JBG SMITH(US:JBGS)2021-02-23 21:48Debt and Interest Rate Risk - As of December 31, 2020, approximately $678.3 million of the outstanding consolidated debt was subject to variable interest rates without hedging arrangements, exposing the company to increased interest expense risks [183]. - A hypothetical increase of 100 basis points in interest rates would result in an annual increase of approximately $6.9 million in interest expense based on the variable rate debt outstanding as of December 31, 2020 [183]. - The company has interest rate swap agreements covering $862.7 million of its outstanding consolidated debt, which may reduce overall returns during periods of rising interest rates [184]. - The transition from USD-LIBOR to an alternative reference rate, such as SOFR, is uncertain and could lead to increased interest payments and market volatility [185]. - The company is subject to interest rate risk, which could adversely affect cash flow and the ability to service indebtedness, impacting the market price of common shares [183]. - The company’s fixed rate debt balance was $925.5 million with a weighted average effective interest rate of 4.32% as of December 31, 2020 [421]. - The company’s variable rate mortgages payable included a mortgage with an interest rate cap agreement as of December 31, 2020 [421]. - The weighted average effective interest rate for variable rate mortgages was 2.52% as of December 31, 2020, with total mortgages payable of $1.2 billion [556]. - The company had various interest rate swap and cap agreements on mortgages payable with an aggregate notional value of $1.3 billion as of December 31, 2020 [576]. Financial Performance - Total revenue for 2020 was $602.7 million, a decrease of 6.9% from $647.8 million in 2019 [448]. - Net loss attributable to common shareholders for 2020 was $62.3 million, compared to a net income of $65.6 million in 2019 [448]. - Comprehensive loss for 2020 was $93.5 million, compared to a comprehensive income of $48.1 million in 2019 [450]. - The company’s accumulated deficit grew to $412.9 million in 2020, compared to $231.2 million in 2019, reflecting an increase of 78.5% [446]. - Net income for 2020 was a loss of $67,261 thousand, compared to a profit of $74,144 thousand in 2019, indicating a significant decline in profitability [455]. - Total cash provided by operating activities in 2020 was $169,021 thousand, slightly down from $173,986 thousand in 2019 [455]. - The company reported cash paid for interest of $56,961,000 in 2020, an increase from $49,437,000 in 2019 [457]. - The company declared dividends of $120,011 thousand to common shareholders in 2020, compared to $129,834 thousand in 2019 [455]. Assets and Liabilities - Total assets increased to $6.08 billion in 2020, up from $5.99 billion in 2019, reflecting a growth of 1.6% [446]. - Total liabilities rose to $2.34 billion in 2020, an increase of 18% from $1.99 billion in 2019 [446]. - Cash and cash equivalents increased to $225.6 million in 2020, up from $126.4 million in 2019, representing a growth of 78.5% [446]. - The company’s pro rata share of debt from unconsolidated real estate ventures was $399.0 million as of December 31, 2020 [421]. - As of December 31, 2020, the carrying value of the company's real estate assets was approximately $4.77 billion, with an impairment loss of $7.8 million for the year [440]. - The estimated fair value of the company's consolidated debt was $2.0 billion as of December 31, 2020, compared to $1.7 billion as of December 31, 2019 [424]. - The net carrying value of real estate collateralizing mortgages payable totaled $1.8 billion as of December 31, 2020 [573]. Development and Future Plans - Future development plans are capital intensive and will require significant debt financing, which may involve asset sales and public or private securities offerings [182]. - The total estimated potential development density for future development pipeline assets was 14.8 million square feet as of December 31, 2020 [461]. - The company plans to leverage its role as the exclusive developer for Amazon's new headquarters, which may positively impact its revenue and growth prospects [217]. - In December 2020, the company acquired a 1.4-acre future development parcel for $65.0 million, with $47.3 million allocated to the former Americana Hotel site [532]. COVID-19 Impact - The ongoing COVID-19 pandemic poses significant risks to the company's financial condition, including impacts on occupancy rates and operating income [217]. - The company incurred $11.2 million in credit losses against billed rent receivables and $19.6 million against deferred rent receivables due to COVID-19 impacts [530]. - The company has provided rent deferrals totaling $4.3 million to tenants affected by COVID-19, with ongoing negotiations for additional concessions [528]. - Revenue from management services provided to unconsolidated real estate ventures is recognized in "Third-party real estate services, including reimbursements" when earned [488]. Shareholder Considerations - The limited partnership agreement requires partnership approval for extraordinary transactions, which may reduce the likelihood of such transactions being consummated even if they are in the best interests of shareholders [200]. - The declaration of trust contains ownership limits that may delay or prevent change of control transactions that could involve a premium price for common shares [194]. - Certain conflicts of interest may arise due to the ownership interests of trustees and executive officers in related entities, potentially impacting management's focus on the company's business plan [188]. - The company has elected to maintain its REIT status by distributing at least 90% of its taxable income as dividends to shareholders [516]. Real Estate Ventures - The company uses the equity method for investments in unconsolidated real estate ventures when it has significant influence, typically indicated by ownership of 20% or more of voting interests [488]. - The company's investments in unconsolidated real estate ventures totaled $461.4 million as of December 31, 2020, down from $543.0 million in 2019 [543]. - The combined total revenue for unconsolidated real estate ventures was $203.5 million in 2020, a decrease from $266.7 million in 2019 [558]. - The net loss for unconsolidated real estate ventures was $65.8 million in 2020, compared to a loss of $32.5 million in 2019 [558].