JBG SMITH Properties [JBGS] Filings

10-Q 1 jbgs-20220630x10q.htm 10-Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 001-37994

JBG SMITH PROPERTIES

________________________________________________________________________________

(Exact name of Registrant as specified in its charter)

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)

Registrant's telephone number, including area code: (240) 333-3600

_______________________________

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

As of July 29, 2022, JBG SMITH Properties had 114,390,891 common shares outstanding.

Table of Contents

JBG SMITH PROPERTIES

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED JUNE 30, 2022

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	Page
	Condensed Consolidated Balance Sheets (unaudited) as of June 30, 2022 and December 31, 2021	3
	Condensed Consolidated Statements of Operations (unaudited) for the three and six months ended June 30, 2022 and 2021	4
	Condensed Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the three and six months ended June 30, 2022 and 2021	5
	Condensed Consolidated Statements of Equity (unaudited) for the three and six months ended June 30, 2022 and 2021	6
	Condensed Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2022 and 2021	8
	Notes to Condensed Consolidated Financial Statements (unaudited)	10

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	50

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
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	51
Item 6.	Exhibits	54
	Signatures	55

Table of Contents

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

JBG SMITH PROPERTIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except par value amounts)


	June 30, 2022		December 31, 2021
ASSETS
Real estate, at cost:
Land and improvements	$	1,217,216	$	1,378,218
Buildings and improvements		4,004,286		4,513,606
Construction in progress, including land		385,085		344,652
		5,606,587		6,236,476
Less: accumulated depreciation		(1,257,871)		(1,368,003)
Real estate, net		4,348,716		4,868,473
Cash and cash equivalents		162,270		264,356
Restricted cash		212,848		37,739
Tenant and other receivables		46,605		44,496
Deferred rent receivable		154,487		192,265
Investments in unconsolidated real estate ventures		414,349		462,885
Intangible assets, net		157,819		201,956
Other assets, net		82,808		240,160
Assets held for sale		—		73,876
TOTAL ASSETS	$	5,579,902	$	6,386,206

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgages payable, net	$	1,612,169	$	1,777,699
Revolving credit facility		—		300,000
Unsecured term loans, net		398,500		398,664
Accounts payable and accrued expenses		112,784		106,136
Other liabilities, net		111,852		342,565
Total liabilities		2,235,305		2,925,064
Commitments and contingencies
Redeemable noncontrolling interests		521,392		522,725
Shareholders' equity:
Preferred shares, $0.01 par value - 200,000 shares authorized; none issued		—		—
Common shares, $0.01 par value - 500,000 shares authorized; 115,862 and 127,378 shares issued and outstanding as of June 30, 2022 and December 31, 2021		1,160		1,275
Additional paid-in capital		3,285,511		3,539,916
Accumulated deficit		(513,746)		(609,331)
Accumulated other comprehensive income (loss)		18,640		(15,950)
Total shareholders' equity of JBG SMITH Properties		2,791,565		2,915,910
Noncontrolling interests		31,640		22,507
Total equity		2,823,205		2,938,417
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	5,579,902	$	6,386,206

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
REVENUE
Property rental	$	117,036	$	122,819	$	248,634	$	245,060
Third-party real estate services, including reimbursements		22,157		26,745		46,127		64,852
Other revenue		6,312		5,080		12,709		10,021
Total revenue		145,505		154,644		307,470		319,933
EXPENSES
Depreciation and amortization		49,479		56,678		107,541		121,404
Property operating		35,445		35,000		76,089		69,731
Real estate taxes		14,946		18,558		33,132		36,868
General and administrative:
Corporate and other		14,782		13,895		30,597		26,370
Third-party real estate services		24,143		25,557		51,192		54,493
Share-based compensation related to Formation Transaction and special equity awards		1,577		4,441		3,821		9,386
Transaction and other costs		1,987		2,270		2,886		5,960
Total expenses		142,359		156,399		305,258		324,212
OTHER INCOME (EXPENSE)
Income (loss) from unconsolidated real estate ventures, net		(2,107)		3,953		1,038		3,010
Interest and other income (loss), net		1,672		(38)		15,918		(29)
Interest expense		(16,041)		(16,773)		(32,319)		(33,069)
Gain on the sale of real estate, net		158,767		11,290		158,631		11,290
Loss on the extinguishment of debt		(1,038)		—		(1,629)		—
Total other income (expense)		141,253		(1,568)		141,639		(18,798)
INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT		144,399		(3,323)		143,851		(23,077)
Income tax (expense) benefit		(2,905)		5		(2,434)		(4,310)
NET INCOME (LOSS)		141,494		(3,318)		141,417		(27,387)
Net (income) loss attributable to redeemable noncontrolling interests		(18,248)		345		(18,258)		2,575
Net loss attributable to noncontrolling interests		29		—		84		1,108
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	123,275	$	(2,973)	$	123,243	$	(23,704)
EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED	$	1.02	$	(0.03)	$	0.99	$	(0.19)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED		121,316		131,480		123,984		131,510

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
NET INCOME (LOSS)	$	141,494	$	(3,318)	$	141,417	$	(27,387)
OTHER COMPREHENSIVE INCOME:
Change in fair value of derivative financial instruments		7,225		(1,404)		32,320		5,007
Reclassification of net loss on derivative financial instruments from accumulated other comprehensive income (loss) into interest expense		2,791		3,834		6,547		7,575
Total other comprehensive income		10,016		2,430		38,867		12,582
COMPREHENSIVE INCOME (LOSS)		151,510		(888)		180,284		(14,805)
Net (income) loss attributable to redeemable noncontrolling interests		(18,248)		345		(18,258)		2,575
Net loss attributable to noncontrolling interests		29		—		84		1,108
Other comprehensive income attributable to redeemable noncontrolling interests		(1,311)		(235)		(4,277)		(1,208)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES	$	131,980	$	(778)	$	157,833	$	(12,330)

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)


								Accumulated
								Other
				Additional				Comprehensive
	Common Shares			Paid-In		Accumulated		Income		Noncontrolling		Total
	Shares	Amount		Capital		Deficit		(Loss)		Interests		Equity
BALANCE AS OF MARCH 31, 2022	124,248	$	1,243	$	3,444,793	$	(609,363)	$	9,935	$	28,438	$	2,875,046
Net income (loss) attributable to common shareholders and noncontrolling interests	—		—		—		123,275		—		(29)		123,246
Conversion of common limited partnership units ("OP Units") to common shares	72		1		1,761		—		—		—		1,762
Common shares repurchased	(8,499)		(84)		(213,807)		—		—		—		(213,891)
Common shares issued pursuant to employee incentive compensation plan and Employee Share Purchase Plan ("ESPP")	41		—		1,143		—		—		—		1,143
Dividends declared on common shares ($0.225 per common share)	—		—		—		(27,658)		—		—		(27,658)
Contributions from noncontrolling interests, net	—		—		—		—		—		3,231		3,231
Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation	—		—		51,621		—		(1,311)		—		50,310
Total other comprehensive income	—		—		—		—		10,016		—		10,016
BALANCE AS OF JUNE 30, 2022	115,862	$	1,160	$	3,285,511	$	(513,746)	$	18,640	$	31,640	$	2,823,205

BALANCE AS OF MARCH 31, 2021	131,277	$	1,314	$	3,631,277	$	(433,675)	$	(30,800)	$	8,730	$	3,176,846
Net loss attributable to common shareholders and noncontrolling interests	—		—		—		(2,973)		—		—		(2,973)
Conversion of OP Units to common shares	530		5		17,756		—		—		—		17,761
Common shares issued pursuant to employee incentive compensation plan and ESPP	34		—		1,090		—		—		—		1,090
Dividends declared on common shares ($0.225 per common share)	—		—		—		(29,582)		—		—		(29,582)
Contributions from noncontrolling interests, net	—		—		—		—		—		7,810		7,810
Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation	—		—		94		—		(235)		—		(141)
Total other comprehensive income	—		—		—		—		2,430		—		2,430
BALANCE AS OF JUNE 30, 2021	131,841	$	1,319	$	3,650,217	$	(466,230)	$	(28,605)	$	16,540	$	3,173,241

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Equity

(Unaudited)

(In thousands)


								Accumulated
								Other
				Additional				Comprehensive
	Common Shares			Paid-In		Accumulated		Income		Noncontrolling		Total
	Shares	Amount		Capital		Deficit		(Loss)		Interests		Equity
BALANCE AS OF DECEMBER 31, 2021	127,378	$	1,275	$	3,539,916	$	(609,331)	$	(15,950)	$	22,507	$	2,938,417
Net income (loss) attributable to common shareholders and noncontrolling interests	—		—		—		123,243		—		(84)		123,159
Conversion of OP Units to common shares	280		3		7,773		—		—		—		7,776
Common shares repurchased	(11,840)		(118)		(306,921)		—		—		—		(307,039)
Common shares issued pursuant to employee incentive compensation plan and ESPP	44		—		1,429		—		—		—		1,429
Dividends declared on common shares ($0.225 per common share)	—		—		—		(27,658)		—		—		(27,658)
Contributions from noncontrolling interests, net	—		—		—		—		—		9,217		9,217
Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation	—		—		43,314		—		(4,277)		—		39,037
Total other comprehensive income	—		—		—		—		38,867		—		38,867
BALANCE AS OF JUNE 30, 2022	115,862	$	1,160	$	3,285,511	$	(513,746)	$	18,640	$	31,640	$	2,823,205

BALANCE AS OF DECEMBER 31, 2020	131,778	$	1,319	$	3,657,643	$	(412,944)	$	(39,979)	$	167	$	3,206,206
Net loss attributable to common shareholders and noncontrolling interests	—		—		—		(23,704)		—		(1,108)		(24,812)
Conversion of OP Units to common shares	649		6		21,674		—		—		—		21,680
Common shares repurchased	(620)		(6)		(19,197)		—		—		—		(19,203)
Common shares issued pursuant to employee incentive compensation plan and ESPP	34		—		1,339		—		—		—		1,339
Dividends declared on common shares ($0.225 per common share)	—		—		—		(29,582)		—		—		(29,582)
Contributions from noncontrolling interests, net	—		—		—		—		—		17,481		17,481
Redeemable noncontrolling interests redemption value adjustment and total other comprehensive income allocation	—		—		(11,242)		—		(1,208)		—		(12,450)
Total other comprehensive income	—		—		—		—		12,582		—		12,582
BALANCE AS OF JUNE 30, 2021	131,841	$	1,319	$	3,650,217	$	(466,230)	$	(28,605)	$	16,540	$	3,173,241

See accompanying notes to the condensed consolidated financial statements (unaudited).

Table of Contents

JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2022		2021
OPERATING ACTIVITIES:
Net income (loss)	$	141,417	$	(27,387)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Share-based compensation expense		25,375		26,892
Depreciation and amortization, including amortization of deferred financing costs		109,697		123,444
Deferred rent		(7,237)		(12,170)
Income from unconsolidated real estate ventures, net		(1,038)		(3,010)
Amortization of market lease intangibles, net		(621)		(658)
Amortization of lease incentives		4,303		4,191
Loss on extinguishment of debt		1,629		—
Gain on the sale of real estate, net		(158,631)		(11,290)
Loss on operating lease and other receivables		738		975
Income from investments, net		(15,282)		—
Return on capital from unconsolidated real estate ventures		6,028		10,348
Other non-cash items		(4,781)		473
Changes in operating assets and liabilities:
Tenant and other receivables		(2,847)		11,204
Other assets, net		(3,669)		274
Accounts payable and accrued expenses		(1,375)		238
Other liabilities, net		13,943		32
Net cash provided by operating activities		107,649		123,556
INVESTING ACTIVITIES:
Development costs, construction in progress and real estate additions		(128,114)		(67,408)
Proceeds from the sale of real estate		923,108		14,370
Proceeds from the sale of investments		19,030		—
Distributions of capital from unconsolidated real estate ventures		52,465		4,583
Investments in unconsolidated real estate ventures and other investments		(81,185)		(21,990)
Net cash provided by (used in) investing activities		785,304		(70,445)
FINANCING ACTIVITIES:
Repayments of mortgages payable		(167,132)		(3,342)
Repayments of revolving credit facility		(300,000)		—
Debt issuance costs		(1,256)		(4,587)
Proceeds from common shares issued pursuant to ESPP		800		880
Common shares repurchased		(297,040)		(19,203)
Dividends paid to common shareholders		(56,323)		(59,232)
Distributions to redeemable noncontrolling interests		(8,196)		(9,712)
Distributions to noncontrolling interests		(21)		(22)
Contributions from noncontrolling interests		9,238		17,464
Net cash used in financing activities		(819,930)		(77,754)
Net increase (decrease) in cash and cash equivalents, and restricted cash		73,023		(24,643)
Cash and cash equivalents, and restricted cash, beginning of period		302,095		263,336
Cash and cash equivalents, and restricted cash, end of period	$	375,118	$	238,693

See accompanying notes to the condensed consolidated financial statements (unaudited).

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JBG SMITH PROPERTIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Six Months Ended June 30,
	2022		2021
CASH AND CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD:
Cash and cash equivalents	$	162,270	$	201,150
Restricted cash		212,848		37,543
Cash and cash equivalents, and restricted cash	$	375,118	$	238,693

SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION:
Cash paid for interest (net of capitalized interest of $3,928 and $3,256 in 2022 and 2021)	$	34,612	$	30,335
Accrued capital expenditures included in accounts payable and accrued expenses		57,426		41,662
Write-off of fully depreciated assets		7,993		43,185
Deconsolidation of real estate asset		—		26,476
Conversion of OP Units to common shares		7,776		21,680
Cash paid for amounts included in the measurement of lease liabilities for operating leases		1,092		1,320

JBG SMITH Properties [JBGS] Filings
10-Q	[2022-08-02]
10-Q	[2022-05-03]
10-K	[2022-02-22]
10-Q	[2021-11-02]
10-Q	[2021-08-03]
10-Q	[2021-05-04]
10-K	[2021-02-23]
10-Q	[2020-11-03]
10-Q	[2020-08-04]
10-Q	[2020-05-05]
10-K	[2020-02-25]
10-Q	[2019-11-05]
10-Q	[2019-08-06]
10-Q	[2019-05-07]
10-K	[2019-02-26]
10-Q	[2018-11-07]
10-Q	[2018-08-09]
10-Q	[2018-05-09]
10-K	[2018-03-12]
10-Q	[2017-11-13]
10-Q	[2017-08-14]