JBG SMITH(US:JBGS)2024-02-20 21:17Debt and Interest Rates - Variable rate mortgage loans as of December 31, 2023, had a balance of $608.6 million with a weighted average interest rate of 6.25%, and a 1% change in base rates would impact annual interest expense by $1.4 million[383] - Fixed rate mortgage loans as of December 31, 2023, had a balance of $1.19 billion with a weighted average interest rate of 4.78%[383] - The revolving credit facility as of December 31, 2023, had a balance of $62.0 million with a weighted average interest rate of 6.83%, and a 1% change in base rates would impact annual interest expense by $629,000[383] - The Tranche A-1 Term Loan as of December 31, 2023, had a balance of $200.0 million with a weighted average interest rate of 2.70%[383] - The Tranche A-2 Term Loan as of December 31, 2023, had a balance of $400.0 million with a weighted average interest rate of 3.58%[383] - The 2023 Term Loan as of December 31, 2023, had a balance of $120.0 million with a weighted average interest rate of 5.31%[383] - The pro rata share of debt of unconsolidated real estate ventures as of December 31, 2023, had a balance of $68.0 million, with $35.0 million in variable rate loans at a weighted average interest rate of 5.00% and $33.0 million in fixed rate loans at a weighted average interest rate of 4.13%[383] - The estimated fair value of consolidated debt as of December 31, 2023, was $2.5 billion[386] - Interest rate swap and cap agreements designated as effective hedges had an aggregate notional value of $2.2 billion as of December 31, 2023, with assets totaling $35.6 million and liabilities totaling $7.9 million[389] - Non-designated interest rate cap agreements had an aggregate notional value of $642.7 million as of December 31, 2023, with assets totaling $6.7 million and liabilities totaling $6.5 million[390] - In January 2023, the company entered into a $187.6 million loan facility with a fixed interest rate of 5.13%[529] - In June 2023, the company repaid $142.4 million in mortgage loans[530] - As of December 31, 2023, the company had interest rate swap and cap agreements with an aggregate notional value of $1.7 billion[532] - The company's unsecured revolving credit facility and term loans totaled $1.5 billion as of December 31, 2023[533] - In July 2023, the company amended covenants related to the Tranche A-1 and Tranche A-2 Term Loans to align with the revolving credit facility and 2023 Term Loan covenants[538] Financial Performance - Total revenue for 2023 decreased slightly to $604.2 million from $605.8 million in 2022, with property rental revenue declining to $483.2 million from $491.7 million[410] - Net loss attributable to common shareholders in 2023 was $79.98 million, compared to a net income of $85.37 million in 2022[410] - Depreciation and amortization expenses decreased to $210.2 million in 2023 from $213.8 million in 2022[410] - Interest expense increased significantly to $108.7 million in 2023 from $75.9 million in 2022[410] - The company recorded a substantial impairment loss of $90.2 million in 2023, compared to no impairment loss in 2022[410] - Comprehensive loss attributable to JBG SMITH PROPERTIES was $105.6 million in 2023, a significant decline from the $147.0 million comprehensive income in 2022[411] - Net income (loss) for 2023 was $(91.7 million), compared to $99.0 million in 2022 and $(89.7 million) in 2021[416] - Net cash provided by operating activities in 2023 was $183.4 million, slightly higher than $178.0 million in 2022 but lower than $217.6 million in 2021[416] - Development costs and real estate additions in 2023 totaled $(333.7 million), compared to $(326.7 million) in 2022 and $(173.2 million) in 2021[416] - Proceeds from the sale of real estate in 2023 were $281.5 million, significantly lower than $928.9 million in 2022 and $14.4 million in 2021[416] - Total other comprehensive loss was $32.2 million in 2023, compared to a $70.2 million gain in 2022[411] - The company repurchased 22,576 common shares in 2023, reducing total shares outstanding to 94,309[414] - Dividends declared on common shares decreased to $0.675 per share in 2023 from $0.90 per share in 2022[414] - Weighted average number of common shares outstanding decreased to 105,095 in 2023 from 119,005 in 2022[410] - Combined income statement information for unconsolidated real estate ventures reported a net loss of $85.6 million for the year ended December 31, 2023[515] Real Estate Portfolio and Development - The company's Operating Portfolio as of December 31, 2023, included 44 operating assets with 6,318 multifamily units and 8.3 million square feet of commercial space[424] - Approximately 75.0% of the company's holdings are in the National Landing submarket in Northern Virginia, anchored by Amazon's new headquarters and Virginia Tech's $1 billion Innovation Campus[422] - The company's development pipeline includes 17 assets with an estimated potential development density of 10.8 million square feet[424] - Construction in progress increased from $544.7 million in 2022 to $659.1 million in 2023, an increase of 21.0%[408] - Investments in unconsolidated real estate ventures decreased from $299.9 million in 2022 to $264.3 million in 2023, a decline of 11.9%[408] - In October 2022, the company acquired the remaining 50.0% ownership interest in 8001 Woodmont for $115.0 million, including the assumption of a $51.9 million mortgage loan[494] - In August 2022, the company acquired the remaining 36.0% ownership interest in Atlantic Plumbing for $19.7 million, including the repayment of a $100.0 million mortgage loan[495] - In November 2021, the company acquired The Batley for $205.3 million, exclusive of $3.1 million in transaction costs[496] - In January 2024, the company sold North End Retail for a gross sales price of $14.3 million[499] - In March 2023, the company sold an 80.0% interest in 4747 Bethesda Avenue for a gross sales price of $196.0 million, representing a gross valuation of $245.0 million[508] - The company recorded an impairment loss of $25.3 million related to Central Place Tower in 2023, which was sold in February 2024 for a gross sales price of $325.0 million[504] - Formed a real estate venture with Fortress in April 2022, contributing $66.1 million for a 33.5% interest, with a total gross sales price of $580.0 million for a 1.6 million square foot office portfolio[509] - Entered into two real estate ventures with J.P. Morgan in April 2021, contributing cash and land for a 50% ownership interest in 2.0 million square feet of mixed-use development in Potomac Yard[511] Balance Sheet and Asset Valuation - Total assets decreased from $5,903.4 million in 2022 to $5,518.5 million in 2023, a decline of 6.5%[408] - Real estate, net decreased from $4,823.1 million in 2022 to $4,536.8 million in 2023, a decline of 5.9%[408] - Cash and cash equivalents decreased from $241.1 million in 2022 to $164.8 million in 2023, a decline of 31.7%[408] - Total liabilities increased from $2,708.0 million in 2022 to $2,825.9 million in 2023, an increase of 4.4%[408] - Shareholders' equity decreased from $2,681.9 million in 2022 to $2,222.9 million in 2023, a decline of 17.1%[408] - Accumulated deficit increased from $(628.6) million in 2022 to $(777.0) million in 2023, a deterioration of 23.6%[408] - Revolving credit facility increased from $0 in 2022 to $62.0 million in 2023[408] - Term loans, net increased from $547.1 million in 2022 to $717.2 million in 2023, an increase of 31.1%[408] - Cash and cash equivalents, and restricted cash, decreased to $200.4 million at the end of 2023 from $274.1 million at the end of 2022[419] - Total tenant and other receivables decreased from $56.3 million in 2022 to $44.2 million in 2023[500] - Total investments in unconsolidated real estate ventures decreased from $299.9 million in 2022 to $264.3 million in 2023[503] - Combined balance sheet information for unconsolidated real estate ventures showed total assets of $867.6 million and total liabilities of $273.7 million as of December 31, 2023[514] - Consolidated VIEs, including JBG SMITH LP, had total assets of $503.2 million and liabilities of $293.3 million as of December 31, 2023[518] - Deferred leasing costs, net, decreased to $81.5 million as of December 31, 2023, from $94.1 million in 2022[519] - Total intangible assets, net, decreased to $56.6 million as of December 31, 2023, from $68.2 million in 2022[520] - Estimated amortization related to lease and other identified intangible assets for 2024 is $7.6 million[521] - Mortgage loans as of December 31, 2023, totaled $1.798 billion, with variable rate loans at $608.6 million and fixed rate loans at $1.190 billion[526] - The net carrying value of real estate collateralizing mortgage loans totaled $2.2 billion as of December 31, 2023 and 2022[528] Revenue and Leasing - Rental revenue from the U.S. federal government in 2023 was $64.4 million, accounting for 12.9% of total rental revenue, down from 14.8% in 2022[426] - The company recognized revenue of $21.7 million, $24.0 million, and $23.7 million for leasing, property management, and other real estate services provided to unconsolidated real estate ventures for the years ended December 31, 2023, 2022, and 2021, respectively[505] - Property rental revenue is recognized on a straight-line basis over the lease term, including tenant reimbursements for operating expenses and real estate taxes[470] - Variable lease payments based on a percentage of sales are recorded as variable lease income when earned[472] - Third-party real estate services revenue includes property and asset management fees, recognized as services are performed, with development fees recognized over the project duration[474] - Lease payments for renewal periods reasonably certain to be exercised are included in lease liability and right-of-use asset measurements[476] Accounting and Valuation Methods - The fair values of buildings are determined using the "as-if vacant" approach with discounted cash flow models, considering exit capitalization rates, discount rates, estimated market rents, and hypothetical lease-up periods[432] - Real estate is carried at cost, net of accumulated depreciation and amortization, with maintenance and repair expenses included in property operating expenses[434] - Construction in progress, including land, is carried at cost, with direct and indirect development costs capitalized, and depreciation not recorded until the property is ready for use[435] - Depreciation and amortization expense is recognized on a straight-line basis over estimated useful lives ranging from 3 to 40 years, with tenant improvements amortized over the lease term[436] - The company evaluates real estate and related intangible assets for impairment when indicators such as declining performance, below-average occupancy, or cost overruns suggest the carrying amount may not be recoverable[437] - Above- and below-market lease components are valued based on the present value of the difference between contractual lease payments and estimated market rates, with amortization over the remaining lease term[438] - Investments in unconsolidated real estate ventures are accounted for using the equity method when the company has significant influence but not control, with proportionate earnings or losses recognized in consolidated statements[445] - The company earns revenue from management services provided to unconsolidated real estate ventures, including property management, leasing, and development fees, recognized gross of ownership interest[446] - Intangible assets, such as in-place leases and wireless spectrum licenses, are amortized or accreted over their useful lives, with indefinite-lived licenses considered for renewal at minimal cost[452][453] - Assets held for sale are carried at the lower of carrying amounts or estimated fair value less disposal costs, with depreciation and amortization expense not recognized during the holding period[456] - Derivative financial instruments are used to manage exposure to variable interest rate risk and are measured at fair value, with changes in fair value affecting operating cash flows unless they contain a significant financing element[462] - Interest rate swap and cap agreements designated as effective hedges are carried at fair value and assessed for effectiveness, with fair value recorded in "Accumulated other comprehensive income" and reclassified into "Interest expense" when hedged transactions affect earnings[463] - Non-designated derivatives, such as interest rate cap agreements, are carried at fair value with gains or losses recorded in "Interest expense"[467] - Fair value measurement follows ASC 820, prioritizing Level 1 inputs (quoted prices in active markets) over Level 3 inputs (unobservable inputs)[468] - The company has elected to be taxed as a REIT, distributing at least 90% of its taxable income to shareholders to avoid federal income taxes[480] - Share-based compensation expense is recognized ratably over the vesting period, with fair value determined using the Monte Carlo or Black-Scholes methods[486] - The company paid a deferred purchase price of $19.6 million related to the 2020 acquisition of a development parcel[493] Investments and Ventures - Unconsolidated real estate ventures' mortgage loans totaled $235.0 million as of December 31, 2023, with a weighted average effective interest rate of 5.00% for variable rate loans[512] - Net carrying amounts of investments in unconsolidated VIEs were $87.3 million as of December 31, 2023, included in "Investments in unconsolidated real estate ventures"[516] - Unrealized gains from real estate-focused technology investments totaled $1.3 million, $2.1 million, and $4.6 million for the years ended December 31, 2021, 2022, and 2023, respectively[523] - Realized losses from real estate-focused technology investments totaled $758,000 and $1.2 million for the years ended December 31, 2023 and 2022, respectively[523] - Realized gains (losses) from equity investments totaled $436,000, $13.5 million, and ($1.0) million for the years ended December 31, 2021, 2022, and 2023, respectively[524]