JBG SMITH(JBGS) - 2022 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Presents JBG SMITH's unaudited condensed consolidated financial statements and notes for Q1 2022 and 2021 Condensed Consolidated Balance Sheets Presents JBG SMITH's unaudited condensed consolidated balance sheets as of March 31, 2022, and December 31, 2021 Condensed Consolidated Balance Sheets Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Total Assets | $6,315,880 | $6,386,206 | $(70,326) | | Real estate, net | $4,313,223 | $4,868,473 | $(555,250) | | Assets held for sale | $891,750 | $73,876 | $817,874 | | Total Liabilities | $2,894,785 | $2,925,064 | $(30,279) | | Total Equity | $2,875,046 | $2,938,417 | $(63,371) | Condensed Consolidated Statements of Operations Details JBG SMITH's unaudited condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021 Condensed Consolidated Statements of Operations Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | % Change | | :------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | :------- | | Total Revenue | $161,965 | $165,289 | $(3,324) | (2.0)% | | Property rental | $131,598 | $122,241 | $9,357 | 7.7% | | Third-party real estate services, including reimbursements | $23,970 | $38,107 | $(14,137) | (37.1)% | | Total Expenses | $162,899 | $167,813 | $(4,914) | (2.9)% | | Income (loss) from unconsolidated real estate ventures, net | $3,145 | $(943) | $4,088 | 433.5% | | Interest and other income, net | $14,246 | $9 | $14,237 | * | | NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $(32) | $(20,731) | $20,699 | (99.8)% | | LOSS PER COMMON SHARE - BASIC AND DILUTED | $0.00 | $(0.16) | $0.16 | (100.0)% | Condensed Consolidated Statements of Comprehensive Income (Loss) Outlines JBG SMITH's unaudited condensed consolidated statements of comprehensive income (loss) for Q1 2022 and 2021 Condensed Consolidated Statements of Comprehensive Income (Loss) Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :------------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | | NET LOSS | $(77) | $(24,069) | $23,992 | | Change in fair value of derivative financial instruments | $25,095 | $6,411 | $18,684 | | Other comprehensive income | $28,851 | $10,152 | $18,699 | | COMPREHENSIVE INCOME (LOSS) | $28,774 | $(13,917) | $42,691 | Condensed Consolidated Statements of Equity Presents JBG SMITH's unaudited condensed consolidated statements of equity for the three months ended March 31, 2022 and 2021 Condensed Consolidated Statements of Equity Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Total Equity | $2,875,046 | $2,938,417 | $(63,371) | | Common shares repurchased | $(93,148) | N/A | $(93,148) | | Other comprehensive income | $28,851 | N/A | $28,851 | | Contributions from noncontrolling interests, net | $5,986 | N/A | $5,986 | | Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation | $(11,273) | N/A | $(11,273) | Condensed Consolidated Statements of Cash Flows Details JBG SMITH's unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 Condensed Consolidated Statements of Cash Flows Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | | Net cash provided by operating activities | $69,598 | $66,502 | $3,096 | | Net cash used in investing activities | $(32,951) | $(29,515) | $(3,436) | | Net cash used in financing activities | $(119,529) | $(51,776) | $(67,753) | | Net decrease in cash and cash equivalents, and restricted cash | $(82,882) | $(14,789) | $(68,093) | Notes to Condensed Consolidated Financial Statements Detailed notes to JBG SMITH's unaudited condensed consolidated financial statements, covering policies, dispositions, and debt 1. Organization and Basis of Presentation Describes JBG SMITH's organizational structure, REIT status, and basis of financial statement presentation - JBG SMITH is a Maryland REIT owning and operating commercial and multifamily assets in Metro-served submarkets of the Washington, D.C. metropolitan area[22] - Over half of the portfolio is in National Landing, Northern Virginia, where JBG SMITH is the developer for Amazon's new over five million square foot headquarters and Virginia Tech's $1 billion Innovation Campus[22] - As of March 31, 2022, the Operating Portfolio included 62 operating assets (41 commercial, 20 multifamily, 1 land asset), 2 under-construction multifamily assets, 9 near-term development assets, and 20 future development assets[23] 2. Summary of Significant Accounting Policies Summarizes JBG SMITH's significant accounting policies, including updates related to reference rate reform - Financial statements are prepared in accordance with GAAP for interim financial information, with no material changes to significant accounting policies from the Annual Report[25][31] - The company elected to apply hedge accounting expedients under Topic 848 for reference rate reform, allowing continued assessment of hedged forecasted transactions and effectiveness for future LIBOR-indexed cash flows[33][35] 3. Dispositions and Assets Held for Sale Details JBG SMITH's asset dispositions and reclassifications to assets held for sale during the period - A development parcel was disposed of for a gross sales price of $3.25 million on March 28, 2022, resulting in a loss of $(136) thousand[36] - On April 1, 2022, the Universal Buildings (commercial assets in Washington D.C.) were sold for $228.0 million, having been classified as assets held for sale as of March 31, 2022[37] - On April 13, 2022, an unconsolidated real estate venture was formed with Fortress Investment Group LLC to recapitalize a 1.6 million square foot office portfolio and land parcels for $580.0 million, including four wholly-owned commercial assets classified as held for sale[38] 4. Investments in Unconsolidated Real Estate Ventures Outlines JBG SMITH's investments in unconsolidated real estate ventures and related transactions Investments in Unconsolidated Real Estate Ventures Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------------ | :----------------------------- | :------------------------------ | | Total investments in unconsolidated real estate ventures | $461,444 | $462,885 | - Unconsolidated real estate ventures disposed of assets (The Alaire, The Terano, and 12511 Parklawn Drive) for a gross sales price of $137.5 million, resulting in JBG SMITH's proportionate share of aggregate gain of $5.2 million for the three months ended March 31, 2022[46] - JBG SMITH provides leasing, property management, and other real estate services to these ventures, recognizing revenue of $5.5 million in Q1 2022 (vs. $5.9 million in Q1 2021)[44] 5. Variable Interest Entities Identifies JBG SMITH's consolidated and unconsolidated variable interest entities and associated risks - JBG SMITH LP is the most significant consolidated VIE, with JBG SMITH holding an 89.0% ownership interest and acting as the general partner, thus being the primary beneficiary[55] - As of March 31, 2022, excluding JBG SMITH LP, the company consolidated three other VIEs with total assets of $300.2 million and liabilities of $21.8 million[56] - The company also has interests in unconsolidated VIEs, where its maximum loss exposure is limited to investments, construction commitments, and debt guarantees[54] 6. Other Assets, Net Presents changes in JBG SMITH's other assets, net, including reclassifications and derivative fair values Other Assets, Net Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Total other assets, net | $71,385 | $240,160 | $(168,775) | | Finance lease right-of-use assets | $0 | $180,956 | $(180,956) | | Derivative agreements, at fair value | $15,478 | $951 | $14,527 | - The decrease in other assets, net, was largely due to finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2 being reclassified as "Assets held for sale"[57] - The company recorded a realized gain of $13.9 million from the sale of equity investments in Q1 2022, included in "Interest and other income, net"[59] 7. Debt Details JBG SMITH's debt structure, including mortgages, term loans, and revolving credit facility Debt Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Mortgages payable, net | $1,613,082 | $1,777,699 | $(164,617) | | Mortgages payable, net, related to assets held for sale | $163,897 | $0 | $163,897 | | Revolving credit facility | $300,000 | $300,000 | $0 | | Unsecured term loans, net | $398,332 | $398,664 | $(332) | - The Tranche A-1 Term Loan was amended in January 2022 to extend its maturity to January 2025 and change its interest rate to SOFR plus 1.15% to 1.75%[64] - As of March 31, 2022, the company had $1.7 billion in floating rate debt and $1.4 billion in hedging arrangements using LIBOR as a reference rate, with uncertainties regarding LIBOR's future[196] 8. Other Liabilities, Net Summarizes changes in JBG SMITH's other liabilities, net, primarily due to asset reclassifications Other Liabilities, Net Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------ | :-------------------- | | Total other liabilities, net | $106,929 | $342,565 | $(235,636) | | Liabilities related to finance lease right-of-use assets | $0 | $162,510 | $(162,510) | | Derivative agreements, at fair value | $658 | $18,361 | $(17,703) | | Dividends payable | $0 | $32,603 | $(32,603) | - The decrease was mainly due to the reclassification of finance ground leases at 1730 M Street and Courthouse Plaza 1 and 2 to "Liabilities related to assets held for sale"[66] 9. Redeemable Noncontrolling Interests Discusses JBG SMITH's redeemable noncontrolling interests, including OP and LTIP unit redemptions - As of March 31, 2022, outstanding OP Units and redeemable LTIP Units totaled 15.3 million, representing an 11.0% ownership interest in JBG SMITH LP[67] - During Q1 2022, 207,882 OP Units were redeemed for an equivalent number of common shares[67] - The balance of redeemable noncontrolling interests increased from $522.7 million at the beginning of the period to $546.0 million at the end of Q1 2022[69] 10. Property Rental Revenue Analyzes JBG SMITH's property rental revenue, distinguishing between fixed and variable rent components Property Rental Revenue Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change | | :---------------------- | :------------------------------------------------ | :------------------------------------------------ | :------- | | Property rental revenue | $131,598 | $122,241 | 7.7% | | Fixed rent | $120,637 | $112,249 | 7.5% | | Variable rent | $10,961 | $9,992 | 9.7% | 11. Share-Based Payments Details JBG SMITH's share-based compensation expense and equity awards granted during the period Share-Based Payments Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change | | :------------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :------- | | Total share-based compensation expense | $13,954 | $14,027 | (0.5)% | | Share-based compensation related to Formation Transaction and special equity awards | $2,244 | $4,945 | (54.6)% | - In January 2022, 660,785 Time-Based LTIP Units were granted with a weighted average grant-date fair value of $27.41 per unit, vesting ratably over four years[73] - In January 2022, 1.5 million performance-based AO LTIP Units were granted with a weighted average grant-date fair value of $4.44 per unit, subject to a TSR modifier and a three-year performance period[76] 12. Transaction and Other Costs Reports JBG SMITH's transaction and other costs, including demolition and deal-related expenses Transaction and Other Costs Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change | | :-------------------------- | :------------------------------------------------ | :------------------------------------------------ | :------- | | Transaction and other costs | $899 | $3,690 | (75.6)% | | Demolition costs | $22 | $1,008 | (97.8)% | | Completed, potential and pursued transaction expenses | $732 | $2,442 | (70.0)% | 13. Interest Expense Analyzes JBG SMITH's interest expense, highlighting factors influencing changes during the period Interest Expense Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change | | :------------- | :------------------------------------------------ | :------------------------------------------------ | :------- | | Interest expense | $16,278 | $16,296 | (0.1)% | - The decrease in interest expense was due to a $3.2 million change in the fair value of interest rate caps due to rising interest rates[166] - This was partially offset by a $1.4 million increase at Courthouse Plaza 1 and 2 due to a ground lease amendment and an $894,000 increase related to the revolving credit facility[166] 14. Shareholders' Equity and Loss Per Common Share Details JBG SMITH's shareholders' equity, common share repurchases, and loss per common share Shareholders' Equity and Loss Per Common Share Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Change (in thousands) | | :------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :-------------------- | | Net loss attributable to common shareholders | $(32) | $(20,731) | $20,699 | | Loss per common share - basic and diluted | $0.00 | $(0.16) | $0.16 | | Weighted average number of common shares outstanding - basic and diluted | 126,682 | 131,540 | (4,858) | - During Q1 2022, the company repurchased and retired 3.3 million common shares for $93.1 million at a weighted average price of $27.86 per share[83] - On April 29, 2022, a quarterly dividend of $0.225 per common share was declared[88] 15. Fair Value Measurements Explains JBG SMITH's fair value measurements for derivative financial instruments and hedging activities - Derivative financial instruments (interest rate swap and cap agreements) are used to manage interest rate risk and are measured at fair value on a recurring basis[89][90] - As of March 31, 2022, derivative financial instruments designated as effective hedges had a net unrealized gain of $11.6 million (vs. $(17.2) million as of December 31, 2021), recorded in "Accumulated other comprehensive income (loss)"[90] - The fair values of these derivatives are classified within Level 2 of the valuation hierarchy, based on interest rate pricing models and observable inputs[91][95] 16. Segment Information Provides JBG SMITH's segment information, detailing performance across Commercial, Multifamily, and Third-party services - Reportable segments are Commercial, Multifamily, and Third-party asset management and real estate services[99][135] - Consolidated NOI increased by 7.0% to $76.97 million in Q1 2022 from $71.96 million in Q1 2021[106] - Multifamily NOI increased by 53.0% to $23.3 million in Q1 2022, while Commercial NOI slightly decreased by 0.9% to $53.7 million[108][184][185] 17. Commitments and Contingencies Outlines JBG SMITH's construction commitments, tenant obligations, and environmental liabilities - Construction commitments for assets under construction totaled $569.0 million as of March 31, 2022, expected to be expended over the next two to three years[113][220] - Committed tenant-related obligations were $78.6 million as of March 31, 2022[115][221] - Environmental liabilities totaled $18.2 million as of March 31, 2022 and December 31, 2021[114][227] 18. Transactions with Related Parties Details JBG SMITH's transactions with related parties, including fee-based services and receivables - The company provides fee-based real estate services to the WHI Impact Pool and JBG Legacy Funds, among other third parties[121] - Revenue from these related parties was $5.5 million for Q1 2022 (vs. $5.8 million in Q1 2021)[125] - Receivables from JBG Legacy Funds and WHI Impact Pool totaled $2.7 million as of March 31, 2022[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion of JBG SMITH's Q1 2022 financial condition, operating results, strategy, and liquidity Organization and Basis of Presentation Describes JBG SMITH's organizational structure, REIT status, and basis of financial statement presentation - JBG SMITH is a Maryland REIT focused on commercial and multifamily assets in the Washington, D.C. metropolitan area, particularly National Landing[130] - The company serves as the developer for Amazon's new headquarters and Virginia Tech's Innovation Campus in National Landing[130] - The financial statements are prepared in accordance with GAAP, and the company intends to maintain its REIT status[133][134] Overview Provides an overview of JBG SMITH's operating portfolio, development pipeline, and strategic placemaking initiatives - As of March 31, 2022, the Operating Portfolio consisted of 62 operating assets (13.0 million sq ft commercial, 7,715 multifamily units) and significant development pipelines[138] - The company is executing a Placemaking strategy in National Landing, including new multifamily and office developments, retail, and digital infrastructure investments like 5G[139][140][141] - JBG SMITH has leases with Amazon totaling 1.0 million square feet in National Landing and is constructing two new office buildings for Amazon (2.1 million sq ft) at Metropolitan Park[142] 2022 Outlook Outlines JBG SMITH's 2022 strategy, focusing on capital allocation, portfolio shift, and segment performance expectations - Strategy involves active capital allocation, including opportunistic sales of non-core office assets and land sites to fund new acquisitions and development projects, aiming to shift the portfolio to majority multifamily[143] - Office portfolio performance remained stable in Q1, but new leasing is expected to lag through 2022 due to delayed return-to-office plans[144] - Multifamily portfolio shows improved occupancy and asking rents above pre-pandemic levels, with expected incremental NOI growth as leases roll[145] Operating Results Summarizes JBG SMITH's key operating results for Q1 2022, including net loss, revenue, and occupancy rates Operating Results Summary | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | % Change | | :------------------------------------------ | :-------------------------------- | :-------------------------------- | :------- | | Net loss attributable to common shareholders | $(32,000) | $(20,700,000) | (99.8)% | | Third-party real estate services revenue, including reimbursements | $24.0 million | $38.1 million | (37.1)% | | Same store NOI | $88.5 million | $79.0 million | 12.0% | - Operating commercial portfolio leased and occupied percentages were 85.2% and 83.3% as of March 31, 2022[146] - Operating multifamily portfolio leased and occupied percentages were 94.1% and 91.6% as of March 31, 2022[146] Critical Accounting Estimates Confirms no significant changes to JBG SMITH's critical accounting estimates during Q1 2022 - No significant changes to critical accounting estimates (asset acquisitions, real estate, investments in real estate ventures, revenue recognition) during Q1 2022[150] Recent Accounting Pronouncements Refers to Note 2 for details on recent accounting pronouncements, including reference rate reform application - Refer to Note 2 for details on recent accounting pronouncements, including the application of Topic 848 for Reference Rate Reform[153] Results of Operations Detailed analysis of JBG SMITH's Q1 2022 operating results, including revenue, expenses, and venture income Results of Operations Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change | | :------------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :------- | | Property rental revenue | $131,598 | $122,241 | 7.7% | | Third-party real estate services revenue, including reimbursements | $23,970 | $38,107 | (37.1)% | | Depreciation and amortization expense | $58,062 | $64,726 | (10.3)% | | Property operating expense | $40,644 | $34,731 | 17.0% | | Income (loss) from unconsolidated real estate ventures, net | $3,145 | $(943) | 433.5% | | Interest and other income, net | $14,246 | $9 | * | - Property rental revenue increase was driven by higher occupancy at 4747 Bethesda Avenue, West Half, The Wren, 900 W Street, 901 W Street, and a new Amazon lease at 2100 Crystal Drive[155] - Third-party real estate services revenue decrease was primarily due to a $10.7 million decrease in development fees and a $2.9 million decrease in reimbursement revenue[156] FFO Presents Funds From Operations (FFO) as a non-GAAP measure for JBG SMITH's levered operating performance FFO Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | :------- | | Net loss attributable to common shareholders | $(32) | $(20,731) | (99.8)% | | Real estate depreciation and amortization | $55,517 | $62,500 | (11.1)% | | FFO attributable to common shareholders | $51,300 | $42,328 | 21.2% | - FFO is a non-GAAP measure used to compare levered operating performance, excluding real estate depreciation and amortization, and gains/losses from real estate sales[167] NOI and Same Store NOI Analyzes JBG SMITH's Consolidated NOI and Same Store NOI, highlighting factors contributing to changes NOI and Same Store NOI Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change | | :---------------- | :------------------------------------------------ | :------------------------------------------------ | :------- | | Consolidated NOI | $76,969 | $71,955 | 7.0% | | Same store NOI | $88,539 | $79,034 | 12.0% | | Number of properties in same store pool | 59 | 55 | 7.3% | - Same store NOI increase was attributable to higher occupancy and rents, lower concessions in multifamily, and cash basis tenants paying deferred rent and increased parking revenue in commercial[174] - The same store pool increased to 59 properties from 55, including West Half, 901 W Street, 900 W Street, 1770 Crystal Drive, 1900 N Street, and 4747 Bethesda Avenue, while excluding The Alaire and The Terano due to sales[172] Reportable Segments Details JBG SMITH's segment performance for Commercial, Multifamily, and Third-party services Reportable Segments Summary | Segment | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | % Change (Revenue) | % Change (NOI) | | :------------------------------------ | :------------------------------------------------ | :------------------------------------------------ | :----------------- | :------------- | | Commercial Property Revenue | $91,633 | $89,871 | 2.0% | N/A | | Commercial Consolidated NOI | $53,654 | $54,135 | N/A | (0.9)% | | Multifamily Property Revenue | $42,242 | $32,651 | 29.4% | N/A | | Multifamily Consolidated NOI | $23,266 | $15,211 | N/A | 53.0% | - Multifamily growth was due to the acquisition of The Batley in November 2021 and higher occupancy and rental rates across the portfolio[185] - Commercial NOI decrease was due to higher cleaning expenses and lower occupancy at Universal Buildings and 2221 South Clark – Office[184] Liquidity and Capital Resources Discusses JBG SMITH's liquidity and capital resources, including operating cash flow and funding strategies - Primary sources of operating cash flow are property rental income and fee-based real estate services[186] - Anticipates adequate liquidity from cash flows from operations, financings, recapitalizations, asset sales, and existing cash balances to fund requirements for the next 12 months[187] Financing Activities Summarizes JBG SMITH's financing activities, including debt structure, amendments, and repayments Financing Activities Summary | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------------------------ | :----------------------------- | :------------------------------ | | Mortgages payable, net, including assets held for sale | $1,776,979 | $1,777,699 | | Revolving credit facility | $300,000 | $300,000 | | Unsecured term loans | $400,000 | $400,000 | - The Tranche A-1 Term Loan was amended in January 2022 to extend its maturity to January 2025 and change its interest rate to SOFR plus 1.15% to 1.75%[191] - In April 2022, the company repaid $210.0 million on its revolving credit facility[200] Common Shares Repurchased Details JBG SMITH's common share repurchase program, including shares bought and total value Common Shares Repurchased Summary | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Common shares repurchased and retired | 3.3 million | 619,749 | | Value of common shares repurchased | $93.1 million | $19.2 million | | Weighted average purchase price per share | $27.86 | $30.96 | - Since the program's inception in March 2020, 12.5 million common shares have been repurchased for $355.6 million[197] - In April 2022, an additional 707,000 common shares were repurchased for $19.4 million[198] Material Cash Requirements Outlines JBG SMITH's material cash requirements for debt maturities, tenant obligations, and development - Mortgages payable totaling $107.5 million (consolidated) and $194.1 million (our share) are scheduled to mature in 2022[201] - Committed tenant-related obligations totaled $78.6 million as of March 31, 2022[201] - Development expenditures for assets under construction require an additional $569.0 million over the next two to three years[202] - Funding sources include cash, cash flows from operations, distributions from ventures, credit facility borrowing capacity ($699.5 million available), and proceeds from financings/asset sales[209] Summary of Cash Flows Summarizes JBG SMITH's cash flow activities from operations, investing, and financing for Q1 2022 Summary of Cash Flows Table | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :------------------------------------------------ | :------------------------------------------------ | | Net cash provided by operating activities | $69,598 | $66,502 | | Net cash used in investing activities | $(32,951) | $(29,515) | | Net cash used in financing activities | $(119,529) | $(51,776) | | Net decrease in cash and cash equivalents, and restricted cash | $(82,882) | $(14,789) | - The decrease in cash was primarily due to $119.5 million used in financing activities (common share repurchases, dividends) and $33.0 million used in investing activities (development costs), partially offset by $69.6 million from operating activities[206][207][208][211] Unconsolidated Real Estate Ventures Details JBG SMITH's investments, capital commitments, and guarantees related to unconsolidated real estate ventures - Investments in unconsolidated real estate ventures totaled $461.4 million as of March 31, 2022[213] - Additional capital commitments and recorded guarantees to unconsolidated real estate ventures totaled $68.6 million as of March 31, 2022, with no principal payment guarantees[215] Commitments and Contingencies Outlines JBG SMITH's construction commitments, tenant obligations, environmental liabilities, and guarantees - Construction commitments for assets under construction totaled $569.0 million as of March 31, 2022[220] - Committed tenant-related obligations totaled $78.6 million as of March 31, 2022[221] - Environmental liabilities totaled $18.2 million as of March 31, 2022[227] - Aggregate principal payment guarantees for consolidated entities were $8.3 million as of March 31, 2022[223] Item 3. Quantitative and Qualitative Disclosures about Market Risk Details JBG SMITH's exposure to market risks, primarily interest rate risk, and its hedging strategies using derivatives Interest Rate Risk Analyzes JBG SMITH's interest rate risk exposure, including variable rate debt and potential financial impact Interest Rate Risk Summary | Debt Type | March 31, 2022 Balance (in thousands) | Weighted Average Effective Interest Rate | Annual Effect of 1% Change in Base Rates (in thousands) | | :------------------------------------------------ | :------------------------------------ | :--------------------------------------- | :------------------------------------------------------ | | Variable rate mortgages payable | $749,946 | 2.38% | $7,604 | | Revolving credit facility | $300,000 | 1.50% | $3,042 | | Pro rata share of variable rate debt of unconsolidated real estate ventures | $274,276 | 3.05% | $2,781 | - The fair value of consolidated debt was estimated at $2.5 billion as of March 31, 2022[232] Hedging Activities Describes JBG SMITH's use of derivative financial instruments for cash flow hedging to manage interest rate risk - Derivative financial instruments (interest rate swap and cap agreements) are used as cash flow hedges to manage interest rate risk[233][234] - As of March 31, 2022, effective hedges had an aggregate notional value of $1.0 billion and a fair value asset of $11.6 million[235] - Ineffective hedges had an aggregate notional value of $692.7 million and a fair value asset of $3.9 million as of March 31, 2022[236] Item 4. Controls and Procedures Confirms JBG SMITH's disclosure controls effectiveness and no material changes to internal control over financial reporting Evaluation of Disclosure Controls and Procedures Reports on the evaluation and effectiveness of JBG SMITH's disclosure controls and procedures as of March 31, 2022 - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[237] Changes in Internal Control over Financial Reporting States no material changes in JBG SMITH's internal control over financial reporting during Q1 2022 - No material changes in internal control over financial reporting during Q1 2022[238] PART II – OTHER INFORMATION Item 1. Legal Proceedings JBG SMITH is involved in routine legal actions, with no anticipated material adverse effects on financial position or operations - Ongoing legal actions are in the ordinary course of business[239] - Management does not expect these legal matters to have a material adverse effect on financial condition, results of operations, or cash flows[239] Item 1A. Risk Factors There have been no material changes to the risk factors previously disclosed in JBG SMITH's Annual Report - No material changes to previously disclosed risk factors in the Annual Report[240] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds JBG SMITH repurchased 3.3 million common shares for $93.1 million in Q1 2022 under its $500.0 million repurchase program Unregistered Sales of Equity Securities and Use of Proceeds Summary | Period | Total Number Of Common Shares Purchased | Average Price Paid Per Common Share | | :------------------------------------ | :-------------------------------------- | :---------------------------------- | | January 1, 2022 - January 31, 2022 | 32,304 | $25.99 | | February 1, 2022 - February 28, 2022 | 679,479 | $26.50 | | March 1, 2022 - March 31, 2022 | 2,629,364 | $28.23 | | Total for the three months ended March 31, 2022 | 3,341,147 | $27.86 | | Program total since inception in March 2020 | 12,487,968 | $28.45 | - The Board authorized a $500.0 million share repurchase program in March 2020[242] - In April 2022, an additional 707,000 common shares were repurchased for $19.4 million[241] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities reported by JBG SMITH during the reporting period - No defaults upon senior securities[243] Item 4. Mine Safety Disclosures This item is not applicable to JBG SMITH Properties - Not applicable[246] Item 5. Other Information Shareholders elected trustees and ratified auditors, but did not approve executive compensation on an advisory basis - Shareholders elected 11 trustees to the Board[248] - Shareholders ratified the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for fiscal year 2022[249] - Shareholders did not approve, on a non-binding advisory basis, the compensation of named executive officers[249] Item 6. Exhibits Lists all exhibits filed with Form 10-Q, including organizational documents, credit agreements, and certifications - Includes Declaration of Trust, Bylaws, Credit Agreements, and Form of AO LTIP Unit Agreement[251] - Certifications of CEO and CFO (Rule 13a-14(a) and 18 U.S.C 1350) are filed[251] Signatures Report signed by M. Moina Banerjee, CFO, and Angela Valdes, CAO, on May 3, 2022, confirming submission - Signed by M. Moina Banerjee, Chief Financial Officer, and Angela Valdes, Chief Accounting Officer[255][256] - Date of signing: May 3, 2022[255][256]