JBG SMITH(US:JBGS)2024-07-30 20:15Letter to Shareholders Management's Strategic Overview and Q2 Highlights JBG SMITH's management highlights a macroeconomic landscape poised for recovery, with a continued strategic shift towards a majority multifamily portfolio. The company reported strong multifamily performance, significant progress on public infrastructure in National Landing, and active capital allocation through asset dispositions and share repurchases, despite a slow investment sales market - Multifamily portfolio exhibited strong performance with climbing occupancy, 4.6% blended effective rent increase (8.6% upon renewal), and a 50.9% renewal rate. Multifamily Same Store NOI increased 3.4%5 - National Landing public infrastructure projects achieved key milestones, including groundbreaking on the new Crystal City Metro entrance (expected completion 2027) and capital allocation for the pedestrian bridge to Reagan National Airport (design-build in 2025)6 - Investment sales activity remains slow across all asset types, but a modest pick-up in multifamily transactions is observed in Northern Virginia. The company continues to seek opportunities to dispose of an additional $200 – $300 million of assets7 - The 9.3 million square foot Development Pipeline is expected to be entitled by the end of 2025, preparing for land sales, ground leases, or joint ventures when construction costs and interest rates normalize8 Key Financial Leverage Metrics (as of June 30, 2024) | Metric | Value | | :-------------------------------- | :------ | | Net Debt / Total Enterprise Value | 62.1% | | Net Debt to Annualized Adjusted EBITDA | 11.9x | Share Repurchase Program Highlights | Period | Shares Repurchased (millions) | Total Value (millions) | Weighted Average Price per Share | | :---------------- | :---------------------------- | :--------------------- | :------------------------------- | | Year-to-date | 8.6 | $132.1 | $15.37 | | Since inception (2020) | 54.5 | $1,100 | $20.01 | Operating Portfolio Performance and Market Trends JBG SMITH's operating portfolio shows strong lease-up for new multifamily deliveries like 1900 Crystal Drive, outperforming other projects. The DC-area multifamily market is robust, ranking high for rent growth. Conversely, the broader DC metro office market faces challenges with high vacancy and reduced demand, though National Landing's office sector demonstrates resilience due to strategic positioning and amenity-rich environments - 1900 Crystal Drive, delivered in Q2 2024, was 38.5% leased at quarter-end and 49.5% leased by July 28th, exceeding the leasing pace of all five other multifamily deliveries since 201711 - The DC-area multifamily market is performing strongly, ranked as the top large market in the nation for year-over-year rent growth by CoStar. Apartment List data shows 3.3% rent growth in DC metro versus 0.5% in other Gateway markets, with comparable occupancy11 - Executed 166,000 square feet of new office leases in Q2 2024, marking the strongest quarter for new office leasing in three years. Defense and technology tenants drove 88% of total leasing activity in National Landing32 - Anticipate approximately 485,000 square feet (approximately $22 million of annualized rent) in National Landing to be vacated in the second half of 2024 and 202514 - The broader DC metro office market faces challenges with a 22.1% total vacancy rate and nearly net-zero demand. Northern Virginia's overall leasing activity has stabilized at 1.7 million square feet per quarter, down from a pre-pandemic average of 2.7 million square feet15 - National Landing remains a focal point for future office demand in Northern Virginia, driven by proximity to the Pentagon, local tech talent, and placemaking attractions. The area also benefits from the lowest new construction pipeline ever reported by JLL (539,000 square feet)17 - The company is taking 1800 South Bell and 2100 Crystal Drive out of service and phasing out 2200 Crystal Drive, reducing office stock by approximately 743,000 square feet (12%) to repurpose older buildings for redevelopment, multifamily conversion, hospitality, or other specialty uses40 Q2 2024 Earnings Release Financial Performance Summary JBG SMITH reported a net loss for Q2 2024 and year-to-date, with FFO and Core FFO also decreasing compared to the prior year. However, Same Store NOI increased, driven by strong multifamily performance, while the commercial portfolio experienced a slight decline in occupancy Net Income (Loss), FFO, and Core FFO Attributable to Common Shareholders | Metric (in millions, except per share amounts) | Three Months Ended June 30, 2024 Amount | Three Months Ended June 30, 2024 Per Diluted Share | Three Months Ended June 30, 2023 Amount | Three Months Ended June 30, 2023 Per Diluted Share | | :--------------------------------------------- | :-------------------------------------- | :------------------------------------------------- | :-------------------------------------- | :------------------------------------------------- | | Net income (loss) | $(24.4) | $(0.27) | $(10.5) | $(0.10) | | FFO | $14.3 | $0.16 | $33.4 | $0.30 | | Core FFO | $16.1 | $0.18 | $39.8 | $0.36 | - Annualized Net Operating Income (NOI) for Q2 2024 was $286.4 million, down from $307.5 million in Q1 2024. Excluding sold or out-of-service assets, Annualized NOI was $283.9 million, down from $292.6 million in Q1 202473 - Same Store NOI (SSNOI) increased 3.2% quarter-over-quarter to $71.4 million for Q2 2024, primarily due to higher rents and occupancy in the multifamily portfolio, and lower real estate taxes and operating expenses in the commercial portfolio (partially offset by lower occupancy)23 Operating Portfolio Occupancy and Rent Growth (as of June 30, 2024) | Portfolio | Leased % (Q2 2024) | Leased % (Q1 2024) | Occupied % (Q2 2024) | Occupied % (Q1 2024) | Effective Blended Rent Growth | Effective Renewal Rent Growth | | :---------------- | :----------------- | :----------------- | :------------------- | :------------------- | :---------------------------- | :---------------------------- | | Multifamily | 96.9% | 95.9% | 94.3% | 94.3% | 4.6% | 8.6% | | Commercial | 82.3% | 84.6% | 80.6% | 83.1% | N/A | N/A | - Executed approximately 248,000 square feet of office leases in Q2 2024, including 166,000 square feet of new leases. Second-generation leases generated a 2.0% rental rate increase on a cash basis and a 12.7% rental rate increase on a GAAP basis47 Portfolio Development and Capital Structure JBG SMITH is actively developing multifamily assets, with 1900 Crystal Drive recently delivered and leasing ahead of expectations. The company maintains a strong balance sheet with a total enterprise value of $4.1 billion, a significant portion of debt fixed or hedged, and a focus on managing near-term maturities - As of June 30, 2024, two multifamily assets totaling 1,583 units were under construction, including 1900 Crystal Drive, which delivered in Q2 and was 49.5% leased by July 28, 202448 - The development pipeline includes 18 assets with an estimated 9.3 million square feet of potential development density at the company's share48 Key Capital Structure Metrics (as of June 30, 2024) | Metric | Value | | :-------------------------------- | :------------ | | Total Enterprise Value | $4.1 billion | | Common Shares and Units Value | $1.5 billion | | Debt (net of premium/discount) | $2.7 billion | | Cash and Cash Equivalents (at share) | $169.3 million | | Net Debt to Annualized Adjusted EBITDA | 11.9x | | Net Debt / Total Enterprise Value | 62.1% | - As of June 30, 2024, the company had $163.5 million of cash and cash equivalents ($169.3 million at its share) and $694.3 million of availability under its revolving credit facility26 - 93.3% of the company's debt was fixed or hedged as of the end of Q2 2024, with a weighted average debt maturity of 3.2 years35 - Near-term debt maturities include $121 million (4.4% of total debt) next month, related to a non-core office asset, and $424 million (15.6% of total debt) in 2025, with the majority secured by readily financeable multifamily assets3536 Dividends and Forward-Looking Statements The Board of Trustees declared a quarterly dividend of $0.175 per common share. The company also provides extensive forward-looking statements, cautioning investors about inherent risks and uncertainties in its projections and strategic plans, emphasizing that actual outcomes may differ materially from expectations - On July 24, 2024, the Board of Trustees declared a quarterly dividend of $0.175 per common share, payable on August 21, 2024, to shareholders of record as of August 7, 202476 - Forward-looking statements represent intentions, plans, expectations, and beliefs, but are subject to numerous assumptions, risks, and uncertainties, meaning future results, financial condition, and business may differ materially from those expressed5278 Non-GAAP Financial Measures and Definitions This section provides detailed explanations and reconciliations for various non-GAAP financial measures used by JBG SMITH, such as 'at JBG SMITH Share,' EBITDA, FFO, Core FFO, FAD, Net Debt, and NOI. These measures are presented to offer valuable insights into the company's performance and financial condition, supplementing GAAP reporting - The company presents financial information 'at JBG SMITH Share' to reflect its economic interests in partially owned entities, calculated by applying its ownership percentage to each asset's financial information. This is a non-GAAP presentation intended to provide valuable investor information79 - Key non-GAAP measures defined and reconciled include 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 Debt, Net Operating Income (NOI), and Annualized NOI818283193121157 Condensed Consolidated Balance Sheets (in thousands) | ASSETS | June 30, 2024 | December 31, 2023 | | :------------------------------------------- | :------------ | :---------------- | | Real estate, net | $4,526,415 | $4,536,759 | | Cash and cash equivalents | $163,536 | $164,773 | | Investments in unconsolidated real estate ventures | $101,043 | $264,281 | | TOTAL ASSETS | $5,325,116| $5,518,515 | | LIABILITIES | June 30, 2024 | December 31, 2023 | | Mortgage loans, net | $1,876,459 | $1,783,014 | | Revolving credit facility | $40,000 | $62,000 | | Term loans, net | $717,610 | $717,172 | | Total liabilities | $2,853,861| $2,825,929 | Condensed Consolidated Statements of Operations (in thousands) | REVENUE | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Property rental | $112,536 | $120,592 | $235,172 | $244,625 | | Third-party real estate services, including reimbursements | $17,397 | $22,862 | $35,265 | $45,646 | | Other revenue | $5,387 | $8,641 | $10,067 | $14,786 | | Total revenue | $135,320 | $152,095 | $280,504 | $305,057 | | NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $(24,373) | $(10,545) | $(56,649) | $10,626 | | EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED | $(0.27) | $(0.10) | $(0.63) | $0.09 | Q2 2024 Supplemental Information Overview and Company Profile JBG SMITH is a Maryland REIT focused on mixed-use properties in the Washington, DC market, particularly National Landing, with a strategic emphasis on placemaking. The company's portfolio is heavily concentrated in National Landing, anchored by key demand drivers, and it also provides third-party asset management services. The section provides a snapshot of the company's executive leadership and key financial metrics as of June 30, 2024 - JBG SMITH owns, operates, invests in, and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, DC, most notably National Landing. Approximately 75.0% of its holdings are in National Landing, anchored by Amazon's new headquarters, Virginia Tech's Innovation Campus, proximity to the Pentagon, and placemaking initiatives77103 - The company's dynamic portfolio comprises 13.4 million square feet of high-growth multifamily, office, and retail assets at share, with 98% being Metro-served. It also maintains a development pipeline encompassing 9.3 million square feet of mixed-use, primarily multifamily, development opportunities77 - JBG SMITH's executive officers include W. Matthew Kelly (CEO), M. Moina Banerjee (CFO), Kevin P. Reynolds (Chief Development Officer), George L. Xanders (Chief Investment Officer), Steven A. Museles (Chief Legal Officer), David Ritchey (Chief Commercial Officer), and Evan Regan-Levine (Chief Strategy Officer)72 Company Snapshot (as of June 30, 2024) | Metric | Value | | :------------------------------------------ | :------------ | | Exchange/ticker | NYSE: JBGS | | Indicated annual dividend per share | $0.70 | | Dividend yield | 4.6% | | Common share price | $15.23 | | Common shares and OP Units outstanding (in millions) | 101.10 | | Total market capitalization | $1.54 billion | | Net Debt | $2.52 billion | | Total Enterprise Value | $4.06 billion | | Net Debt / Total Enterprise Value | 62.1% | Financial Highlights JBG SMITH's Q2 2024 financial highlights show a net loss attributable to common shareholders, but positive operating portfolio NOI. Key non-GAAP metrics like FFO, Core FFO, and Adjusted EBITDA are presented, along with leverage ratios, indicating the company's financial position and operational performance Summary Financial Results (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :------------------------------- | :----------------------------- | | Total revenue | $135,320 | $280,504 | | Net loss attributable to common shareholders | $(24,373) | $(56,649) | | Per diluted common share | $(0.27) | $(0.63) | | Operating portfolio NOI | $71,594 | $148,457 | | FFO | $16,927 | $29,526 | | Core FFO | $18,962 | $50,755 | | FAD | $19,728 | $55,090 | | FAD payout ratio | 96.4% | 69.0% | | EBITDA | $52,292 | $98,201 | | EBITDAre | $52,203 | $97,435 | | Adjusted EBITDA | $52,980 | $116,666 | | Net Debt / total enterprise value | 62.1% | 62.1% | | Net Debt to annualized Adjusted EBITDA | 11.9x | 10.8x | Portfolio Overview JBG SMITH's operating portfolio consists of 15 multifamily assets and 23 commercial assets, with a significant concentration in National Landing. The portfolio demonstrates high occupancy rates and substantial annualized rent and NOI, reflecting the company's strategic focus on multifamily development and strong market positioning Operating Portfolio Summary (at JBG SMITH Share, as of June 30, 2024) | Operating Portfolio | Number of Assets | Units / Square Feet | % Leased | % Occupied | Annualized Rent (in thousands) | Annualized NOI (in thousands) | | :--------------------------------------- | :--------------- | :-------------------------- | :------- | :--------- | :----------------------------- | :---------------------------- | | Multifamily - National Landing | 4 | 2,856 Units | 97.3% | 94.9% | $73,597 | $52,076 | | Multifamily - DC | 10 | 3,140 Units | 96.6% | 93.6% | $98,321 | $66,504 | | Multifamily - MD | 1 | 322 Units | 97.4% | 96.6% | $14,021 | $9,492 | | Multifamily – total / weighted average | 15 | 6,318 Units | 96.9%| 94.3% | $185,939 | $128,072 | | Commercial - National Landing | 18 | 5,828,015 SF | 81.5% | 79.5% | $206,076 | $135,760 | | Commercial - Other | 5 | 1,069,047 SF | 86.3% | 86.1% | $47,732 | $18,752 | | Commercial - total / weighted average | 23 | 6,897,062 SF | 82.3%| 80.6% | $253,808 | $154,512 | | Ground Leases | 2 | — | — | — | — | $3,792 | | Operating - Total / Weighted Average | 40 | 6,318 Units/ 6,897,062 SF | 88.5%| 86.4% | $439,747 | $286,376 | - Adjusted Annualized NOI, which includes annualized base rent of signed but not yet commenced leases, totaled $294,256 thousand245 Financial Information This section provides a detailed overview of JBG SMITH's financial position, including condensed consolidated balance sheets, statements of operations, and information on unconsolidated real estate ventures and other tangible assets and liabilities. It highlights a slight decrease in total assets driven by reduced investments in unconsolidated ventures, alongside a modest increase in total liabilities Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | ASSETS | June 30, 2024 | December 31, 2023 | Change | | :------------------------------------------- | :------------ | :---------------- | :----- | | Real estate, net | $4,526,415 | $4,536,759 | $(10,344) | | Cash and cash equivalents | $163,536 | $164,773 | $(1,237) | | Investments in unconsolidated real estate ventures | $101,043 | $264,281 | $(163,238) | | TOTAL ASSETS | $5,325,116| $5,518,515 | $(193,399) | | LIABILITIES | June 30, 2024 | December 31, 2023 | Change | | Mortgage loans, net | $1,876,459 | $1,783,014 | $93,445 | | Revolving credit facility | $40,000 | $62,000 | $(22,000) | | Term loans, net | $717,610 | $717,172 | $438 | | Total liabilities | $2,853,861| $2,825,929 | $27,932 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (in thousands, except per share data) | REVENUE | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Property rental | $112,536 | $120,592 | $235,172 | $244,625 | | Third-party real estate services, including reimbursements | $17,397 | $22,862 | $35,265 | $45,646 | | Other revenue | $5,387 | $8,641 | $10,067 | $14,786 | | Total revenue | $135,320 | $152,095 | $280,504 | $305,057 | | NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $(24,373) | $(10,545) | $(56,649) | $10,626 | | EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED | $(0.27) | $(0.10) | $(0.63) | $0.09 | Unconsolidated Real Estate Ventures Unconsolidated Real Estate Ventures (in thousands, at JBG SMITH Share) | Metric | June 30, 2024 | | :---------------------------------------- | :------------ | | Total assets | $170,351 | | Borrowings, net | $66,553 | | Total liabilities | $78,914 | | Total revenue (Three Months Ended June 30, 2024) | $2,278 | | Net loss (Three Months Ended June 30, 2024) | $(714) | Other Tangible Assets and Liabilities Other Tangible Assets and Liabilities (in thousands, at JBG SMITH Share) | Metric | June 30, 2024 | | :---------------------------------------- | :------------ | | Restricted cash | $42,504 | | Tenant and other receivables, net | $32,055 | | Other assets, net | $115,007 | | Total Other Tangible Assets, Net | $189,566 | | Accounts payable and accrued liabilities | $109,133 | | Other liabilities, net | $73,571 | | Total Other Tangible Liabilities, Net | $182,704 | Non-GAAP Reconciliations This section provides detailed reconciliations for key non-GAAP financial measures, including EBITDA, EBITDAre, Adjusted EBITDA, FFO, Core FFO, and FAD, along with an analysis of the Third-Party Asset Management and Real Estate Services Business and Pro Rata Adjusted General and Administrative Expenses. These reconciliations offer a clearer view of the company's operational performance and profitability, adjusted for non-recurring or non-cash items EBITDA, EBITDAre and Adjusted EBITDA Reconciliations EBITDA, EBITDAre and Adjusted EBITDA (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EBITDA | $52,292 | $67,996 | $98,201 | $176,257 | | EBITDAre | $52,203 | $67,996 | $97,435 | $135,557 | | Adjusted EBITDA | $52,980 | $71,969 | $116,666 | $140,327 | | Net Debt to Annualized Adjusted EBITDA | 11.9x | 8.3x | 10.8x | 8.5x | | Net Debt (at JBG SMITH Share) | $2,522,604 | $2,376,363 | $2,522,604 | $2,376,363 | FFO, Core FFO and FAD Reconciliations FFO, Core FFO and FAD (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | FFO Attributable to Common Shareholders | $14,335 | $33,423 | $25,013 | $66,425 | | FFO per common share - diluted | $0.16 | $0.30 | $0.27 | $0.59 | | Core FFO Attributable to Common Shareholders | $16,058 | $39,755 | $43,002 | $76,933 | | Core FFO per common share - diluted | $0.18 | $0.36 | $0.47 | $0.69 | | FAD available to OP Units | $19,728 | $39,520 | $55,090 | $77,896 | | FAD Payout Ratio | 96.4% | 70.1% | 69.0% | 73.6% | Third-Party Asset Management and Real Estate Services Business Third-Party Asset Management and Real Estate Services Business (in thousands, at JBG SMITH Share) | Service Revenue | Three Months Ended June 30, 2024 | | :------------------------------------------------- | :------------------------------- | | Property management fees | $3,874 | | Asset management fees | $1,242 | | Development fees | $421 | | Leasing fees | $1,128 | | Construction management fees | $177 | | Other service revenue | $1,260 | | Total Revenue | $8,102 | | Pro rata adjusted general and administrative expense: third-party real estate services | $(9,126) | | Total Services Revenue Less Allocated General and Administrative Expenses | $(1,024) | Pro Rata Adjusted General and Administrative Expenses Pro Rata Adjusted General and Administrative Expenses (in thousands) | General and Administrative Expenses | Three Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | | Corporate and other | $17,001 | | Third-party real estate services | $18,650 | | Total | $35,651 | | Adjustments | $(9,082) | | Pro Rata Adjusted | $26,569 | Net Operating Income (NOI) Analysis This section provides a detailed breakdown of Net Operating Income (NOI), including Same Store NOI, Summary NOI, and specific analyses for multifamily and commercial portfolios. It highlights the overall increase in Same Store NOI, driven by strong performance in both multifamily and commercial segments, and provides granular data on revenue, expenses, and occupancy rates across different property types and submarkets Same Store NOI Same Store NOI (in thousands, at JBG SMITH share) | Same Store NOI | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | % Change | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | % Change | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :------- | :----------------------------- | :----------------------------- | :------- | | Multifamily | $32,026 | $30,967 | 3.4% | $64,695 | $60,385 | 7.1% | | Commercial | $38,395 | $37,563 | 2.2% | $78,097 | $76,285 | 2.4% | | Ground Leases | $948 | $597 | 58.8% | $2,276 | $1,215 | 87.3% | | Total Same Store NOI | $71,369 | $69,127 | 3.2% | $145,068 | $137,885 | 5.2% | | Non-Same Store NOI | $225 | $10,853 | (97.9%) | $3,389 | $23,317 | (85.5%) | | Total Operating Portfolio NOI | $71,594 | $79,980 | (10.5%)| $148,457 | $161,202 | (7.9%) | Summary NOI Summary NOI (in thousands, at JBG SMITH Share) | Summary NOI | Three Months Ended June 30, 2024 | Annualized NOI | | :--------------------------------------------- | :------------------------------- | :------------- | | Multifamily Operating Portfolio NOI | $32,018 | $128,072 | | Commercial Operating Portfolio NOI | $38,628 | $154,512 | | Ground Leases Operating Portfolio NOI | $948 | $3,792 | | Total Operating Portfolio NOI | $71,594 | $286,376 | | % occupied (at JBG SMITH Share) | 86.4% | | Summary NOI - Multifamily Summary NOI - Multifamily (in thousands, at JBG SMITH Share) | Multifamily NOI | Three Months Ended June 30, 2024 | Annualized NOI | | :------------------------------------------------- | :------------------------------- | :------------- | | National Landing Operating Portfolio NOI | $13,019 | $52,076 | | DC Operating Portfolio NOI | $16,626 | $66,504 | | MD Operating Portfolio NOI | $2,373 | $9,492 | | Total Operating Portfolio NOI | $32,018 | $128,072 | | % occupied (at JBG SMITH Share) | 94.3% | | Summary NOI - Commercial Summary NOI - Commercial (in thousands, at JBG SMITH Share) | Commercial NOI | Three Months Ended June 30, 2024 | Annualized NOI | | :------------------------------------------------ | :------------------------------- | :------------- | | National Landing Operating Portfolio NOI | $33,940 | $135,760 | | Other Operating Portfolio NOI | $4,688 | $18,752 | | Total Operating Portfolio NOI | $38,628 | $154,512 | | % occupied (at JBG SMITH Share) | 80.6% | | Leasing Activity This section details JBG SMITH's leasing performance across multifamily and office portfolios, including signed but not yet commenced leases, rent rate changes, lease expirations, and tenant diversification. It highlights strong multifamily rent growth and significant office leasing activity, while also outlining future lease expirations and the concentration of key tenants and industries Signed But Not Yet Commenced Leases Annualized Estimated Rent from Signed But Not Yet Commenced Leases (in thousands, at JBG SMITH Share) | Asset Type | Total Annualized Estimated Rent | September 30, 2024 | December 31, 2024 | March 31, 2025 | June 30, 2025 | September 30, 2025 | December 31, 2025 | | :----------------------------------------- | :------------------------------ | :----------------- | :---------------- | :------------- | :------------ | :----------------- | :---------------- | | Multifamily (Operating & Under Construction) | $2,268 | $138 | $463 | $498 | $513 | $532 | $557 | | Commercial (Operating) | $6,936 | $1,153 | $1,664 | $1,684 | $1,684 | $1,684 | $1,684 | | Total | $9,204 | $1,291 | $2,127 | $2,182 | $2,197 | $2,216 | $2,241 | Leasing Activity - Multifamily Multifamily Leasing Activity (Three Months Ended June 30) | Metric | 2024 | 2023 | | :-------------------------- | :---- | :---- | | Effective new lease rates | 0.4% | 2.0% | | Effective renewal lease rates | 8.6% | 7.0% | | Effective blended lease rates | 4.6% | 4.5% | | Renewal rate | 50.9% | 47.4% | Leasing Activity - Office Office Leasing Activity (in thousands of square feet, at JBG SMITH Share) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :----------------------------- | | Square feet leased | 248 | 347 | | First-generation space: New | 16 | 46 | | Second-generation space: New | 150 | 151 | | Second-generation space: Renewal | 82 | 150 | | Weighted average lease term (years) | 7.3 | 5.8 | | Weighted average Free Rent period (months) | 6.1 | 4.8 | | Second-generation space: Cash basis % change | 2.0% | 1.6% | | Second-generation space: GAAP basis % change | 12.7% | 10.0% | Lease Expirations Lease Expirations (at JBG SMITH Share, as of June 30, 2024) | Year of Lease Expiration | Number of Leases | Square Feet | % of Total Square Feet | Annualized Rent (in thousands) | % of Total Annualized Rent | | :----------------------- | :--------------- | :---------- | :--------------------- | :----------------------------- | :------------------------- | | Month-to-Month | 36 | 195,268 | 3.3% | $6,821 | 2.5% | | 2024 | 48 | 582,497 | 9.7% | $26,745 | 10.0% | | 2025 | 58 | 514,100 | 8.6% | $23,862 | 8.9% | | 2026 | 44 | 227,703 | 3.8% | $11,221 | 4.2% | | 2027 | 39 | 621,682 | 10.4% | $29,772 | 11.1% | | 2028 | 29 | 366,479 | 6.1% | $16,916 | 6.3% | | 2029 | 32 | 255,057 | 4.3% | $12,124 | 4.5% | | 2030 | 23 | 624,204 | 10.4% | $30,641 | 11.4% | | 2031 | 24 | 542,724 | 9.1% | $20,691 | 7.7% | | 2032 | 19 | 651,033 | 10.9% | $26,697 | 10.0% | | Thereafter | 65 | 1,393,895 | 23.4% | $62,239 | 23.4% | | Total / Weighted Average | 417 | 5,974,642 | 100.0% | $267,729 | 100.0% | - The weighted average remaining lease term for the entire portfolio is 5.7 years204 Tenant Concentration Top Tenant Concentration (in thousands, at JBG SMITH Share, as of June 30, 2024) | Tenant | Number of Leases | Square Feet | % of Total Square Feet | Annualized Rent | % of Total Annualized Rent | | :---------------------------- | :--------------- | :---------- | :--------------------- | :-------------- | :------------------------- | | U.S. Government (GSA) | 36 | 1,712,823 | 28.7% | $68,038 | 25.4% | | Amazon | 3 | 357,339 | 6.0% | $16,317 | 6.1% | | Lockheed Martin Corporation | 2 | 207,095 | 3.5% | $10,056 | 3.8% | | Public Broadcasting Service | 1 | 120,328 | 2.0% | $4,962 | 1.9% | | Accenture LLP | 2 | 102,756 | 1.7% | $4,942 | 1.8% | Industry Diversity Industry Diversity (in thousands, at JBG SMITH Share, as of June 30, 2024) | Industry | Number of Leases | Square Feet | % of Total Square Feet | Annualized Rent | % of Total Annualized Rent | | :---------------------------- | :--------------- | :---------- | :--------------------- | :-------------- | :------------------------- | | Government | 40 | 1,722,180 | 28.8% | $68,512 | 25.6% | | Government Contractors | 94 | 1,416,484 | 23.7% | $68,156 | 25.5% | | Business Services | 25 | 721,831 | 12.1% | $34,526 | 12.9% | | Member Organizations | 36 | 493,335 | 8.3% | $24,512 | 9.2% | | Health Services | 26 | 244,267 | 4.1% | $10,947 | 4.1% | | Food and Beverage | 51 | 161,829 | 2.7% | $9,179 | 3.4% | | Real Estate | 24 | 191,477 | 3.2% | $7,981 | 3.0% | | Communications | 3 | 160,690 | 2.7% | $6,844 | 2.6% | | Legal Services | 11 | 97,545 | 1.6% | $6,293 | 2.4% | | Educational Services | 6 | 62,506 | 1.0% | $2,980 | 1.1% | | Other | 101 | 702,498 | 11.8% | $27,799 | 10.2% | | Total | 417 | 5,974,642 | 100.0% | $267,729 | 100.0% | Property Data This section provides detailed property tables for JBG SMITH's multifamily, commercial, under-construction, and development pipeline assets, along with disposition activity. It offers granular insights into the portfolio's composition, occupancy, rent metrics, and future development potential, highlighting the company's strategic focus on National Landing and multifamily growth Property Tables - Multifamily Multifamily Assets (at JBG SMITH Share, as of June 30, 2024) | Submarket | Number of Units | Total Square Feet | % Leased | % Occupied | Annualized Rent (in thousands) | Monthly Rent Per Unit | Monthly Rent Per Square Foot | | :---------------- | :-------------- | :---------------- | :------- | :--------- | :----------------------------- | :-------------------- | :--------------------------- | | National Landing | 2,856 | 2,315,347 | 97.3% | 94.9% | $73,597 | $2,389 | $2.89 | | DC | 3,140 | 2,643,750 | 96.6% | 93.6% | $98,321 | $2,551 | $3.43 | | MD | 322 | 363,947 | 97.4% | 96.6% | $14,021 | $3,473 | $3.25 | | Operating - Total / Weighted Average | 6,318 | 5,323,044 | 96.9%| 94.3% | $185,939 | $2,530 | $3.17 | Property Tables - Commercial Commercial Assets (at JBG SMITH Share, as of June 30, 2024) | Submarket | Total Square Feet | % Leased | % Occupied | Annualized Rent (in thousands) | Office Annualized Rent Per Square Foot | Retail Annualized Rent Per Square Foot | | :---------------- | :---------------- | :------- | :--------- | :----------------------------- | :------------------------------------- | :------------------------------------- | | National Landing | 5,828,015 | 81.5% | 79.5% | $206,076 | $44.79 | $38.03 | | Other | 1,069,047 | 86.3% | 86.1% | $47,732 | $51.54 | $56.38 | | Total at JBG SMITH Share | 6,897,062 | 82.3%| 80.6% | $253,808 | $45.99 | $40.00 | - In Q2 2024, 2100 Crystal Drive, 18,789 SF of office space at 2200 Crystal Drive, and 2,480 SF of retail space at various National Landing assets were taken out of service128 Property Tables - Under-Construction Under-Construction Assets (at JBG SMITH Share, as of June 30, 2024) | Asset | Submarket | % Ownership | Estimated Square Feet | Estimated Number of Units | Estimated Completion Date | Estimated Stabilization Date | Estimated Stabilized NOI (in millions) | | :------------------ | :---------------- | :---------- | :-------------------- | :------------------------ | :------------------------ | :--------------------------- | :------------------------------------- | | 1900 Crystal Drive | National Landing | 100.0% | 633,985 | 808 | Q1 2024 - Q3 2024 | Q1 2026 | $44.2 | Property Tables - Development Pipeline Development Pipeline (at JBG SMITH Share, as of June 30, 2024) | Location | Estimated Total Potential Development Density (SF) | Multifamily (SF) | Office (SF) | Retail (SF) | Estimated Number of Units | | :---------------- | :------------------------------------------------- | :--------------- | :---------- | :---------- | :------------------------ | | National Landing | 7,224,100 | 5,713,600 | 1,375,900 | 134,600 | 5,565 | | DC | 2,107,000 | 1,840,200 | 149,600 | 117,200 | 1,935 | | Total | 9,331,100 | 7,553,800 | 1,525,500 | 251,800 | 7,500 | | Fully Entitled | 4,734,200 | 3,729,800 | 806,000 | 198,400 | 4,145 | Disposition Activity Disposition Activity (Q1 2024, in thousands, at JBG SMITH Share) | Asset | % Ownership | Asset Type | Location | Date Disposed | Total Square Feet | Gross Sales Price | | :-------------------- | :---------- | :--------- | :--------------- | :------------ | :---------------- | :---------------- | | North End Retail | 100.0% | Multifamily| Washington, DC | January 22, 2024 | 27,355 SF | $14,250 | | Central Place Tower | 50.0% | Commercial | Arlington, VA | February 13, 2024 | 275,797 SF | $162,500 | | Subtotal | | | | | | $176,750 | | Q2 2024 | None | | | | | | Debt Information This section provides a comprehensive overview of JBG SMITH's debt structure, including a summary of principal balances, maturity profiles, and interest rates, as well as a detailed breakdown by instrument. It highlights the company's significant portion of fixed or hedged debt and its liquidity position, while outlining near-term debt maturities Debt Summary Debt Summary (in thousands, at JBG SMITH Share, as of June 30, 2024) | Debt Type | Total Principal Balance | % of Total Debt Maturing | % Floating Rate | % Fixed Rate | Weighted Average Interest Rate | | :---------------------------------------------- | :---------------------- | :----------------------- | :-------------- | :----------- | :----------------------------- | | Unsecured Debt | $760,000 | 27.9% | 0% | 100% | 3.79% | | Secured Debt | $1,957,992 | 72.1% | 39.8% | 60.2% | 5.30% | | Total Consolidated and Unconsolidated Principal Balance | $2,717,992 | 100.0% | 28.6% | 71.4% | 4.88% | - Debt maturing in 2024 totals $120.9 million (4.4% of total debt), and in 2025 totals $624.0 million (23.0% of total debt)113 - The company has an undrawn capacity of $694.3 million under its revolving credit facility113 Debt by Instrument Consolidated Debt by Instrument (in thousands, as of June 30, 2024) | Asset | Principal Balance | Stated Interest Rate | Interest Rate Hedge | Current Annual Interest Rate | Initial Maturity Date | | :------------------------------------ | :---------------- | :------------------- | :------------------ | :--------------------------- | :-------------------- | | 2101 L Street | $120,933 | 3.97% | Fixed | 3.97% | 08/15/24 | | RiverHouse Apartments | $307,710 | S + 1.39% | Swap | 3.55% | 04/01/25 | | 1900 Crystal Drive | $206,980 | S + 2.61% | Cap | 7.11% | 04/25/26 | | Tranche A-1 Term Loan | $200,000 | S + 1.24% | Swap | 2.70% | 01/14/25 | | Revolving Credit Facility | $40,000 | S + 1.45% | — | 6.78% | 06/29/27 | | Total Consolidated Principal Balance | $2,649,992 | | | | | | Total Consolidated Indebtedness | $2,625,329 | | | | | Unconsolidated Debt by Instrument (in thousands, as of June 30, 2024) | Asset | Principal Balance | Stated Interest Rate | Interest Rate Hedge | Current Annual Interest Rate | Initial Maturity Date | | :-------------------- | :---------------- | :------------------- | :------------------ | :--------------------------- | :-------------------- | | 1101 17th Street | $60,000 | S + 1.31% | Swap | 4.13% | 06/13/25 | | 4747 Bethesda Avenue | $175,000 | S + 1.35% | Cap | 5.73% | 02/20/27 | | Total Unconsolidated Principal Balance | $235,000 | | | | | | Total Unconsolidated Indebtedness | $227,837 | | | | | Definitions This section provides a comprehensive glossary of key terms and non-GAAP financial measures used throughout the investor package. It defines various financial, operational, and property-related metrics, ensuring clarity and consistency in understanding JBG SMITH's reporting and strategic communications - The section defines key terms such as 'Annualized Rent,' 'Development Pipeline,' 'EBITDA,' 'EBITDAre,' 'Adjusted EBITDA,' 'FFO,' 'Core FFO,' 'FAD,' 'Net Debt,' 'NOI,' 'Annualized NOI,' 'Same Store,' 'Percent Leased,' 'Percent Occupied,' and 'Under-Construction,' among others, to provide a clear understanding of the company's financial and operational metrics1931211576364656667217228 Appendix The appendix provides detailed reconciliations for interest expense, transaction and other costs, and Net Operating Income (NOI). These reconciliations offer transparency into the components of these financial figures, highlighting specific adjustments and changes over time, and supporting the non-GAAP measures presented in the main report Interest Expense Reconciliation Interest Expense (in thousands) | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :------------------------------------------- | :------------------------------- | :----------------------------- | | Interest expense before capitalized interest | $32,090 | $63,724 | | Amortization of deferred financing costs | $4,354 | $8,485 | | Capitalized interest | $(3,467) | $(8,092) | | Total | $33,004 | $64,225 | Transaction and Other Costs Reconciliation Transaction and Other Costs (in thousands) | Cost Type | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Completed, potential and pursued transaction expenses | $34 | $227 | $1,541 | $274 | | Severance and other costs | $505 | $1,799 | $512 | $3,247 | | Demolition costs | $285 | $1,466 | $285 | $2,443 | | Total | $824 | $3,492 | $2,338 | $5,964 | NOI Reconciliations NOI Reconciliation (in thousands) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) attributable to common shareholders | $(24,373) | $(10,545) | $(56,649) | $10,626 | | Consolidated NOI | $65,144 | $75,051 | $132,123 | $152,667 | | NOI attributable to unconsolidated real estate ventures at our share | $1,168 | $5,175 | $4,215 | $9,604 | | Total adjustments | $4,109 | $4,027 | $10,960 | $6,924 | | NOI | $69,253 | $79,078 | $143,083 | $159,591 | | Operating Portfolio NOI | $71,594 | $79,980 | $148,457 | $161,202 | | Same Store NOI | $71,369 | $69,127 | $145,068 | $137,885 | | Change in Same Store NOI | 3.2% | | 5.2% | |