JBG SMITH Properties 10-Q for FY2020 Q1

JBG SMITH Properties (JBGS)

10-Q 2020-05-05 For: 2020-03-31

Added on April 08, 2026

About this 10-Q

JBG SMITH Properties filed this 10-Q on May 5, 2020, covering the quarter ended March 31, 2020 (FY2020 Q1).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $158.11M; up 1.9% from $155.2M a year earlier
Net income: $42.93M; up 72.7% from net income of $24.86M a year earlier
Diluted EPS: $0.32; up 60.0% from $0.20 a year earlier

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Maryland	81-4307010
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
4747 Bethesda Avenue Suite 200 Bethesda MD	20814
(Address of Principal Executive Offices)	(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares, par value $0.01 per share	JBGS	New York Stock Exchange

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	Page
	Condensed Consolidated Balance Sheets (unaudited) as of March 31, 2020 and December 31, 2019	3
	Condensed Consolidated Statements of Operations (unaudited) for the three months ended March 31, 2020 and 2019	4
	Condensed Consolidated Statements of Comprehensive Income (unaudited) for the three months ended March 31, 2020 and 2019	5
	Condensed Consolidated Statements of Equity (unaudited) for the three months ended March 31, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2020 and 2019	7
	Notes to Condensed Consolidated Financial Statements (unaudited)	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	46
Item 4.	Controls and Procedures	47

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	48
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	51
Item 3.	Defaults Upon Senior Securities	51
Item 4.	Mine Safety Disclosures	51
Item 5.	Other Information	52
Item 6.	Exhibits	53
	Signatures	54


	March 31, 2020		December 31, 2019
ASSETS
Real estate, at cost:
Land and improvements	$	1,281,375	$	1,240,455
Buildings and improvements		3,985,055		3,880,973
Construction in progress, including land		585,103		654,091
		5,851,533		5,775,519
Less accumulated depreciation		(1,155,114)		(1,119,571)
Real estate, net		4,696,419		4,655,948
Cash and cash equivalents		295,442		126,413
Restricted cash		18,577		16,103
Tenant and other receivables, net		56,036		52,941
Deferred rent receivable, net		174,728		169,721
Investments in unconsolidated real estate ventures		542,983		543,026
Other assets, net		281,752		253,687
Assets held for sale		73,876		168,412
TOTAL ASSETS	$	6,139,813	$	5,986,251

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgages payable, net	$	1,294,806	$	1,125,777
Revolving credit facility		200,000		200,000
Unsecured term loans, net		297,466		297,295
Accounts payable and accrued expenses		124,811		157,702
Other liabilities, net		228,323		206,042
Liabilities related to assets held for sale		213		—
Total liabilities		2,145,619		1,986,816
Commitments and contingencies
Redeemable noncontrolling interests		503,040		612,758
Shareholders' equity:
Preferred shares, $0.01 par value - 200,000 shares authorized, none issued		—		—
Common shares, $0.01 par value - 500,000 shares authorized; 133,517 and 134,148 shares issued and outstanding as of March 31, 2020 and December 31, 2019		1,336		1,342
Additional paid-in capital		3,723,795		3,633,042
Accumulated deficit		(188,239)		(231,164)
Accumulated other comprehensive loss		(45,941)		(16,744)
Total shareholders' equity of JBG SMITH Properties		3,490,951		3,386,476
Noncontrolling interests in consolidated subsidiaries		203		201
Total equity		3,491,154		3,386,677
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	6,139,813	$	5,986,251


	Three Months Ended March 31,
	2020		2019
REVENUE
Property rentals	$	120,380	$	119,413
Third-party real estate services, including reimbursements		29,716		27,691
Other revenue		8,011		8,095
Total revenue		158,107		155,199
EXPENSES
Depreciation and amortization		48,489		48,719
Property operating		34,503		32,174
Real estate taxes		18,199		17,235
General and administrative:
Corporate and other		13,176		12,314
Third-party real estate services		28,814		28,066
Share-based compensation related to Formation Transaction and special equity awards		9,441		11,131
Transaction and other costs		5,309		4,895
Total expenses		157,931		154,534
OTHER INCOME (EXPENSE)
Income (loss) from unconsolidated real estate ventures, net		(2,692)		3,601
Interest and other income, net		907		951
Interest expense		(12,005)		(17,174)
Gain on sale of real estate		59,477		39,033
Loss on extinguishment of debt		(33)		—
Total other income (expense)		45,654		26,411
INCOME BEFORE INCOME TAX BENEFIT		45,830		27,076
Income tax benefit		2,345		1,172
NET INCOME		48,175		28,248
Net income attributable to redeemable noncontrolling interests		(5,250)		(3,387)
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	42,925	$	24,861
EARNINGS PER COMMON SHARE:
Basic	$	0.32	$	0.20
Diluted	$	0.32	$	0.20
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING:
Basic		134,542		122,573
Diluted		135,429		123,423


								Accumulated
								Other		Noncontrolling
				Additional				Comprehensive		Interests in
	Common Shares			Paid-In		Accumulated		Income		Consolidated		Total
	Shares	Amount		Capital		Deficit		(Loss)		Subsidiaries		Equity
BALANCE AS OF JANUARY 1, 2020	134,148	$	1,342	$	3,633,042	$	(231,164)	$	(16,744)	$	201	$	3,386,677
Net income attributable to common shareholders and noncontrolling interests	—		—		—		42,925		—		—		42,925
Conversion of common limited partnership units to common shares	787		8		31,118		—		—		—		31,126
Common shares repurchased	(1,418)		(14)		(41,163)		—		—		—		(41,177)
Common shares issued pursuant to Employee Share Purchase Plan	—		—		132		—		—		—		132
Contributions from (distributions to) noncontrolling interests	—		—		—		—		—		2		2
Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation	—		—		100,666		—		3,573		—		104,239
Other comprehensive loss	—		—		—		—		(32,770)		—		(32,770)
BALANCE AS OF MARCH 31, 2020	133,517	$	1,336	$	3,723,795	$	(188,239)	$	(45,941)	$	203	$	3,491,154

BALANCE AS OF JANUARY 1, 2019	120,937	$	1,210	$	3,155,256	$	(176,018)	$	6,700	$	204	$	2,987,352
Net income attributable to common shareholders and noncontrolling interests	—		—		—		24,861		—		—		24,861
Conversion of common limited partnership units to common shares	1,657		17		57,089		—		—		—		57,106
Contributions from (distributions to) noncontrolling interests	—		—		—		—		—		161		161
Redeemable noncontrolling interests redemption value adjustment and other comprehensive (income) loss allocation	—		—		(62,212)		—		1,383		—		(60,829)
Other comprehensive loss	—		—		—		—		(11,535)		—		(11,535)
BALANCE AS OF MARCH 31, 2019	122,594	$	1,227	$	3,150,133	$	(151,157)	$	(3,452)	$	365	$	2,997,116


						Liabilities
						Related to
			Total	Assets Held		Assets Held
Assets	Segment	Location	Square Feet ⁽¹⁾	for Sale		for Sale
				(In thousands)
March 31, 2020
Pen Place ⁽²⁾	Other	Arlington, Virginia	2,080	$	73,876	$	213

December 31, 2019
Pen Place ⁽²⁾	Other	Arlington, Virginia	2,080	$	73,895	$	—
Metropolitan Park ⁽³⁾	Other	Arlington, Virginia	2,150		94,517		—
			4,230	$	168,412	$	—


	Ownership
Real Estate Venture Partners	Interest ⁽¹⁾	March 31, 2020		December 31, 2019
		(In thousands)
Prudential Global Investment Management	50.0%	$	217,076	$	215,624
CPPIB	55.0%		112,808		109,911
Landmark	1.8% - 49.0%		76,201		77,944
CBREI Venture	5.0% - 64.0%		67,084		68,405
Berkshire Group	50.0%		46,859		46,391
Brandywine	30.0%		13,741		13,830
Pacific Life Insurance Company ⁽²⁾	20.0%		8,653		10,385
Other			561		536
Total investments in unconsolidated real estate ventures		$	542,983	$	543,026


	Weighted
	Average Effective
	Interest Rate ⁽¹⁾	March 31, 2020		December 31, 2019
		(In thousands)
Variable rate ⁽²⁾	3.42%	$	644,399	$	629,479
Fixed rate ⁽³⁾	4.00%		558,657		561,236
Unconsolidated real estate ventures - mortgages payable			1,203,056		1,190,715
Unamortized deferred financing costs			(2,525)		(2,859)
Unconsolidated real estate ventures - mortgages payable, net ⁽⁴⁾		$	1,200,531	$	1,187,856


	Weighted Average
	Effective
	Interest Rate ⁽¹⁾	March 31, 2020		December 31, 2019
		(In thousands)
Variable rate	2.35%	$	177,200	$	2,200
Fixed rate ⁽²⁾	4.28%		1,123,426		1,125,648
Mortgages payable			1,300,626		1,127,848
Unamortized deferred financing costs and premium/ discount, net			(5,820)		(2,071)
Mortgages payable, net		$	1,294,806	$	1,125,777


Expected volatility	18.0	%
Risk-free interest rate	1.5	%
Post-grant restriction periods	2 years


Expected volatility	15.0	%
Dividend yield	2.3	%
Risk-free interest rate	1.3	%


	Fair Value Measurements
	Total		Level 1		Level 2		Level 3
	(In thousands)
March 31, 2020
Derivative financial instruments designated as cash flow hedges:
Classified as liabilities in "Other liabilities, net"	$	50,169		—	$	50,169		—
Derivative financial instruments not designated as cash flow hedges:
Classified as assets in "Other assets, net"		63		—		63		—


December 31, 2019
Derivative financial instruments designated as cash flow hedges:
Classified as liabilities in "Other liabilities, net"	$	17,440		—	$	17,440		—


	March 31, 2020				December 31, 2019
	Carrying				Carrying
	Amount ⁽¹⁾		Fair Value		Amount ⁽¹⁾		Fair Value
	(In thousands)
Financial liabilities:
Mortgages payable	$	1,300,626	$	1,223,797	$	1,127,848	$	1,162,890
Revolving credit facility		200,000		196,930		200,000		200,177
Unsecured term loans		300,000		296,208		300,000		300,607


	Three Months Ended March 31, 2020
	Commercial		Multifamily		Other		Total
	(In thousands)
Property rentals revenue	$	91,198	$	32,803	$	(3,621)	$	120,380
Other property revenue		6,244		137		—		6,381
Total property revenue		97,442		32,940		(3,621)		126,761
Property expense:
Property operating		27,943		10,307		(3,747)		34,503
Real estate taxes		12,372		4,738		1,089		18,199
Total property expense		40,315		15,045		(2,658)		52,702
Consolidated NOI	$	57,127	$	17,895	$	(963)	$	74,059



	March 31, 2020		December 31, 2019
	(In thousands)
Deferred leasing costs, net	$	125,155	$	126,016
Lease intangible assets, net		21,669		23,644
Other identified intangible assets, net		47,031		48,620
Operating lease right-of-use assets, net		6,564		19,865
Finance lease right-of-use asset ⁽¹⁾		42,316		—
Prepaid expenses		10,735		12,556
Deferred financing costs on credit facility, net		7,919		3,071
Deposits		3,210		3,210
Derivative agreements, at fair value		63		—
Other		17,090		16,705
Total other assets, net	$	281,752	$	253,687


	Three Months Ended March 31, 2019
	Commercial		Multifamily		Other		Total
	(In thousands)
Property rentals revenue	$	96,247	$	28,249	$	(5,083)	$	119,413
Other property revenue		6,375		80		—		6,455
Total property revenue		102,622		28,329		(5,083)		125,868
Property expense:
Property operating		30,481		7,967		(6,274)		32,174
Real estate taxes		12,513		3,548		1,174		17,235
Total property expense		42,994		11,515		(5,100)		49,409
Consolidated NOI	$	59,628	$	16,814	$	17	$	76,459


Period	Total Number Of Common Shares Purchased		Average Price Paid Per Common Share	Total Number of Common Shares Purchased As Part of Publicly Announced Plans Or Programs		Approximate Dollar Value of Common Shares that May Yet Be Purchased Under the Plan or Programs
						(In thousands)
January 1, 2020 - January 31, 2020	-	$	-	-	$	-
February 1, 2020 - February 29, 2020	-		-	-		-
March 1, 2020 - March 31, 2020	1,418,153		29.01	1,418,153		458,853
	1,418,153		29.01	1,418,153


Exhibits	Description
3.1	Declaration of Trust of JBG SMITH Properties, as amended and restated (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on July 21, 2017).
3.2	Articles Supplementary to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on March 6, 2018).
3.3	Articles of Amendment to Declaration of Trust of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our current report on Form 8-K, filed on May 3, 2018).
3.4	Amended and Restated Bylaws of JBG SMITH Properties (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on February 21, 2020).
10.1	Second Amendment to Credit Agreement, dated as of January 7, 2020, by and among JBG SMITH Properties LP, as Borrower, the financial institutions party thereto as lenders, and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on January 7, 2020).
10.30†	Amendment No. 1 to the JBG SMITH Properties 2017 Omnibus Share Plan, effective February 18, 2020 (incorporated by reference to Exhibit 10.30 to our Annual Report on Form 10-K, filed on March 5, 2020).
10.32†	Form of 2020 JBG SMITH Properties Restricted LTIP Unit Agreement (incorporated by reference to Exhibit 10.32 to our Annual Report on Form 10-K, filed on March 5, 2020).
10.33†	Form of 2020 JBG SMITH Properties Performance LTIP Unit Agreement (incorporated by reference to Exhibit 10.33 to our Annual Report on Form 10-K, filed on March 5, 2020).
10.37†	Letter Agreement, dated as of February 21, 2020, by and between JBG SMITH Properties and Robert A. Stewart (incorporated by reference to Exhibit 10.37 to our Annual Report on Form 10-K, filed on March 5, 2020).
31.1**	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.
31.2**	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended and Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934, as amended and 18 U.S.C 1350, as created by Section 906 of the Sarbanes- Oxley Act of 2002.
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Extension Calculation Linkbase
101.LAB	XBRL Extension Labels Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)


**	Filed herewith.
†	Denotes a management contract or compensatory plan, contract or arrangement.


		JBG SMITH Properties

Date:	May 5, 2020	/s/ Stephen W. Theriot
		Stephen W. Theriot
		Chief Financial Officer
		(Principal Financial and Accounting Officer)