JBG SMITH Announces Fourth Quarter 2017 Results

CHEVY CHASE, Md.--()--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-K for the year ended December 31, 2017 and reported its financial results below.

“net income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.”

Additional information regarding our results of operations, properties and tenants can be found in our Fourth Quarter 2017 Investor Report, which is posted in the Investor Relations section of our website at www.jbgsmith.com.

Fourth Quarter 2017 Financial Results

  • Net loss attributable to common shareholders was $(16.4) million, or $(0.15) per diluted share.
  • Funds From Operations (“FFO”) attributable to common shareholders was $32.5 million, or $0.28 per diluted share.
  • Core Funds From Operations (“Core FFO”) attributable to common shareholders was $49.4 million, or $0.42 per diluted share.

Six Months Ended December 31, 2017 Financial Results

  • Net loss attributable to common shareholders was $(86.2) million, or $(0.76) per diluted share.
  • FFO attributable to common shareholders was $6.5 million, or $0.06 per diluted share.
  • Core FFO attributable to common shareholders was $103.4 million, or $0.89 per diluted share.
  • Note that our acquisition of the management business and certain assets and liabilities of The JBG Companies (the “JBG Assets”) has been accounted for as a business combination and the results from these operations have been included in our financial results commencing on July 18, 2017. Accordingly, these results exclude the net loss, FFO, and Core FFO from the JBG Assets for the period July 1, 2017 to July 17, 2017.

Operating Portfolio Highlights

  • Annualized Net Operating Income (“NOI”) for the three months ended December 31, 2017 was $363.3 million compared with $357.5 million for the three months ended September 30, 2017. (Includes the JBG Assets as if the acquisition of the JBG Assets occurred on July 1, 2017.)
  • The operating office portfolio was 88.0% leased and 87.2% occupied as of December 31, 2017 compared with 88.2% and 87.5% as of September 30, 2017.
  • The operating multifamily portfolio was 95.6% leased and 93.8% occupied as of December 31, 2017 compared with 96.2% and 94.6% as of September 30, 2017.
  • The operating other portfolio (excluding the Crystal City Marriott Hotel) was 96.5% leased and 96.2% occupied as of December 31, 2017 compared with 98.8% and 97.6% as of September 30, 2017.
  • Executed approximately 558,000 square feet of office leases at our share in the fourth quarter, totaling approximately 212,000 square feet of new leases, and approximately 346,000 square feet of second generation leases, which generated a 9.1% rental rate increase on a GAAP basis and an 8.8% rental rate decrease on a cash basis.
  • Same Store Net Operating Income (“SSNOI”) increased 10.3% to $71.6 million for the three months ended December 31, 2017 compared with $64.9 million for the three months ended December 31, 2016 and 6.5% to $272.0 million for the year ended December 31, 2017 compared with $255.3 million for the year ended December 31, 2016. The increase in SSNOI is largely attributable to higher rental revenue from new leases, the expiration of rent abatements and the expiration of certain payments associated with assumed lease liabilities. The same store pool for the three months and year ended December 31, 2017 includes only the assets that were in service for the entirety of both periods being compared and does not include any JBG Assets.

Development Portfolio Highlights

Under Construction

  • As of December 31, 2017, there were ten assets under construction (four office assets, five multifamily assets and one other asset), consisting of 1.2 million square feet and 1,568 units, both at our share.
  • During the fourth quarter, we commenced construction on one multifamily asset (965 Florida Avenue).

Near-Term Development

  • As of December 31, 2017, there were no assets in near-term development.

Future Development Pipeline

  • As of December 31, 2017, there were 43 future development assets consisting of 17.9 million square feet of estimated potential density at our share.

Third-Party Asset Management and Real Estate Services Business

  • For the three months ended December 31, 2017, revenue from third-party real estate services, including reimbursements was $24.4 million. Excluding reimbursements and service revenue from our interests in consolidated and unconsolidated joint ventures, revenue from our third-party asset management and real estate services business was $14.2 million, of which $5.8 million came from property management fees, $4.0 million came from asset management fees, $1.7 million came from leasing fees, $1.7 million came from development fees, $0.7 million came from construction management fees and $0.3 million came from other service revenue.
  • The general and administrative expenses allocated to the third-party asset management and real estate services business were $10.3 million for the three months ended December 31, 2017.

Balance Sheet

  • We had $2.2 billion of debt ($2.6 billion including our share of debt of unconsolidated ventures) as of December 31, 2017. Of the $2.6 billion of debt at our share, approximately 70% was fixed-rate, and we have caps in place for approximately 19%.
  • At December 31, 2017, our enterprise value was approximately $7.0 billion, comprised of 137.7 million common shares and units valued at $4.8 billion and debt at our share of $2.6 billion, less cash and cash equivalents.
  • The weighted average interest rate of our debt at share was 4.05% at December 31, 2017.
  • As of December 31, 2017, we had $329 million of cash and cash equivalents, including our share of cash and cash equivalents from unconsolidated joint ventures, and $1.2 billion of capacity under our credit facility.
  • Net Debt / Adjusted EBITDA at our share for the three months ended December 31, 2017 was 7.1x and our Net Debt / Total Enterprise Value was 32%.

Financing Activities

During the fourth quarter we:

  • Closed two loans with an aggregate credit limit of $148.4 million at our share:
    • A $78.0 million loan on 1235 South Clark, an office asset in the Crystal City submarket of Arlington, VA. The loan has a 10-year term and a fixed interest rate of 3.94%; and
    • A $110.0 million refinancing on Atlantic Plumbing ($70.4 million at our share), a multifamily asset in the U Street/Shaw submarket of Washington, DC. The loan has a 5-year term and a floating interest rate of LIBOR + 1.50%. A swap agreement has been placed to fix the interest rate of 5.08% through September 2020. At closing, $100.0 million was funded, which was used in part to repay the existing $88.4 million loan. We have the ability to draw an additional $10.0 million subject to the asset’s performance.
  • Repaid approximately $78.2 million of secured debt:
    • A $67.3 million loan on 220 20th Street, a multifamily asset in Crystal City, VA; and
    • A $10.9 million loan on Capitol Point – North, a development parcel in the NoMa submarket of Washington, DC.
  • Entered into agreements in the aggregate notional amounts of $792.9 million to swap variable interest rates to fixed rates on the following debt instruments:
    • $50.0 million related to our Tranche A-1 Term Loan;
    • $107.7 million related to our mortgage loan on RTC - West;
    • $107.5 million related to our mortgage loan on 800 North Glebe Road;
    • $307.7 million related to our mortgage loan on River House; and
    • $220.0 million related to our mortgage loan on The Bartlett.
  • Executed short-term extensions of three loans we expect to refinance in 2018.

Subsequent to December 31, 2017, we:

  • Drew an additional $50 million under the Term Loan A-1, in accordance with the delayed draw provisions of the credit facility. Concurrent with the draw, we entered into an agreement to swap the variable interest rate to a fixed rate.
  • Closed a $48.0 million loan on The Alaire ($8.6 million at our share), a residential asset in the Twinbrook submarket of Rockville, MD. The loan has a term of 7 years and a variable interest rate of LIBOR + 1.82%. At closing, $47.0 million was funded, with the ability to draw an additional $1.0 million subject to the asset’s performance. Concurrent with the loan closing, we entered into an agreement to cap the maximum LIBOR rate under the loan for three years.
  • Closed a joint venture with Canada Pension Plan Investment Board (“CPPIB”) at 1900 N Street, an Under Construction, 271,000-square foot, Trophy office building located in the DC CBD. 1900 N Street is 29.6% preleased to Goodwin Procter, a global 50 law firm, from the top down. CPPIB will invest approximately $101 million for a 45% interest in the venture, and we will continue to develop, manage and lease the asset.

Dividends

On December 18, 2017, we declared a dividend of $0.225 per common share, an indicated annual dividend of $0.90 per common share. The dividend was paid on January 8, 2018 to common shareholders of record as of December 29, 2017.

About JBG SMITH

JBG SMITH is an S&P 400 company that owns, operates, invests in and develops assets concentrated in leading urban infill submarkets in and around Washington, DC. Our mixed-use operating portfolio comprises approximately 20 million square feet of high-quality office, multifamily and retail assets, 98% of which are Metro-served. With a focus on placemaking, we drive synergies across the portfolio and create amenity-rich, walkable neighborhoods. JBG SMITH’s future development pipeline includes 17.9 million square feet of potential development density at our share. For additional information on JBG SMITH please visit www.jbgsmith.com.

Forward Looking Statements

Certain statements contained herein may constitute “forward-looking statements” as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results of JBG SMITH Properties (“JBG SMITH” or the “Company”) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximate”, “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this document. We also note the following forward-looking statements: our expected annualized dividend per share and dividend yield, estimated net operating income; in the case of our construction and near-term development assets, estimated square feet, estimated number of units, the estimated completion date, estimated stabilization date, estimated incremental investment, estimated total investment, projected net operating income yield and estimated stabilized net operating income; and in the case of our future development assets, estimated potential development density, estimated commercial SF/multifamily units to be replaced, estimated remaining acquisition cost, estimated capitalized cost and estimated total investment. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. These factors include, among others: adverse economic conditions in the Washington, DC metropolitan area, the timing of and costs associated with development and property improvements, financing commitments, and general competitive factors. For further discussion of factors that could materially affect the outcome of our forward-looking statements and other risks and uncertainties, see “Risk Factors” and the Cautionary Statement Concerning Forward-Looking Statements in JBG SMITH’s Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission (the “SEC”) on March 12, 2018. 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 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:

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and Adjusted EBITDA

Management uses EBITDA as a supplemental operating performance measure and believes it helps 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). This supplemental measure may help investors and lenders understand our ability to incur and service debt and to make capital expenditures. EBITDA is not a substitute 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 EBITDA adjusted for items we believe are not representative of ongoing operating results, such as non-recurring transaction and other costs, gain (loss) on the extinguishment of debt, gain on the bargain purchase of a business, impairment of real estate and investments in unconsolidated joint ventures and share-based compensation expense related to the Formation Transaction. We believe that adjusting such items not considered part of our comparable operations, provides a meaningful measure to evaluate and compare our performance from period-to-period.

Because EBITDA and Adjusted EBITDA have limitations as analytical tools, we use EBITDA and Adjusted EBITDA to supplement GAAP financial measures. Additionally, we believe that users of these measures should consider EBITDA 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 the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines FFO as “net income (computed in accordance with GAAP), excluding gains (or losses) from sales of, or impairment charges related to, depreciable operating properties, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.”

"Core FFO" represents FFO adjusted to exclude items (net of tax) which we believe are not representative of ongoing operating results, such as transaction and other costs, gains (or losses) on extinguishment of debt, gain on the bargain purchase of a business, gains (or losses) on the disposal of non-depreciable assets, share-based compensation expense related to the Formation Transaction, amortization of the management contracts intangible and the mark-to-market of interest rate swaps.

"FAD" is a non-GAAP financial performance measure and represents FFO less cash basis recurring tenant improvements, leasing commissions and other capital expenditures, net deferred rent activity, 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 as a performance measure or cash flow as a liquidity measure. FFO, Core FFO and FAD may not be comparable to similarly titled measures used by other companies.

Net 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 represents NOI for the three months ended December 31, 2017 multiplied by four. 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. We also report adjusted annualized NOI which includes signed but not yet commenced leases and incremental revenue from recently delivered assets assuming stabilization. While we believe adjusted annualized NOI provides useful information regarding potential future NOI from our assets, it does not account for any decrease in NOI for lease terminations, defaults or other negative events that could affect NOI and therefore, should not be relied upon as indicative of future NOI.

Management uses each of these measures as supplemental performance measures for its assets and believes they provide useful information to investors because they reflect only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets.

However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of this measure of the operating performance of our assets is limited. Moreover, our method of calculating NOI may differ from other real estate companies and, accordingly, may not be comparable. NOI should be considered only as a supplement to net operating income (loss) (computed in accordance with GAAP) as a measure of the operating performance of our assets.

Same Store and Non-Same Store

“Same store” refers to the pool of assets that were in service for the entirety of both periods being compared, except for assets for which significant redevelopment, renovation, or repositioning occurred during either of the periods being compared. No JBG Assets are included in the same store pool.

“Non-same store” refers to all assets excluded from the same store pool.

   

CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS

 
in thousands

December 31,
2017

December 31,
2016

         
ASSETS    
Real estate, at cost:
Land and improvements $ 1,368,294 $ 939,592
Buildings and improvements 3,670,268 3,064,466
Construction in progress, including land 978,942 151,333
Real estate held for sale   8,293      
6,025,797 4,155,391
Less accumulated depreciation   (1,011,330 )   (930,769 )
Real estate, net 5,014,467 3,224,622
Cash and cash equivalents 316,676 29,000
Restricted cash 21,881 3,263
Tenant and other receivables, net 46,734 33,380
Deferred rent receivable, net 146,315 136,582
Investments in and advances to unconsolidated real estate ventures 261,811 45,776
Receivable from former parent 75,062
Other assets, net     263,923       112,955  
TOTAL ASSETS   $ 6,071,807     $ 3,660,640  
         
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY        
Liabilities:
Mortgages payable, net $ 2,025,692 $ 1,165,014
Revolving credit facility 115,751
Unsecured term loan, net 46,537
Payable to former parent 283,232
Accounts payable and accrued expenses 138,607 40,923
Other liabilities, net   161,277     49,487  
Total liabilities   2,487,864     1,538,656  
Commitments and contingencies
Redeemable noncontrolling interests 609,129
Total equity     2,974,814       2,121,984  
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY   $ 6,071,807     $ 3,660,640  
 
_________________
 
Note: For complete financial statements, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
 
   

CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS

 
in thousands, except per share data Three Months Ended December 31, Year Ended December 31,
2017   2016 2017   2016
REVENUE
Property rentals $ 119,726 $ 102,093 $ 436,625 $ 401,595
Tenant reimbursements 10,824 9,398 37,985 37,661
Third-party real estate services, including reimbursements 24,355 9,265 63,236 33,882
Other income   1,466     1,283     5,167     5,381  
Total revenue   156,371     122,039     543,013     478,519  
EXPENSES
Depreciation and amortization 51,933 35,052 161,659 133,343
Property operating 33,714 25,217 111,055 100,304
Real estate taxes 18,456 14,072 66,434 57,784
General and administrative:
Corporate and other 11,595 12,713 47,131 48,753
Third-party real estate services 21,557 4,794 51,919 19,066
Share-based compensation related to Formation Transaction 14,806 29,251
Transaction and other costs   12,566     4,948     127,739     6,476  
Total operating expenses   164,627     96,796     595,188     365,726  
OPERATING INCOME (LOSS) (8,256 ) 25,243 (52,175 ) 112,793
Income (loss) from unconsolidated real estate ventures, net (2,778 ) 5 (4,143 ) (947 )
Interest and other income, net 422 700 1,788 2,992
Interest expense (14,328 ) (13,119 ) (58,141 ) (51,781 )
Loss on extinguishment of debt (12 ) (701 )
Gain (loss) on bargain purchase   (3,395 )       24,376      
INCOME (LOSS) BEFORE INCOME TAX BENEFIT (EXPENSE) (28,347 ) 12,829 (88,996 ) 63,057
Income tax benefit (expense)   9,595     (199 )   9,912     (1,083 )
NET INCOME (LOSS) (18,752 ) 12,630 (79,084 ) 61,974
Net loss attributable to redeemable noncontrolling interests 2,331 7,328
Net loss attributable to noncontrolling interest     3             3        
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS   $ (16,418 )   $ 12,630     $ (71,753 )   $ 61,974  
EARNINGS (LOSS) PER COMMON SHARE:
Basic $ (0.15 ) $ 0.13 $ (0.70 ) $ 0.62
Diluted $ (0.15 ) $ 0.13 $ (0.70 ) $ 0.62
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING – basic and diluted 117,955 100,571 105,359 100,571
__________________
 
Note: For complete financial statements, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2017.
 
 

EBITDA AND ADJUSTED EBITDA (NON-GAAP)

 
dollars in thousands

Three Months Ended
December 31, 2017

 

Six Months Ended
December 31, 2017

         
Condensed Consolidated and Combined Statement of Operations        
Total revenue $ 156,371 $ 308,721
Total operating expenses   164,627     405,717  
Operating Loss (8,256 ) (96,996 )
Loss from unconsolidated real estate ventures (2,778 ) (4,457 )
Interest and other income, net 422 43
Interest expense (14,328 ) (29,637 )
Loss on extinguishment of debt (12 ) (701 )
Gain (loss) on bargain purchase   (3,395 )   24,376  
Loss Before Income Tax Benefit (Expense) (28,347 ) (107,372 )
Income tax benefit     9,595       10,629  
Net Loss   $ (18,752 )   $ (96,743 )
         
EBITDA and Adjusted EBITDA        
Net loss $ (18,752 ) $ (96,743 )
Depreciation and amortization expense 51,933 95,884
Interest expense (1) 14,328 29,637
Income tax expense (benefit) (9,595 ) (10,629 )
Unconsolidated real estate ventures allocated share of above adjustments     10,864       20,015  
EBITDA   $ 48,778     $ 38,164  
Transaction and other costs 12,566 116,661
Loss on extinguishment of debt 12 701
Loss (gain) on bargain purchase 3,395 (24,376 )
Share-based compensation related to Formation Transaction     14,806       29,251  
Adjusted EBITDA   $ 79,557     $ 160,401  
         
Net Debt to Adjusted EBITDA (2)   7.1x   7.0x
 

December 31,
2017

Net Debt (at JBG SMITH Share)
Consolidated indebtedness $ 2,188,104
Unconsolidated indebtedness 395,117
Total consolidated and unconsolidated indebtedness 2,583,221
Less: cash and cash equivalents   328,918  
Net Debt (at JBG SMITH Share) $ 2,254,303  
____________________
 
Note: Excludes the financial information of the JBG Assets for the period July 1, 2017 to July 17, 2017.
 
(1)   Interest expense includes amortization of deferred financing costs, premiums/discounts and the mark-to-market of interest rate swaps and caps.
(2) For the purposes of this calculation, Adjusted EBITDA for the three months ended December 31, 2017 is annualized by multiplying by four, and Adjusted EBITDA for the six months ended December 31, 2017 is annualized by multiplying by two.
 
   

FFO, CORE FFO AND FAD (NON-GAAP)

 
in thousands, except per share data

Three Months
Ended
December 31,
2017

 

Six Months
Ended
December 31,
2017(1)

         
FFO and Core FFO        
Net loss attributable to common shareholders $ (16,418 ) $ (86,249 )
Net loss attributable to redeemable noncontrolling interests (2,331 ) (10,491 )
Net loss attributable to noncontrolling interests   (3 )   (3 )
Net loss (18,752 ) (96,743 )
Real estate depreciation and amortization 49,548 90,941
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures     7,235       13,294  
FFO attributable to operating partnership common units   $ 38,031     $ 7,492  
FFO attributable to redeemable noncontrolling interests   (5,572 )   (1,015 )
FFO attributable to common shareholders $ 32,459   $ 6,477  
 
FFO attributable to the operating partnership common units $ 38,031 $ 7,492
Transaction and other costs, net of tax 6,709 110,804
Mark-to-market on derivative instruments (881 ) (1,348 )
Share of gain from mark-to-market on derivatives held by unconsolidated real estate ventures (507 ) (903 )
Loss on extinguishment of debt 12 701
Loss (gain) on bargain purchase 3,395 (24,376 )
Share-based compensation related to Formation Transaction 14,806 29,251
Amortization of management contracts intangible, net of tax 161 1,914
Tax benefit associated with the 2017 Tax Act     (3,854 )     (3,854 )
Core FFO attributable to operating partnership common units   $ 57,872     $ 119,681  
Core FFO attributable to redeemable noncontrolling interests   (8,480 )   (16,305 )
Core FFO attributable to common shareholders $ 49,392   $ 103,376  
FFO per diluted common share $ 0.28 $ 0.06
Core FFO per diluted common share $ 0.42 $ 0.89
Weighted average diluted shares 117,955 115,810
_______________
 
(1)   Excludes net income (loss) from JBG Assets for the period July 1, 2017 to July 17, 2017.
 
   

FFO, CORE FFO AND FAD (NON-GAAP)

 
in thousands, except per share data

Three Months
Ended
December 31,
2017

 

Six Months
Ended
December 31,
2017

         
FAD        
Core FFO attributable to the operating partnership common units $ 57,872 $ 119,681
Recurring capital expenditures and second-generation tenant improvements and leasing commissions (24,930 ) (40,905 )
Straight-line and other rent adjustments (1) 887 (669 )
Share of straight-line rent from unconsolidated real estate ventures 108 (420 )
Third party lease liability assumption payments (1,059 ) (1,059 )
Share of third party lease liability assumption payments for unconsolidated real estate ventures (312 ) (312 )
Share-based compensation expense 2,028 3,567
Amortization of debt issuance costs 1,060 2,585
Share of debt issuance costs from unconsolidated real estate ventures 54 86
Non-real estate depreciation and amortization     928       1,733  
FAD available to the Operating Partnership Common Units (A)   $ 36,636     $ 84,287  
Distributions to common shareholders and unitholders (B) $ 31,097 $ 62,195
FAD Payout Ratio (B÷A) (2) 84.9 % 73.8 %
 
         
Capital Expenditures        
Maintenance and recurring capital expenditures $ 19,054 $ 22,595
Share of maintenance capital and recurring expenditures from unconsolidated joint ventures 1,049 1,393
Second generation tenant improvements and leasing commissions 3,925 13,299
Share of second generation tenant improvements and leasing commissions from unconsolidated real estate ventures   902     3,618  
Recurring capital expenditures and second-generation tenant improvements and leasing commissions   24,930     40,905  
First generation tenant improvements and leasing commissions 7,584 7,584
Share of first generation tenant improvements and leasing commissions from unconsolidated real estate ventures 1,285 1,285
Non-recurring capital expenditures from consolidated properties 3,593 5,699
Share of non-recurring capital expenditures from unconsolidated joint ventures   1,029     1,471  
Non-recurring capital expenditures     13,491       16,039  
Total JBG SMITH Share of Capital Expenditures   $ 38,421     $ 56,944  
 
_______________
 
Note: Excludes net income (loss) from the JBG Assets for the period July 1, 2017 to July 17, 2017.
 
(1)   Includes straight-line rent, above/below market lease amortization and lease incentive amortization.
(2) 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.
 
 

NOI RECONCILIATIONS (NON-GAAP)

 
dollars in thousands Three Months Ended December 31,
2017   2016
 
Net income (loss) attributable to common shareholders $ (16,418 ) $ 12,630
Add:
Depreciation and amortization expense 51,933 35,052
General and administrative expense:
Corporate and other 11,595 12,713
Third-party real estate services 21,557 4,794
Share-based compensation related to Formation Transaction 14,806
Transaction and other costs 12,566 4,948
Interest expense 14,328 13,119
Loss on extinguishment of debt 12
Income tax expense (benefit) (9,595 ) 199
Less:
Third-party real estate services, including reimbursements 24,355 9,265
Other income 1,466 1,283
Loss from unconsolidated real estate ventures, net (2,778 ) 5
Interest and other income (loss), net 422 700
Gain on bargain purchase (3,395 )
Net loss attributable to redeemable noncontrolling interests 2,331
Net loss attributable to noncontrolling interest   3      
Consolidated NOI 78,380 72,202
NOI attributable to consolidated JBG Assets (1) 10,492
Proportionate NOI attributable to unconsolidated JBG Assets (1) 3,376
Proportionate NOI attributable to unconsolidated real estate ventures (2) 8,644 1,763
Non-cash rent adjustments (3) 887 (4,114 )
Other adjustments (4)   2,906     (2,194 )
Total adjustments     12,437       9,323  
NOI   $ 90,817     $ 81,525  
Non-same store NOI     19,205       16,580  
Same store NOI   $ 71,612     $ 64,945  
 
Number of properties in same store pool 36 36
_________________
 
(1) Proportionate NOI attributable to unconsolidated real estate ventures includes Vornado Included Assets for all of 2017 and 2016 and JBG Assets for 2017 for the period July 18, 2017 to December 31, 2017.
(2) Adjustment to include straight-line rent, above/below market lease amortization and lease incentive amortization.
(3) Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties, and exclude incidental income generated by development assets and commercial lease termination revenue.
(4) Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties, and exclude incidental income generated by development assets and commercial lease termination revenue.
 
 

NOI RECONCILIATIONS (NON-GAAP)

 
dollars in thousands Year Ended December 31,
2017   2016
 
Net income (loss) attributable to common shareholders $ (71,753 ) $ 61,974
Add:
Depreciation and amortization expense 161,659 133,343
General and administrative expense:
Corporate and other 47,131 48,753
Third-party real estate services 51,919 19,066
Share-based compensation related to Formation Transaction 29,251
Transaction and other costs 127,739 6,476
Interest expense 58,141 51,781
Loss on extinguishment of debt 701
Income tax expense (benefit) (9,912 ) 1,083
Less:
Third-party real estate services, including reimbursements 63,236 33,882
Other income 5,167 5,381
Income (loss) from unconsolidated real estate ventures (4,143 ) (947 )
Interest and other income, net 1,788 2,992
Gain on bargain purchase 24,376
Net loss attributable to redeemable noncontrolling interests 7,328
Net loss attributable to noncontrolling interest   3      
Consolidated NOI 297,121 281,168
Proforma NOI attributable to consolidated JBG Assets (1) 25,165 39,641
Proportionate NOI attributable to unconsolidated JBG Assets (1) 8,646 11,692
Proportionate NOI attributable to unconsolidated real estate ventures (2) 21,515 7,326
Non-cash rent adjustments (3) (6,715 ) (13,030 )
Other adjustments (4)   3,819       (13,670 )
Total adjustments     52,430       31,959  
NOI   $ 349,551     $ 313,127  
Non-same store NOI     77,547       57,828  
Same store NOI   $ 272,004     $ 255,299  
 
Number of properties in same store pool 36 36
_________________
 
(1)   Includes financial information for the JBG Assets as if the July 18, 2017 acquisition of the JBG Assets had been completed as of the beginning of the period presented.
(2) Proportionate NOI attributable to unconsolidated real estate ventures includes Vornado Included Assets for all of 2017 and 2016 and JBG Assets for 2017 for the period July 18, 2017 to December 31, 2017.
(3) Adjustment to include straight-line rent, above/below market lease amortization and lease incentive amortization.
(4) Adjustment to include other income and payments associated with assumed lease liabilities related to operating properties, and exclude incidental income generated by development assets and commercial lease termination revenue.
 

Contacts

JBG SMITH
Jaime Marcus, 240-333-3643
SVP, Investor Relations
jmarcus@jbgsmith.com

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