet.

Amazon’s arrival has not only increased the value of our assets in National Landing but may also drive increases in the value of assets in other nearby submarkets, especially those within a short commute of Amazon’s new headquarters. In addition to the 55% of JBG SMITH that sits within National Landing roughly 25% of our total assets sit within a 20-minute commute of the submarket. While we believe that many of these locations will realize value appreciation from their relative proximity to Amazon’s new headquarters, especially multifamily assets, we have not included any of that potential value increase in the potential NAV impact.

National Landing Milestones

The estimated development and delivery timeline for assets in National Landing, including the 4.1 million square feet of office assets we are developing for Amazon, our Under Construction and Future Development assets, and the third-party infrastructure investments is summarized below:



13



397838026_nationallandingdevelopmentti.jpg

14



397838026_earningsrelease1q19.jpg



FOR IMMEDIATE RELEASE            397838026_logovwhitebluergba01.jpg
CONTACT
Jaime Marcus
SVP, Investor Relations
(240) 333-3643
jmarcus@jbgsmith.com
JBG SMITH ANNOUNCES FIRST QUARTER 2019 RESULTS

Chevy Chase, MD (May 7, 2019) - 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 March 31, 2019 and reported its financial results.
Additional information regarding our results of operations, properties and tenants can be found in our First Quarter 2019 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com.
First Quarter 2019 Financial Results
Net income attributable to common shareholders was $24.9 million, or $0.20 per diluted share.
Funds From Operations (“FFO”) attributable to common shareholders was $35.1 million, or $0.28 per diluted share.
Core Funds From Operations (“Core FFO”) attributable to common shareholders was $44.2 million, or $0.36 per diluted share.

Operating Portfolio Highlights
Annualized Net Operating Income (“NOI”) for the three months ended March 31, 2019 was $321.6 million, compared to $341.8 million for the three months ended December 31, 2018, at our share. The decrease in NOI is primarily attributable to lost income from disposed assets and increased rental abatements.
The operating commercial portfolio was 90.2% leased and 85.6% occupied as of March 31, 2019, compared to 89.6% and 85.5% as of December 31, 2018, at our share.
The operating multifamily portfolio was 97.0% leased and 94.8% occupied as of March 31, 2019, compared to 95.7% and 93.9% as of December 31, 2018, at our share.
Executed approximately 785,000 square feet of office leases at our share in the first quarter, comprising approximately 555,000 square feet of new leases, and approximately 230,000 square feet of second generation leases, which generated a 3.9% rental rate decrease on a GAAP basis and a 6.8% rental rate decrease on a cash basis. The new leases primarily resulted from Amazon.com, Inc. ("Amazon") executing three initial leases during the quarter totaling 537,000 square feet at three of our existing office buildings in National Landing. The leases encompass approximately 88,000 square feet at 241 18th Street South, approximately 191,000 square feet at 1800 South Bell Street, and approximately 258,000 square feet at 1770 Crystal Drive. We expect Amazon to begin moving into 241 18th Street South and 1800 South Bell in 2019 and 1770 Crystal Drive by the end of 2020. Also, in April 2019, we executed an agreement with Amazon to lease an additional approximately 48,000 square feet of office space at 2345 Crystal Drive in National Landing in conjunction with the creation of Amazon's additional headquarters.
Same Store Net Operating Income (“SSNOI”) decreased 10.1% to $73.6 million for the three months ended March 31, 2019, compared to $81.9 million for the three months ended March 31, 2018. The decrease in SSNOI for the three months ended March 31, 2019 is largely attributable to rental abatements and lower base

1



rent. The reported same store pool as of March 31, 2019 includes only the assets that were in service for the entirety of both periods being compared.
 
Development Portfolio Highlights
Under Construction
During the quarter ended March 31, 2019, there were nine assets under construction (five commercial assets and four multifamily assets), consisting of 926,530 square feet and 1,298 units, both at our share.

Near-Term Development
As of March 31, 2019, there were no assets in near-term development.

Future Development Pipeline
As of March 31, 2019, there were 40 future development assets consisting of 18.7 million square feet of estimated potential density at our share, including the 4.1 million square feet held for sale to Amazon.

Third-Party Asset Management and Real Estate Services Business
For the three months ended March 31, 2019, revenue from third-party real estate services, including reimbursements, was $27.7 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 $13.8 million, of which $5.1 million came from property management fees, $3.4 million came from asset management fees, $2.2 million came from leasing fees, $1.6 million came from development fees, $0.6 million came from construction management fees and $0.8 million came from other service revenue.
The general and administrative expenses allocated to the third-party asset management and real estate services business were $12.5 million for the three months ended March 31, 2019.

Balance Sheet
We had $2.1 billion of debt ($2.4 billion including our share of debt of unconsolidated real estate ventures) as of March 31, 2019. Of the $2.4 billion of debt at our share, approximately 68% was fixed-rate, and rate caps were in place for approximately 2%.
The weighted average interest rate of our debt at share was 4.28% as of March 31, 2019.
At March 31, 2019, our total enterprise value was approximately $7.7 billion, comprising 137.8 million common shares and units valued at $5.7 billion and debt (net of premium / (discount) and deferred financing costs) at our share of $2.4 billion, less cash and cash equivalents at our share of $405.6 million.
As of March 31, 2019, we had $395.6 million of cash and cash equivalents on a GAAP basis and $405.6 million of cash and cash equivalents at our share, and $1.1 billion of capacity under our credit facility.
Net Debt to Annualized Adjusted EBITDA at our share for the three months ended March 31, 2019 was 7.1x and our Net Debt / Total Enterprise Value was 26.3% as of March 31, 2019. Pro forma Net Debt to Annualized Adjusted EBITDA at our share would have been 5.4x for the three months ended March 31, 2019, including the $472.3 million of net proceeds from the underwritten public offering completed in April 2019.

Financing and Investing Activities
Sold Commerce Executive/Commerce Metro Land, an operating commercial/future development asset located in Reston, Virginia, for $115.0 million. The sale also included approximately 894,000 square feet of estimated potential development density.
Executed purchase and sale agreements with Amazon for two of our National Landing Future Development assets, Pen Place and Mets 6, 7 and 8, which will serve as the initial phase of new construction associated with Amazon's additional headquarters. Subject to customary closing conditions, Amazon is expected to pay $293.9

2



million for the sites, or $72.00 per square foot based on their combined estimated potential development density of up to approximately 4.1 million square feet. We expect to close on the Mets land sale as early as 2019 and on Pen Place as early as 2020.
Executed a contract to purchase a stabilized multifamily asset located in Washington, DC, which we intend to use as a replacement property in a 1031 like-kind exchange for the expected proceeds from the sale of the Mets 6, 7 and 8 land parcels to Amazon.
Redeemed 1.7 million common limited partnership units ("OP Units") for an equivalent number of our common shares.

Subsequent to March 31, 2019:

Closed an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other estimated offering expenses, of approximately $472.3 million. We intend to use the net proceeds to fund development opportunities and for general corporate purposes.
Repaid mortgage debt totaling approximately $293.6 million at The Bartlett and Fort Totten Square.
Dividends
In May 2019, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on May 24, 2019 to shareholders of record on May 13, 2019.
About JBG SMITH
JBG SMITH is an S&P 400 company that owns, operates, invests in and develops a dynamic portfolio of high-quality mixed-use properties in and around Washington, DC. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Capital region, including National Landing where it now serves as the exclusive developer for Amazon’s new headquarters. JBG SMITH’s operating portfolio currently comprises approximately 18 million square feet of high-quality office, multifamily and retail assets, 98% at our share of which are Metro-served. It also maintains a robust future pipeline encompassing approximately 18.7 million square feet of mixed-use development opportunities. For more information on JBG SMITH please visit www.jbgsmith.com. 
Forward Looking Statements
Certain statements contained herein may constitute “forward-looking statements” as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results of JBG SMITH Properties (“JBG SMITH” or the “Company”) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximate”, "hypothetical", "potential", “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this earnings release. We also note the following forward-looking statements: 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. Expected key Amazon transaction terms and timeframes for closing, planned infrastructure improvements related to Amazon's additional headquarters; the economic impacts of Amazon's additional headquarters on the DC region and National Landing; our development plans related to Amazon's additional headquarters; the expected accretion to our net asset value ("NAV") as a result of the Amazon transaction and our future NAV growth rate; in the case of our Amazon lease transaction and our new development opportunities in National Landing, the total square feet to be leased to Amazon and the expected net effective rent, estimated square feet, estimated number of units, the estimated construction start and occupancy dates, estimated incremental investment, targeted NOI yield; and in the case of our future development opportunities, estimated potential development density. Many of the

3



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, 2018 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 real estate and impairment losses of 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 transaction and other costs, gain (loss) on the extinguishment of debt, distributions in excess of our investment in consolidated real estate ventures, gain on the bargain purchase of a business, lease liability adjustments and share-based compensation expense related to the Formation Transaction and special equity awards. We believe that adjusting such items not considered part of our comparable operations, provides a meaningful measure to evaluate and compare our performance from period-to-period.
Because EBITDA, EBITDAre and Adjusted EBITDA have limitations as analytical tools, we use EBITDA, EBITDAre and Adjusted EBITDA to supplement GAAP financial measures. Additionally, we believe that users of these measures should consider EBITDA, EBITDAre and Adjusted EBITDA in conjunction with net income (loss) and other GAAP measures in understanding our operating results.
Funds from Operations ("FFO"), Core FFO and Funds Available for Distribution (“FAD")
FFO is a non-GAAP financial measure computed in accordance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018. NAREIT defines FFO as “net income (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity."
"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, distributions in excess of our investment in consolidated real estate ventures, share-based compensation expense related to the Formation Transaction and special equity awards, lease liability adjustments, amortization of the management contracts intangible and the mark-to-market of derivative instruments.
"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 March 31, 2019 multiplied by four. Due to seasonality in the hospitality business, annualized NOI for Crystal City Marriott represents the trailing twelve-month NOI as of March 31, 2019. 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.
“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.



6



CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
in thousands
March 31, 2019
 
December 31, 2018
 
 
 
 
ASSETS
 
Real estate, at cost:
 
 
 
Land and improvements
$
1,227,255

 
$
1,371,874

Buildings and improvements
3,717,906

 
3,722,930

Construction in progress, including land
751,730

 
697,930

 
5,696,891

 
5,792,734

Less accumulated depreciation
(1,075,309
)
 
(1,051,875
)
Real estate, net
4,621,582

 
4,740,859

Cash and cash equivalents
395,584

 
260,553

Restricted cash
17,877

 
138,979

Tenant and other receivables, net
49,979

 
46,568

Deferred rent receivable, net
152,323

 
143,473

Investments in and advances to unconsolidated real estate ventures
321,366

 
322,878

Other assets, net
297,525

 
264,994

Assets held for sale
168,458

 
78,981

TOTAL ASSETS
$
6,024,694

 
$
5,997,285

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Liabilities:
 
 
 
Mortgages payable, net
$
1,835,842

 
$
1,838,381

Unsecured term loans, net
297,277

 
297,129

Accounts payable and accrued expenses
134,776

 
130,960

Other liabilities, net
174,434

 
181,606

Liabilities related to assets held for sale
486

 
3,717

Total liabilities
2,442,815

 
2,451,793

Commitments and contingencies

 

Redeemable noncontrolling interests
584,763

 
558,140

Total equity
2,997,116

 
2,987,352

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
$
6,024,694

 
$
5,997,285

_______________

Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.


7



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
in thousands, except per share data
Three Months Ended March 31,
 
2019
 
2018
REVENUE
 
 
 
Property rentals
$
119,413

 
$
131,228

Third-party real estate services, including reimbursements
27,691

 
24,330

Other income
8,095

 
7,479

Total revenue
155,199

 
163,037

EXPENSES
 
 
 
Depreciation and amortization
48,719

 
49,160

Property operating
32,174

 
35,158

Real estate taxes
17,235

 
19,610

General and administrative:
 
 
 
Corporate and other
12,314

 
8,414

Third-party real estate services
28,066

 
22,609

Share-based compensation related to Formation Transaction and
special equity awards
11,131

 
9,428

Transaction and other costs
4,895

 
4,221

Total expenses
154,534

 
148,600

OTHER INCOME (EXPENSE)

 

Income (loss) from unconsolidated real estate ventures, net
3,601

 
(1,902
)
Interest and other income, net
951

 
573

Interest expense
(17,174
)
 
(19,257
)
Gain on sale of real estate
39,033

 
455

Total other income (expense)
26,411

 
(20,131
)
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (EXPENSE)
27,076

 
(5,694
)
Income tax benefit
1,172

 
908

NET INCOME (LOSS)
28,248

 
(4,786
)
Net (income) loss attributable to redeemable noncontrolling interests
(3,387
)
 
594

Net loss attributable to noncontrolling interests

 
2

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
24,861

 
$
(4,190
)
EARNINGS (LOSS) PER COMMON SHARE:
 
 
 
Basic
$
0.20

 
$
(0.04
)
Diluted
$
0.20

 
$
(0.04
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING :
 
 
 
Basic
122,573

 
117,955

Diluted
123,423

 
117,955

___________________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.



8



EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)
(Unaudited)
dollars in thousands
 
Three Months Ended March 31,
 
 
2019
 
2018
 
 
 
 
 
EBITDA, EBITDAre and Adjusted EBITDA
 
 
 
 
Net income (loss)
 
$
28,248

 
$
(4,786
)
Depreciation and amortization expense
 
48,719

 
49,160

Interest expense (1)
 
17,174

 
19,257

Income tax benefit
 
(1,172
)
 
(908
)
Unconsolidated real estate ventures allocated share of above adjustments
 
7,806

 
10,175

Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures
 
(1
)
 

EBITDA (2)
 
$
100,774

 
$
72,898

Gain on sale of real estate
 
(39,033
)
 
(455
)
EBITDAre (2)
 
$
61,741

 
$
72,443

Transaction and other costs (3)
 
4,895

 
4,221

Share-based compensation related to Formation Transaction and special equity awards
 
11,131

 
9,428

Net distributions in excess of our investment in unconsolidated real estate venture (4)
 
(6,441
)
 

Unconsolidated real estate ventures allocated share of above adjustments
 

 
30

Adjusted EBITDA (2)
 
$
71,326

 
$
86,122

 
 
 
 
 
Net Debt to Annualized Adjusted EBITDA (5)
 
7.1x

 
6.9x

 
 
 
 
 
 
 
March 31, 2019
 
March 31, 2018
Net Debt (at JBG SMITH Share)
 
 
 
 
Consolidated indebtedness (6)
 
$
2,128,803

 
$
2,185,461

Unconsolidated indebtedness (6)
 
303,397

 
419,476

Total consolidated and unconsolidated indebtedness
2,432,200

 
2,604,937

Less: cash and cash equivalents
 
405,646

 
238,519

Net Debt (at JBG SMITH Share)
 
$
2,026,554

 
$
2,366,418

 
 
$
(0.41
)
 
 

____________________
Note: EBITDAre for the three months ended March 31, 2018 was restated in compliance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.

(1)
Interest expense includes the amortization of deferred financing costs and the ineffective portion of any interest rate swaps or caps, net of capitalized interest.
(2)
Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.3 million for the three months ended March 31, 2018).
(3)
Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs and severance costs), demolition costs and costs related to other completed, potential and pursued transactions.
(4)
As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent net distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized.
(5)
Pro forma Net Debt to Annualized Adjusted EBITDA would have been 5.4x for the three months ended March 31, 2019, including the $472.3 million of net proceeds from the underwritten public offering completed in April 2019.
(6)
Net of premium/discount and deferred financing costs.




9



FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
in thousands, except per share data
Three Months Ended March 31,
 
2019
 
2018
 
 
 
 
FFO and Core FFO
 
 
 
Net income (loss) attributable to common shareholders
$
24,861

 
$
(4,190
)
Net income (loss) attributable to redeemable noncontrolling interests
3,387

 
(594
)
Net loss attributable to noncontrolling interests

 
(2
)
Net income (loss)
28,248

 
(4,786
)
Gain on sale of real estate
(39,033
)
 
(455
)
Real estate depreciation and amortization
46,035

 
46,639

Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures
4,653

 
6,436

Net (income) loss attributable to noncontrolling interests in consolidated real estate ventures
(1
)
 
2

FFO Attributable to Operating Partnership Common Units (1)
$
39,902

 
$
47,836

FFO attributable to redeemable noncontrolling interests
(4,783
)
 
(7,127
)
FFO attributable to common shareholders (1)
$
35,119

 
$
40,709

 
 
 
 
FFO attributable to the operating partnership common units
$
39,902

 
$
47,836

Transaction and other costs, net of tax (2)
4,626

 
4,136

Mark-to-market on derivative instruments
(476
)
 
(1,119
)
Share of gain from mark-to-market on derivative instruments held by unconsolidated real estate ventures
227

 
(342
)
Net distributions in excess of our investment in unconsolidated real estate venture (3)
(6,441
)
 

Share-based compensation related to Formation Transaction and special equity awards
11,131

 
9,428

Amortization of management contracts intangible, net of tax
1,287

 
1,286

Core FFO Attributable to Operating Partnership Common Units (1)
$
50,256

 
$
61,225

Core FFO attributable to redeemable noncontrolling interests
(6,024
)
 
(9,037
)
Core FFO attributable to common shareholders (1)
$
44,232

 
$
52,188

FFO per diluted common share
$
0.28

 
$
0.35

Core FFO per diluted common share
$
0.36

 
$
0.44

Weighted average diluted shares
123,423

 
117,955

 
 
 
 



See footnotes on page 11.

10



FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)

in thousands, except per share data
Three Months Ended March 31,
 
2019
 
2018
 
 
 
 
FAD
 
 
 
Core FFO attributable to the operating partnership common units
$
50,256

 
$
61,225

Recurring capital expenditures and second generation tenant improvements and leasing commissions
(22,297
)
 
(6,097
)
Straight-line and other rent adjustments (4)
(6,808
)
 
(1,075
)
Share of straight-line rent from unconsolidated real estate ventures
(135
)
 
159

Third-party lease liability assumption payments
(1,136
)
 
(472
)
Share of third party lease liability assumption payments for unconsolidated real estate ventures

 
(50
)
Share-based compensation expense
5,330

 
4,276

Amortization of debt issuance costs
970

 
1,164

Share of amortization of debt issuance costs from unconsolidated real estate ventures
48

 
69

Non-real estate depreciation and amortization
912

 
749

FAD available to the Operating Partnership Common Units (A) (5)
$
27,140

 
$
59,948

Distributions to common shareholders and unitholders (6) (B)
$
31,284

 
$
31,423

FAD Payout Ratio (B÷A) (7)
115.3
%
 
52.4
%
Capital Expenditures
 
 
 
Maintenance and recurring capital expenditures
$
5,495

 
$
2,683

Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures
88

 
1,149

Second generation tenant improvements and leasing commissions
16,155

 
1,893

Share of second generation tenant improvements and leasing commissions from unconsolidated real estate ventures
559

 
372

Recurring capital expenditures and second generation tenant improvements and leasing commissions
22,297

 
6,097

First generation tenant improvements and leasing commissions
6,197

 
4,185

Share of first generation tenant improvements and leasing commissions from unconsolidated real estate ventures
233

 
995

Non-recurring capital expenditures
6,722

 
3,366

Share of non-recurring capital expenditures from unconsolidated joint ventures

 
620

Non-recurring capital expenditures
13,152

 
9,166

Total JBG SMITH Share of Capital Expenditures
$
35,449

 
$
15,263


_______________

Note: FFO attributable to operating partnership common units and FFO attributable to common shareholders for the three months ended March 31, 2018 were restated in compliance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.
(1)
Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.3 million for the three months ended March 31, 2018).
(2)
Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs, and severance costs), demolition costs and costs related to other completed, potential and pursued transactions.
(3)
As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent net distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized.
(4)
Includes straight-line rent, above/below market lease amortization and lease incentive amortization.
(5)
The decline in FAD available to the Operating Partnership Common Units was attributable to a significant increase in second generation tenant improvements and leasing commissions from the early renewal of several leases during the quarter.
(6)
The distribution for the three months ended March 31, 2019 excludes a special dividend of $0.10 per common share that was paid in January 2019.
(7)
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 March 31,
 
2019
 
2018
 
 
Net income (loss) attributable to common shareholders
$
24,861

 
$
(4,190
)
Add:
 
 
 
Depreciation and amortization expense
48,719

 
49,160

General and administrative expense:
 
 
 
Corporate and other
12,314

 
8,414

Third-party real estate services
28,066

 
22,609

Share-based compensation related to Formation Transaction and
special equity awards
11,131

 
9,428

Transaction and other costs
4,895

 
4,221

Interest expense
17,174

 
19,257

Income tax benefit
(1,172
)
 
(908
)
Net income (loss) attributable to redeemable noncontrolling interests
3,387

 
(594
)
Less:
 
 
 
Third-party real estate services, including reimbursements
27,691

 
24,330

Other income (excluding parking income of $6,455 and $6,363 in 2019 and 2018)
1,640

 
1,116

Income (loss) from unconsolidated real estate ventures, net
3,601

 
(1,902
)
Interest and other income, net
951

 
573

Gain on sale of real estate
39,033

 
455

Net loss attributable to noncontrolling interests

 
2

Consolidated NOI
76,459

 
82,823

Proportionate NOI attributable to unconsolidated real estate ventures
5,386

 
9,207

Non-cash rent adjustments (1)
(6,808
)
 
(1,096
)
Other adjustments (2)
3,353

 
4,252

Total adjustments
1,931

 
12,363

NOI
$
78,390

 
$
95,186

Less: out-of-service NOI loss (3)
(1,271
)
 
(834
)
Operating portfolio NOI
$
79,661

 
$
96,020

Non-same store NOI (4)
6,088

 
14,147

Same store NOI (5)
$
73,573

 
$
81,873

 
 
 
 
Growth in same store NOI
(10.1
)%
 
 
Number of properties in same store pool
56

 
 

___________________

(1)
Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization.
(2)
Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue.
(3)
Includes the results for our Under Construction assets and Future Development Pipeline.
(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. The decrease in non-same store NOI is primarily attributable to lost income from disposed assets.
(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



397838026_suppinfo1q19.jpg



397838026_suppcover1q19.jpg


TABLE OF CONTENTS
MARCH 31, 2019


 
Page
Overview
 
Disclosures
3-4
Company Profile
5-6
Financial Highlights
Financial Highlights - Trends
8-9
Portfolio Overview
Financial Information
 
Condensed Consolidated Balance Sheets
Condensed Consolidated 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)
16-17
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)
Summary NOI (Non-GAAP)
Summary NOI - Commercial (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:
 
Commercial
33-36
Multifamily
37-39
Under Construction
Future Development
Disposition Activity
Debt
 
Debt Summary
Debt by Instrument
44-45
Real Estate Ventures
 
Consolidated Real Estate Ventures
Unconsolidated Real Estate Ventures
47-48
Definitions
49-52
Appendices - Reconciliations of Non-GAAP Financial Highlights
53-56

397838026_logoverticaltransbluea04.jpg
 
Page 2


DISCLOSURES
MARCH 31, 2019




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”, “hypothetical”, “potential”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this document. We also note the following forward-looking statements: our potential net operating income ("NOI") growth and the assumptions on which such growth is premised, our estimated future leverage (Debt/EBITDA) profile, the potential effect of Amazon.com, Inc. ("Amazon") on job growth, rent growth and cap rates in the Washington, DC metropolitan area and National Landing, in particular, our anticipated dispositions and 1031 exchanges, our indicated annual dividend per share and dividend yield, annualized NOI; adjusted annualized NOI; in the case of our construction assets, estimated square feet, estimated number of units, the estimated completion date, estimated stabilization date, estimated incremental investment, estimated total investment, projected NOI yield, weighted average projected NOI yield, NOI yield or estimated total project cost, estimated total NOI weighted average completion date, weighted average stabilization date and estimated incremental investment, intended type of asset use and potential tenants, and estimated stabilized NOI; 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, estimated total investment, expected key Amazon transaction terms, our anticipated role as developer, property manager and retail leasing agent in connection with Amazon’s new headquarters, planned infrastructure and education improvements related to Amazon’s new headquarters; the economic impacts of Amazon’s new headquarters on the DC region and National Landing, our development planned related to Amazon’s new headquarters, the expected accretion to our net asset value ("NAV") as a result of the Amazon transaction and our future net asset value ("NAV") growth rate; in the case of our Amazon lease transactions and our development opportunities in National Landing, the total square feet to be leased to Amazon and the expected net effective rent, estimated square feet, estimated number of units, the estimated construction start and occupancy dates, estimated incremental investment, and targeted NOI yield; and in the case of our future development opportunities, 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 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, 2018 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 Properties ("JBG SMITH") was organized as a Maryland real estate investment trust ("REIT") on October 27, 2016 for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust's ("Vornado") Washington, D.C. segment. On July 18, 2017, JBG SMITH acquired the management business and certain assets and liabilities of The JBG Companies ("JBG") (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction."

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.

397838026_logoverticaltransbluea04.jpg
 
Page 3


DISCLOSURES
MARCH 31, 2019




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.
Definitions
See pages 49-52 for definitions of terms used in this Investor Package.

Information herein with respect to the proposed transaction with Amazon is based on executed leases and purchase and sale agreements between us and Amazon. Closing under these agreements is subject to customary closing conditions.

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


397838026_logoverticaltransbluea04.jpg
 
Page 4


COMPANY PROFILE
MARCH 31, 2019
(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 commercial 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 commercial 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 asset management and real estate services business that provides fee-based real estate services to third parties, our real estate ventures and the legacy funds formerly organized by JBG ("JBG Legacy Funds").

Q1 2019 Financial Results

Net income attributable to common shareholders was $24.9 million, or $0.20 per diluted share.
FFO attributable to common shareholders was $35.1 million, or $0.28 per diluted share.
Core FFO attributable to common shareholders was $44.2 million, or $0.36 per diluted share.

Q1 2019 to Q4 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 March 31, 2019 was $321.6 million, compared to $341.8 million for the three months ended December 31, 2018, at our share. The decrease in NOI is primarily attributable to lost income from disposed assets and increased rental abatements.
The operating commercial portfolio was 90.2% leased and 85.6% occupied as of March 31, 2019, compared to 89.6% and 85.5% as of December 31, 2018 at our share.
The operating multifamily portfolio was 97.0% leased and 94.8% occupied as of March 31, 2019, compared to 95.7% and 93.9% as of December 31, 2018 at our share.
Same store NOI decreased 10.1% to $73.6 million for the three months ended March 31, 2019, compared to $81.9 million for the three months ended March 31, 2018. The decrease in same store NOI for the three months ended March 31, 2019 is largely attributable to rental abatements and lower base rent. The reported same store pool as of March 31, 2019 includes only the assets that were in service for the entirety of both periods being compared. See page 51 for the definition of same store.

Under Construction
During the quarter ended March 31, 2019, there were nine assets under construction (five commercial assets and four multifamily assets), consisting of 926,530 square feet and 1,298 units, both at our share.

Near-Term Development
As of March 31, 2019, there were no assets in near-term development.

Future Development
As of March 31, 2019, there were 40 future development assets consisting of 18.7 million square feet of estimated potential density at our share, including the 4.1 million square feet held for sale to Amazon.


397838026_logoverticaltransbluea04.jpg
 
Page 5


COMPANY PROFILE
MARCH 31, 2019
(Unaudited)





Company Overview

Acquisition and Disposition Activity During the Quarter
Sold Commerce Executive/Commerce Metro Land, an operating commercial/future development asset located in Reston, Virginia, for $115.0 million. The sale also included approximately 894,000 square feet of estimated potential development density.
Executed purchase and sale agreements with Amazon for two of our National Landing Future Development assets, Pen Place and Mets 6, 7 and 8, which will serve as the initial phase of new construction associated with Amazon’s additional headquarters. Subject to customary closing conditions, Amazon is expected to pay $293.9 million for the sites, or $72.00 per square foot based on their combined estimated potential development density of up to approximately 4.1 million square feet. We expect to close on the Mets land sale as early as 2019 and on Pen Place as early as 2020.
Executed a contract to purchase a stabilized multifamily asset located in Washington, DC, which we intend to use a replacement property in a 1031 like-kind exchange for the expected proceeds from the sale of the Mets 6, 7 and 8 land parcels to Amazon, which is expected to close later this year.

Equity Offering
In April 2019, we closed an underwritten public offering of 11.5 million common shares (including 1.5 million common shares related to the exercise of the underwriters' option to cover overallotments) at $42.00 per share, which generated net proceeds, after deducting the underwriting discounts and commissions and other estimated offering expenses, of approximately $472.3 million. We intend to use the net proceeds to fund development opportunities and for general corporate purposes.

In April 2019, we repaid the mortgage debt totaling approximately $293.6 million at The Bartlett and Fort Totten Square.
Executive Officers
 
Company Snapshot as of March 31, 2019
 
 
 
 
 
W. Matthew Kelly
Chief Executive Officer and Trustee
 
Exchange/ticker
NYSE: JBGS
David P. Paul
President and Chief Operating Officer
 
Insider ownership (1)
approximately 8%
Stephen W. Theriot
Chief Financial Officer
 
Indicated annual dividend per share
$0.90
Kevin P. Reynolds
Chief Development Officer
 
Dividend yield
2.2%
Steven A. Museles
Chief Legal Officer
 
 
 
M. Moina Banerjee
Executive Vice President, Head of Capital Markets
 
Total Enterprise Value (dollars in billions, except share price)
 
 
 
 
Common share price
$41.35
 
 
 
Common shares and common limited partnership units ("OP Units")
   outstanding (in millions)
137.76
 
 
 
Total market capitalization
$5.70
 
 
 
Total consolidated and unconsolidated indebtedness at JBG SMITH share
2.43
 
 
 
Less: cash and cash equivalents at JBG SMITH share
(0.41)
 
 
 
Net debt
$2.02
 
 
 
Total Enterprise Value
$7.72
 
 
 
 
 
 
 
 
Net Debt / Total Enterprise Value (2)
26.3%
 
 
 
 
 
 
(1)
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 31, 2019 assuming that all OP Units are redeemed for shares and including the 11.5 million shares issued in the underwritten public offering completed in April 2019.
.


 
 
 
(2)
Pro forma Net Debt / Total Enterprise Value would have been 20.1% as of March 31, 2019, including the $472.3 million of net proceeds from the underwritten public offering completed in April 2019.

397838026_logoverticaltransbluea04.jpg
 
Page 6


FINANCIAL HIGHLIGHTS
MARCH 31, 2019
(Unaudited)



dollars in thousands, except per share data
Three Months Ended March 31, 2019
 
 
Summary Financial Results
 
Total revenue
$
155,199

Net income attributable to common shareholders
$
24,861

Per diluted common share
$
0.20

Operating portfolio NOI
$
79,661

FFO attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
39,902

Per operating partnership common unit
$
0.28

Core FFO attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
50,256

Per operating partnership common unit
$
0.36

FAD attributable to the operating partnership common units (including units owned by JBG SMITH Properties)
$
27,140

FAD payout ratio
115.3
%
EBITDA attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
100,774

EBITDAre attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
61,741

Adjusted EBITDA attributable to operating partnership common units (including units owned by JBG SMITH Properties)
$
71,326

Net debt to annualized adjusted EBITDA (1)
7.1x

 
 
 
March 31, 2019
 
 
Debt Summary and Key Ratios (at JBG SMITH Share)
 
Total consolidated indebtedness (2)
$
2,128,803

Total consolidated and unconsolidated indebtedness (2)
$
2,432,200

Weighted average interest rates:
 
Variable rate debt
4.53
%
Fixed rate debt
4.16
%
Total debt
4.28
%
Cash and cash equivalents
$
405,646

____________________
(1)
Pro forma Net Debt to Annualized Adjusted EBITDA would have been 5.4x for the three months ended March 31, 2019, including the $472.3 million of net proceeds from the underwritten public offering completed in April 2019.
(2)
Net of premium/discount and deferred financing costs.


397838026_logoverticaltransbluea04.jpg
 
Page 7


FINANCIAL HIGHLIGHTS - TRENDS
MARCH 31, 2019
(Unaudited)


 
 
Three Months Ended
dollars in thousands, except per share data, at JBG SMITH share
 
Q1 2019
Q4 2018
Q3 2018
Q2 2018
Q1 2018
Commercial NOI (1)
 
$
59,304

$
65,462

$
71,314

$
75,311

$
73,764

Multifamily NOI (2)
 
20,357

20,078

19,615

19,324

19,059

Operating portfolio NOI (3)
 
$
79,661

$
85,540

$
90,929

$
94,635

$
92,823

Total Annualized NOI (4)
 
$
321,583

$
341,849

$
364,915

$
378,540

$
371,292

 
 
 
 
 
 
 
Net income (loss) attributable to common shareholders
 
$
24,861

$
710

$
22,830

$
20,574

$
(4,190
)
Per diluted common share
 
$
0.20

$
(0.01
)
$
0.19

$
0.17

$
(0.04
)
FFO attributable to operating partnership common units (3) (5)
 
$
39,902

$
44,834

$
49,246

$
42,522

$
47,836

Per operating partnership common unit
 
$
0.28

$
0.32

$
0.36

$
0.31

$
0.35

Core FFO attributable to operating partnership common units (3) (5)
$
50,256

$
56,948

$
59,256

$
62,305

$
61,225

Per operating partnership common unit
 
$
0.36

$
0.41

$
0.43

$
0.45

$
0.44

FAD attributable to operating partnership common units (5) (6)
 
$
27,140

$
20,736

$
45,019

$
57,568

$
59,948

FAD payout ratio
 
115.3
%
150.9
%
69.3
%
54.2
%
52.4
%
EBITDA attributable to operating partnership common units (3) (5)
 
$
100,774

$
97,503

$
102,109

$
101,211

$
72,898

EBITDAre attributable to operating partnership common units (3) (5)
$
61,741

$
70,555

$
74,683

$
67,815

$
72,443

Adjusted EBITDA attributable to operating partnership common units (3) (5)
 
$
71,326

$
82,608

$
83,842

$
87,226

$
86,122

Net debt to annualized adjusted EBITDA (7)
 
7.1x

6.5x

6.7x

6.3x

6.9x

 
 
 
 
 
 
 
 
 
Q1 2019
Q4 2018
Q3 2018
Q2 2018
Q1 2018
 
 
 
 
 
 
 
Number of Operating Assets
 
 
 
 
 
 
Commercial (1)
 
45

46

49

51

53

Multifamily (2)
 
16

16

16

16

15

Total
 
61

62

65

67

68

 
 
 
 
 
 
 
Operating Portfolio % Leased (8)
 
 
 
 
 
 
Commercial (1) (9)
 
90.2
%
89.6
%
87.1
%
87.5
%
87.9
%
Multifamily (2)
 
97.0
%
95.7
%
96.1
%
95.9
%
96.1
%
Weighted Average
 
92.0
%
91.2
%
89.4
%
89.5
%
89.8
%
 
 
 
 
 
 
 
Operating Portfolio % Occupied (10)
 
 
 
 
 
 
Commercial (1) (9)
 
85.6
%
85.5
%
85.4
%
86.0
%
87.0
%
Multifamily (2)
 
94.8
%
93.9
%
94.3
%
92.6
%
94.2
%
Weighted Average
 
88.1
%
87.7
%
87.6
%
87.7
%
88.7
%

See footnotes on page 9.

397838026_logoverticaltransbluea04.jpg
 
Page 8


FINANCIAL HIGHLIGHTS - TRENDS
MARCH 31, 2019
(Unaudited)


Footnotes
Note: See appendices for reconciliations of non-GAAP financial measures to their respective comparable GAAP financial measures. FFO attributable to operating partnership common units for Q1 2018 was restated in compliance with the definition established by the National Association of Real Estate Investment Trusts (“NAREIT”) in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.

(1)
Beginning in Q4 2018, JBG SMITH renamed the Office portfolio to the Commercial portfolio and reclassified Vienna Retail, Stonebridge at Potomac Town Center and Crystal City Marriott from the Other portfolio to the Commercial portfolio.
(2)
Beginning in Q4 2018, JBG SMITH reclassified North End Retail from the Other portfolio to the Multifamily portfolio.
(3)
Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $2.2 million, $1.5 million, $1.5 million and $1.3 million for Q4 2018, Q3 2018, Q2 2018 and Q1 2018).
(4)
Beginning in Q3 2018, JBG SMITH revised the presentation of annualized NOI for Crystal City Marriott to reflect the trailing twelve-month NOI due to the seasonality in the hospitality business.
(5)
Operating partnership common units include units owned by JBG SMITH Properties.
(6)
The Q1 2019 and Q4 2018 declines in FAD available to the Operating Partnership Common Units were attributable to significant increases in second generation tenant improvements and leasing commissions from the early renewal of several leases during the quarters. Additionally, Q4 2018 was further impacted by increases in recurring capital expenditures, which is consistent with historical seasonality trends.
(7)
Pro forma Net Debt to Annualized Adjusted EBITDA would have been 5.4x for the three months ended March 31, 2019, including the $472.3 million of net proceeds from the underwritten public offering completed in April 2019.
(8)
Beginning in Q3 2018, JBG SMITH excludes storage square feet from the percent leased metric.
(9)
Crystal City Marriott and 1700 M Street are excluded from the percent leased and the percent occupied metrics.
(10)
Percent occupied excludes occupied retail square feet.



397838026_logoverticaltransbluea04.jpg
 
Page 9


PORTFOLIO OVERVIEW

MARCH 31, 2019
(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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial (2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In service
 
45

 
12,542,688

 
10,904,102

 
90.2
%
 
85.6
%
 
$
404,881

 
$
44.57

$
240,155

Multifamily
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In service
 
15

 
6,024

 
4,240

 
97.5
%
 
95.3
%
 
$
106,995

 
$
2,121

$
76,760

Recently delivered
 
1

 
291

 
291

 
89.2
%
 
86.9
%
 
8,432

 
2,422

4,668

Total / weighted average
 
16

 
6,315

 
4,531

 
97.0
%
 
94.8
%
 
$
115,427

 
$
2,139

$
81,428

 
 
 
 
 
 
 
 
 
 
88.1
%
 
 
 
 
 
Operating - Total / Weighted Average
 
61

 
12,542,688 SF/ 6,315 Units

 
10,904,102 SF/ 4,531 Units

 
92.0
%
 
88.1
%
 
$
520,308

 
$44.57 per SF/ $2,139 per unit

$
321,583

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Under Construction
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial (4)
 
5

 
1,158,429

 
926,530

 
82.1
%
 
 
 
 
 
 
 
Multifamily
 
4

 
1,476

 
1,298

 
N/A

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Development - Total
 
9

 
1,158,429 SF/
1,476 Units

 
926,530 SF/
1,298 Units

 
82.1
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future Development
 
40

 
22,131,000

 
18,688,300

 
 
 
 
 
 
 
 
 

_______________

(1)
For commercial 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. Crystal City Marriott and 1700 M Street are 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)
Crystal City Marriott and 1700 M Street are excluded from percent leased, percent occupied, annualized rent, and annualized rent per square foot metrics.
(3)
Refer to pages 40-41 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.


397838026_logoverticaltransbluea04.jpg
 
Page 10


CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 2019
(Unaudited)







in thousands
March 31,
2019
 
December 31,
2018
 
 
 
 
ASSETS
 
Real estate, at cost:
 
 
 
Land and improvements
$
1,227,255

 
$
1,371,874

Buildings and improvements
3,717,906

 
3,722,930

Construction in progress, including land
751,730

 
697,930

 
5,696,891

 
5,792,734

Less accumulated depreciation
(1,075,309
)
 
(1,051,875
)
Real estate, net
4,621,582

 
4,740,859

Cash and cash equivalents
395,584

 
260,553

Restricted cash
17,877

 
138,979

Tenant and other receivables, net
49,979

 
46,568

Deferred rent receivable, net
152,323

 
143,473

Investments in and advances to unconsolidated real estate ventures
321,366

 
322,878

Other assets, net
297,525

 
264,994

Assets held for sale
168,458

 
78,981

TOTAL ASSETS
$
6,024,694

 
$
5,997,285

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
 
 
 
Liabilities:
 
 
 
Mortgages payable, net
$
1,835,842

 
$
1,838,381

Unsecured term loans, net
297,277

 
297,129

Accounts payable and accrued expenses
134,776

 
130,960

Other liabilities, net
174,434

 
181,606

Liabilities related to assets held for sale
486

 
3,717

Total liabilities
2,442,815

 
2,451,793

Commitments and contingencies
 
 
 
Redeemable noncontrolling interests
584,763

 
558,140

Total equity
2,997,116

 
2,987,352

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
$
6,024,694

 
$
5,997,285


_______________

Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.


397838026_logoverticaltransbluea04.jpg
 
Page 11


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
MARCH 31, 2019
(Unaudited)




(Unaudited)
(In thousands)


in thousands, except per share data
Three Months Ended March 31,
 
2019
 
2018
REVENUE
 
 
 
Property rentals
$
119,413

 
$
131,228

Third-party real estate services, including reimbursements
27,691

 
24,330

Other income
8,095

 
7,479

Total revenue
155,199

 
163,037

EXPENSES
 
 
 
Depreciation and amortization
48,719

 
49,160

Property operating
32,174

 
35,158

Real estate taxes
17,235

 
19,610

General and administrative:
 
 
 
Corporate and other
12,314

 
8,414

Third-party real estate services
28,066

 
22,609

Share-based compensation related to Formation Transaction and
special equity awards
11,131

 
9,428

Transaction and other costs
4,895

 
4,221

Total expenses
154,534

 
148,600

OTHER INCOME (EXPENSE)

 

Income (loss) from unconsolidated real estate ventures, net
3,601

 
(1,902
)
Interest and other income, net
951

 
573

Interest expense
(17,174
)
 
(19,257
)
Gain on sale of real estate
39,033

 
455

Total other income (expense)
26,411

 
(20,131
)
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (EXPENSE)
27,076

 
(5,694
)
Income tax benefit
1,172

 
908

NET INCOME (LOSS)
28,248

 
(4,786
)
Net (income) loss attributable to redeemable noncontrolling interests
(3,387
)
 
594

Net loss attributable to noncontrolling interests

 
2

NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
24,861

 
$
(4,190
)
EARNINGS (LOSS) PER COMMON SHARE:
 
 
 
Basic
$
0.20

 
$
(0.04
)
Diluted
$
0.20

 
$
(0.04
)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING :
 
 
 
Basic
122,573

 
117,955

Diluted
123,423

 
117,955

___________________
Note: For complete financial statements, please refer to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2019.

397838026_logoverticaltransbluea04.jpg
 
Page 12


UNCONSOLIDATED REAL ESTATE VENTURES
 
MARCH 31, 2019
(Unaudited)






in thousands, at JBG SMITH share
 
BALANCE SHEET INFORMATION
March 31, 2019
 
 
Total real estate, at cost
$
638,728

Less accumulated depreciation
(29,840
)
Real estate, net
608,888

Cash and cash equivalents
10,090

Other assets, net
40,478

Total assets
$
659,456

Borrowings, net
$
303,397

Other liabilities, net
44,629

Total liabilities
$
348,026


OPERATING INFORMATION
Three Months Ended March 31, 2019
Total revenue
$
13,767

Expenses:
 
Depreciation and amortization
4,677

Property operating
7,697

Real estate taxes
1,307

Total expenses
13,681

Other income (expense):

Interest expense
(3,676
)
Interest and other income, net
3

Loss before income tax expense
(3,587
)
Income tax expense
(1
)
Net loss
$
(3,588
)
Net distributions in excess of our investment in unconsolidated real estate venture
6,441

Other
748

Income from unconsolidated real estate ventures, net
$
3,601



397838026_logoverticaltransbluea04.jpg
 
Page 13


OTHER TANGIBLE ASSETS AND LIABILITIES, NET
MARCH 31, 2019
(Unaudited)



in thousands, at JBG SMITH share
March 31, 2019
 
 
Other Tangible Assets, Net (1) (2)
 
Restricted cash
$
20,642

Tenant and other receivables, net
52,878

Other assets, net
33,598

Total Other Tangible Assets, Net
$
107,118

 
 
Other Tangible Liabilities, Net (2) (3)
 
Accounts payable and accrued liabilities
$
157,121

Other liabilities, net
129,967

Total Other Tangible Liabilities, Net
$
287,088


____________________
(1)
Excludes cash and cash equivalents.
(2)
Excludes assets held for sale and liabilities related to assets held for sale.
(3)
Excludes debt.


397838026_logoverticaltransbluea04.jpg
 
Page 14


EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)
MARCH 31, 2019
(Unaudited)





dollars in thousands
 
Three Months Ended March 31,
 
 
2019
 
2018
 
 
 
 
 
EBITDA, EBITDAre and Adjusted EBITDA
 
 
 
 
Net income (loss)

$
28,248

 
$
(4,786
)
Depreciation and amortization expense
 
48,719

 
49,160

Interest expense (1)
 
17,174

 
19,257

Income tax benefit
 
(1,172
)
 
(908
)
Unconsolidated real estate ventures allocated share of above adjustments
 
7,806

 
10,175

Allocated share of above adjustments to noncontrolling interests in consolidated real estate ventures
 
(1
)
 

EBITDA (2)
 
$
100,774

 
$
72,898

Gain on sale of real estate
 
(39,033
)
 
(455
)
EBITDAre (2)
 
$
61,741

 
$
72,443

Transaction and other costs (3)
 
4,895

 
4,221

Share-based compensation related to Formation Transaction and special equity awards
 
11,131

 
9,428

Net distributions in excess of our investment in unconsolidated real estate venture (4)
 
(6,441
)
 

Unconsolidated real estate ventures allocated share of above adjustments
 

 
30

Adjusted EBITDA (2)
 
$
71,326

 
$
86,122

 
 
 
 
 
Net Debt to Annualized Adjusted EBITDA (5)
 
7.1x

 
6.9x

 
 
 
 
 
 
 
March 31, 2019
 
March 31, 2018
Net Debt (at JBG SMITH Share)
 
 
 
 
Consolidated indebtedness (6)
 
$
2,128,803

 
$
2,185,461

Unconsolidated indebtedness (6)
 
303,397

 
419,476

Total consolidated and unconsolidated indebtedness
2,432,200

 
2,604,937

Less: cash and cash equivalents
 
405,646

 
238,519

Net Debt (at JBG SMITH Share)
 
$
2,026,554

 
$
2,366,418

 
 
$
(0.41
)
 
 
____________________
Note: EBITDAre for the three months ended March 31, 2018 was restated in compliance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018.
(1)
Interest expense includes the amortization of deferred financing costs and the ineffective portion of any interest rate swaps or caps, net of capitalized interest.
(2)
Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $1.3 million for the three months ended March 31, 2018).
(3)
Includes fees and expenses incurred in connection with the Formation Transaction (including transition services provided by our former parent, integration costs and severance costs), demolition costs and costs related to other completed, potential and pursued transactions.
(4)
As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent net distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized.
(5)
Pro forma Net Debt to Annualized Adjusted EBITDA would have been 5.4x for the three months ended March 31, 2019, including the $472.3 million of net proceeds from the underwritten public offering completed in April 2019.
(6)
Net of premium/discount and deferred financing costs.

397838026_logoverticaltransbluea04.jpg
 
Page 15


FFO, CORE FFO AND FAD (NON-GAAP)
MARCH 31, 2019
(Unaudited)





in thousands, except per share data
Three Months Ended March 31,
 
2019
 
2018
 
 
 
 
FFO and Core FFO
 
 
 
Net income (loss) attributable to common shareholders
$
24,861

 
$
(4,190
)
Net income (loss) attributable to redeemable noncontrolling interests
3,387

 
(594
)
Net loss attributable to noncontrolling interests

 
(2
)
Net income (loss)
28,248

 
(4,786
)
Gain on sale of real estate
(39,033
)
 
(455
)
Real estate depreciation and amortization
46,035

 
46,639

Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures
4,653

 
6,436

Net (income) loss attributable to noncontrolling interests in consolidated real estate ventures
(1
)
 
2

FFO Attributable to Operating Partnership Common Units (1)
$
39,902

 
$
47,836

FFO attributable to redeemable noncontrolling interests
(4,783
)
 
(7,127
)
FFO attributable to common shareholders (1)
$
35,119

 
$
40,709

 
 
 
 
FFO attributable to the operating partnership common units
$
39,902

 
$
47,836

Transaction and other costs, net of tax (2)
4,626

 
4,136

Mark-to-market on derivative instruments
(476
)
 
(1,119
)
Share of gain from mark-to-market on derivative instruments held by unconsolidated real estate ventures
227

 
(342
)
Net distributions in excess of our investment in unconsolidated real estate venture (3)
(6,441
)
 

Share-based compensation related to Formation Transaction and special equity awards
11,131

 
9,428

Amortization of management contracts intangible, net of tax
1,287

 
1,286

Core FFO Attributable to Operating Partnership Common Units (1)
$
50,256

 
$
61,225

Core FFO attributable to redeemable noncontrolling interests
(6,024
)
 
(9,037
)
Core FFO attributable to common shareholders (1)
$
44,232

 
$
52,188

FFO per diluted common share
$
0.28

 
$
0.35

Core FFO per diluted common share
$
0.36

 
$
0.44

Weighted average diluted shares
123,423

 
117,955

FAD
 
 
 
Core FFO attributable to the operating partnership common units
$
50,256

 
$
61,225

Recurring capital expenditures and second generation tenant improvements and leasing commissions
(22,297
)
 
(6,097
)
Straight-line and other rent adjustments (4)
(6,808
)
 
(1,075
)
Share of straight-line rent from unconsolidated real estate ventures
(135
)
 
159

Third-party lease liability assumption payments
(1,136
)
 
(472
)
Share of third party lease liability assumption payments for unconsolidated real estate ventures

 
(50
)
Share-based compensation expense
5,330

 
4,276

Amortization of debt issuance costs
970

 
1,164

Share of amortization of debt issuance costs from unconsolidated real estate ventures
48

 
69

Non-real estate depreciation and amortization
912

 
749

FAD available to the Operating Partnership Common Units (A) (5)
$
27,140

 
$
59,948

Distributions to common shareholders and unitholders (6) (B)
$
31,284

 
$
31,423

FAD Payout Ratio (B÷A) (7)
115.3
%
 
52.4
%
See footnotes on page 17.

397838026_logoverticaltransbluea04.jpg
 
Page 16


FFO, CORE FFO AND FAD (NON-GAAP)
MARCH 31, 2019
(Unaudited)





in thousands, except per share data
Three Months Ended March 31,
 
2019
 
2018
 
 
 
 
Capital Expenditures
 
 
 
Maintenance and recurring capital expenditures
$
5,495

 
$
2,683

Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures
88