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 September 30, 2017
OR
☐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 AvenueSuite 200 BethesdaMD | 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
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes
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
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-212b-2 of the Exchange Act) Yes
As of November 6, 2017,October 29, 2021, JBG SMITH Properties had 117,957,107129,725,289 common shares outstanding.
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2
ITEM 1. Financial Statements
JBG SMITH PROPERTIES Condensed Consolidated and Combined Balance Sheets September 30, 2017 and December 31, 2016 (Unaudited) (In thousands, except par value amounts) | |||||||
September 30, 2017 | December 31, 2016 | ||||||
ASSETS | |||||||
Real estate, at cost: | |||||||
Land and improvements | $ | 1,272,997 | $ | 939,592 | |||
Buildings and improvements | 3,662,853 | 3,064,466 | |||||
Construction in progress, including land | 906,680 | 151,333 | |||||
5,842,530 | 4,155,391 | ||||||
Less accumulated depreciation | (982,454 | ) | (930,769 | ) | |||
Real estate, net | 4,860,076 | 3,224,622 | |||||
Cash and cash equivalents | 367,896 | 29,000 | |||||
Restricted cash | 17,521 | 3,263 | |||||
Tenant and other receivables, net | 50,474 | 33,380 | |||||
Deferred rent receivable, net | 145,683 | 136,582 | |||||
Investments in and advances to unconsolidated real estate ventures | 284,986 | 45,776 | |||||
Receivable from former parent | — | 75,062 | |||||
Other assets, net | 288,391 | 112,955 | |||||
TOTAL ASSETS | $ | 6,015,027 | $ | 3,660,640 | |||
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |||||||
Liabilities: | |||||||
Mortgages payable, net | $ | 1,977,674 | $ | 1,165,014 | |||
Revolving credit facility | 115,751 | — | |||||
Unsecured term loan, net | 46,389 | — | |||||
Payable to former parent | — | 283,232 | |||||
Accounts payable and accrued expenses | 131,627 | 40,923 | |||||
Other liabilities, net | 100,774 | 49,487 | |||||
Total liabilities | 2,372,215 | 1,538,656 | |||||
Commitments and contingencies | |||||||
Redeemable noncontrolling interests | 567,001 | — | |||||
Shareholders' equity: | |||||||
Preferred shares, $0.01 par value - 200,000 shares authorized, none issued | — | — | |||||
Common shares, $0.01 par value - 500,000 shares authorized and 117,957 shares issued and outstanding at September 30, 2017 | 1,180 | — | |||||
Additional paid-in capital | 3,099,056 | — | |||||
Accumulated deficit | (28,827 | ) | — | ||||
Total shareholders' equity of JBG SMITH Properties | 3,071,409 | — | |||||
Former parent equity | — | 2,121,689 | |||||
Noncontrolling interests in consolidated subsidiaries | 4,402 | 295 | |||||
Total equity | 3,075,811 | 2,121,984 | |||||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | $ | 6,015,027 | $ | 3,660,640 |
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except par value amounts)
| | | | | | |
|
| September 30, 2021 |
| December 31, 2020 | ||
ASSETS |
| |
|
| |
|
Real estate, at cost: |
| |
|
| |
|
Land and improvements | | $ | 1,358,299 | | $ | 1,391,472 |
Buildings and improvements | |
| 4,368,477 | |
| 4,341,103 |
Construction in progress, including land | |
| 299,359 | |
| 268,056 |
| |
| 6,026,135 | |
| 6,000,631 |
Less: accumulated depreciation | |
| (1,346,107) | |
| (1,232,690) |
Real estate, net | |
| 4,680,028 | |
| 4,767,941 |
Cash and cash equivalents | |
| 194,277 | |
| 225,600 |
Restricted cash | |
| 34,900 | |
| 37,736 |
Tenant and other receivables | |
| 51,128 | |
| 55,903 |
Deferred rent receivable | |
| 187,882 | |
| 170,547 |
Investments in unconsolidated real estate ventures | |
| 486,052 | |
| 461,369 |
Other assets, net | |
| 300,537 | |
| 286,575 |
Assets held for sale | |
| 74,174 | |
| 73,876 |
TOTAL ASSETS | | $ | 6,008,978 | | $ | 6,079,547 |
| | | | | | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | |
|
| |||
Liabilities: | |
|
| |
|
|
Mortgages payable, net | | $ | 1,674,285 | | $ | 1,593,738 |
Revolving credit facility | |
| — | |
| — |
Unsecured term loans, net | |
| 398,493 | |
| 397,979 |
Accounts payable and accrued expenses | |
| 105,307 | |
| 103,102 |
Other liabilities, net | |
| 200,204 | |
| 247,774 |
Total liabilities | |
| 2,378,289 | |
| 2,342,593 |
Commitments and contingencies | |
|
| |
|
|
Redeemable noncontrolling interests | |
| 526,913 | |
| 530,748 |
Shareholders' equity: | |
|
| |
|
|
Preferred shares, $0.01 par value - 200,000 shares authorized; NaN issued | |
| 0 | |
| 0 |
Common shares, $0.01 par value - 500,000 shares authorized; 129,704 and 131,778 shares issued and outstanding as of September 30, 2021 and December 31, 2020 | |
| 1,298 | |
| 1,319 |
Additional paid-in capital | |
| 3,606,462 | |
| 3,657,643 |
Accumulated deficit | |
| (495,033) | |
| (412,944) |
Accumulated other comprehensive loss | |
| (25,446) | |
| (39,979) |
Total shareholders' equity of JBG SMITH Properties | |
| 3,087,281 | |
| 3,206,039 |
Noncontrolling interests | |
| 16,495 | |
| 167 |
Total equity | |
| 3,103,776 | |
| 3,206,206 |
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | | $ | 6,008,978 | | $ | 6,079,547 |
See accompanying notes to the condensed consolidated and combined financial statements.statements (unaudited).
3
JBG SMITH PROPERTIES Condensed Consolidated and Combined Statements of Operations For the three and nine months ended September 30, 2017 and 2016 (Unaudited) (In thousands, except per share data) | |||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
REVENUE | |||||||||||||||
Property rentals | $ | 116,458 | $ | 103,265 | $ | 316,899 | $ | 299,497 | |||||||
Tenant reimbursements | 9,593 | 10,231 | 27,161 | 28,428 | |||||||||||
Third-party real estate services, including reimbursements | 25,141 | 8,297 | 38,881 | 24,617 | |||||||||||
Other income | 1,158 | 1,564 | 3,701 | 3,938 | |||||||||||
Total revenue | 152,350 | 123,357 | 386,642 | 356,480 | |||||||||||
EXPENSES | |||||||||||||||
Depreciation and amortization | 43,951 | 31,377 | 109,726 | 98,291 | |||||||||||
Property operating | 29,634 | 27,287 | 77,341 | 75,087 | |||||||||||
Real estate taxes | 17,194 | 14,462 | 47,978 | 43,712 | |||||||||||
General and administrative: | |||||||||||||||
Corporate and other | 10,593 | 10,913 | 35,536 | 36,040 | |||||||||||
Third-party real estate services | 21,178 | 4,779 | 30,362 | 14,272 | |||||||||||
Share-based compensation related to Formation Transaction | 14,445 | — | 14,445 | — | |||||||||||
Transaction and other costs | 104,095 | 1,528 | 115,173 | 1,528 | |||||||||||
Total operating expenses | 241,090 | 90,346 | 430,561 | 268,930 | |||||||||||
OPERATING (LOSS) INCOME | (88,740 | ) | 33,011 | (43,919 | ) | 87,550 | |||||||||
(Loss) income from unconsolidated real estate ventures | (1,679 | ) | 584 | (1,365 | ) | (952 | ) | ||||||||
Interest and other (loss) income, net | (379 | ) | 749 | 1,366 | 2,292 | ||||||||||
Interest expense | (15,309 | ) | (13,028 | ) | (43,813 | ) | (38,662 | ) | |||||||
Loss on extinguishment of debt | (689 | ) | — | (689 | ) | — | |||||||||
Gain on bargain purchase | 27,771 | — | 27,771 | — | |||||||||||
(LOSS) INCOME BEFORE INCOME TAX EXPENSE | (79,025 | ) | 21,316 | (60,649 | ) | 50,228 | |||||||||
Income tax benefit (expense) | 1,034 | (302 | ) | 317 | (884 | ) | |||||||||
NET (LOSS) INCOME | (77,991 | ) | 21,014 | (60,332 | ) | 49,344 | |||||||||
Net loss attributable to redeemable noncontrolling interests | 8,160 | — | 2,481 | — | |||||||||||
NET (LOSS) INCOME ATTRIBUTABLE TO JBG SMITH PROPERTIES | $ | (69,831 | ) | $ | 21,014 | $ | (57,851 | ) | $ | 49,344 | |||||
(LOSS) EARNINGS PER COMMON SHARE: | |||||||||||||||
Basic | $ | (0.61 | ) | $ | 0.21 | $ | (0.55 | ) | $ | 0.49 | |||||
Diluted | $ | (0.61 | ) | $ | 0.21 | $ | (0.55 | ) | $ | 0.49 | |||||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - basic and diluted | $ | 114,744 | $ | 100,571 | $ | 105,347 | $ | 100,571 |
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share data)
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
REVENUE |
| |
|
| |
| | |
|
| |
|
Property rental | | $ | 125,900 | | $ | 118,680 | | $ | 370,960 | | $ | 354,519 |
Third-party real estate services, including reimbursements | |
| 25,842 | |
| 26,987 | |
| 90,694 | |
| 83,870 |
Other revenue | |
| 5,280 | |
| 5,368 | |
| 15,301 | |
| 15,705 |
Total revenue | |
| 157,022 | |
| 151,035 | |
| 476,955 | |
| 454,094 |
EXPENSES | |
|
| |
|
| |
| | |
|
|
Depreciation and amortization | |
| 56,726 | |
| 56,481 | |
| 178,130 | |
| 157,586 |
Property operating | |
| 40,198 | |
| 37,572 | |
| 109,929 | |
| 105,867 |
Real estate taxes | |
| 18,259 | |
| 17,354 | |
| 55,127 | |
| 53,422 |
General and administrative: | |
|
| |
|
| |
| | |
|
|
Corporate and other | |
| 12,105 | |
| 11,086 | |
| 38,475 | |
| 37,478 |
Third-party real estate services | |
| 25,542 | |
| 28,207 | |
| 80,035 | |
| 86,260 |
Share-based compensation related to Formation Transaction and special equity awards | |
| 3,480 | |
| 7,133 | |
| 12,866 | |
| 25,432 |
Transaction and other costs | |
| 2,951 | |
| 845 | |
| 8,911 | |
| 7,526 |
Total expenses | |
| 159,261 | |
| 158,678 | |
| 483,473 | |
| 473,571 |
OTHER INCOME (EXPENSE) | |
|
| |
|
| |
|
| |
|
|
Income (loss) from unconsolidated real estate ventures, net | |
| 20,503 | |
| (965) | |
| 23,513 | |
| (17,142) |
Interest and other income, net | |
| 192 | |
| — | |
| 163 | |
| 1,021 |
Interest expense | |
| (17,243) | |
| (16,885) | |
| (50,312) | |
| (44,660) |
Gain on sale of real estate | |
| — | |
| — | |
| 11,290 | |
| 59,477 |
Loss on extinguishment of debt | |
| — | |
| — | |
| — | |
| (33) |
Total other income (expense) | |
| 3,452 | |
| (17,850) | |
| (15,346) | |
| (1,337) |
INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT | |
| 1,213 | | | (25,493) | |
| (21,864) | |
| (20,814) |
Income tax (expense) benefit | |
| (217) | |
| 488 | |
| (4,527) | |
| 3,721 |
NET INCOME (LOSS) | |
| 996 | |
| (25,005) | |
| (26,391) | |
| (17,093) |
Net (income) loss attributable to redeemable noncontrolling interests | |
| (103) | |
| 2,212 | |
| 2,472 | |
| 445 |
Net loss attributable to noncontrolling interests | |
| — | |
| — | |
| 1,108 | |
| — |
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | | $ | 893 | | $ | (22,793) | | $ | (22,811) | | $ | (16,648) |
EARNINGS (LOSS) PER COMMON SHARE - BASIC AND DILUTED | | $ | 0.00 | | $ | (0.18) | | $ | (0.18) | | $ | (0.14) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC AND DILUTED | |
| 131,351 | |
| 133,620 | |
| 131,456 | |
| 133,924 |
See accompanying notes to the condensed consolidated and combined financial statements.statements (unaudited).
4
JBG SMITH PROPERTIES
(Unaudited)
(In thousands)
Common Shares | Additional Paid-In Capital | Accumulated Deficit | Former Parent Equity | Noncontrolling Interests in Consolidated Subsidiaries | Total Equity | |||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||||
BALANCE AT JANUARY 1, 2017 | $ | 2,121,689 | $ | 295 | $ | 2,121,984 | ||||||||||||||||||||
Net income (loss) attributable to JBG SMITH Properties | — | $ | — | $ | — | $ | (28,827 | ) | (29,024 | ) | (1) | — | (57,851 | ) | ||||||||||||
Deferred compensation shares and options, net | — | — | — | — | 1,526 | — | 1,526 | |||||||||||||||||||
Contributions from former parent, net | — | — | — | — | 334,843 | — | 334,843 | |||||||||||||||||||
Issuance of common limited partnership units at the Separation | — | — | — | — | (96,632 | ) | — | (96,632 | ) | |||||||||||||||||
Issuance of common shares at the Separation | 94,736 | 947 | 2,331,455 | — | (2,332,402 | ) | — | — | ||||||||||||||||||
Issuance of common shares in connection with the Combination | 23,221 | 233 | 864,685 | — | — | — | 864,918 | |||||||||||||||||||
Noncontrolling interests acquired in connection with the Combination | — | — | — | — | — | 3,987 | 3,987 | |||||||||||||||||||
Distributions to noncontrolling interests | — | — | — | — | — | (14 | ) | (14 | ) | |||||||||||||||||
Contributions from noncontrolling interests | — | — | — | — | — | 134 | 134 | |||||||||||||||||||
Adjustment to record redeemable noncontrolling interest at redemption value | — | — | (97,084 | ) | — | — | — | (97,084 | ) | |||||||||||||||||
BALANCE AT SEPTEMBER 30, 2017 | 117,957 | $ | 1,180 | $ | 3,099,056 | $ | (28,827 | ) | $ | — | $ | 4,402 | $ | 3,075,811 |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
NET INCOME (LOSS) | | $ | 996 | | $ | (25,005) | | $ | (26,391) | | $ | (17,093) |
OTHER COMPREHENSIVE INCOME (LOSS): | |
|
| |
|
| |
|
| |
|
|
Change in fair value of derivative financial instruments | |
| (329) | |
| (278) | |
| 4,678 | |
| (39,489) |
Reclassification of net loss on derivative financial instruments from accumulated other comprehensive loss into interest expense | |
| 3,901 | |
| 3,823 | |
| 11,476 | |
| 8,137 |
Other comprehensive income (loss) | |
| 3,572 | |
| 3,545 | |
| 16,154 | |
| (31,352) |
COMPREHENSIVE INCOME (LOSS) | |
| 4,568 | |
| (21,460) | |
| (10,237) | |
| (48,445) |
Net (income) loss attributable to redeemable noncontrolling interests | |
| (103) | |
| 2,212 | |
| 2,472 | |
| 445 |
Net loss attributable to noncontrolling interests | | | — | | | — | | | 1,108 | | | — |
Other comprehensive (income) loss attributable to redeemable noncontrolling interests | |
| (413) | |
| (309) | |
| (1,621) | |
| 3,446 |
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO JBG SMITH PROPERTIES | | $ | 4,052 | | $ | (19,557) | | $ | (8,278) | | $ | (44,554) |
See accompanying notes to the condensed consolidated and combined financial statements.statements (unaudited).
5
JBG SMITH PROPERTIES Condensed Consolidated and Combined Statements of Cash Flows For the nine months ended September 30, 2017 and 2016 (Unaudited) (In thousands) | |||||||
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
OPERATING ACTIVITIES: | |||||||
Net (loss) income | $ | (60,332 | ) | $ | 49,344 | ||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | |||||||
Share-based compensation expense | 17,164 | 3,486 | |||||
Depreciation and amortization, including amortization of debt issuance costs | 111,684 | 99,612 | |||||
Deferred rent | (9,249 | ) | (10,772 | ) | |||
Loss from unconsolidated real estate ventures | 1,365 | 952 | |||||
Amortization of above- and below-market lease intangibles, net | (872 | ) | (1,012 | ) | |||
Return on capital from unconsolidated real estate ventures | 1,149 | 1,020 | |||||
Gain on bargain purchase | (27,771 | ) | — | ||||
Loss on extinguishment of debt | 689 | — | |||||
Unrealized gain on interest rate swaps | (467 | ) | — | ||||
Bad debt expense | 1,808 | 618 | |||||
Other non-cash items | 6,466 | 3,592 | |||||
Changes in operating assets and liabilities: | |||||||
Tenant and other receivables | (3,617 | ) | (2,177 | ) | |||
Other assets, net | (32,884 | ) | (19,762 | ) | |||
Accounts payable and accrued expenses | 19,077 | (4,091 | ) | ||||
Other liabilities, net | (817 | ) | (19,427 | ) | |||
Net cash provided by operating activities | 23,393 | 101,383 | |||||
INVESTING ACTIVITIES: | |||||||
Development costs, construction in progress and real estate additions | (115,922 | ) | (185,439 | ) | |||
Cash received in connection with the Combination | 83,942 | — | |||||
Restricted cash | (798 | ) | 3,234 | ||||
Investments in and advances to unconsolidated real estate ventures | (1,441 | ) | (19,965 | ) | |||
Repayment of notes receivable | 50,934 | — | |||||
Other investments | (3,531 | ) | (1,935 | ) | |||
Proceeds from repayment of receivable from former parent | 75,000 | — | |||||
Net cash provided by (used in) investing activities | 88,184 | (204,105 | ) | ||||
FINANCING ACTIVITIES: | |||||||
Contributions from former parent, net | 160,203 | 32,955 | |||||
Repayment of borrowings from former parent | (115,630 | ) | — | ||||
Capital lease payments | (17,776 | ) | — | ||||
Proceeds from borrowings from former parent | 4,000 | 39,000 | |||||
Proceeds from borrowings | 407,769 | — | |||||
Repayments of borrowings | (192,681 | ) | (8,871 | ) | |||
Debt issuance costs | (18,686 | ) | (37 | ) | |||
Contributions from noncontrolling interests | 134 | — | |||||
Distributions to noncontrolling interests | (14 | ) | (7 | ) | |||
Net cash provided by financing activities | 227,319 | 63,040 | |||||
Net increase (decrease) in cash and cash equivalents | 338,896 | (39,682 | ) | ||||
Cash and cash equivalents at beginning of the period | 29,000 | 74,966 | |||||
Cash and cash equivalents at end of the period | $ | 367,896 | $ | 35,284 | |||
JBG SMITH PROPERTIES Condensed Consolidated and Combined Statements of Cash Flows For the nine months ended September 30, 2017 and 2016 (Unaudited) (In thousands) | |||||||
Nine Months Ended September 30, | |||||||
2017 | 2016 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION: (1) | |||||||
Transfer of mortgage payable to former parent | $ | — | $ | 115,022 | |||
Cash paid for interest (net of capitalized interest of $2,285 and $3,690 in 2017 and 2016, respectively) | 45,354 | 37,540 | |||||
Accrued capital expenditures included in accounts payable and accrued expenses | 17,633 | 15,206 | |||||
Write-off of fully depreciated assets | (24,909 | ) | (87,220 | ) | |||
Cash payments for income taxes | 3,681 | 1,087 | |||||
Non-cash transactions related to the Formation Transaction: | |||||||
Issuance of common limited partnership units at the Separation | 96,632 | — | |||||
Issuance of common shares at the Separation | 2,332,402 | — | |||||
Issuance of common shares in connection with the Combination | 864,918 | — | |||||
Issuance of common limited partnership units in connection with the Combination | 359,967 | — | |||||
Adjustment to record redeemable noncontrolling interest at redemption value | 97,084 | — | |||||
Contribution from former parent in connection with the Separation | 174,639 | — |
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Equity
(Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | ||
| | | | | | | Additional | | | | | Other | | | | | | |||
| | Common Shares | | Paid-In | | Accumulated |
| Comprehensive | | Noncontrolling | | Total | ||||||||
| | Shares | | Amount | | Capital | | Deficit |
| Loss | | Interests | | Equity | ||||||
BALANCE AS OF JUNE 30, 2021 |
| 131,841 | | $ | 1,319 | | $ | 3,650,217 | | $ | (466,230) | | $ | (28,605) | | $ | 16,540 | | $ | 3,173,241 |
Net income attributable to common shareholders and noncontrolling interests |
| — | |
| — | |
| — | |
| 893 | |
| — | |
| — | |
| 893 |
Conversion of common limited partnership units to common shares |
| 180 | |
| 2 | |
| 5,668 | |
| — | |
| — | |
| — | |
| 5,670 |
Common shares repurchased | | (2,317) | | | (23) | | | (68,907) | | | — | | | — | | | — | | | (68,930) |
Common shares issued pursuant to employee incentive compensation plan and Employee Share Purchase Plan ("ESPP") | | — | | | — | | | 210 | | | — | | | — | | | — | | | 210 |
Dividends declared on common shares | | — | | | — | | | — | | | (29,696) | | | — | | | — | | | (29,696) |
Distributions to noncontrolling interests |
| — | |
| — | |
| — | |
| — | |
| — | |
| (45) | |
| (45) |
Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation |
| — | |
| — | |
| 19,274 | |
| — | |
| (413) | |
| — | |
| 18,861 |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| 3,572 | |
| — | |
| 3,572 |
BALANCE AS OF SEPTEMBER 30, 2021 |
| 129,704 | | $ | 1,298 | | $ | 3,606,462 | | $ | (495,033) | | $ | (25,446) | | $ | 16,495 | | $ | 3,103,776 |
| | | | | | | | | | | | | | | | | | | | |
BALANCE AS OF JUNE 30, 2020 |
| 133,708 | | $ | 1,338 | | $ | 3,742,205 | | $ | (255,162) | | $ | (47,886) | | $ | 191 | | $ | 3,440,686 |
Net loss attributable to common shareholders and noncontrolling interests |
| — | |
| — | |
| — | |
| (22,793) | |
| — | |
| — | |
| (22,793) |
Conversion of common limited partnership units to common shares |
| 169 | |
| 2 | |
| 4,794 | |
| — | |
| — | |
| — | |
| 4,796 |
Common shares repurchased | | (1,439) | | | (15) | | | (38,362) | | | — | |
| — | |
| — | | | (38,377) |
Common shares issued pursuant to ESPP | | — | | | — | | | 186 | | | — | | | — | | | — | | | 186 |
Dividends declared on common shares | | — | | | — | | | — | | | (30,020) | | | — | | | — | | | (30,020) |
Distributions to noncontrolling interests |
| — | |
| — | |
| — | |
| — | |
| — | |
| (12) | |
| (12) |
Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation |
| — | |
| — | |
| 12,236 | |
| — | |
| (309) | |
| — | |
| 11,927 |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| 3,545 | |
| — | |
| 3,545 |
BALANCE AS OF SEPTEMBER 30, 2020 |
| 132,438 | | $ | 1,325 | | $ | 3,721,059 | | $ | (307,975) | | $ | (44,650) | | $ | 179 | | $ | 3,369,938 |
See accompanying notes to the condensed consolidated and combined financial statements.
6
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Equity
(Unaudited)
(In thousands)
| | | | | | | | | | | | | | | | | | | | |
|
| | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | Accumulated | | | | | | ||
| | | | | | | Additional | | | | | Other | | | | | | |||
| | Common Shares | | Paid-In | | Accumulated |
| Comprehensive | | Noncontrolling | | Total | ||||||||
| | Shares | | Amount | | Capital | | Deficit |
| Loss | | Interests | | Equity | ||||||
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 |
| — | |
| — | |
| — | |
| (22,811) | |
| — | |
| (1,108) | |
| (23,919) |
Conversion of common limited partnership units to common shares |
| 829 | |
| 8 | |
| 27,342 | |
| — | |
| — | |
| — | |
| 27,350 |
Common shares repurchased | | (2,937) | | | (29) | | | (88,104) | | | — | | | — | | | — | | | (88,133) |
Common shares issued pursuant to employee incentive compensation plan and ESPP | | 34 | | | — | | | 1,549 | | | — | | | — | | | — | | | 1,549 |
Dividends declared on common shares | | — | | | — | | | — | | | (59,278) | | | — | | | — | | | (59,278) |
Contributions from noncontrolling interests, net |
| — | |
| — | |
| — | |
| — | |
| — | |
| 17,436 | |
| 17,436 |
Redeemable noncontrolling interests redemption value adjustment and other comprehensive income allocation |
| — | |
| — | |
| 8,032 | |
| — | |
| (1,621) | |
| — | |
| 6,411 |
Other comprehensive income |
| — | |
| — | |
| — | |
| — | |
| 16,154 | |
| — | |
| 16,154 |
BALANCE AS OF SEPTEMBER 30, 2021 |
| 129,704 | | $ | 1,298 | | $ | 3,606,462 | | $ | (495,033) | | $ | (25,446) | | $ | 16,495 | | $ | 3,103,776 |
| | | | | | | | | | | | | | | | | | | | |
BALANCE AS OF DECEMBER 31, 2019 |
| 134,148 | | $ | 1,342 | | $ | 3,633,042 | | $ | (231,164) | | $ | (16,744) | | $ | 201 | | $ | 3,386,677 |
Net loss attributable to common shareholders and noncontrolling interests |
| — | |
| — | |
| — | |
| (16,648) | |
| — | |
| — | |
| (16,648) |
Conversion of common limited partnership units to common shares |
| 1,112 | |
| 12 | |
| 40,662 | |
| — | |
| — | |
| — | |
| 40,674 |
Common shares repurchased | | (2,857) | | | (29) | | | (79,540) | | | — | | | — | | | — | | | (79,569) |
Common shares issued pursuant to ESPP | | 35 | | | — | | | 1,320 | | | — | | | — | | | — | | | 1,320 |
Dividends declared on common shares | | — | | | — | | | — | | | (60,163) | | | — | | | — | | | (60,163) |
Distributions to noncontrolling interests |
| — | |
| — | |
| — | |
| — | |
| — | |
| (22) | |
| (22) |
Redeemable noncontrolling interests redemption value adjustment and other comprehensive loss allocation |
| — | |
| — | |
| 125,575 | |
| — | |
| 3,446 | |
| — | |
| 129,021 |
Other comprehensive loss |
| — | |
| — | |
| — | |
| — | |
| (31,352) | |
| — | |
| (31,352) |
BALANCE AS OF SEPTEMBER 30, 2020 |
| 132,438 | | $ | 1,325 | | $ | 3,721,059 | | $ | (307,975) | | $ | (44,650) | | $ | 179 | | $ | 3,369,938 |
See accompanying notes to the condensed consolidated financial statements (unaudited).
7
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| | | | | | |
| | Nine Months Ended September 30, | ||||
|
| 2021 |
| 2020 | ||
OPERATING ACTIVITIES: |
| |
|
| |
|
Net loss | | $ | (26,391) | | $ | (17,093) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |
|
| |
|
|
Share-based compensation expense | |
| 38,320 | |
| 53,183 |
Depreciation and amortization, including amortization of deferred financing costs | |
| 181,217 | |
| 160,395 |
Deferred rent | |
| (17,463) | |
| (19,124) |
(Income) loss from unconsolidated real estate ventures, net | |
| (23,513) | |
| 17,142 |
Amortization of market lease intangibles, net | |
| (896) | |
| (356) |
Amortization of lease incentives | |
| 6,083 | |
| 5,144 |
Loss on extinguishment of debt | |
| — | |
| 33 |
Gain on sale of real estate | |
| (11,290) | |
| (59,477) |
Loss on operating lease and other receivables | |
| 1,071 | |
| 14,750 |
Return on capital from unconsolidated real estate ventures | |
| 13,212 | |
| 3,697 |
Other non-cash items | |
| 583 | |
| 265 |
Changes in operating assets and liabilities: | |
|
| |
|
|
Tenant and other receivables | |
| 3,704 | |
| (4,757) |
Other assets, net | |
| (12,059) | |
| (11,566) |
Accounts payable and accrued expenses | |
| 5,954 | |
| 1,366 |
Other liabilities, net | |
| (4,120) | |
| (15,747) |
Net cash provided by operating activities | |
| 154,412 | |
| 127,855 |
INVESTING ACTIVITIES: | |
|
| |
|
|
Development costs, construction in progress and real estate additions | |
| (108,361) | |
| (245,456) |
Deposits for real estate and other acquisitions | |
| (10,263) | |
| (25,274) |
Proceeds from sale of real estate | |
| 14,370 | |
| 154,493 |
Distributions of capital from unconsolidated real estate ventures | |
| 40,188 | |
| 70,818 |
Investments in unconsolidated real estate ventures and other | |
| (32,685) | |
| (12,277) |
Net cash used in investing activities | |
| (96,751) | |
| (57,696) |
FINANCING ACTIVITIES: | |
|
| |
|
|
Borrowings under mortgages payable | |
| 85,000 | |
| 580,105 |
Borrowings under revolving credit facility | |
| — | |
| 500,000 |
Borrowings under unsecured term loans | |
| — | |
| 100,000 |
Repayments of mortgages payable | |
| (4,462) | |
| (6,680) |
Repayments of revolving credit facility | |
| — | |
| (700,000) |
Debt issuance costs | |
| (5,747) | |
| (14,856) |
Finance lease payments | |
| — | |
| (3,281) |
Proceeds from common shares issued pursuant to ESPP | |
| 880 | |
| 887 |
Common shares repurchased | | | (82,300) | | | (74,434) |
Dividends paid to common shareholders | |
| (88,928) | |
| (90,347) |
Distributions to redeemable noncontrolling interests | |
| (13,705) | |
| (11,333) |
Distributions to noncontrolling interests | | | (22) | | | (23) |
Contributions from noncontrolling interests | | | 17,464 | | | — |
Net cash (used in) provided by financing activities | |
| (91,820) | |
| 280,038 |
Net (decrease) increase in cash and cash equivalents and restricted cash | |
| (34,159) | |
| 350,197 |
Cash and cash equivalents and restricted cash, beginning of period | |
| 263,336 | |
| 142,516 |
Cash and cash equivalents and restricted cash, end of period | | $ | 229,177 | | $ | 492,713 |
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD: | |
|
| |||
Cash and cash equivalents | | $ | 194,277 | | $ | 455,111 |
Restricted cash | |
| 34,900 | |
| 37,602 |
Cash and cash equivalents and restricted cash | | $ | 229,177 | | $ | 492,713 |
See accompanying notes to the condensed consolidated financial statements (unaudited).
8
JBG SMITH PROPERTIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
| | | | | | |
| | Nine Months Ended September 30, | ||||
|
| 2021 |
| 2020 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW AND NON-CASH INFORMATION: | |
|
| |||
Cash paid for interest (net of capitalized interest of $4,854 and $11,545 in 2021 and 2020) | | $ | 46,010 | | $ | 40,744 |
Accrued capital expenditures included in accounts payable and accrued expenses | |
| 41,660 | |
| 51,092 |
Write-off of fully depreciated assets | |
| 46,278 | |
| 29,393 |
Deconsolidation of real estate asset | |
| 26,476 | |
| — |
Conversion of common limited partnership units to common shares | |
| 27,350 | |
| 40,674 |
Derecognition of operating lease right-of-use assets | | | — | | | (13,151) |
Derecognition of liabilities related to operating lease right-of-use assets | | | — | | | (13,151) |
Recognition of finance lease right-of-use assets | |
| — | |
| 42,354 |
Recognition of liabilities related to finance lease right-of-use assets | |
| — | |
| 40,684 |
Cash paid for amounts included in the measurement of lease liabilities for operating leases | |
| 1,761 | |
| 4,603 |
See accompanying notes to the condensed consolidated financial statements (unaudited).
9
(Unaudited)
1.Organization and Basis of Presentation
Organization
JBG SMITH Properties ("JBG SMITH") was organized by Vornado Realty Trust ("Vornado" or "former parent") as, a Maryland real estate investment trust ("REIT") on October 27, 2016 (capitalized on November 22, 2016), owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail. JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in the Washington, D.C. metropolitan area that have high barriers to entry and vibrant urban amenities. Over half of our portfolio is in National Landing in Northern Virginia, where we serve as the exclusive developer for Amazon.com, Inc.'s ("Amazon") new headquarters and where Virginia Tech's under-construction $1 billion Innovation Campus is located. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, Amazon, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH Properties LP ("JBG SMITH LP"), our operating partnership. As of September 30, 2021, JBG SMITH, as its sole general partner, controlled JBG SMITH LP and owned 90.8% of its common limited partnership units ("OP Units"). JBG SMITH was formedis hereinafter referred to as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures.
We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado’sVornado Realty Trust's ("Vornado") Washington, DC segment, which operated as Vornado / Charles E. Smith, (the "Vornado Included Assets").D.C. segment. On July 18, 2017, JBG SMITHwe acquired the management business and certain assets and liabilities (the "JBG Assets") of The JBG Companies (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction." Unless the context otherwise requires, all references to "we," "us," and "our," refer to the Vornado Included Assets, our predecessor and accounting acquirer, for periods prior to the Separation and to JBG SMITH for periods from and after the Separation and Combination.
As of September 30, 2017,2021, our portfolio comprised: (i) 69Operating Portfolio consisted of 63 operating assets comprising 51 office42 commercial assets totaling over 13.713.1 million square feet (11.8(11.3 million square feet at our share), 14 and 21 multifamily assets totaling 6,0167,776 units (4,232(6,125 units at our share) and four other assets totaling approximately 765,000 square feet (348,000 square feet. Additionally, we have: (i) 1 under-construction multifamily asset with 808 units (808 units at our share); (ii) nine assets under construction comprising four office11 near-term development assets totaling approximately 1.35.3 million square feet (1.2 million square feet at our share), four multifamily assets totaling 1,334 units (1,149 units at our share) and one other asset totaling approximately 41,100 square feet (4,100 square feet at our share; (iii) one near-term development multifamily asset totaling 433 units (303 units at our share), and (iv) 42 future development assets totaling approximately 21.3 million square feet (17.6(5.0 million square feet at our share) of estimated potential development density; and (iii) 25 future development assets totaling 14.3 million square feet (11.6 million square feet at our share) of estimated potential development density.
We derive our revenue primarily from leases with officecommercial and multifamily tenants, includingwhich include fixed and percentage rents, and reimbursements from tenants for certain expenses such as real estate taxes, property operating expenses, and repairs and maintenance. In addition, to our portfolio, we have a third-party asset management and real estate services business that provides fee-based real estate services to our real estate ventures, legacy funds formerly organized by JBG ("JBG Legacy Funds") and other third parties.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(Dollars in thousands) | 2017 | 2016 | 2017 | 2016 | |||||||||||
U.S. federal government | $ | 22,492 | $ | 27,594 | $ | 68,869 | $ | 74,939 | |||||||
Percentage of office segment revenue | 22.6 | % | 30.5 | % | 25.3 | % | 28.5 | % | |||||||
Percentage of total rental revenue | 17.8 | % | 24.3 | % | 20.0 | % | 22.9 | % |
Basis of Presentation
The accompanying unaudited condensed consolidated and combined financial statements and notes are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions of Form 10-Q and Article 10 of Regulation S-X. Accordingly, these unaudited condensed consolidated and combined financial statements do not contain certain information required in annual financial statements and notes as required under GAAP. In our opinion, all adjustments considered necessary for a fair presentation have been included, and all such adjustments are of a normal recurring nature. All intercompany transactions and balances have been eliminated. The results of operations for the three and nine months ended September 30, 20172021 and 20162020 are not necessarily indicative of the results that may be expected for a full year. These condensed consolidated and combined financial statements should be read in conjunction with our Registration StatementAnnual Report on Form 10, as amended,10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the "SEC") and declared effective on June 26, 2017 as well as the final Information Statement filed with the SEC as Exhibit 99.1 to our Current Report on Form 8-K filed on June 27, 2017.
The accompanying condensed consolidated and combined financial statements include theour accounts and those of our wholly owned subsidiaries and consolidated variable interest entities ("VIEs"), including JBG SMITH and our wholly-owned subsidiaries and those other entities in which we have a controlling financial interest, including where we have been determined to be a primary beneficiary of a variable interest entity ("VIE").LP. See Note 65 for more additional
10
information on our consolidated VIEs. The portions of the equity and net income (loss) income of consolidated subsidiariesentities that are not attributable to JBG SMITHus are presented separately as amounts attributable to noncontrolling interests in theour condensed consolidated and combined financial statements.
References to the Separation at July 17, 2017. The transfer of the Vornado Included Assets from Vornado to JBG SMITH was completed prior to the Separation, at net book values (historical carrying amounts) carved out from Vornado’s books and records. For purposes of the formation of JBG SMITH, the Vornado Included Assets were designated as the predecessor and the accounting acquirer of JBG SMITH. Consequently, theour financial statements of JBG SMITH, as set forth herein, represent a continuation of therefer to our condensed consolidated financial information of the Vornado Included Assets as the predecessor and accounting acquirer such that the historical financial information included hereinstatements as of any date orSeptember 30, 2021 and December 31, 2020, and for any periods on or priorthe three and nine months ended September 30, 2021 and 2020. References to the completion of the Combination represents the pre-Combination financial information of the Vornado Included Assets. The financial statements reflect the common sharesour balance sheets refer to our condensed consolidated balance sheets as of the date of the Separation as outstanding for all prior periods priorSeptember 30, 2021 and December 31, 2020. References to July 17, 2017. The acquisition of the management business and certain assets and liabilities of JBG completed subsequently by JBG SMITH was accounted for as a business combination using the acquisition method whereby identifiable assets acquired and liabilities assumed are recorded at the acquisition-date fair values and income and cash flows from the operations were consolidated into the financialour statements of JBG SMITH commencing July 18, 2017.
Income Taxes
We have elected to be applicable to the Vornado Included Assets based on an analysis of key metrics, including total revenues. Such costs do not necessarily reflect what the actual costs would have been if JBG SMITH had been operatingtaxed as a separate standalone public company. These charges are discussed further in Note 17.
Significant Accounting Policies
There were no material changes to our significant accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.
Use of Estimates
The preparation of the financial statements in conformity with GAAP requires managementus to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities atas of the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
In March 2020, the World Health Organization declared a global pandemic related to the novel coronavirus ("COVID-19"). The significance, extent and duration of the impact of COVID-19 on us and our tenants remains largely uncertain and dependent on near-term and future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19, the distribution, effectiveness and willingness of people to take COVID-19 vaccines, the extent and effectiveness of the containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in the area in which we use discounted income, oroperate. The ultimate adverse impact of COVID-19 is highly uncertain; however, the effects of COVID-19 on us and our tenants have affected estimates used in the preparation of the underlying cash flow models with inputsflows used in assessing our long-lived assets for impairment and assumptions thatthe assessment of the collectability of receivables from tenants, including deferred rent receivables. We have made what we believe are consistent with current market conditions for similar assets. The most significant assumptions in determining the allocation of the purchase price to tangible assets are the exit capitalization rate, discount rate, estimated market rents and hypothetical expected lease-up periods.
Due to the redevelopment, including interest expense,business disruptions and challenges caused by COVID-19, we have provided rent deferrals and other lease concessions to certain tenants. We have entered into agreements with certain tenants, many of which have been placed on the cash basis of accounting, resulting in the deferral to future periods or abatement of $492,000 of rent that had been contractually due in the third quarter of 2021. We are capitalized to the extent thatnegotiating additional rent deferrals and other lease concessions with
11
some of our tenants, which have been considered when establishing credit losses against billed and deferred rent receivables. During 2020, we believe such costs are recoverable through the value of the property. The capitalization period begins when redevelopment activities are underwaybegan recognizing revenue from substantially all co-working tenants and ends when the project is substantially complete. General and administrative costs are expensed as incurred. Depreciation requires an estimate by management of the useful life of each property and improvement as well as an allocation of the costs associated with a property to its various components. Depreciation is recognized on a straight‑line basis over estimated useful lives, which range from three to 40 years. Tenant allowances are amortized on a straight‑line basis over the lives of the related leases, which approximate the useful lives of the tenant improvements.
Recent Accounting Pronouncements
Reference Rate Reform
In evaluating whether real estate meets the held for sale criteria set forth by the Property, Plant and Equipment Topic ofMarch 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards CodificationUpdate 2020-04, Reference Rate Reform ("ASC"Topic 848"),. Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period of March 12, 2020 through December 31, 2022 as reference rate reform activities occur. During the nine months ended September 30, 2021, we did not make a determination asany elections. During the year ended December 31, 2020, we elected to apply the point in timehedge accounting expedients related to (i) the assertion that it isour hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future London Interbank Offered Rate ("LIBOR") indexed cash flows to assume that a salethe index upon which future hedged transactions will be consummated. Givenbased matches the natureindex on the corresponding derivatives. Application of all real estate sales contracts, it is not unusual for such contracts to allow potential buyers a periodthese expedients preserves our past presentation of timeour derivatives. We will continue to evaluate the property prior to formal acceptanceimpact of the contract. In addition, certainguidance and may apply other matters criticalelections, as applicable.
3.Acquisition, Dispositions and Assets Held for Sale
Acquisition
We have agreed, subject to the final sale, such as financing arrangements, often remain pending even upon contract acceptance. Ascustomary closing conditions, to acquire The Batley, a result, real estate under contract may not close within the expected time period or may not close at all. Therefore, any real estate categorized as held for sale represents only those properties that management has determined are probable to close within the requirements set forth432-unit multifamily asset in the Property, Plant and Equipment TopicUnion Market submarket of the FASB ASC.
Dispositions
In April 2021, we invested cash in and Advancescontributed land to Real Estate Ventures
During the entities are not VIEs in accordance with the Consolidation Topicthree and nine months ended September 30, 2021, we recognized our proportionate share of the FASB ASC, we are not consideredgain from the primary beneficiarysale of various assets by our unconsolidated real estate ventures, which is included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. See Note 4 for additional information.
Assets Held for Sale
The amounts included in "Assets held for sale" in our balance sheets primarily represent the entities determined to be VIEs, we do not have voting control, and/or the limited partners (or non-managing members) have substantive participatory rights, then the selectioncarrying value of the accounting method used to accountreal estate. The following is a summary of assets held for sale:
| | | | | | | | | |
| | | | | | | | | |
| | | | | | Total | | Assets Held | |
Assets |
| Segment |
| Location |
| Square Feet (1) |
| for Sale | |
| | | | | | (In thousands) | |||
September 30, 2021 | | | | | | | | | |
Pen Place (2) | | Other | | Arlington, Virginia | | 2,082 | | $ | 74,174 |
December 31, 2020 | | | | | | | | | |
Pen Place (2) | | Other | | Arlington, Virginia | | 2,082 | | $ | 73,876 |
(1) | Represents estimated or approved potential development density. |
12
(2) | In March 2019, we entered into an agreement for the sale of Pen Place to Amazon, which we expect to close during the second quarter of 2022. |
4.Investments in Unconsolidated Real Estate Ventures
The following is a summary of our investments in unconsolidated real estate ventures:
| | | | | | | | |
| | Effective | | | ||||
| | Ownership | | | | | | |
Real Estate Venture Partners |
| Interest (1) |
| September 30, 2021 |
| December 31, 2020 | ||
| | | | (In thousands) | ||||
Prudential Global Investment Management |
| 50.0% | | $ | 209,261 | | $ | 216,939 |
Landmark |
| 1.8% - 49.0% | |
| 53,295 | |
| 66,724 |
CBREI Venture |
| 5.0% - 64.0% | |
| 59,028 | |
| 65,190 |
Canadian Pension Plan Investment Board ("CPPIB") |
| 55.0% | |
| 49,098 | |
| 47,522 |
J.P. Morgan Global Alternatives ("J.P. Morgan") (2) | | 50.0% | | | 47,362 | | | — |
Berkshire Group |
| 50.0% | |
| 53,589 | | | 50,649 |
Brandywine Realty Trust |
| 30.0% | |
| 13,755 | |
| 13,710 |
Other |
| | |
| 664 | | | 635 |
Total investments in unconsolidated real estate ventures (3) | | | | $ | 486,052 | | $ | 461,369 |
(1) | Reflects our effective ownership interests in the underlying real estate as of September 30, 2021. We have multiple investments with certain venture partners with varying ownership interests in the underlying real estate. |
(2) | J.P. Morgan is the advisor for an institutional investor. |
(3) | As of September 30, 2021 and December 31, 2020, our total investments in unconsolidated real estate ventures were greater than the net book value of the underlying assets by $20.2 million and $18.9 million, resulting principally from capitalized interest and our 0 investment balance in the real estate venture with CPPIB that owns 1101 17th Street. |
In April 2021, we entered into 2 real estate ventures with an institutional investor advised by J.P. Morgan, in which we have 50% ownership interests, to design, develop, manage and own approximately 2.0 million square feet of new mixed-use development located in Potomac Yard, the southern portion of National Landing. Our venture partner contributed a land site that is generallyentitled for 1.3 million square feet of development at Potomac Yard Landbay F, while we contributed cash and adjacent land with over 700,000 square feet of estimated development capacity at Potomac Yard Landbay G. We will also act as pre-developer, developer, property manager and leasing agent for all future commercial and residential properties on the site. We have determined the ventures are VIEs, but we are not the primary beneficiary of the VIEs and, accordingly, we have not consolidated either venture. We recognized an $11.3 million gain on the land contributed to one of the real estate ventures based on the cash received and the remeasurement of our retained interest in the asset, which was included in "Gain on sale of real estate" in our statements of operations for the nine months ended September 30, 2021. As part of the transaction, our venture partner elected to accelerate the monetization of a 2013 promote interest in the land contributed by it to the ventures. During the second quarter of 2021, the total amount of the promote paid was $17.5 million, of which $4.2 million was paid to certain of our non-employee trustees and certain of our executives.
The following is a summary of disposition activity by our unconsolidated real estate ventures for the nine months ended September 30, 2021:
| | | | | | | | | | | | |
| | | | | | | | | | | Proportionate | |
| | Real Estate | | | | | | Gross | | Share of | ||
| | Venture | | | | Ownership | | Sales | | Aggregate | ||
Date Disposed |
| Partners | | Assets | | Percentage |
| Price |
| Gain (1) | ||
| | | | | | | | (In thousands) | ||||
May 3, 2021 |
| CBREI Venture | | Fairway Apartments/Fairway Land ("Fairway") (2) | | 10.0% |
| $ | 93,000 | | $ | 2,094 |
May 19, 2021 | | Landmark | | Courthouse Metro Land/Courthouse Metro Land – Option ("Courthouse Metro") | | 18.0% | | | 3,000 | | | 2,352 |
May 27, 2021 | | Landmark | | 5615 Fishers Lane | | 18.0% | | | 6,500 | | | 743 |
September 17, 2021 | | Landmark | | 500 L'Enfant Plaza (3) | | 49.0% | | | 166,500 | | | 23,137 |
| | | | | | |
| | | | $ | 28,326 |
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(1) | Included in "Income (loss) from unconsolidated real estate ventures, net" in our statements of operations. |
(2) | The venture repaid a related mortgage payable of $45.3 million. |
(3) | The venture repaid a related mortgage payable of $80.0 million. |
We provide leasing, property management and other real estate services to our unconsolidated real estate ventures. We recognized revenue, including expense reimbursements, of $5.9 million and $17.8 million for the three and nine months ended September 30, 2021, and $6.3 million and $19.3 million for the three and nine months ended September 30, 2020, for such services.
A reconsideration event could cause us to consolidate an unconsolidated real estate venture in the future or deconsolidate a consolidated entity. We evaluate reconsideration events as we become aware of them. Reconsideration events include amendments to real estate venture agreements and changes in our partner's ability to make contributions to the venture. Under certain circumstances, we may purchase our partner's interest.
The following is a summary of the debt of our unconsolidated real estate ventures:
| | | | | | | | |
| | Weighted | | | | | | |
| | Average Effective | | | ||||
|
| Interest Rate (1) |
| September 30, 2021 |
| December 31, 2020 | ||
| | | | (In thousands) | ||||
Variable rate (2) |
| 2.59% | | $ | 786,169 | | $ | 863,617 |
Fixed rate (3) (4) |
| 4.16% | |
| 293,920 | |
| 323,050 |
Mortgages payable | | | |
| 1,080,089 | |
| 1,186,667 |
Unamortized deferred financing costs | | | |
| (5,785) | |
| (7,479) |
Mortgages payable, net (4) | | | | $ | 1,074,304 | | $ | 1,179,188 |
(1) | Weighted average effective interest rate as of September 30, 2021. |
(2) | Includes variable rate mortgages payable with interest rate cap agreements. |
(3) | Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements. |
(4) | See Note 17 for additional information on guarantees of the debt of certain of our unconsolidated real estate ventures. |
The following is a summary of financial information for our unconsolidated real estate ventures:
| | | | | | |
|
| September 30, 2021 |
| December 31, 2020 | ||
|
| (In thousands) | ||||
Combined balance sheet information: | | | | | | |
Real estate, net | | $ | 2,170,039 | | $ | 2,247,384 |
Other assets, net | |
| 257,138 | |
| 270,516 |
Total assets | | $ | 2,427,177 | | $ | 2,517,900 |
| | | | | | |
Mortgages payable, net | | $ | 1,074,304 | | $ | 1,179,188 |
Other liabilities, net | |
| 128,554 | |
| 140,304 |
Total liabilities | |
| 1,202,858 | |
| 1,319,492 |
Total equity | |
| 1,224,319 | |
| 1,198,408 |
Total liabilities and equity | | $ | 2,427,177 | | $ | 2,517,900 |
14
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
|
| (In thousands) | ||||||||||
Combined income statement information: (1) | | | | | | | | | | | | |
Total revenue | | $ | 45,289 | | $ | 47,235 | | $ | 141,370 | | $ | 162,128 |
Operating income (loss) (2) | | | 51,068 | | | 1,296 | |
| 94,275 | |
| (24,418) |
Net income (loss) (2) | | | 42,261 | | | (6,265) | |
| 69,091 | |
| (60,331) |
(1) | Excludes information related to the venture that owned The Marriott Wardman Park hotel for the three months ended September 30, 2020 as we suspended equity loss recognition for the venture after June 30, 2020. On October 1, 2020, we transferred our interest in the related venture to our venture partner. |
(2) | Includes the gain from the sale 500 L'Enfant Plaza of $47.4 million during the three months ended September 30, 2021. Includes the gain from the sale of Fairway, Courthouse Metro, 5615 Fishers Lane and 500 L'Enfant Plaza totaling $85.5 million during the nine months ended September 30, 2021. Includes the loss from the sale of Woodglen of $16.4 million during the nine months ended September 30, 2020. |
5.Variable Interest Entities
We hold various interests in entities deemed to be VIEs, which we evaluate at acquisition, formation, after a change in the ownership agreement, after a change in the entity's economics or after any other reconsideration event to determine if the VIE should be consolidated in our financial statements or should no longer be considered a VIE. An entity is a VIE because it is in the development stage and/or does not hold sufficient equity at risk, or conducts substantially all its operations on behalf of an investor with disproportionately few voting interests and the degree of influence we have over the entity. Management uses its judgment when determiningrights. We will consolidate a VIE if we are the primary beneficiary of or have a controlling financial interest in, an entity inthe VIE, which we have a variable interest. Factors considered in determining whether we haveentails having the power to direct the activities that most significantly impact the entity’sVIE’s economic performance include risk and reward sharing, experience and financial conditionperformance. Certain criteria we assess in determining whether we are the primary beneficiary of the other partners,VIE include our influence over significant business activities, our voting rights, involvementand any noncontrolling interest kick-out or participating rights.
Unconsolidated VIEs
As of September 30, 2021 and December 31, 2020, we had interests in entities deemed to be VIEs. Although we are engaged to act as the managing partner in charge of day-to-day capitaloperations of these investees, we are not the primary beneficiary of these VIEs, as we do not hold unilateral power over activities that, when taken together, most significantly impact the respective VIE's economic performance. We account for our investment in these entities under the equity method. As of September 30, 2021 and operating decisions andDecember 31, 2020, the extentnet carrying amount of our involvementinvestment in the entity.
Consolidated VIEs
JBG SMITH LP is our most significant consolidated VIE. We hold 90.8% of related expensesthe limited partnership interest in JBG SMITH LP, act as the general partner and exercise full responsibility, discretion and control over its day-to-day management. The noncontrolling interests of JBG SMITH LP do not have substantive liquidation rights, substantive kick-out rights without cause, or substantive participating rights that could be exercised by a simple majority of noncontrolling interest limited partners (including by such a limited partner unilaterally). Because the noncontrolling interest holders do not have these rights, JBG SMITH LP is recognized in "(Loss) incomea VIE. As general partner, we have the power to direct the activities of unconsolidated real estate ventures"JBG SMITH LP that most significantly affect its economic performance, and through our majority interest, we have both the right to receive benefits from and the obligation to absorb losses of JBG SMITH LP. Accordingly, we are the primary beneficiary of JBG SMITH LP and consolidate it in our statementsfinancial statements. Because we conduct our business and hold our assets and liabilities through JBG SMITH LP, its total assets and liabilities comprise substantially all of operations. We may also earn incremental promote distributions if certain financial return benchmarks are achieved upon ultimate dispositionour consolidated assets and liabilities.
Through the structure of the 1900 Crystal Drive transaction we executed in March 2021, we have the ability to facilitate an exchange out of an asset into 1900 Crystal Drive. We leased the land underlying properties. Management fees1900 Crystal Drive located in National
15
Landing to a lessee, which plans to construct an 808-unit multifamily asset comprising 2 towers with ground floor retail. The ground lessee has engaged us to be the development manager for the construction of 1900 Crystal Drive, and separately, we are recognized when earned,the lessee in a master lease of the asset. We have an option to acquire the asset until a specified period after completion. In March 2021, the ground lessee entered into a mortgage loan collateralized by the leasehold interest with a maximum principal balance of $227.0 million and promote feesan interest rate of LIBOR plus 3.0% per annum. As of September 30, 2021, 0 proceeds had been received from the mortgage loan. In connection with the mortgage loan, we have guaranteed the completion of the asset and provided certain carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy). The ground lessee was obligated to invest $17.5 million of equity funding, all of which has been funded, and we are recognized when certain earnings eventsobligated to provide additional project funding through a mezzanine loan to the ground lessee, of which we have occurred,funded $11.7 million as of September 30, 2021. We determined that 1900 Crystal Drive is a VIE and that we are the primary beneficiary of the VIE. Accordingly, we consolidate the VIE with the lessee's ownership interest shown as "Noncontrolling interests" in our balance sheet. The ground lease, the mezzanine loan and the amountmaster lease described above are eliminated in consolidation. As of September 30, 2021, the VIE had total assets and liabilities of $29.7 million and $4.5 million. The assets of the VIE can only be used to settle the obligations of the VIE, and the liabilities include third-party liabilities of the VIE for which the creditors or beneficial interest holders do not have recourse against us.
6.Other Assets, Net
The following is determinablea summary of other assets, net:
| | | | | | |
|
| September 30, 2021 |
| December 31, 2020 | ||
| | (In thousands) | ||||
Deferred leasing costs, net | | $ | 116,544 | | $ | 117,141 |
Lease intangible assets, net | |
| 11,055 | |
| 15,565 |
Management and leasing contracts, net | | | 21,084 | | | 25,512 |
Other identified intangible assets | | | 17,360 | | | 17,500 |
Wireless spectrum licenses (1) | | | 25,730 | | | — |
Operating lease right-of-use assets | |
| 3,326 | |
| 3,542 |
Finance lease right-of-use assets | | | 41,675 | | | 41,996 |
Prepaid expenses | |
| 20,171 | |
| 14,000 |
Deferred financing costs, net | |
| 9,352 | |
| 6,656 |
Deposits (1) | |
| 12,026 | |
| 28,560 |
Other | |
| 22,214 | |
| 16,103 |
Total other assets, net | | $ | 300,537 | | $ | 286,575 |
(1) | During 2020, we deposited $25.3 million with the Federal Communications Commission in connection with the acquisition of wireless spectrum licenses. In March 2021, we received the licenses. While the licenses are issued for ten years, as long as we act within the requirements and constraints of the regulatory authorities, the renewal and extension of these licenses is reasonably certain at minimal cost. Accordingly, we have concluded that the licenses are indefinite-lived intangible assets. |
7.Debt
Mortgages Payable
The following is a summary of mortgages payable:
| | | | | | | | | |
| | Weighted Average | | | | | | | |
| | Effective | | | | ||||
|
| Interest Rate (1) |
| | September 30, 2021 |
| December 31, 2020 | ||
| | | | | (In thousands) | ||||
Variable rate (2) |
| 2.08% | | | $ | 762,246 | | $ | 678,346 |
Fixed rate (3) |
| 4.32% | | |
| 922,161 | |
| 925,523 |
Mortgages payable | | | | |
| 1,684,407 | |
| 1,603,869 |
Unamortized deferred financing costs and premium / discount, net (4) | | | |
| (10,122) | |
| (10,131) | |
Mortgages payable, net | | | | | $ | 1,674,285 | | $ | 1,593,738 |
16
(1) | Weighted average effective interest rate as of September 30, 2021. |
(2) | Includes variable rate mortgages payable with interest rate cap agreements. |
(3) | Includes variable rate mortgages payable with interest rates fixed by interest rate swap agreements. |
(4) | As of September 30, 2021, net deferred financing costs related to an unfunded mortgage loan totaling $4.0 million were included in "Other assets, net." |
As of September 30, 2021 and collectible. Any promote fees are reflected in "(Loss) income from unconsolidated real estate ventures" in our statements of operations.
In July 2021, we entered into a mortgage loan with a principal balance of $85.0 million, collateralized by 1225 S. Clark Street. The mortgage loan has a seven-year term and an interest rate of LIBOR plus 1.60% per annum.
As of September 30, 2021 and December 31, 2020, we had various interest rate swap and cap agreements on certain mortgages payable with an aggregate notional value of $1.3 billion. See Note 15 for additional information.
Credit Facility
As of September 30, 2021 and December 31, 2020, our $1.4 billion credit facility consisted of a $1.0 billion revolving credit facility maturing in January 2025, a $200.0 million unsecured term loan ("Tranche A-1 Term Loan") maturing in January 2023 and a $200.0 million unsecured term loan ("Tranche A-2 Term Loan") maturing in July 2024. The following is a summary of amounts outstanding under the investmentcredit facility:
| | | | | | | | | |
| | Effective | | | | ||||
|
| Interest Rate (1) |
| | September 30, 2021 |
| December 31, 2020 | ||
| | | | | (In thousands) | ||||
Revolving credit facility (2) (3) (4) |
| 1.13% | | | $ | — | | $ | — |
| | | | | | | | | |
Tranche A-1 Term Loan (5) |
| 2.59% | | | $ | 200,000 | | $ | 200,000 |
Tranche A-2 Term Loan (5) |
| 2.49% | | |
| 200,000 | |
| 200,000 |
Unsecured term loans |
|
| | |
| 400,000 | |
| 400,000 |
Unamortized deferred financing costs, net |
|
| | |
| (1,507) | |
| (2,021) |
Unsecured term loans, net |
|
| | | $ | 398,493 | | $ | 397,979 |
(1) | Effective interest rate as of September 30, 2021. |
(2) | As of September 30, 2021 and December 31, 2020, letters of credit with an aggregate face amount of $1.4 million and $1.5 million were outstanding under our revolving credit facility. |
(3) | As of September 30, 2021 and December 31, 2020, net deferred financing costs related to our revolving credit facility totaling $5.4 million and $6.7 million were included in "Other assets, net." |
(4) | The interest rate for our revolving credit facility excludes a 0.15% facility fee. |
(5) | As of September 30, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the respective term loan and provide a weighted average interest rate of 1.39% for the Tranche A-1 Term Loan and 1.34% for the Tranche A-2 Term Loan. |
17
8.Other Liabilities, Net
The following is a summary of other liabilities, net:
| | | | | | |
|
| September 30, 2021 |
| December 31, 2020 | ||
| | (In thousands) | ||||
Lease intangible liabilities, net | | $ | 8,567 | | $ | 10,300 |
Lease assumption liabilities | |
| 6,257 | |
| 10,126 |
Lease incentive liabilities | |
| 14,125 | |
| 13,913 |
Liabilities related to operating lease right-of-use assets | |
| 8,914 | |
| 10,752 |
Liabilities related to finance lease right-of-use assets | |
| 40,733 | |
| 40,221 |
Prepaid rent | |
| 20,343 | |
| 19,809 |
Security deposits | |
| 17,953 | |
| 13,654 |
Environmental liabilities | |
| 18,168 | |
| 18,242 |
Deferred tax liability, net | |
| 6,290 | |
| 2,509 |
Dividends payable | |
| — | |
| 34,075 |
Derivative agreements, at fair value | |
| 28,406 | |
| 44,222 |
Deferred purchase price (1) | | | 19,639 | | | 19,479 |
Other | |
| 10,809 | |
| 10,472 |
Total other liabilities, net | | $ | 200,204 | | $ | 247,774 |
(1) | Deferred purchase price associated with the December 2020 acquisition of the former Americana Hotel site. |
9.Redeemable Noncontrolling Interests
JBG SMITH LP
OP Units held by persons other than JBG SMITH are redeemable for cash or, at our election, our common shares, subject to certain limitations. During the nine months ended September 30, 2021 and 2020, unitholders redeemed 829,107 and 1.1 million OP Units, which we elected to redeem for an equivalent number of our common shares. As of September 30, 2021, outstanding OP Units totaled 13.1 million, representing a 9.2% ownership interest in thatJBG SMITH LP. On our balance sheets, our OP Units and certain vested long-term incentive partnership units ("LTIP Units") are presented at the higher of their redemption value or their carrying value, with adjustments to the redemption value recognized in "Additional paid-in capital." Redemption value per OP Unit is equivalent to the market value of one of our common shares at the end of the period. In October 2021, unitholders redeemed 20,953 OP Units, which we elected to redeem for an equivalent number of our common shares.
Consolidated Real Estate Venture
We are a partner in a consolidated real estate venture on an other-than-temporary basis. Cash flow projectionsthat owns a multifamily asset located in Washington, D.C. Pursuant to the terms of the real estate venture agreement, we are obligated to fund all capital contributions until our ownership interest reaches a maximum of 97.0%. Our partner can redeem its interest for the investments consider property level factors such as expected future operating income, trends and prospects, as well as the effectscash under certain conditions. As of demand, competition and other factors. We consider various qualitative factors to determine ifSeptember 30, 2021, we held a decrease96.0% ownership interest in the real estate venture.
18
The following is a summary of the activity of redeemable noncontrolling interests:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | ||||||||||||||||
| | 2021 | | 2020 | ||||||||||||||
| | | | | Consolidated | | | | | | | | Consolidated | | | | ||
| | JBG | | Real Estate | | | | | JBG | | Real Estate | | | | ||||
|
| SMITH LP |
| Venture |
| Total |
| SMITH LP |
| Venture |
| Total | ||||||
|
| (In thousands) | ||||||||||||||||
Balance, beginning of period | | $ | 536,171 | | $ | 8,468 | | $ | 544,639 | | $ | 493,067 | | $ | 6,016 | | $ | 499,083 |
OP Unit redemptions | |
| (5,670) | |
| — | |
| (5,670) | |
| (4,796) | |
| — | |
| (4,796) |
Net income (loss) attributable to redeemable noncontrolling interests | |
| 116 | |
| (13) | |
| 103 | |
| (2,176) | |
| (36) | |
| (2,212) |
Other comprehensive income | |
| 413 | |
| — | |
| 413 | |
| 309 | |
| — | |
| 309 |
Distributions | |
| (3,993) | |
| — | |
| (3,993) | |
| (3,723) | |
| — | |
| (3,723) |
Share-based compensation expense | |
| 10,695 | |
| — | |
| 10,695 | |
| 14,496 | |
| — | |
| 14,496 |
Adjustment to redemption value | |
| (20,748) | |
| 1,474 | |
| (19,274) | |
| (14,012) | |
| 1,776 | |
| (12,236) |
Balance, end of period | | $ | 516,984 | | $ | 9,929 | | $ | 526,913 | | $ | 483,165 | | $ | 7,756 | | $ | 490,921 |
| | Nine Months Ended September 30, | ||||||||||||||||
| | 2021 | | 2020 | ||||||||||||||
| | | | | Consolidated | | | | | | | | Consolidated | | | | ||
| | JBG | | Real Estate | | | | | JBG | | Real Estate | | | | ||||
|
| SMITH LP |
| Venture |
| Total |
| SMITH LP |
| Venture |
| Total | ||||||
|
| (In thousands) | ||||||||||||||||
Balance, beginning of period | | $ | 522,882 | | $ | 7,866 | | $ | 530,748 | | $ | 606,699 | | $ | 6,059 | | $ | 612,758 |
OP Unit redemptions | |
| (27,350) | |
| — | |
| (27,350) | |
| (40,674) | |
| — | |
| (40,674) |
LTIP Units issued in lieu of cash bonuses (1) | |
| 5,614 | |
| — | |
| 5,614 | |
| 4,066 | |
| — | |
| 4,066 |
Net loss attributable to redeemable noncontrolling interests | |
| (2,400) | |
| (72) | |
| (2,472) | |
| (366) | |
| (79) | |
| (445) |
Other comprehensive income (loss) | |
| 1,621 | |
| — | |
| 1,621 | |
| (3,446) | |
| — | |
| (3,446) |
Distributions | |
| (9,282) | |
| — | |
| (9,282) | |
| (7,505) | |
| — | |
| (7,505) |
Share-based compensation expense | |
| 36,066 | |
| — | |
| 36,066 | |
| 51,742 | |
| — | |
| 51,742 |
Adjustment to redemption value | |
| (10,167) | |
| 2,135 | |
| (8,032) | |
| (127,351) | |
| 1,776 | |
| (125,575) |
Balance, end of period | | $ | 516,984 | | $ | 9,929 | | $ | 526,913 | | $ | 483,165 | | $ | 7,756 | | $ | 490,921 |
(1) | See Note 11 for additional information. |
10.Property Rental Revenue
The following is a summary of property rental revenue from our non-cancellable leases:
| | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | | ||||
| | (In thousands) | | ||||||||||
Fixed | | $ | 114,100 | | $ | 109,321 | | $ | 339,321 | | $ | 326,866 | |
Variable | | | 11,800 | | | 9,359 | | | 31,639 | | | 27,653 | |
Property rental revenue | | $ | 125,900 | | $ | 118,680 | | $ | 370,960 | | $ | 354,519 | |
11.Share-Based Payments
LTIP Units and Time-Based LTIP Units
During the nine months ended September 30, 2021, we granted to certain employees 498,955 LTIP Units with time-based vesting requirements ("Time-Based LTIP Units") with a weighted average grant-date fair value of our investment$29.21 per unit that
19
primarily vest ratably over four years subject to continued employment. Compensation expense for these units is other-than-temporary. These factors include agebeing recognized over a four-year period.
Additionally, in January 2021, we granted 163,065 fully vested LTIP Units to certain employees, who elected to receive all or a portion of their cash bonus, related to 2020 service, as LTIP Units. The LTIP units had a grant-date fair value of $29.54 per unit. Compensation expense totaling $4.8 million for these LTIP Units was recognized in 2020.
In April 2021, as part of their annual compensation, we granted to non-employee trustees a total of 71,792 fully vested LTIP Units with an aggregate grant-date fair value of $1.9 million. The LTIP Units may not be sold while a trustee is serving on the Board of Trustees.
In July 2021, we granted to certain employees 608,325 Time-Based LTIP Units with a weighted average grant-date fair value of $31.73 per unit that vest 50% on the fifth anniversary of the venture, our intentgrant date and ability to retain our investment in the entity, financial condition and long-term prospects25% on each of the entitysixth and relationships with our partners and banks. If we believe thatseventh anniversaries of the decline in thegrant date, subject to continued employment. Compensation expense for these units is being recognized over a seven-year period.
The aggregate grant-date fair value of the investmentTime-Based LTIP Units and LTIP Units granted during the nine months ended September 30, 2021 was $40.6 million. The Time-Based LTIP Units and LTIP Units were valued based on the closing common share price on the date of grant, less a discount for post-grant restrictions. The discount was determined using Monte Carlo simulations, and the following is temporary, no impairment charge is recorded. If our analysis indicates that there is an other-than temporary impairment related to the investment in a particular real estate venture, the carrying valuesummary of the venture will be adjustedsignificant assumptions used to an amount that reflects the estimatedvalue these units:
| | |
Expected volatility | 34.0% to 39.0% | |
Risk-free interest rate | 0.1% to 0.4% | |
Post-grant restriction periods | 2 to 3 years |
Performance-Based LTIP Units
In January 2021, we granted to certain employees 627,874 LTIP Units with performance-based vesting requirements ("Performance-Based LTIP Units") with a weighted average grant-date fair value of $15.14 per unit. Our Performance-Based LTIP Units have a three-year performance period. 50% of any Performance-Based LTIP Units that are earned vest at the investment.
In July 2021, we granted to certain employees 844,070 Performance-Based LTIP Units with a weighted average grant-date fair value of $23.08 per unit that vest 50% on the fifth anniversary of the grant date and 25% on each of the sixth and seventh anniversaries of the grant date, subject to continued employment, and earn based on our achievement of 4 share price targets during the performance period commencing on the first anniversary of the grant date and ending on the sixth anniversary of the grant date. Compensation expense for these units is being recognized over a seven-year period.
The aggregate grant-date fair value of the Performance-Based LTIP Units granted during the nine months ended September 30, 2021 was $29.0 million, valued using Monte Carlo simulations. The following is a summary of the significant assumptions used to value the Performance-Based LTIP Units:
| | |
Expected volatility | 31.0% - 34.0% | |
Dividend yield | 2.6% | |
Risk-free interest rate | 0.2% - 1.0% |
20
Restricted Share Units ("RSUs")
In January 2021, we granted to certain non-executive employees 22,194 RSUs with time-based vesting requirements ("Time-Based RSUs") with a weighted average grant-date fair value of $31.52 per unit and 13,516 RSUs with performance-based vesting requirements ("Performance-Based RSUs") with a weighted average grant-date fair value of $15.16 per unit. Vesting requirements and compensation expense recognition for the Time-Based RSUs and the Performance-Based RSUs are identical to those of the Time-Based LTIP Units and Performance-Based LTIP Units granted in January 2021.
The aggregate grant-date fair value of the RSUs granted during the nine months ended September 30, 2021 was $905,000. The Time-Based RSUs were valued based on the closing common share price on the date of grant and the Performance-Based RSUs were valued using Monte Carlo simulations with the same significant assumptions used to value the Performance-Based LTIP Units above.
ESPP
Pursuant to the ESPP, employees purchased 34,320 common shares for $880,000 during the nine months ended September 30, 2021. The following is a summary of the significant assumptions used to value the ESPP common shares using the Black-Scholes model:
| | |
Expected volatility | 39.0% | |
Dividend yield | 1.5% | |
Risk-free interest rate | 0.1% | |
Expected life | | 6 months |
Share-Based Compensation Expense
The following is a summary of share-based compensation expense:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
|
| (In thousands) | ||||||||||
Time-Based LTIP Units | | $ | 3,999 | | $ | 3,364 | | $ | 12,494 | | $ | 11,003 |
Performance-Based LTIP Units | |
| 3,216 | |
| 3,999 | |
| 9,615 | |
| 14,207 |
LTIP Units | |
| — | |
| — | |
| 1,091 | |
| 1,100 |
Other equity awards (1) | |
| 1,473 | |
| 1,690 | |
| 4,395 | |
| 4,829 |
Share-based compensation expense - other | |
| 8,688 | |
| 9,053 | |
| 27,595 | |
| 31,139 |
Formation Awards | |
| 476 | |
| 875 | |
| 1,923 | |
| 3,473 |
OP Units (2) | |
| 1,610 | |
| 4,780 | |
| 6,508 | |
| 17,398 |
LTIP Units (2) | |
| 66 | |
| 95 | |
| 217 | |
| 310 |
Special Performance-Based LTIP Units (3) | |
| 629 | |
| 657 | |
| 2,014 | |
| 2,015 |
Special Time-Based LTIP Units (3) | |
| 699 | |
| 726 | |
| 2,204 | |
| 2,236 |
Share-based compensation related to Formation Transaction and special equity awards (4) | |
| 3,480 | |
| 7,133 | |
| 12,866 | |
| 25,432 |
Total share-based compensation expense | |
| 12,168 | |
| 16,186 | |
| 40,461 | |
| 56,571 |
Less: amount capitalized | |
| (740) | |
| (1,177) | |
| (2,141) | |
| (3,388) |
Share-based compensation expense | | $ | 11,428 | | $ | 15,009 | | $ | 38,320 | | $ | 53,183 |
(1) | Primarily comprising compensation expense for: (i) fully vested LTIP Units issued to certain employees in lieu of all or a portion of any cash bonus earned, (ii) RSUs and (iii) shares issued under our ESPP. |
(2) | Represents share-based compensation expense for LTIP Units and OP Units issued in the Formation Transaction, which are subject to post-Combination employment obligations. |
(3) | Represents equity awards issued related to our successful pursuit of Amazon's additional headquarters in National Landing. |
(4) | Included in "General and administrative expense: Share-based compensation related to Formation Transaction and special equity awards" in the accompanying statements of operations. |
21
As of September 30, 2021, we had $73.7 million of total unrecognized compensation expense related to unvested share-based payment arrangements, which is expected to be recognized over a weighted average period of 3.5 years.
12.Transaction and Other Costs
The following is a summary of transaction and other costs:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
|
| (In thousands) | ||||||||||
Demolition costs | | $ | 1,422 | | $ | 179 | | $ | 2,869 | | $ | 179 |
Integration and severance costs | |
| 154 | |
| 406 | |
| 616 | |
| 3,066 |
Completed, potential and pursued transaction expenses | |
| 1,375 | |
| 260 | |
| 5,426 | |
| 281 |
Other (1) | |
| — | |
| — | |
| — | |
| 4,000 |
Transaction and other costs | | $ | 2,951 | | $ | 845 | | $ | 8,911 | | $ | 7,526 |
(1) | Related to a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and owns affordable workforce housing in the Washington, D.C. metropolitan area. |
13.Interest Expense
The following is a summary of interest expense:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
|
| (In thousands) | ||||||||||
Interest expense before capitalized interest | | $ | 17,278 | | $ | 18,274 | | $ | 50,744 | | $ | 52,751 |
Amortization of deferred financing costs | |
| 1,096 | |
| 857 | |
| 3,188 | |
| 2,255 |
Interest expense related to finance lease right-of-use assets | | | 430 | | | 464 | | | 1,284 | | | 1,026 |
Net unrealized (gain) loss on derivative financial instruments not designated as cash flow hedges | |
| 37 | |
| 202 | |
| (50) | |
| 173 |
Capitalized interest | |
| (1,598) | |
| (2,912) | |
| (4,854) | |
| (11,545) |
Interest expense | | $ | 17,243 | | $ | 16,885 | | $ | 50,312 | | $ | 44,660 |
14.Shareholders' Equity and Earnings Per Common Share
Common Shares Repurchased
In March 2020, our Board of Trustees authorized the repurchase of up to $500 million of our outstanding common shares. During three and nine months ended September 30, 2021, we repurchased and retired 2.3 million and 2.9 million common shares for $68.9 million and $88.1 million, an average purchase price of $29.73 and $29.99 per share. During the three and nine months ended September 30, 2020, we repurchased and retired 1.4 million and 2.9 million common shares for $38.4 million and $79.6 million, an average purchase price of $26.64 and $27.82 per share. Since we began the share repurchase program, we have repurchased and retired 6.7 million common shares for $192.9 million, an average purchase price of $28.71 per share.
22
Earnings (Loss) Per Common Share
The following is a summary of the calculation of basic and diluted earnings (loss) per common share and a reconciliation of the amounts of net income (loss) available to common shareholders used in calculating basic and diluted earnings per common share to net income (loss):
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| | 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
| | (In thousands, except per share amounts) | ||||||||||
Net income (loss) | | $ | 996 | | $ | (25,005) | | $ | (26,391) | | $ | (17,093) |
Net (income) loss attributable to redeemable noncontrolling interests | | | (103) | |
| 2,212 | |
| 2,472 | |
| 445 |
Net loss attributable to noncontrolling interests | | | — | |
| — | |
| 1,108 | |
| — |
Net income (loss) attributable to common shareholders | | | 893 | | | (22,793) | | | (22,811) | | | (16,648) |
Distributions to participating securities | | | (763) | | | (822) | |
| (1,497) | |
| (1,729) |
Net income (loss) available to common shareholders - basic and diluted | | $ | 130 | | $ | (23,615) | | $ | (24,308) | | $ | (18,377) |
| | | | | | | | | | | | |
Weighted average number of common shares outstanding - basic and diluted | | | 131,351 | | | 133,620 | |
| 131,456 | |
| 133,924 |
| | | | | | | | | | | | |
Earnings (loss) per common share - basic and diluted | | $ | 0.00 | | $ | (0.18) | | $ | (0.18) | | $ | (0.14) |
The effect of the redemption of OP Units, LTIP Units and Time-Based LTIP Units that were outstanding as of September 30, 2021 and 2020 is excluded in the computation of diluted earnings per common share as the assumed exchange of such units for common shares on a one-for-one basis was antidilutive (the assumed redemption of these units would have no impact on the determination of diluted earnings per share). Since OP Units, LTIP Units and Time-Based LTIP Units, which are held by noncontrolling interests, are attributed gains at an identical proportion to the common shareholders, the gains attributable and their equivalent weighted average OP Units, LTIP Units and Time-Based LTIP Unit impact are excluded from net income (loss) available to common shareholders and from the weighted average number of common shares outstanding in calculating diluted earnings per common share. Performance-Based LTIP Units, Special Performance-Based LTIP Units, Formation Awards and RSUs, which totaled 5.2 million and 4.9 million for the three and nine months ended September 30, 2021, and 4.4 million and 4.9 million for the three and nine months ended September 30, 2020, were excluded from the calculation of diluted earnings per common share as they were antidilutive, but no less than its initial carrying value, with such adjustments recognizedpotentially could be dilutive in "Additional paid-in capital".
Dividends Declared in consolidated subsidiaries representsOctober 2021
On October 27, 2021, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on November 24, 2021 to shareholders of record as of November 10, 2021.
15.Fair Value Measurements
Fair Value Measurements on a Recurring Basis
To manage or hedge our exposure to interest rate risk, we follow established risk management policies and procedures, including the portionuse of equity that wea variety of derivative financial instruments. We do not own in entities we consolidate, including interests in consolidated real estate ventures or VIEs in connection with property acquisitions. We identify our noncontrolling interests separately within the equity section on the balance sheets. See Note 10 for further information.
As of September 30, 2021 and December 31, 2020, we had various derivative financial instruments consisting of interest rate swapsswap and caps,cap agreements that are considered economic hedges, but not designated as accounting hedges, and are
23
Accounting Standards Codification 820 ("Topic 820"), Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). ASCTopic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:
Level 1 — quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities;
Level 2 — observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and
Level 3 — unobservable inputs that are used when little or no market data is available.
Fair value of purchase consideration: | |||
Common shares and OP Units | $ | 1,224,886 | |
Cash | 20,573 | ||
Total consideration paid | $ | 1,245,459 | |
Fair value of assets acquired and liabilities assumed: | |||
Land and improvements | $ | 342,932 | |
Building and improvements | 623,889 | ||
Construction in progress, including land | 632,664 | ||
Leasehold improvements and equipment | 7,890 | ||
Cash | 104,516 | ||
Restricted cash | 13,460 | ||
Investments in and advances to unconsolidated real estate ventures | 238,388 | ||
Identified intangible assets | 146,600 | ||
Notes receivable (1) | 50,934 | ||
Identified intangible liabilities | (8,449 | ) | |
Mortgages payable assumed (2) | (768,523 | ) | |
Capital lease obligations assumed (3) | (33,543 | ) | |
Deferred tax liability (4) | (21,476 | ) | |
Other liabilities acquired, net | (52,065 | ) | |
Noncontrolling interests in consolidated subsidiaries | (3,987 | ) | |
Net assets acquired | 1,273,230 | ||
Gain on bargain purchase (5) | 27,771 | ||
Total consideration paid | $ | 1,245,459 |
Outstanding common shares and common limited partnership units prior to the Combination | 100,571 | ||
Exchange ratio (1) | 2.71 | ||
Common shares and OP Units issued in consideration | 37,164 | ||
Price per share/unit (2) | $ | 37.10 | |
Fair value of common shares and OP Units issued in consideration | $ | 1,378,780 | |
Fair value adjustment to OP Units due to transfer restrictions | (43,303 | ) | |
Portion of consideration attributable to performance of future services (3) | (110,591 | ) | |
Fair value of common shares and OP Units purchase consideration | $ | 1,224,886 |
The fair values of the depreciable tangible and identified intangible assets and liabilities, all of which have definite lives and are amortized, are as follows:
Total Fair Value | Weighted Average Amortization Period | ||||||
Useful Life (1) | |||||||
(In thousands) | (In years) | ||||||
Tangible assets: | |||||||
Building and improvements | $ | 559,042 | 3 - 40 years | ||||
Tenant improvements | 64,847 | Shorter of useful life or remaining life of the respective lease | |||||
Total building and improvements | $ | 623,889 | |||||
Leasehold improvements | $ | 4,422 | Shorter of useful life or remaining life of the respective lease | ||||
Identified intangible assets: | |||||||
In-place leases | $ | 59,351 | 6.4 | Remaining life of the respective lease | |||
Above-market real estate leases | 11,700 | 6.3 | Remaining life of the respective lease | ||||
Below-market ground leases | 659 | 88.5 | Remaining life of the respective lease | ||||
Option to enter into ground lease | 17,090 | N/A | Remaining life of contract | ||||
Management and leasing contracts (2) | 57,800 | 7.4 | Estimated remaining life of contracts, ranging between 3 - 8 years | ||||
Total identified intangible assets | $ | 146,600 | |||||
Identified intangible liabilities: | |||||||
Below-market real estate leases | $ | 8,449 | 10.2 | Remaining life of the respective lease |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | (In thousands) | ||||||||||||||
Unaudited pro forma information: | |||||||||||||||
Total revenue | $ | 160,428 | $ | 170,498 | $ | 481,314 | $ | 492,874 | |||||||
Net income (loss) attributable to JBG SMITH Properties | $ | 2,283 | $ | 803 | $ | (13,741 | ) | $ | (26,701 | ) | |||||
Earnings (loss) per common share: | |||||||||||||||
Basic | $ | 0.02 | $ | 0.01 | $ | (0.13 | ) | $ | (0.27 | ) | |||||
Diluted | $ | 0.02 | $ | 0.01 | $ | (0.13 | ) | $ | (0.27 | ) |
September 30, 2017 | December 31, 2016 | |||||||
(In thousands) | ||||||||
Tenants | $ | 32,106 | $ | 26,278 | ||||
Other | 23,835 | 11,314 | ||||||
Allowance for doubtful accounts | (5,467 | ) | (4,212 | ) | ||||
Total tenant and other receivables, net | $ | 50,474 | $ | 33,380 |
Ownership Interest (1) | Investment Balance | |||||||||
Real Estate Venture Partners (1) | September 30, 2017 | September 30, 2017 | December 31, 2016 | |||||||
(In thousands) | ||||||||||
Landmark | 1.8% - 59.0% | $ | 110,562 | $ | — | |||||
CBREI Venture | 5.0% - 64.0% | 85,386 | — | |||||||
Canadian Pension Plan Investment Board | 55.0% | 36,223 | 36,312 | |||||||
Brandywine | 30.0% | 13,753 | — | |||||||
Berkshire Group | 50.0% | 27,647 | — | |||||||
MRP Realty | 70.0% | 1,802 | — | |||||||
JP Morgan | 5.0% | 9,351 | 9,335 | |||||||
Other | 242 | 129 | ||||||||
Total investments in unconsolidated real estate ventures | 284,966 | 45,776 | ||||||||
Advances to unconsolidated real estate ventures | 20 | — | ||||||||
Total investments in and advances to unconsolidated real estate ventures | $ | 284,986 | $ | 45,776 |
Weighted Average Interest Rate | Balance as of | |||||||||
September 30, 2017 | September 30, 2017 | December 31, 2016 | ||||||||
(In thousands) | ||||||||||
Variable rate (1) | 4.08% | $ | 531,989 | $ | 31,000 | |||||
Fixed rate (2) | 3.90% | 643,801 | 273,000 | |||||||
Unconsolidated real estate ventures - mortgages payable | 1,175,790 | 304,000 | ||||||||
Unamortized deferred financing costs, net | (860 | ) | (1,034 | ) | ||||||
Unconsolidated real estate ventures - mortgages payable, net | $ | 1,174,930 | $ | 302,966 |
September 30, 2017 | December 31, 2016 | |||||||
Combined balance sheet information: | (In thousands) | |||||||
Total assets | $ | 3,446,348 | $ | 598,239 | ||||
Total liabilities | 1,253,664 | 327,862 | ||||||
Noncontrolling interests | 343 | 343 | ||||||
Total equity | 2,192,341 | 270,034 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Combined income statement information: | (In thousands) | |||||||||||||||
Total revenue | $ | 46,830 | $ | 16,364 | $ | 83,387 | $ | 51,066 | ||||||||
Net (loss) income | (5,191 | ) | 2,607 | (414 | ) | 5,083 |
September 30, 2017 | December 31, 2016 | |||||||
(In thousands) | ||||||||
Deferred leasing costs | $ | 168,344 | $ | 157,258 | ||||
Accumulated amortization | (66,403 | ) | (57,910 | ) | ||||
Deferred leasing costs, net | 101,941 | 99,348 | ||||||
Prepaid expenses | 21,942 | 2,199 | ||||||
Identified intangible assets, net | 143,000 | 3,063 | ||||||
Other | 21,508 | 8,345 | ||||||
Total other assets, net | $ | 288,391 | $ | 112,955 |
September 30, 2017 | December 31, 2016 | ||||||
Identified intangible assets: | (in thousands) | ||||||
In-place leases | $ | 72,081 | $ | 12,777 | |||
Above-market real estate leases | 12,473 | 773 | |||||
Below-market ground leases | 2,874 | 2,215 | |||||
Option to enter into ground lease | 17,090 | — | |||||
Management and leasing contracts | 57,800 | — | |||||
Other | 206 | 206 | |||||
Total identified intangibles assets | 162,524 | 15,971 | |||||
Accumulated amortization: | |||||||
In-place leases | 15,187 | 10,871 | |||||
Above-market real estate leases | 1,082 | 612 | |||||
Below-market ground leases | 1,344 | 1,278 | |||||
Management and leasing contracts | 1,753 | — | |||||
Other | 158 | 147 | |||||
Total accumulated amortization | 19,524 | 12,908 | |||||
Identified intangible assets, net | $ | 143,000 | $ | 3,063 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
In-place lease amortization (1) | $ | 4,104 | $ | 233 | $ | 4,347 | $ | 336 | |||||||
Above-market real estate lease amortization (2) | 448 | 20 | 471 | 64 | |||||||||||
Below-market ground lease amortization (3) | 23 | 21 | 66 | 64 | |||||||||||
Management and leasing contract amortization (1) | 1,753 | — | 1,753 | — | |||||||||||
Other amortization (1) | 3 | 22 | 10 | 69 | |||||||||||
Total identified intangible asset amortization | $ | 6,331 | $ | 296 | $ | 6,647 | $ | 533 |
Year ending December 31, | Amount | |||
(in thousands) | ||||
2018 | $ | 15,119 | ||
2019 | 12,032 | |||
2020 | 10,105 | |||
2021 | 6,664 | |||
2022 | 5,312 |
Weighted Average Interest Rate | Balance as of | |||||||||
September 30, 2017 | September 30, 2017 | December 31, 2016 | ||||||||
(In thousands) | ||||||||||
Variable rate (1) | 2.95% | $ | 1,152,106 | $ | 547,291 | |||||
Fixed rate (2) | 4.79% | 836,141 | 620,327 | |||||||
Mortgages payable (3) | 1,988,247 | 1,167,618 | ||||||||
Unamortized deferred financing costs and premium/discount, net | (10,573 | ) | (2,604 | ) | ||||||
Mortgages payable, net | $ | 1,977,674 | $ | 1,165,014 | ||||||
Payable to former parent (4) | — | $ | — | $ | 283,232 |
Interest Rate | Balance as of | |||||
September 30, 2017 | September 30, 2017 | |||||
(In thousands) | ||||||
Revolving credit facility (1) | 2.34% | $ | 115,751 | |||
Tranche A-1 Term Loan | 2.44% | $ | 50,000 | |||
Unamortized deferred financing costs, net | (3,611 | ) | ||||
Unsecured term loan, net | $ | 46,389 |
Year ending December 31, | Amount | |||
(In thousands) | ||||
2017 | $ | — | ||
2018 | 376,019 | |||
2019 | 227,919 | |||
2020 | 215,096 | |||
2021 | 215,592 | |||
2022 | 327,500 | |||
Thereafter | 791,872 | |||
Total | $ | 2,153,998 |
September 30, 2017 | December 31, 2016 | ||||||
(In thousands) | |||||||
Lease intangible liabilities | $ | 44,965 | $ | 36,515 | |||
Accumulated amortization | (26,287 | ) | (24,945 | ) | |||
Lease intangible liabilities, net | 18,678 | 11,570 | |||||
Prepaid rent | 12,445 | 9,163 | |||||
Lease assumptions liabilities and accrued tenant incentives | 12,090 | 14,907 | |||||
Capital lease obligation | 15,976 | — | |||||
Security deposits | 13,795 | 10,324 | |||||
Ground lease deferred rent payable | 3,559 | 3,331 | |||||
Deferred tax liability (1) | 22,007 | — | |||||
Other | 2,224 | 192 | |||||
Total other liabilities, net | $ | 100,774 | $ | 49,487 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Lease intangible liabilities amortization (1) | $ | 633 | $ | 359 | $ | 1,343 | $ | 1,076 |
Year ending December 31, | Amount | |||
(in thousands) | ||||
2018 | $ | 2,765 | ||
2019 | 2,679 | |||
2020 | 2,392 | |||
2021 | 1,917 | |||
2022 | 1,798 |
Nine Months Ended September 30, | |||
2017 | |||
(In thousands) | |||
Balance at January 1, 2017 (1) | $ | — | |
OP Units issued at the Separation | 96,632 | ||
OP Units issued in connection with the Combination (2) | 359,967 | ||
Net loss attributable to redeemable noncontrolling interests | (2,481 | ) | |
Share-based compensation expense | 15,799 | ||
Adjustment to redemption value | 97,084 | ||
Balance as of September 30, 2017 | $ | 567,001 |
Formation Awards | $ | 3,963 | |
LTIP Units that vested immediately | 2,546 | ||
OP Units (1) | 7,936 | ||
Share-based compensation related to Formation Transaction (2) | 14,445 | ||
LTIP Units that vest over four years | 885 | ||
OPP Units | 469 | ||
Other equity awards | 1,526 | ||
Share-based compensation expense - other (3) | 2,880 | ||
Total share-based compensation expense | 17,325 | ||
Less amount capitalized | (161 | ) | |
Net share-based compensation expense (4) | $ | 17,164 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands, except per share amounts) | |||||||||||||||
Net (loss) income attributable to JBG SMITH Properties | $ | (69,831 | ) | $ | 21,014 | $ | (57,851 | ) | $ | 49,344 | |||||
Weighted average shares outstanding — basic and diluted (1) | 114,744 | 100,571 | 105,347 | 100,571 | |||||||||||
(Loss) earnings per share available to common shareholders: | |||||||||||||||
Basic | $ | (0.61 | ) | $ | 0.21 | $ | (0.55 | ) | $ | 0.49 | |||||
Diluted | $ | (0.61 | ) | $ | 0.21 | $ | (0.55 | ) | $ | 0.49 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||
OP Units | 3,281 | — | 3,281 | — | |||||||
Formation Awards | 2,681 | — | 2,681 | — | |||||||
LTIP Units | 410 | — | 410 | — | |||||||
OPP Units | 605 | — | 605 | — |
Year ending December 31, | Amount | |||
(In thousands) | ||||
2017 | $ | 133,025 | ||
2018 | 387,636 | |||
2019 | 310,230 | |||
2020 | 277,278 | |||
2021 | 234,005 | |||
2022 | 195,750 | |||
Thereafter | 868,284 |
The following areis a summary of assets and liabilities measured at fair value on a recurring basisbasis:
| | | | | | | | | | | | |
| | Fair Value Measurements | ||||||||||
|
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||||
| | (In thousands) | ||||||||||
September 30, 2021 |
| | | | | | | | | | | |
Derivative financial instruments designated as cash flow hedges: | |
|
|
| |
| |
|
|
| |
|
Classified as liabilities in "Other liabilities, net" | | $ | 28,406 | |
| — | | $ | 28,406 | |
| — |
Derivative financial instruments not designated as cash flow hedges: | |
|
| |
|
| |
|
| |
|
|
Classified as assets in "Other assets, net" | |
| 266 | |
| — | |
| 266 | |
| — |
| | | | | | | | | | | | |
December 31, 2020 | |
|
|
| |
| |
|
|
| |
|
Derivative financial instruments designated as cash flow hedges: | |
|
|
| |
| |
|
|
| |
|
Classified as liabilities in "Other liabilities, net" | | $ | 44,222 | |
| — | | $ | 44,222 | |
| — |
Derivative financial instruments not designated as cash flow hedges: | |
|
| |
|
| |
|
| |
|
|
Classified as assets in "Other assets, net" | |
| 35 | |
| — | |
| 35 | |
| — |
The fair values of our derivative financial instruments were determined using widely accepted valuation techniques, including discounted cash flow analysis on the expected cash flows of the derivative financial instrument. This analysis reflected the contractual terms of the derivative, including the period to maturity, and used observable market-based inputs, including interest rate market data and implied volatilities in such interest rates. While it was determined that the majority of the inputs used to value the derivatives fall within Level 2 of the fair value hierarchy under authoritative accounting guidance, the credit valuation adjustments associated with the derivatives also utilized Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default. However, as of September 30, 2017:2021 and December 31, 2020, the significance of the impact of the credit valuation adjustments on the overall valuation of the derivative financial instruments was assessed, and it was determined that these adjustments were not significant to the overall valuation of the derivative financial instruments. As a result, it was determined that the derivative financial instruments in their entirety should be classified in Level 2 of the fair value hierarchy. The net unrealized gains and losses included in "Other comprehensive income (loss)" in our statements of comprehensive income (loss) for the three and nine months ended September 30, 2021 and 2020 were attributable to the net change in unrealized gains or losses related to the interest rate swaps that were outstanding during those periods, none of which were reported in our statements of operations as the interest rate swaps were documented and qualified as hedging instruments.
24
Fair Value Measurements | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
September 30, 2017 | (In thousands) | ||||||||||||||
Interest rate swaps and caps: | |||||||||||||||
Classified as liabilities in "Other liabilities, net" | $ | 703 | $ | — | $ | 703 | $ | — |
As of September 30, 20172021 and December 31, 2016,2020, all financial instrumentsassets and liabilities were reflected in our balance sheets at amounts which, in our estimation, reasonably approximated their fair values, except for the following:
| | | | | | | | | | | | |
| | September 30, 2021 | | December 31, 2020 | ||||||||
|
| Carrying |
| |
| Carrying |
| | ||||
| | Amount (1) | | Fair Value | | Amount (1) | | Fair Value | ||||
|
| (In thousands) | ||||||||||
Financial liabilities: |
| |
|
| |
|
| |
|
| |
|
Mortgages payable | | $ | 1,684,407 | | $ | 1,739,548 | | $ | 1,603,869 | | $ | 1,606,470 |
Unsecured term loans | |
| 400,000 | |
| 400,201 | |
| 400,000 | |
| 399,678 |
September 30, 2017 | December 31, 2016 | ||||||||||||||
Carrying Amount (1) | Fair Value | Carrying Amount (1) | Fair Value | ||||||||||||
(In thousands) | |||||||||||||||
Financial liabilities: | |||||||||||||||
Mortgages payable | $ | 1,988,247 | $ | 2,015,653 | $ | 1,167,618 | $ | 1,192,267 |
(1) | The carrying amount consists of principal only. |
The carrying amount consistsfair values of principal only.
We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. As a result of the Formation Transaction, we redefinedWe define our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker (“CODM”("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three3 reportable segments (office,(commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services. In connection therewith, we have reclassified the prior period segment financial data to conform to the current period presentation.
The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the net operating income (“NOI”("NOI") of properties within each segment. NOI includes property rental revenuesrevenue and tenant reimbursementsparking revenue, and deducts property operating expenses and real estate taxes.
With respect to the third-party asset management and real estate services business, the CODM reviews revenuesrevenue streams generated by this segment (third-party("Third-party real estate services, including reimbursements)reimbursements"), as well as the expenses attributable to the segment (general("General and administrative: third-party real estate services)services"), which are both disclosed separately in theour statements of operations. The following represents the components of revenue from our third-party real estate services business:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
|
| (In thousands) | ||||||||||
Property management fees | | $ | 4,831 | | $ | 4,694 | | $ | 14,549 | | $ | 15,453 |
Asset management fees | |
| 2,145 | |
| 2,301 | |
| 6,602 | |
| 7,400 |
Development fees (1) | |
| 4,032 | |
| 2,614 | |
| 22,705 | |
| 8,474 |
Leasing fees | |
| 1,822 | |
| 1,086 | |
| 4,106 | |
| 3,627 |
Construction management fees | |
| — | |
| 584 | |
| 375 | |
| 2,057 |
Other service revenue | |
| 1,295 | |
| 2,000 | |
| 4,783 | |
| 5,452 |
Third-party real estate services revenue, excluding reimbursements | |
| 14,125 | |
| 13,279 | |
| 53,120 | |
| 42,463 |
Reimbursement revenue (2) | |
| 11,717 | |
| 13,708 | |
| 37,574 | |
| 41,407 |
Third-party real estate services revenue, including reimbursements | | | 25,842 | | | 26,987 | | | 90,694 | | | 83,870 |
Third-party real estate services expenses | | | 25,542 | | | 28,207 | | | 80,035 | | | 86,260 |
Third-party real estate services revenue less expenses | | $ | 300 | | $ | (1,220) | | $ | 10,659 | | $ | (2,390) |
25
(1) | Estimated development fee revenue totaling $51.2 million as of September 30, 2021 is expected to be recognized over the next six years as unsatisfied performance obligations are completed. |
(2) | Represents reimbursement of expenses incurred by us on behalf of third parties, including allocated payroll costs and amounts paid to third-party contractors for construction management projects. |
Management company assets primarily consist of management and leasing contracts with a net book value of $56.0$21.1 million and $25.5 million as of September 30, 2021 and December 31, 2020, which are classified in "Other assets, net" in theour balance sheet as of September 30, 2017.sheets. Consistent with theinternal reporting presented to our CODM approach and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.
The following table reflectsis the reconciliation of net income (loss) income attributable to JBG SMITH Propertiescommon shareholders to NOI for the three and nine months ended September 30, 2017 and 2016:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Net (loss) income attributable to JBG SMITH Properties | $ | (69,831 | ) | $ | 21,014 | $ | (57,851 | ) | $ | 49,344 | |||||
Add: | |||||||||||||||
Depreciation and amortization expense | 43,951 | 31,377 | 109,726 | 98,291 | |||||||||||
General and administrative expense: | |||||||||||||||
Corporate and other | 10,593 | 10,913 | 35,536 | 36,040 | |||||||||||
Third-party real estate services | 21,178 | 4,779 | 30,362 | 14,272 | |||||||||||
Share-based compensation related to Formation Transaction | 14,445 | — | 14,445 | — | |||||||||||
Transaction and other costs | 104,095 | 1,528 | 115,173 | 1,528 | |||||||||||
Interest expense | 15,309 | 13,028 | 43,813 | 38,662 | |||||||||||
Loss on extinguishment of debt | 689 | — | 689 | — | |||||||||||
Income tax (benefit) expense | (1,034 | ) | 302 | (317 | ) | 884 | |||||||||
Less: | |||||||||||||||
Third-party real estate services, including reimbursements | 25,141 | 8,297 | 38,881 | 24,617 | |||||||||||
Other income | 1,158 | 1,564 | 3,701 | 3,938 | |||||||||||
(Loss) income from unconsolidated real estate ventures | (1,679 | ) | 584 | (1,365 | ) | (952 | ) | ||||||||
Interest and other (loss) income, net | (379 | ) | 749 | 1,366 | 2,292 | ||||||||||
Gain on bargain purchase | 27,771 | — | 27,771 | — | |||||||||||
Net loss attributable to redeemable noncontrolling interests | 8,160 | — | 2,481 | — | |||||||||||
NOI | $ | 79,223 | $ | 71,747 | $ | 218,741 | $ | 209,126 |
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
|
| | (In thousands) | |||||||||
Net income (loss) attributable to common shareholders | | $ | 893 | | $ | (22,793) | | $ | (22,811) | | $ | (16,648) |
Add: | |
|
| |
|
| |
|
| |
|
|
Depreciation and amortization expense | |
| 56,726 | |
| 56,481 | |
| 178,130 | |
| 157,586 |
General and administrative expense: | |
|
| |
|
| |
|
| |
|
|
Corporate and other | |
| 12,105 | |
| 11,086 | |
| 38,475 | |
| 37,478 |
Third-party real estate services | |
| 25,542 | |
| 28,207 | |
| 80,035 | |
| 86,260 |
Share-based compensation related to Formation Transaction and special equity awards | |
| 3,480 | |
| 7,133 | |
| 12,866 | |
| 25,432 |
Transaction and other costs | |
| 2,951 | |
| 845 | |
| 8,911 | |
| 7,526 |
Interest expense | |
| 17,243 | |
| 16,885 | |
| 50,312 | |
| 44,660 |
Loss on extinguishment of debt | |
| — | |
| — | |
| — | |
| 33 |
Income tax expense (benefit) | |
| 217 | |
| (488) | |
| 4,527 | |
| (3,721) |
Net income (loss) attributable to redeemable noncontrolling interests | |
| 103 | |
| (2,212) | |
| (2,472) | |
| (445) |
Net loss attributable to noncontrolling interests | | | — | | | — | | | (1,108) | | | — |
Less: | |
|
| |
|
| |
|
| |
|
|
Third-party real estate services, including reimbursements revenue | |
| 25,842 | |
| 26,987 | |
| 90,694 | |
| 83,870 |
Other revenue | |
| 1,568 | |
| 2,292 | |
| 5,658 | |
| 5,438 |
Income (loss) from unconsolidated real estate ventures, net | |
| 20,503 | |
| (965) | |
| 23,513 | |
| (17,142) |
Interest and other income, net | |
| 192 | |
| — | |
| 163 | |
| 1,021 |
Gain on sale of real estate | |
| — | |
| — | |
| 11,290 | |
| 59,477 |
Consolidated NOI | | $ | 71,155 | | $ | 66,830 | | $ | 215,547 | | $ | 205,497 |
The following is a summary of NOI by segment forsegment. Items classified in the threeOther column include future development assets, corporate entities and nine months ended September 30, 2017 and 2016:the elimination of intersegment activity.
| | | | | | | | | | | | |
| | Three Months Ended September 30, 2021 | ||||||||||
|
| Commercial |
| Multifamily |
| Other |
| Total | ||||
|
| (In thousands) | ||||||||||
Property rental revenue | | $ | 92,522 | | $ | 35,020 | | $ | (1,642) | | $ | 125,900 |
Parking revenue | |
| 3,520 | |
| 111 | |
| 81 | |
| 3,712 |
Total property revenue | |
| 96,042 | |
| 35,131 | |
| (1,561) | |
| 129,612 |
Property expense: | |
| | |
| | |
| | |
|
|
Property operating | |
| 27,068 | |
| 14,212 | |
| (1,082) | |
| 40,198 |
Real estate taxes | |
| 12,098 | |
| 4,930 | |
| 1,231 | |
| 18,259 |
Total property expense | |
| 39,166 | |
| 19,142 | |
| 149 | |
| 58,457 |
Consolidated NOI | | $ | 56,876 | | $ | 15,989 | | $ | (1,710) | | $ | 71,155 |
26
Three Months Ended September 30, 2017 | ||||||||||||||||||||
Office | Multifamily | Other | Eliminations | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Rental revenue: | ||||||||||||||||||||
Property rentals | $ | 91,534 | $ | 23,397 | $ | 4,171 | $ | (2,644 | ) | $ | 116,458 | |||||||||
Tenant reimbursements | 7,917 | 1,548 | 128 | — | 9,593 | |||||||||||||||
Total rental revenue | 99,451 | 24,945 | 4,299 | (2,644 | ) | 126,051 | ||||||||||||||
Rental expense: | — | |||||||||||||||||||
Property operating | 27,000 | 6,796 | 3,502 | (7,664 | ) | 29,634 | ||||||||||||||
Real estate taxes | 13,038 | 2,952 | 1,204 | — | 17,194 | |||||||||||||||
Total rental expense | 40,038 | 9,748 | 4,706 | (7,664 | ) | 46,828 | ||||||||||||||
NOI | $ | 59,413 | $ | 15,197 | $ | (407 | ) | $ | 5,020 | $ | 79,223 |
Three Months Ended September 30, 2016 | ||||||||||||||||||||
Office | Multifamily | Other | Eliminations | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Rental revenue: | ||||||||||||||||||||
Property rentals | $ | 81,575 | $ | 15,850 | $ | 4,898 | $ | 942 | $ | 103,265 | ||||||||||
Tenant reimbursements | 8,977 | 876 | 378 | — | 10,231 | |||||||||||||||
Total rental revenue | 90,552 | 16,726 | 5,276 | 942 | 113,496 | |||||||||||||||
Rental expense: | — | |||||||||||||||||||
Property operating | 25,083 | 4,782 | 3,065 | (5,643 | ) | 27,287 | ||||||||||||||
Real estate taxes | 11,793 | 1,663 | 1,006 | 14,462 | ||||||||||||||||
Total rental expense | 36,876 | 6,445 | 4,071 | (5,643 | ) | 41,749 | ||||||||||||||
NOI | $ | 53,676 | $ | 10,281 | $ | 1,205 | $ | 6,585 | $ | 71,747 |
Nine Months Ended September 30, 2017 | ||||||||||||||||||||
Office | Multifamily | Other | Eliminations | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Rental revenue: | ||||||||||||||||||||
Property rentals | $ | 249,532 | $ | 62,050 | $ | 9,623 | $ | (4,306 | ) | $ | 316,899 | |||||||||
Tenant reimbursements | 22,738 | 3,772 | 651 | — | 27,161 | |||||||||||||||
Total rental revenue | 272,270 | 65,822 | 10,274 | (4,306 | ) | 344,060 | ||||||||||||||
Rental expense: | — | |||||||||||||||||||
Property operating | 71,377 | 16,716 | 11,330 | (22,082 | ) | 77,341 | ||||||||||||||
Real estate taxes | 37,185 | 7,973 | 2,820 | — | 47,978 | |||||||||||||||
Total rental expense | 108,562 | 24,689 | 14,150 | (22,082 | ) | 125,319 | ||||||||||||||
NOI | $ | 163,708 | $ | 41,133 | $ | (3,876 | ) | $ | 17,776 | $ | 218,741 |
Nine Months Ended September 30, 2016 | ||||||||||||||||||||
Office | Multifamily | Other | Eliminations | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Rental revenue: | ||||||||||||||||||||
Property rentals | $ | 237,826 | $ | 45,203 | $ | 18,621 | $ | (2,153 | ) | $ | 299,497 | |||||||||
Tenant reimbursements | 24,807 | 2,422 | 1,199 | — | 28,428 | |||||||||||||||
Total rental revenue | 262,633 | 47,625 | 19,820 | (2,153 | ) | 327,925 | ||||||||||||||
Rental expenses: | — | |||||||||||||||||||
Property operating | 69,740 | 12,594 | 14,934 | (22,181 | ) | 75,087 | ||||||||||||||
Real estate taxes | 34,855 | 5,063 | 3,794 | — | 43,712 | |||||||||||||||
Total rental expense | 104,595 | 17,657 | 18,728 | (22,181 | ) | 118,799 | ||||||||||||||
NOI | $ | 158,038 | $ | 29,968 | $ | 1,092 | $ | 20,028 | $ | 209,126 |
| | Three Months Ended September 30, 2020 | ||||||||||
|
| Commercial |
| Multifamily |
| Other |
| Total | ||||
|
| (In thousands) | ||||||||||
Property rental revenue | | $ | 90,050 | | $ | 30,452 | | $ | (1,822) | | $ | 118,680 |
Parking revenue | |
| 3,002 | |
| 74 | |
| — | |
| 3,076 |
Total property revenue | |
| 93,052 | |
| 30,526 | |
| (1,822) | |
| 121,756 |
Property expense: | |
| | |
|
| |
|
| |
|
|
Property operating | |
| 26,701 | |
| 13,226 | |
| (2,355) | |
| 37,572 |
Real estate taxes | |
| 12,136 | |
| 4,656 | |
| 562 | |
| 17,354 |
Total property expense | |
| 38,837 | |
| 17,882 | |
| (1,793) | |
| 54,926 |
Consolidated NOI | | $ | 54,215 | | $ | 12,644 | | $ | (29) | | $ | 66,830 |
| | | | | | | | | | | | |
| | Nine Months Ended September 30, 2021 | ||||||||||
|
| Commercial |
| Multifamily |
| Other |
| Total | ||||
|
| (In thousands) | ||||||||||
Property rental revenue | | $ | 275,736 | | $ | 100,324 | | $ | (5,100) | | $ | 370,960 |
Parking revenue | |
| 9,169 | |
| 286 | |
| 188 | |
| 9,643 |
Total property revenue | |
| 284,905 | |
| 100,610 | |
| (4,912) | |
| 380,603 |
Property expense: | |
| | |
|
| |
|
| |
|
|
Property operating | |
| 76,155 | |
| 38,449 | |
| (4,675) | |
| 109,929 |
Real estate taxes | |
| 36,018 | |
| 15,240 | |
| 3,869 | |
| 55,127 |
Total property expense | |
| 112,173 | |
| 53,689 | |
| (806) | |
| 165,056 |
Consolidated NOI | | $ | 172,732 | | $ | 46,921 | | $ | (4,106) | | $ | 215,547 |
| | Nine Months Ended September 30, 2020 | ||||||||||
|
| Commercial |
| Multifamily |
| Other |
| Total | ||||
| | (In thousands) | ||||||||||
Property rental revenue | | $ | 266,823 | | $ | 94,873 | | $ | (7,177) | | $ | 354,519 |
Parking revenue | |
| 10,018 | |
| 249 | |
| — | |
| 10,267 |
Total property revenue | |
| 276,841 | |
| 95,122 | |
| (7,177) | |
| 364,786 |
Property expense: | |
|
| |
|
| |
|
| |
|
|
Property operating | |
| 78,645 | |
| 34,238 | |
| (7,016) | |
| 105,867 |
Real estate taxes | |
| 36,532 | |
| 14,088 | |
| 2,802 | |
| 53,422 |
Total property expense | |
| 115,177 | |
| 48,326 | |
| (4,214) | |
| 159,289 |
Consolidated NOI | | $ | 161,664 | | $ | 46,796 | | $ | (2,963) | | $ | 205,497 |
The following is a summary of certain balance sheet data by segment as of September 30, 2017 and December 31, 2016:
| | | | | | | | | | | | |
|
| Commercial |
| Multifamily |
| Other |
| Total | ||||
| | (In thousands) | ||||||||||
September 30, 2021 | | | | | | | | | | | | |
Real estate, at cost | | $ | 3,494,929 | | $ | 2,135,448 | | $ | 395,758 | | $ | 6,026,135 |
Investments in unconsolidated real estate ventures | |
| 300,304 | |
| 110,369 | |
| 75,379 | |
| 486,052 |
Total assets (1) | |
| 3,541,397 | |
| 1,779,416 | |
| 688,165 | |
| 6,008,978 |
December 31, 2020 | |
|
| |
|
| |
|
| |
|
|
Real estate, at cost | | $ | 3,459,171 | | $ | 2,036,131 | | $ | 505,329 | | $ | 6,000,631 |
Investments in unconsolidated real estate ventures | |
| 327,798 | |
| 108,593 | |
| 24,978 | |
| 461,369 |
Total assets (1) | |
| 3,430,509 | |
| 1,787,718 | |
| 861,320 | |
| 6,079,547 |
Office | Multifamily | Other | Eliminations | Total | |||||||||||||||
September 30, 2017 | (In thousands) | ||||||||||||||||||
Real estate, at cost | $ | 3,867,513 | $ | 1,434,730 | $ | 540,287 | $ | — | $ | 5,842,530 | |||||||||
Investments in and advances to unconsolidated real estate ventures | $ | 126,620 | $ | 106,842 | $ | 51,524 | $ | — | $ | 284,986 | |||||||||
Total assets | $ | 3,338,100 | $ | 1,472,864 | $ | 1,204,063 | $ | — | $ | 6,015,027 | |||||||||
December 31, 2016 | |||||||||||||||||||
Real estate, at cost | $ | 2,798,946 | $ | 959,404 | $ | 397,041 | $ | — | $ | 4,155,391 | |||||||||
Investments in and advances to unconsolidated real estate ventures | $ | 45,647 | $ | — | $ | 129 | $ | — | $ | 45,776 | |||||||||
Total assets | $ | 2,388,396 | $ | 873,157 | $ | 399,087 | $ | — | $ | 3,660,640 |
(1) | Includes assets held for sale. See Note 3 for additional information. |
27
17.Commitments and Contingencies
Insurance
We maintain general liability insurance with limits of $200.0$150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $2.0$1.5 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per occurrence and in the aggregate, and $2.0 billion per occurrence and in the aggregate for nuclear, biological, chemical and radiological terrorism events, as definedoccurrence. These policies are partially reinsured by the Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020. Insurance premiums are charged directly to each of the properties and are included in "Property operating expenses" in the statement of operations.
We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material.
Our debt, consisting of mortgage loansmortgages payable secured by our properties, a revolving credit facility and unsecured term loans, containcontains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect theour ability to finance or refinance our properties.
Construction Commitments
As of September 30, 2017,2021, we havehad assets under construction in progress that will, require an additional $707.8 million to complete ($611.1 million related to our consolidated entities and $96.7 million related to our unconsolidated real estate ventures at our share), based on our current plans and estimates, require an additional $320.3 million to complete, which we anticipate will be primarily expended over the next two to three years. These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset recapitalizations and sales, issuance and sale of securities, and available cash.
Environmental Matters
Most of our properties hasassets have been subjectedsubject, at some point, to varying degreesenvironmental assessments that are intended to evaluate the environmental condition of environmental assessment at various times.the assets. The environmental assessments did not reveal any material environmental contamination that we believe would have a material adverse effect on our overall business, financial condition or results of operations.operations, or that have not been anticipated and remediated during site redevelopment as required by law. Nevertheless, there can be no assurance that the identification of new areas of contamination, changes in the extent or known scope of contamination, the discovery of additional sites or changes in cleanup requirements would not result in significant cost to us.
Other
As of September 30, 2021, we had committed tenant-related obligations totaling $76.9 million ($73.6 million related to our consolidated entities and $3.3 million related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.
There are various legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.
From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to (1)unconsolidated real estate ventures, to (i) guarantee portions of the principal, interest and other amounts in connection with their borrowings, (2)(ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and (3)or (iii) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the jointreal estate venture or us for their share of any payments made under the guarantee. Amounts that may be required to be paid in future periods in relation to budget overruns or operating losses thatcertain of these guarantees. At times, we also included in somehave agreements with certain of our guarantees are not estimable.outside venture partners
28
whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. Amounts that we may be required to pay in future periods in relation to guarantees associated with budget overruns or operating losses are not estimable.
As of September 30, 2017, the aggregate amount2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.1 million. As of ourSeptember 30, 2021, we had 0 principal payment guarantees was approximately $89.0 million for our consolidated entities and $63.8 million forrelated to our unconsolidated real estate ventures.
Additionally, with respect to borrowings of our consolidated entities, we have agreed, and may in the future agree, to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion of development projects.As of September 30, 2017, we expect to fund additional capital to certain2021, the aggregate amount of principal payment guarantees was $8.3 million for our unconsolidated investments totaling approximately $50.6 million, , which we anticipate will be primarily expended over the next two to three years.
Year ending December 31, | Amount | |||
(In thousands) | ||||
2017 | $ | 1,974 | ||
2018 | 8,391 | |||
2019 | 8,170 | |||
2020 | 7,825 | |||
2021 | 7,496 | |||
2022 | 6,580 | |||
Thereafter | 874,467 | |||
Total | $ | 914,903 |
18.Transactions with Vornado
Our third-party asset management and other services including, but not limited to, accounting, reporting, legal, tax, information technology and human resources have been allocated to the assets in the consolidated and combined financial statements based on either actual costs incurred or a proportion of costs estimated to be applicable to the Vornado Included Assets based on key metrics including total revenue. The total amounts allocated during the three months ended September 30, 2017 and 2016 were $873,000 and $4.5 million, respectively. The total amounts allocated during the nine months ended September 30, 2017 and 2016 were $13.0 million and $15.2 million, respectively. These allocated amounts are included as a component of "General and administrative expense: corporate and other" expenses on the statements of operations and do not necessarily reflect what actual costs would have been if the Vornado Included Assets were a separate standalone public company.
We launched the WHI with the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. We are the manager for the WHI Impact Pool, which is the social impact debt financing vehicle of the WHI. As of September 30, 2021, the WHI Impact Pool had completed closings of capital commitments totaling $114.4 million, which included a commitment from us of $11.2 million. As of September 30, 2021, our remaining commitment was $8.3 million.
The third-party real estate services revenue, including expense reimbursements, from thesethe JBG Legacy Funds and the WHI Impact Pool was $5.6 million and $17.2 million for both the three and nine months ended September 30, 2017 was $8.4 million.
We rented our former corporate offices from an unconsolidated real estate venture and made payments totaling $246,000 and $1.0 million for the three and nine months ended September 30, 2021, and $403,000 and $4.1 million for the three and nine months ended September 30, 2020.
We have agreements with Building Maintenance Services ("BMS"), an entity in which we have a minor preferred interest, to supervise cleaning, engineering and security services at our properties. We paid BMS $4.9 million and $13.4 million during the three and nine months ended September 30, 2021, and $4.0 million and $12.6 million for the three and nine months ended September 30, 2020, which is included in "Property operating expenses" in our statements of our management team and/or Boardoperations.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements contained herein constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are not guarantees of future performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Our future results, financial condition and business may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as "approximates," "believes," "expects," "anticipates," "estimates," "intends," "plans," "would," "may" or other similar expressions in this Quarterly Report on Form 10-Q. Many of the factors that will determine the outcome of these and our other forward-looking statements are beyond our ability to control or predict. For further discussion of factors that could materially affect the outcome of our forward-looking statements, see "Risk Factors" in Item 1A of our Registration Statement on Form 10, as amended, filed with the Securities and Exchange Commission (the "SEC") and declared effective on June 26, 2017, as well as the section entitled "Risk Factors" of the final Information Statement filed with the SEC as Exhibit 99.1 on our CurrentAnnual Report on Form 8-K filed10-K for the year ended December 31, 2020 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this Quarterly Report on June 27, 2017.
One of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effect of the current pandemic of the novel coronavirus ("COVID-19") on our financial condition, results of operations, cash flows, performance, tenants, the real estate market, and the global economy and financial markets. The significance, extent and duration of the impact of COVID-19 on us and our tenants remains largely uncertain and dependent on near-term and future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19, the distribution, effectiveness and willingness of people to take COVID-19 vaccines, the extent and effectiveness of the containment measures taken, and the response of the overall economy, the financial markets and the population, particularly in the area in which we operate. Moreover, investors are cautioned to interpret many of the risks identified under the section titled "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We do not undertake any obligation to release publicly any revisions to our forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report on Form 10-Q.
Organization and Basis of Presentation
JBG SMITH Properties ("JBG SMITH") was organized by Vornado Realty Trust ("Vornado" or "former parent") as, a Maryland real estate investment trust ("REIT") on October 27, 2016 (capitalized on November 22, 2016)., owns and operates a portfolio of commercial and multifamily assets amenitized with ancillary retail. JBG SMITH's portfolio reflects its longstanding strategy of owning and operating assets within Metro-served submarkets in the Washington, D.C. metropolitan area that have high barriers to entry and vibrant urban amenities. Over half of our portfolio is in National Landing where we serve as the exclusive developer for Amazon.com, Inc.'s ("Amazon") new headquarters and where Virginia Tech's under-construction $1 billion Innovation Campus is located. In addition, our third-party asset management and real estate services business provides fee-based real estate services to the Washington Housing Initiative ("WHI") Impact Pool, Amazon, the legacy funds formerly organized by The JBG Companies ("JBG") (the "JBG Legacy Funds") and other third parties. Substantially all our assets are held by, and our operations are conducted through, JBG SMITH was formedProperties LP ("JBG SMITH LP"), our operating partnership. JBG SMITH is referred to as "we," "us," "our" or other similar terms. References to "our share" refer to our ownership percentage of consolidated and unconsolidated assets in real estate ventures.
We were organized for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado’sVornado Realty Trust's ("Vornado") Washington, DC segment, which operated as Vornado / Charles E. Smith, (the "Vornado Included Assets").D.C. segment. On July 18, 2017, JBG SMITHwe acquired the management business and certain assets and liabilities (the "JBG Assets") of The JBG Companies (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction." Unless the context otherwise requires, all references to "we," "us," and "our," refer to the Vornado Included Assets, our predecessor and accounting acquirer, for periods prior to the Separation and to JBG SMITH for periods from and after the Separation and Combination.
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References to theour financial statements refer to our unaudited condensed consolidated and combined financial statements as of September 30, 20172021 and December 31, 2016,2020, and for the three and nine months ended September 30, 20172021 and 2016.2020. References to theour balance sheets refer to our condensed consolidated and combined balance sheets as of September 30, 20172021 and December 31, 2016.2020. References to theour statements of operations refer to our condensed consolidated and combined statements of operations for the three
The accompanying unaudited financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates. The historical financial results for the Vornado Included Assets reflect charges for certain corporate costs allocated by the former parent which we believe are reasonable. These charges were based on either actual costs incurred or a proportion of costs estimated to be applicable to the Vornado Included Assets based on an analysis of key metrics, including total revenues. Such costs do not necessarily reflect what the actual costs would
We have been if the Vornado Included Assets had been operating as a separate standalone public company. These charges are discussed further in Note 17 to the financial statements.
We aggregate our operating segments into three reportable segments (office,(commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.
Our revenues and expenses are, to some extent, subject to seasonality during the year, which impacts quarterly net earnings, cash flows and funds from operations that affects the sequential comparison of our results in individual quarters over time. For instance, we have historically experienced higher utility costs in the first and third quarters of the year.
We compete with a large number ofmany property owners and developers. Our success depends upon, among other factors, trends affecting national and local economies, the financial condition and operating results of current and prospective tenants, the availability and cost of capital, interest rates, construction and renovation costs, taxes, governmental regulations and legislation, population trends, zoning laws, and our ability to lease, sublease or sell our assets at profitable levels. Our success is also subject to our ability to refinance existing debt on acceptable terms as it comes due.
Overview
As of September 30, 2017,2021, our portfolio comprised: (i) 69Operating Portfolio consisted of 63 operating assets comprising 51 office42 commercial assets totaling over 13.713.1 million square feet (11.8(11.3 million square feet at our share), 14 and 21 multifamily assets totaling 6,0167,776 units (4,232(6,125 units at our share) and four other assets totaling approximately 765,000 square feet (348,000 square feet. Additionally, we have: (i) one under-construction multifamily asset with 808 units (808 units at our share); (ii) nine assets under construction comprising four office11 near-term development assets totaling approximately 1.35.3 million square feet (1.2 million square feet at our share), four multifamily assets totaling 1,334 units (1,149 units at our share) and one other asset totaling approximately 41,100 square feet (4,100 square feet at our share; (iii) one near-term development multifamily asset totaling 433 units (303 units at our share), and (iv) 42 future development assets totaling approximately 21.3 million square feet (17.6(5.0 million square feet at our share) of estimated potential development density; and (iii) 25 future development assets totaling 14.3 million square feet (11.6 million square feet at our share) of estimated potential development density. In 2021, we achieved carbon neutrality across our Operating Portfolio through the purchase of verified carbon offsets and renewable energy credits.
We continue to focus on our comprehensive plan to reposition our holdings in National Landing in Northern Virginia by executing a broad array of Placemaking strategies. Our Placemaking strategies include the delivery of new multifamily and office developments, locally sourced amenity retail, and thoughtful improvements to the streetscape, sidewalks, parks and other outdoor gathering spaces. In keeping with our dedication to Placemaking, each new project is intended to contribute to authentic and distinct neighborhoods by creating a vibrant street environment with robust retail offerings and other amenities including improved public spaces. We have also invested in Citizens Broadband Radio Service ("CBRS") wireless spectrum in National Landing as part of our efforts to make National Landing among the first 5G-operable submarkets in the nation.
In November 2018, Amazon announced it had selected sites that we own in National Landing as the location of its new headquarters. We currently have leases with Amazon totaling approximately 1.0 million square feet at six office buildings
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in National Landing. In March 2019, we executed purchase and sale agreements with Amazon for two of our National Landing development sites, Metropolitan Park and Pen Place, which will serve as the initial phase of construction associated with Amazon's new headquarters at National Landing. In January 2020, we sold Metropolitan Park to Amazon for $155.0 million and began constructing two new office buildings thereon, totaling 2.1 million square feet, inclusive of over 50,000 square feet of street-level retail with new shops and restaurants. We are the developer, property manager and retail leasing agent for Amazon's new headquarters at National Landing.
2021 Outlook
A fundamental component of our strategy to maximize long-term net asset value per share is active capital allocation. Since our inception in 2017, we have completed the sale, recapitalization and/or ground lease of $1.7 billion of primarily office assets, and we intend to opportunistically sell at least another $1.4 billion of non-core office assets and land. We are currently targeting dispositions primarily of office assets in submarkets where we have less concentration and where we anticipate lower growth rates going forward relative to other opportunities within our portfolio. Additionally, we may market select land assets where ground lease or joint venture execution may represent the clearest path to maximizing value. Redeploying the proceeds from any such sales and recapitalizations will not only help fund our planned growth but will also further advance the strategic shift of our portfolio to majority multifamily.
On March 11, 2020, the World Health Organization declared the outbreak of COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. On March 13, 2020, a National Emergency was declared in the United States in response to COVID-19. The efforts made by federal, state and local governments to mitigate the spread of COVID-19 included orders requiring the temporary closure of or imposed limitations on the operations of certain non-essential businesses, which adversely affected many tenants, especially tenants in the retail industry.
The pandemic continues to evolve, and while we are optimistic about the future, we remain cautious about the medium-term implications for office assets. Vacancy is still at record highs across the region, and most companies are still not fully back in the office. Occupancy of our commercial portfolio declined by 180 basis points from June 30, 2021, the majority of which was related to pre-pandemic decision making, although we had two civilian agency Government Services Administration tenants that reduced their leased square footage due to a planned shift toward working from home. We expect continued pressure on our office occupancy through the end of the year and into 2022. Although parking revenue increased during the three months ended September 30, 20172021 as compared to the same period in 2020, parking revenue in our commercial portfolio was approximately 60% below pre-pandemic levels of approximately $30 million annually due to delayed return-to-the-office plans for many of our office tenants.
We are seeing improvements in our multifamily portfolio, with a 390 basis point increase in the occupancy of our operating multifamily portfolio from June 30, 2021 and an increase in market rents due to increased demand and limited new supply.
The significance, extent and duration of the impact of COVID-19 on our business remains largely uncertain and dependent on future developments that cannot be accurately predicted at this time. These developments include: the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the continued speed of the vaccine distribution, the effectiveness and willingness of people to take COVID-19 vaccines, the duration of associated immunity and the efficacy of vaccines against variants of COVID-19, the extent and effectiveness of other containment measurestaken, and the response of the overall economy, the financial markets and the population, particularly in areas in which we operate, as containment measures continue to be lifted, and whether the residential market in the Washington, D.C. region and any of our properties will be materially impacted by the moratoriums on residential evictions, among others. These uncertainties make it difficult to predict operating results for our business for 2021. Therefore, we could experience material declines in revenue, net income, NOI and/or Funds from Operations ("FFO"). For more information, see "Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Operating Results
Key highlights for the three and nine months ended September 30, 2021 included:
● | |
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diluted common share, for the three months ended September 30, |
● | third-party real estate services revenue, including reimbursements, of $25.8 million and $90.7 million for the three and nine months ended September 30, 2021 compared to $27.0 million and $83.9 million for the three and nine months ended September 30, 2020; |
● | operating multifamily portfolio leased and |
● | |
the leasing of a GAAP-basis weighted average rent per square foot (2) of $45.87 for the three months ended September 30, 2021, and the leasing of 1.2 million square feet on a consolidated basis and at our share, at an initial rent (1) of $46.04 per square foot and a GAAP-basis weighted average rent per square foot (2) of $45.43 for the nine months ended September 30, 2021; and |
● | |
(1) | |
Represents the cash basis weighted average starting rent per square foot at our share, which excludes free rent and |
(2) | Represents the weighted average rent per square foot recognized over the term of the respective leases, including the effect of free rent and fixed escalations. |
(3) | Includes the results of the properties that are owned, operated and |
Additionally, investing and financing activity during the threenine months ended September 30, 20172021 included:
● | |
the |
● | an investment in two real estate ventures, in which we have 50% ownership interests, to design, develop, manage and own approximately 2.0 million square feet of new mixed-use development located in Potomac Yard, the southern portion of National Landing. We recognized an $11.3 million gain on the land contributed to one of the real estate ventures based on the cash received and the remeasurement of our retained interest in the asset. See Note 4 to the financial statements for additional information; |
● | recognition of an aggregate gain of $28.3 million from the sale of various assets by our unconsolidated real estate ventures. See Note 4 to the financial statements for additional information; |
the |
● | |
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● | the payment of dividends to our common shareholders totaling $88.9 million |
● | |
the |
● | |
the investment of |
Activity subsequent to September 30, 2021 included:
● | the declaration of a quarterly dividend of $0.225 per common share, payable on November 24, 2021 to shareholders of record as of November 10, 2021. |
Critical Accounting Policies and Estimates
Our Information StatementAnnual Report on Form 10, as amended, filed with10-K for the SEC on June 20, 2017year ended December 31, 2020 contains a description of our critical accounting policies, including asset acquisitions and business combinations, real estate, deferred costs,investments in real estate ventures, revenue recognition and income taxes. Forshare-based compensation. There have been no significant changes to our policies during the three and nine months ended September 30, 2017, there were no material changes to these policies, except for the addition of the following policy:
Recent Accounting Pronouncements
See Note 2 to the financial statements for a description of the potential impact of the adoption of any newrecent accounting pronouncements.
In January 2020, we sold Metropolitan Park. In December 2020, we acquired the Americana Portfolio, which consists of a 1.4-acre future development parcel in National Landing that was formerly occupied by the Americana Hotel and three other parcels. In April 2021, we contributed Potomac Yard Landbay G to an unconsolidated real estate venture.
Comparison of the Three Months Ended September 30, 20172021 to 2016
The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the three months ended September 30, 2017 as2021 compared to the same period in 2016:
| | | | | | | | | |
| | Three Months Ended September 30, |
| ||||||
|
| 2021 |
| 2020 |
| % Change |
| ||
| | (Dollars in thousands) |
| ||||||
Property rental revenue | | $ | 125,900 | | $ | 118,680 |
| 6.1 | % |
Third-party real estate services revenue, including reimbursements | |
| 25,842 | |
| 26,987 |
| (4.2) | % |
Depreciation and amortization expense | |
| 56,726 | |
| 56,481 |
| 0.4 | % |
Property operating expense | |
| 40,198 | |
| 37,572 |
| 7.0 | % |
Real estate taxes expense | |
| 18,259 | |
| 17,354 |
| 5.2 | % |
General and administrative expense: | | | | | | | | | |
Corporate and other | |
| 12,105 | |
| 11,086 |
| 9.2 | % |
Third-party real estate services | |
| 25,542 | |
| 28,207 |
| (9.4) | % |
Share-based compensation related to Formation Transaction and special equity awards | |
| 3,480 | |
| 7,133 |
| (51.2) | % |
Transaction and other costs | |
| 2,951 | |
| 845 |
| 249.2 | % |
Income (loss) from unconsolidated real estate ventures, net | |
| 20,503 | |
| (965) |
| * | |
Interest expense | |
| 17,243 | |
| 16,885 |
| 2.1 | % |
Three Months Ended September 30, | ||||||||||
2017 | 2016 | % Change | ||||||||
(In thousands) | ||||||||||
Property rentals revenue | $ | 116,458 | $ | 103,265 | 12.8 | % | ||||
Tenant reimbursements revenue | 9,593 | 10,231 | (6.2 | )% | ||||||
Third-party real estate services revenue, including reimbursements | 25,141 | 8,297 | 203.0 | % | ||||||
Depreciation and amortization expense | 43,951 | 31,377 | 40.1 | % | ||||||
Property operating expense | 29,634 | 27,287 | 8.6 | % | ||||||
Real estate taxes expense | 17,194 | 14,462 | 18.9 | % | ||||||
General and administrative expense: | ||||||||||
Corporate and other | 10,593 | 10,913 | (2.9 | )% | ||||||
Third-party real estate services | 21,178 | 4,779 | 343.1 | % | ||||||
Share-based compensation related to Formation Transaction | 14,445 | — | * | |||||||
Transaction and other costs | 104,095 | 1,528 | * | |||||||
(Loss) income from unconsolidated real estate ventures | (1,679 | ) | 584 | * | ||||||
Interest expense | 15,309 | 13,028 | 17.5 | % | ||||||
Loss on extinguishment of debt | 689 | — | * | |||||||
Gain on bargain purchase | 27,771 | — | * | |||||||
Net loss attributable to redeemable noncontrolling interests | 8,160 | — | * |
* Not meaningful.
Property rentalsrental revenue increased by approximately $13.2$7.2 million, or 12.8%6.1%, to $116.5$125.9 million in 20172021 from $103.3$118.7 million in 2016.2020. The increase was primarily due to revenues(i) a $5.1 million increase related to the deferral of $13.8 million associated withrent and the assets acquiredwrite-off of deferred rent receivables for tenants that were placed on the cash basis of accounting in the Combination, partially offset by2020 and a decrease in uncollectable operating lease receivables attributable to COVID-19 in 2021, (ii) a $4.7 million increase related to 4747 Bethesda Avenue,
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West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (iii) a $2.6 million in revenues associated with existing assets. The $0.6 million decrease in revenues associated with existing assets is primarily dueincrease related to 1150 17th St and 1770 Crystal Drive, being taken out of service, partially offset by an increase in occupancy and associated rentals at The Bartlett which was placed into service in the secondfourth quarter of 2016.
Third-party real estate services revenue, including reimbursements, increaseddecreased by approximately $16.8$1.1 million, or 203.0%4.2%, to $25.1$25.8 million in 20172021 from $8.3$27.0 million in 2016.2020. The increasedecrease was primarily due to the real estate services business acquireda $2.0 million decrease in the Combination,reimbursements revenue, a $705,000 decrease in other service revenue and a $584,000 decrease in construction management fees, partially offset by lower management feesa $1.4 million increase in development fee revenue primarily related to the timing of development projects and a $736,000 increase in leasing commissions from existing arrangements with third-parties.
Depreciation and amortization expense increased by approximately $12.6 million,$245,000, or 40.1%0.4%, to $44.0$56.7 million in 20172021 from $31.4$56.5 million in 2016.2020. The increase was primarily due to (i) a $1.9 million increase related to 2345 Crystal Drive due to an increase in tenant improvements, (ii) a $1.7 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, and (iii) a $924,000 increase due to 1770 Crystal Drive being placed into service. The increase in depreciation and amortization expense associated with the assets acquiredwas partially offset by a $4.0 million decrease related to 2000 South Bell Street and 2001 South Bell Street as we commenced construction on two new buildings in the Combination.
Property operating expense increased by approximately $2.3$2.6 million, or 8.6%7.0%, to $29.6$40.2 million in 20172021 from $27.3$37.6 million in 2016.2020. The increase was primarily due to (i) a $1.2 million increase related to 2451 Crystal Drive for costs incurred for construction management services provided to tenants, (ii) an $885,000 increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (iii) a $576,000 increase due to 1770 Crystal Drive being placed into service and (iv) $535,000 related to 2221 South Clark Street due to higher operating expenses. The increase in property operating expenses of $4.2 million associated with the assets acquired in the Combination,expense was partially offset by a $1.5 million decrease of $1.9 million associated with existing assetsrelated to 1901 South Bell Street due primarily to lower tenantcosts incurred in 2020 for construction management services expense and lower utilities.
Real estate tax expense increased by approximately $2.7 million,$905,000, or 18.9%5.2%, to $17.2$18.3 million in 20172021 from $14.5$17.4 million in 2016.2020. The increase was primarily due to real estate tax expense of $2.1 million associated with the assets acquired in the Combination,a $548,000 increase related to 4747 Bethesda Avenue and The Wren as these properties placed additional space into service, and a $543,000 increase related to 5 M Street Southwest due to an increase in theits applicable tax assessments and lower capitalized real estate taxes.
General and administrative expense: corporate and other decreasedincreased by approximately $300,000,$1.0 million, or 2.9%9.2%, to $10.6$12.1 million in 20172021 from $10.9$11.1 million in 2016.2020. The decreaseincrease was primarily due to lower marketing and general office expenses, partially offset by an increasea decrease in general operating expenses associated with the operations acquired in the Combination.
General and administrative expense: third-party real estate services increaseddecreased by approximately $16.4$2.7 million, or 343.1%9.4%, to $21.2$25.5 million in 20172021 from $4.8$28.2 million in 2016
General and administrative expense: share-based compensation related to Formation Transaction of $14.4 million in 2017 consists of expense related to share-based compensation issued in connection with the Formation Transaction.
Transaction and other costs of $3.0 million in 2021 primarily included $1.4 million of demolition costs related to 2000 South Bell Street and 2001 South Bell Street and $1.4 million of expenses related to completed, potential and pursued transactions. Transaction and other costs of $845,000 in 2020 consisted of $406,000 of integration and severance costs, $260,000 of expenses related to completed, potential and pursued transactions, and $179,000 of demolition costs related to 223 23rdStreet and 2300 Crystal Drive.
Income from interests inunconsolidated real estate ventures acquired in the Combination.
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partially offset by lower interest expense associated with mortgages that were repaid.
Interest expense increased by approximately $358,000, or 2.1%, to $17.2 million in excess of the purchase consideration2021 from $16.9 million in the Combination.2020. The purchase considerationincrease was based on the fair value of the common shares and OP Units issuedprimarily due to a $1.3 million decrease in the Combination. See Note 3capitalized interest primarily due to the financial statements forplacing of additional information.
Comparison of the Nine Months Ended September 30, 20172021 to 2016
The following summarizes certain line items from our statements of operations that we believe are important in understanding our operations and/or those items which significantly changed in the nine months ended September 30, 2017 as2021 compared to the same period in 2016:
Nine Months Ended September 30, | ||||||||||
2017 | 2016 | % Change | ||||||||
(In thousands) | ||||||||||
Property rentals revenue | $ | 316,899 | $ | 299,497 | 5.8 | % | ||||
Tenant reimbursements revenue | 27,161 | 28,428 | (4.5 | )% | ||||||
Third-party real estate services revenue, including reimbursements | 38,881 | 24,617 | 57.9 | % | ||||||
Depreciation and amortization expense | 109,726 | 98,291 | 11.6 | % | ||||||
Property operating expense | 77,341 | 75,087 | 3.0 | % | ||||||
Real estate taxes expense | 47,978 | 43,712 | 9.8 | % | ||||||
General and administrative expense: | ||||||||||
Corporate and other | 35,536 | 36,040 | (1.4 | )% | ||||||
Third-party real estate services | 30,362 | 14,272 | 112.7 | % | ||||||
Share-based compensation related to Formation Transaction | 14,445 | — | * | |||||||
Transaction and other costs | 115,173 | 1,528 | * | |||||||
Loss from unconsolidated real estate ventures | (1,365 | ) | (952 | ) | 43.4 | % | ||||
Interest expense | 43,813 | 38,662 | 13.3 | % | ||||||
Loss on extinguishment of debt | 689 | — | * | |||||||
Gain on bargain purchase | 27,771 | — | * | |||||||
Net loss attributable to redeemable noncontrolling interests | 2,481 | — | * |
| | | | | | | | | |
| | Nine Months Ended September 30, | |||||||
|
| 2021 |
| 2020 |
| % Change |
| ||
| (Dollars in thousands) |
| |||||||
Property rental revenue | | $ | 370,960 | | $ | 354,519 |
| 4.6 | % |
Third-party real estate services revenue, including reimbursements | |
| 90,694 | |
| 83,870 |
| 8.1 | % |
Depreciation and amortization expense | |
| 178,130 | |
| 157,586 |
| 13.0 | % |
Property operating expense | |
| 109,929 | |
| 105,867 |
| 3.8 | % |
Real estate taxes expense | |
| 55,127 | |
| 53,422 |
| 3.2 | % |
General and administrative expense: | | | | | | | | | |
Corporate and other | |
| 38,475 | |
| 37,478 |
| 2.7 | % |
Third-party real estate services | |
| 80,035 | |
| 86,260 |
| (7.2) | % |
Share-based compensation related to Formation Transaction and special equity awards | |
| 12,866 | |
| 25,432 |
| (49.4) | % |
Transaction and other costs | |
| 8,911 | |
| 7,526 |
| 18.4 | % |
Income (loss) from unconsolidated real estate ventures, net | |
| 23,513 | |
| (17,142) |
| 237.2 | % |
Interest expense | |
| 50,312 | |
| 44,660 |
| 12.7 | % |
Gain on sale of real estate | |
| 11,290 | |
| 59,477 |
| (81.0) | % |
Property rentalsrental revenue increased by approximately $17.4$16.4 million, or 5.8%4.6%, to $316.9$371.0 million in 20172021 from $299.5$354.5 million in 2016.2020. The increase was primarily due to revenues of $13.8 million associated with the assets acquired in the Combination and an increase of $3.6 million in revenues associated with existing assets. The $3.6(i) a $12.8 million increase in revenues associated with existing assets is primarilyrelated to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) an $11.1 million increase due to an the deferral of rent and the write-off of deferred rent receivable for tenants that were placed on the cash basis of accounting in 2020 and a decrease in uncollectable operating lease receivables attributable to COVID-19, (iii) a $7.4 million increase in occupancy and associated rentals at The Bartlett multifamily project as the propertyrelated to 1770 Crystal Drive, which was placed into service in the secondfourth quarter of 2016 and higher rents at 12152020, (iv) a $3.9 million increase related to 1225 S. Clark St,Street due to the commencement of a lease and (v) a $3.2 million increase related to the additional space leased by Amazon at 2345 Crystal Drive. The increase in property rental revenue was partially offset by (i) a $14.1 million decrease in revenuesrelated to lower occupancy at 1150 17
Third-party real estate services revenue, including reimbursements, increased by approximately $14.3$6.8 million, or 57.9%8.1%, to $38.9$90.7 million in 20172021 from $24.6$83.9 million in 2016.2020. The increase was primarily due to a $14.2 million increase in development fees related to the timing of development projects. The increase in third-party real estate services business acquired in the Combination,revenue was partially offset by lowera $3.8 million decrease in reimbursements revenue, a $1.7 million decrease in property and asset management fees due to the sale of assets within the JBG Legacy Funds and leasing commissions from existing arrangements with third-parties.
Depreciation and amortization expense increased by approximately $11.4$20.5 million, or 11.6%13.0%, to $109.7 million for 2017 from $98.3$178.1 million in 2016.2021 from $157.6 million in 2020. The increase was primarily due to (i) an $8.1 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $6.8 million increase related to the Universal Buildings due to the write-off of certain tenant improvements, (iii) a $6.0 million increase related to 2345 Crystal Drive due to an increase in tenant improvements, (iv) a $2.5 million increase due to 1770
36
Crystal Drive being placed into service, (v) a $1.5 million increase related to 1550 Crystal Drive as additional space was placed into service and (vi) a $1.3 million increase related to RTC-West due to the acceleration of depreciation of certain assets. The increase in depreciation and amortization expense associated with the assets acquiredwas partially offset by a $5.1 million decrease related to 2000 South Bell Street and 2001 South Bell Street as we commenced construction on two new buildings in the Combination.
Property operating expense increased by approximately $2.2$4.1 million, or 3.0%3.8%, to $77.3$109.9 million in 2017 and2021 from $75.1$105.9 million in 2016.2020. The increase was primarily due to (i) a $3.3 million increase related to 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $2.8 million increase related to 2451 Crystal Drive due to costs incurred for construction management services provided to tenants, (iii) a $1.4 million increase due to 1770 Crystal Drive being placed into service and (iv) an $832,000 increase at Courthouse Plaza 1 and 2 related to ground rent expense. The increase in property operating expenses of $4.2 million associated with the assets acquired in the Combination,expense was partially offset by a $4.3 million decrease of $2.0 million associated with existing assetsrelated to 1901 South Bell Street due primarily to lower tenantcosts incurred in 2020 for construction management services expense and lower utilities.
Real estate tax expense increased by approximately $4.3$1.7 million, or 9.8%3.2%, to $48.0$55.1 million in 20172021 from $43.7$53.4 million in 2016.2020. The increase was primarily due to (i) a $1.8 million increase at 4747 Bethesda Avenue, West Half, The Wren, 900 W Street and 901 W Street as these properties placed additional space into service, (ii) a $701,000 increase related to 5 M Street Southwest due to an increase in its applicable tax rate in 2021 and (iii) an increase of $533,000 due to 1770 Crystal Drive being placed into service. The increase in real estate tax expense of $2.1 million associated with the assets acquiredwas partially offset by a decrease in the Combination, an increase in thereal estate tax assessments and lower capitalized real estate taxes.
General and administrative expense: corporate and other decreasedincreased by approximately $500,000,$997,000, or 1.4%2.7%, to $35.5 million for 2017 from $36.0$38.5 million in 2016.2021 from $37.5 million in 2020. The decreaseincrease was primarily due to lower marketing and general office expenses, partially offset by an increasea decrease in general operating expenses associated with the operations acquired in the Combination.
General and administrative expense: third-party real estate services increaseddecreased by approximately $16.1$6.2 million, or 112.7%7.2%, to $30.4$80.0 million in 20172021 from $14.3$86.3 million in 20162020. This decrease was primarily due to the real estate services business acquireda decrease in the Combination.
General and administrative expense: share-based compensation related to Formation Transaction of $14.4and special equity awards decreased by approximately $12.6 million, or 49.4%, to $12.9 million in 2017 consists2021 from $25.4 million in 2020. The decrease was primarily due to the graded vesting of expense related to share-based compensationcertain awards issued in connection withprior years, which resulted in lower expense as portions of the Formation Transaction.
Transaction and other costs of $115.2$8.9 million in 2017 consists2021 consisted of $5.4 million of expenses related to completed, potential and pursued transactions, $2.9 million of demolition costs related to 2000 South Bell Street and 2001 South Bell Street and $616,000 of integration and severance costs. Transaction and other costs of $7.5 million in 2020 primarily included $4.0 million of feescosts related to a charitable commitment to the Washington Housing Conservancy, a non-profit that acquires and expenses incurredowns affordable workforce housing in connection with the Formation Transaction, includingWashington, D.C. metropolitan area, and $3.1 million of integration and severance and transaction bonus expense of $34.3 million, investment banking fees of $33.6 million, legal fees of $13.1 million and accounting fees of $8.1 million.
Income from unconsolidated real estate ventures increased by approximately $400,000$40.7 million, or 237.2%, to $1.4$23.5 million for 2021 from a loss of $17.1 million in 2017 from $1.0 million in 2016. The increase in the loss was primarily due to losses from interests in real estate ventures acquired in the Combination, partially offset by a reduction of interest expense of approximately $1.7 million from the refinancing of the Warner Building mortgage loan in May 2016 at a lower interest rate and for a lower outstanding principal amount.
Interest expense increased by approximately $5.7 million, or 12.7%, to $50.3 million in 2021 from $44.7 million in 2020. The increase was primarily due to a $6.7 million decrease in capitalized interest primarily due to the placing of additional space into service at 4747 Bethesda Avenue, West Half, The Wren, 901 W Street and 1770 Crystal Drive and a $5.7 million increase due to new mortgage loans entered into in 2020 at 1221 Van Street, The Bartlett and 220 20th Street. The increase was also due to higher average outstanding balances under our unsecured term loans. The increase in interest expense associated with mortgages that were repaid.was
37
partially offset by a lower outstanding balance under our revolving credit facility and a $3.6 million decrease related to the prepaymentrepayment of mortgages payable.
Gain on bargain purchasethe sale of approximately $27.8real estate of $11.3 million in 2017 represents the estimated fair value of the identifiable net assets acquired in excess of the purchase consideration in the Combination. The purchase consideration2021 was based on the fair valuecash received and the remeasurement of the common shares and OP Units issuedour retained interest in the Combination.land we contributed to one of our unconsolidated real estate ventures. See Note 34 to the financial statements for additional information.
FFO
FFO is a non-GAAP financial measure computed in accordance with GAAP) is a useful supplemental measure of our operating performance that is a recognized metric used extensivelythe definition established by the real estate industry and, in particular, REITs. The National Association of Real Estate Investment Trusts ("NAREIT") stated in its April 2002the NAREIT FFO White Paper on Funds from Operations, "Historical cost accounting for- 2018 Restatement. NAREIT defines FFO as net income (loss) (computed in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity, including our share of such adjustments for unconsolidated real estate ventures.
We believe FFO is a meaningful non-GAAP financial measure useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because FFO excludes real estate depreciation and amortization expense and other non-comparable income and expenses, which implicitly assumes that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen or fallen withtime rather than fluctuating based on market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves."
The following reflectsis the reconciliation of net income (loss) income attributable to JBG SMITH Properties,common shareholders, the most directly comparable GAAP measure, to FFO for the three months ended September 30, 2017:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
| | (In thousands) | ||||||||||
Net income (loss) attributable to common shareholders | | $ | 893 | | $ | (22,793) | | $ | (22,811) | | $ | (16,648) |
Net income (loss) attributable to redeemable noncontrolling interests | |
| 103 | |
| (2,212) | |
| (2,472) | |
| (445) |
Net loss attributable to noncontrolling interests | |
| — | |
| — | |
| (1,108) | |
| — |
Net income (loss) | |
| 996 | |
| (25,005) | |
| (26,391) | |
| (17,093) |
Gain on sale of real estate | |
| — | |
| — | |
| (11,290) | |
| (59,477) |
(Gain) loss on sale of unconsolidated real estate assets | |
| (23,137) | |
| — | |
| (28,326) | |
| 2,952 |
Real estate depreciation and amortization | |
| 54,547 | |
| 54,004 | |
| 171,522 | |
| 149,590 |
Impairment of investments in unconsolidated real estate ventures (1) | | | 1,380 | |
| — | |
| 1,380 | |
| 6,522 |
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures | |
| 7,002 | |
| 7,350 | |
| 21,590 | |
| 21,730 |
FFO attributable to noncontrolling interests | |
| (54) | |
| (4) | |
| 976 | |
| (7) |
FFO attributable to OP Units | |
| 40,734 | |
| 36,345 | |
| 129,461 | |
| 104,217 |
FFO attributable to redeemable noncontrolling interests | |
| (4,703) | |
| (3,945) | |
| (13,242) | |
| (11,353) |
FFO attributable to common shareholders | | $ | 36,031 | | $ | 32,400 | | $ | 116,219 | | $ | 92,864 |
(1) | Related to decreases in the value of the underlying assets. |
Three Months Ended September 30, 2017 | |||
(In thousands) | |||
Net loss attributable to JBG SMITH Properties | $ | (69,831 | ) |
Net loss attributable to redeemable noncontrolling interests | (8,160 | ) | |
Net loss | (77,991 | ) | |
Real estate depreciation and amortization | 41,393 | ||
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures | 6,059 | ||
FFO attributable to the operating partnership common units | (30,539 | ) | |
FFO attributable to redeemable noncontrolling interests | 3,195 | ||
FFO attributable to diluted common shareholders | $ | (27,344 | ) |
Weighted average diluted shares | 114,744 |
NOI and Same Store NOI
NOI which is a non-GAAP financial measure that we usemanagement uses to assess a segment’ssegment's performance. The most directly comparable GAAP measure is net income (loss) attributable to JBG SMITH Properties plus depreciation and amortization expense, general and administrative expense, transaction and other costs, interest expense, gain (loss) on extinguishment of debt and income tax expense, less third-party real estate services, less reimbursements, other income, income (loss) from unconsolidated real estate ventures, interest and other (loss) income, gain on bargain purchase and noncontrolling interests.common shareholders. We use NOI internally as a performance measure and believe NOI provides useful information to investors regarding our financial condition and results of operations because it reflects only property related revenue (which includes base rent, tenant reimbursements and other operating revenue)revenue, net
38
of free rent and payments associated with assumed lease liabilities) less operating expense, beforeexpenses and ground rent, if applicable. NOI also excludes deferred rent, and related party management fees.fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and the amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure forof our assets and believes it provides useful information to investors because it reflects only those revenue and expense items that are incurred at the asset level, excluding non-cash items. In addition, NOI is considered by many in the real estate industry to be a useful starting point for determining the value of a real estate asset or group of assets. However, because NOI excludes depreciation and amortization and captures neither the changes in the value of our assets that result from use or market conditions, nor the level of capital expenditures and capitalized leasing commissions necessary to maintain the operating performance of our assets, all of which have real economic effect and could materially impact the financial performance of our assets, the utility of NOI as a measure of the operating performance of our assets is limited. NOI presented by us may not be comparable to NOI reported by other REITs that define these measures differently. We believe that to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) attributable to JBG SMITH Propertiescommon shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income (loss) attributable to JBG SMITH Propertiescommon shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions.
During the three months ended September 30, 2021, our same store pool decreased to 55 properties from 56 properties due to the exclusion of 500 L'Enfant Plaza, which was sold by an unconsolidated real estate venture during the period. During the nine months ended September 30, 2021, our same store pool increased from 52 properties to 55 properties due to the inclusion of 1800 South Bell Street, F1RST Residences, 1221 Van Street and the commercial portion of 2221 S. Clark Street, and the exclusion of Fairway Apartments, which was sold during the period. Information provided on a same store basis includes the results of properties that are owned, operated and stabilizedin-service for the entirety of both periods being compared, except forwhich excludes properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. While there is judgment surrounding changes in designations, a property is removed from the same store pool when athe property is considered to be a property under constructionunder-construction because it is undergoing significant redevelopment or renovation pursuant to a formal plan or is being repositioned in the market and such renovation or repositioning is expected to have a significant impact on property operating income.NOI. A development property or under-construction property under construction is moved to the same store pool once a substantial portion of the growth expected from the development or redevelopment is reflected in both the current and comparable prior year period. Acquisitions are moved into the same store pool once we have owned the property for the entirety of the comparable periods and the property is not under significant development or redevelopment.
Same store NOI remained at $72.7 million for the three months ended September 30, 2021 compared to the same period in 2020. Same Store NOI was positively impacted by a decrease in uncollectable operating lease receivables and rent deferrals, which was offset by lower occupancy in our commercial portfolio, and lower rents and higher concessions for certain of our multifamily assets.
Same store NOI decreased $7.7 million, or 3.3%, to $223.3 million for the nine months ended September 30, 2017, all2021 from $231.0 million for the same period in 2020. The decrease was substantially attributable to the COVID-19 pandemic, which commenced at the end of the JBG Assetsfirst quarter of 2020, including (i) higher concessions and two Vornado Included Assets (The Bartlettlower rents in our multifamily portfolio and 1800 South Bell Street)(ii) lower occupancy and a decline in parking revenue in our commercial portfolio. These declines were not includedpartially offset by a decrease in the same store comparison as they were not in service or being taken outcleaning expenses across our commercial portfolio.
39
The following table reflectsis the reconciliation of net income (loss) income attributable to JBG SMITH Properties, the most directly comparable GAAP measure,common shareholders to NOI and same store NOI for the periods presented:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 | ||||
| | (Dollars in thousands) | ||||||||||
Net income (loss) attributable to common shareholders | | $ | 893 | | $ | (22,793) | | $ | (22,811) | | $ | (16,648) |
Add: | | | | | | | | | | | | |
Depreciation and amortization expense | |
| 56,726 | |
| 56,481 | |
| 178,130 | |
| 157,586 |
General and administrative expense: | | | | | | | | | | | | |
Corporate and other | |
| 12,105 | |
| 11,086 | |
| 38,475 | |
| 37,478 |
Third-party real estate services | |
| 25,542 | |
| 28,207 | |
| 80,035 | |
| 86,260 |
Share-based compensation related to Formation Transaction and special equity awards | |
| 3,480 | |
| 7,133 | |
| 12,866 | |
| 25,432 |
Transaction and other costs | |
| 2,951 | |
| 845 | |
| 8,911 | |
| 7,526 |
Interest expense | |
| 17,243 | |
| 16,885 | |
| 50,312 | |
| 44,660 |
Loss on extinguishment of debt | |
| — | |
| — | |
| — | |
| 33 |
Income tax expense (benefit) | |
| 217 | |
| (488) | |
| 4,527 | |
| (3,721) |
Net income (loss) attributable to redeemable noncontrolling interests | |
| 103 | |
| (2,212) | |
| (2,472) | |
| (445) |
Net loss attributable to noncontrolling interests | | | — | | | — | | | (1,108) | | | — |
Less: | | | | | | | | | | | | |
Third-party real estate services, including reimbursements revenue | |
| 25,842 | |
| 26,987 | |
| 90,694 | |
| 83,870 |
Other revenue | |
| 1,568 | |
| 2,292 | |
| 5,658 | |
| 5,438 |
Income (loss) from unconsolidated real estate ventures, net | |
| 20,503 | |
| (965) | |
| 23,513 | |
| (17,142) |
Interest and other income, net | |
| 192 | |
| — | |
| 163 | |
| 1,021 |
Gain on sale of real estate | |
| — | |
| — | |
| 11,290 | |
| 59,477 |
Consolidated NOI | |
| 71,155 | |
| 66,830 | |
| 215,547 | |
| 205,497 |
NOI attributable to unconsolidated real estate ventures at our share | |
| 7,336 | |
| 7,130 | |
| 22,951 | |
| 23,206 |
Non-cash rent adjustments (1) | |
| (3,701) | |
| (4,934) | |
| (12,554) | |
| (9,898) |
Other adjustments (2) | |
| 4,683 | |
| 2,881 | |
| 14,608 | |
| 9,236 |
Total adjustments | |
| 8,318 | |
| 5,077 | |
| 25,005 | |
| 22,544 |
NOI | |
| 79,473 | |
| 71,907 | |
| 240,552 | |
| 228,041 |
Less: out-of-service NOI loss (3) | |
| (2,019) | |
| (442) | |
| (4,638) | |
| (2,774) |
Operating Portfolio NOI | |
| 81,492 | |
| 72,349 | |
| 245,190 | |
| 230,815 |
Non-same store NOI (4) | |
| 8,777 | |
| (388) | |
| 21,868 | |
| (165) |
Same store NOI (5) | | $ | 72,715 | | $ | 72,737 | | $ | 223,322 | | $ | 230,980 |
| | | | | | | | | | | | |
Change in same store NOI | |
| 0.0% | | | | |
| (3.3)% | | | |
Number of properties in same store pool | |
| 55 | | | | |
| 55 | | | |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Net (loss) income attributable to JBG SMITH Properties | $ | (69,831 | ) | $ | 21,014 | $ | (57,851 | ) | $ | 49,344 | |||||
Add: | |||||||||||||||
Depreciation and amortization expense | 43,951 | 31,377 | 109,726 | 98,291 | |||||||||||
General and administrative expense: | |||||||||||||||
Corporate and other | 10,593 | 10,913 | 35,536 | 36,040 | |||||||||||
Third-party real estate services | 21,178 | 4,779 | 30,362 | 14,272 | |||||||||||
Share-based compensation related to Formation Transaction | 14,445 | — | 14,445 | — | |||||||||||
Transaction and other costs | 104,095 | 1,528 | 115,173 | 1,528 | |||||||||||
Interest expense | 15,309 | 13,028 | 43,813 | 38,662 | |||||||||||
Loss on extinguishment of debt | 689 | — | 689 | — | |||||||||||
Income tax (benefit) expense | (1,034 | ) | 302 | (317 | ) | 884 | |||||||||
Less: | |||||||||||||||
Third-party real estate services, including reimbursements | 25,141 | 8,297 | 38,881 | 24,617 | |||||||||||
Other income | 1,158 | 1,564 | 3,701 | 3,938 | |||||||||||
(Loss) income from unconsolidated real estate ventures | (1,679 | ) | 584 | (1,365 | ) | (952 | ) | ||||||||
Interest and other (loss) income, net | (379 | ) | 749 | 1,366 | 2,292 | ||||||||||
Gain on bargain purchase | 27,771 | — | 27,771 | — | |||||||||||
Net loss attributable to redeemable noncontrolling interests | 8,160 | — | 2,481 | — | |||||||||||
Total | 79,223 | 71,747 | 218,741 | 209,126 | |||||||||||
Adjustment (1) | 11,315 | 10,492 | 45,645 | 30,762 | |||||||||||
NOI | 90,538 | 82,239 | 264,386 | 239,888 | |||||||||||
Non-same store NOI (2) | 20,266 | 16,137 | 59,029 | 40,792 | |||||||||||
Same store NOI (3) | $ | 70,272 | $ | 66,102 | $ | 205,357 | $ | 199,096 | |||||||
Growth in same store NOI | 6.3 | % | 3.1 | % | |||||||||||
Number of properties | 36 | 36 |
(1) | |
Adjustment |
(2) | Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and allocated corporate general and administrative expenses to operating properties. |
Includes the results |
(4) | Includes the results of properties that were not |
(5) | |
Includes the results of the properties that are owned, operated and |
Reportable Segments
We review operating and financial data for each property on an individual basis; therefore, each of our individual properties is a separate operating segment. We defined our reportable segments to be aligned with our method of internal reporting and the way our Chief Executive Officer, who is also our Chief Operating Decision Maker ("CODM"), makes key operating decisions, evaluates financial results, allocates resources and manages our business. Accordingly, we aggregate our operating segments into three reportable segments (commercial, multifamily, and third-party asset management and real estate services) based on the economic characteristics and nature of our assets and services.
40
The CODM measures and evaluates the performance of our operating segments, with the exception of the third-party asset management and real estate services business, based on the NOI of properties within each segment.
With respect to the third-party asset management and real estate services business, the CODM reviews revenue streams generated by this segment ("Third-party real estate services, including reimbursements"), as well as the expenses attributable to the segment ("General and administrative: third-party real estate services"), which are both disclosed separately in our statements of operations. The following represents the components of revenue from our third-party real estate services business:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
| | (In thousands) | ||||||||||
Property management fees | | $ | 4,831 | | $ | 4,694 | | $ | 14,549 | | $ | 15,453 |
Asset management fees | |
| 2,145 | |
| 2,301 | |
| 6,602 | |
| 7,400 |
Development fees (1) | |
| 4,032 | |
| 2,614 | |
| 22,705 | |
| 8,474 |
Leasing fees | |
| 1,822 | |
| 1,086 | |
| 4,106 | |
| 3,627 |
Construction management fees | |
| — | |
| 584 | |
| 375 | |
| 2,057 |
Other service revenue | |
| 1,295 | |
| 2,000 | |
| 4,783 | |
| 5,452 |
Third-party real estate services revenue, excluding reimbursements | |
| 14,125 | |
| 13,279 | |
| 53,120 | |
| 42,463 |
Reimbursement revenue (2) | |
| 11,717 | |
| 13,708 | |
| 37,574 | |
| 41,407 |
Third-party real estate services revenue, including reimbursements | | | 25,842 | | | 26,987 | | | 90,694 | | | 83,870 |
Third-party real estate services expenses | | | 25,542 | | | 28,207 | | | 80,035 | | | 86,260 |
Third-party real estate services revenue less expenses | | $ | 300 | | $ | (1,220) | | $ | 10,659 | | $ | (2,390) |
(1) | Estimated development fee revenue totaling $51.2 million as of September 30, 2021 is expected to be recognized over the next six years as unsatisfied performance obligations are completed. |
(2) | Represents reimbursements of expenses incurred by us on behalf of third parties, including allocated payroll costs and amounts paid to third-party contractors for |
See discussion of third-party real estate services revenue, including reimbursements, and third-party real estate services expenses for the three and nine months ended September 30, 2021 in the preceding pages under "Results of Operations."
Consistent with internal reporting presented to our CODM and our definition of NOI, the third-party asset management and real estate services operating results are excluded from the NOI data below.
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Property revenue is calculated as property rental revenue plus parking revenue. Property expense is calculated as property operating expenses plus real estate taxes. Consolidated NOI is calculated as property revenue less property expense. See Note 16 to the financial statements for the reconciliation of net income (loss) attributable to common shareholders to consolidated NOI for the three and nine months ended September 30, 2021 and 2020. The following is a summary of NOI by segment:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
|
| 2021 |
| 2020 | X | 2021 |
| 2020 | ||||
| | (In thousands) | ||||||||||
Property revenue: |
| |
|
| |
| | |
|
| |
|
Commercial | | $ | 96,042 | | $ | 93,052 | | $ | 284,905 | | $ | 276,841 |
Multifamily | |
| 35,131 | |
| 30,526 | |
| 100,610 | |
| 95,122 |
Other (1) | |
| (1,561) | |
| (1,822) | |
| (4,912) | |
| (7,177) |
Total property revenue | |
| 129,612 | |
| 121,756 | |
| 380,603 | |
| 364,786 |
| | | | | | | | | | | | |
Property expense: | |
|
| |
|
| |
|
| |
|
|
Commercial | |
| 39,166 | |
| 38,837 | |
| 112,173 | |
| 115,177 |
Multifamily | |
| 19,142 | |
| 17,882 | |
| 53,689 | |
| 48,326 |
Other (1) | |
| 149 | |
| (1,793) | |
| (806) | |
| (4,214) |
Total property expense | |
| 58,457 | |
| 54,926 | |
| 165,056 | |
| 159,289 |
| | | | | | | | | | | | |
Consolidated NOI: | |
|
| |
|
| |
|
| |
|
|
Commercial | |
| 56,876 | |
| 54,215 | |
| 172,732 | |
| 161,664 |
Multifamily | |
| 15,989 | |
| 12,644 | |
| 46,921 | |
| 46,796 |
Other (1) | |
| (1,710) | |
| (29) | |
| (4,106) | |
| (2,963) |
Consolidated NOI | | $ | 71,155 | | $ | 66,830 | | $ | 215,547 | | $ | 205,497 |
(1) | Includes activity related to future development assets and corporate entities and the elimination of intersegment activity. |
Comparison of the periods being compared.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
(In thousands) | |||||||||||||||
Rental revenue: | |||||||||||||||
Office | $ | 99,451 | $ | 90,552 | $ | 272,270 | $ | 262,633 | |||||||
Multifamily | 24,945 | 16,726 | 65,822 | 47,625 | |||||||||||
Other | 4,299 | 5,276 | 10,274 | 19,820 | |||||||||||
Eliminations | (2,644 | ) | 942 | (4,306 | ) | (2,153 | ) | ||||||||
Total rental revenue | 126,051 | 113,496 | 344,060 | 327,925 | |||||||||||
Rental expense: | |||||||||||||||
Office | 40,038 | 36,876 | 108,562 | 104,595 | |||||||||||
Multifamily | 9,748 | 6,445 | 24,689 | 17,657 | |||||||||||
Other | 4,706 | 4,071 | 14,150 | 18,728 | |||||||||||
Eliminations | (7,664 | ) | (5,643 | ) | (22,082 | ) | (22,181 | ) | |||||||
Total rental expense | 46,828 | 41,749 | 125,319 | 118,799 | |||||||||||
NOI: | |||||||||||||||
Office | 59,413 | 53,676 | 163,708 | 158,038 | |||||||||||
Multifamily | 15,197 | 10,281 | 41,133 | 29,968 | |||||||||||
Other | (407 | ) | 1,205 | (3,876 | ) | 1,092 | |||||||||
Eliminations | 5,020 | 6,585 | 17,776 | 20,028 | |||||||||||
Total NOI | $ | 79,223 | $ | 71,747 | $ | 218,741 | $ | 209,126 |
Commercial: Property rental revenue increased by $8.9$3.0 million, or 9.8%3.2%, to $99.5$96.0 million in 20172021 from $90.6$93.1 million in 2016.2020. Consolidated NOI increased by $5.7$2.7 million, or 10.7%4.9%, to $59.4$56.9 million in 20172021 from $53.7$54.2 million in 2016.2020. The increase in property revenue and consolidated NOI is primarilywas due to (i) a decline in rent deferrals and uncollectable operating lease receivables related to tenants impacted by COVID-19, (ii) increases related to 1770 Crystal Drive as the Combination.
Multifamily: Property rental revenue decreasedincreased by $1.0$4.6 million, or 18.5%15.1%, to $4.3$35.1 million in 20172021 from $5.3$30.5 million in 2016. Net operating income (loss) decreased2020. Consolidated NOI increased by $1.6$3.3 million, or 133.8%26.5%, to a loss of $407,000$16.0 million in 2021 from income of $1.2 million.$12.6 million in 2020. The decreaseincrease in property revenue and net operating income (loss) is primarilyconsolidated NOI was due to properties which were taken out of service, including 1700 MThe Wren, 900 W Street, 901 W Street and 1770 Crystal Drive.
Comparison of the Nine Months Ended September 30, 2017 compared2021 to September 30, 2016
Commercial: Property rental revenue increased by $9.7$8.1 million, or 3.7%2.9%, to $272.3$284.9 million in 20172021 from $262.6$276.8 million in 2016. NOI increased by $5.7 million, or 3.6%, to $163.7 million in 2017 from $158.0 million in 2016. The increase in revenue and NOI is primarily due to the Combination and higher rents due to rent commencements at 1215 S. Clark St.
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Multifamily: Property rental revenue decreasedincreased by $9.5$5.5 million, or 48.2%5.8%, to $10.3$100.6 million in 20172021 from $19.8$95.1 million in 2016. Net operating income (loss) decreased2020. Consolidated NOI increased by $5.0 million,$125,000, or 454.9%0.3%, to a loss of $3.9$46.9 million in 2021 from income of $1.1 million.$46.8 million in 2020. The decreaseincrease in property revenue and net operating income (loss) is primarilyconsolidated NOI was due to properties which were taken out of service, including 1700 MThe Wren, 900 W Street, 901 W Street and 1770 Crystal Drive.
Liquidity and Capital Resources
Property rental income is our primary source of operating cash flow and is dependent on a number ofmany factors including occupancy levels and rental rates, as well as our tenants’tenants' ability to pay rent. In addition, to our portfolio, we have a third-party asset management and real estate services business that provides fee-based real estate services to our real estate ventures, legacy funds formerly organized by JBG ("the WHI, Amazon, the JBG Legacy Funds")Funds and other third parties. Our assets provide us with a relatively consistent level of cash flow that enables us to pay operating expenses, debt service, recurring capital expenditures, dividends to shareholders and distributions to holders of OP Units. Other sources of liquidity to fund cash requirements include proceeds from financings, recapitalizations, asset sales and asset sales.the issuance and sale of securities. We anticipate that cash flows from continuing operations over the next 12 months and proceeds from financings, recapitalizations and asset sales, together with existing cash balances, will be adequate to fund our business operations, debt amortization, capital expenditures, any dividends to shareholders and distributions to holders of OP Units.
Financing Activities
The following is a summary of mortgages payable as of September 30, 2017 and December 31, 2016:
| | | | | | | | | |
| | Weighted Average | | | | | | | |
| | Effective |
| | | ||||
|
| Interest Rate (1) |
| September 30, 2021 |
| December 31, 2020 | | ||
| | | | (In thousands) | | ||||
Variable rate (2) |
| 2.08% | | $ | 762,246 | | $ | 678,346 | |
Fixed rate (3) |
| 4.32% | |
| 922,161 | |
| 925,523 | |
Mortgages payable |
| | |
| 1,684,407 | |
| 1,603,869 | |
Unamortized deferred financing costs and premium/discount, net (4) |
| | |
| (10,122) | |
| (10,131) | |
Mortgages payable, net | | | | $ | 1,674,285 | | $ | 1,593,738 | |
Weighted Average Interest Rate | Balance as of | |||||||||
September 30, 2017 | September 30, 2017 | December 31, 2016 | ||||||||
(In thousands) | ||||||||||
Variable rate (1) | 2.95% | $ | 1,152,106 | $ | 547,291 | |||||
Fixed rate (2) | 4.79% | 836,141 | 620,327 | |||||||
Mortgages payable (3) | 1,988,247 | 1,167,618 | ||||||||
Unamortized deferred financing costs and premium/discount, net | (10,573 | ) | (2,604 | ) | ||||||
Mortgages payable, net | $ | 1,977,674 | $ | 1,165,014 | ||||||
Payable to former parent (4) | — | $ | — | $ | 283,232 |
(1) | Weighted average effective interest rate as of September 30, 2021. |
Includes variable rate mortgages payable with interest rate |
(3) | |
Includes variable rate mortgages payable with interest rates |
(4) | |
As of September 30, 2017,2021 and December 31, 2020, the net carrying value of real estate collateralizing our mortgages payable totaled $3.9$1.8 billion. Our mortgage loansmortgages payable contain covenants that limit our ability to incur additional indebtedness on these properties and, in certain circumstances, require lender approval of tenant leases and/or yield maintenance upon repayment prior to maturity. Certain mortgages payable are recourse to us. See Note 17 to the financial statements for additional information.
In July 2021, we entered into a mortgage loan with a principal balance of $85.0 million, collateralized by 1225 S. Clark Street. The mortgage loan has a seven-year term and an interest rate of LIBOR plus 1.60% per annum.
As of September 30, 2017,2021 and December 31, 2020, we were in compliance with all debt covenants.
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Credit Facility
As of September 30, 2017, we repaid mortgages payable with an aggregate principal balance of $181.7 million, which includes mortgages payable totaling $63.7 million assumed in the Combination. We recognized losses on extinguishment of debt in conjunction with these repayments of $689,000 for the three2021 and nine months ended September 30, 2017.
| | | | | | | | | |
| | Effective | | | | ||||
|
| Interest Rate (1) |
| September 30, 2021 |
| December 31, 2020 | | ||
| | | | (In thousands) | | ||||
Revolving credit facility (2) (3) (4) |
| 1.13% | | $ | — | | $ | — | |
| | | | | | | | | |
Tranche A-1 Term Loan (5) |
| 2.59% | | $ | 200,000 | | $ | 200,000 | |
Tranche A-2 Term Loan (5) |
| 2.49% | |
| 200,000 | |
| 200,000 | |
Unsecured term loans |
| | |
| 400,000 | |
| 400,000 | |
Unamortized deferred financing costs, net |
| | |
| (1,507) | |
| (2,021) | |
Unsecured term loans, net | | | | $ | 398,493 | | $ | 397,979 | |
Interest Rate | Balance as of | |||||
September 30, 2017 | September 30, 2017 | |||||
(In thousands) | ||||||
Revolving credit facility (1) | 2.34% | $ | 115,751 | |||
Tranche A-1 Term Loan | 2.44% | $ | 50,000 | |||
Unamortized deferred financing costs, net | (3,611 | ) | ||||
Unsecured term loan, net | $ | 46,389 |
(1) | Effective interest rate as of September 30, 2021. |
As of September 30, |
(3) | As of September 30, 2021 and December 31, 2020, net deferred financing costs related to our revolving credit facility totaling $5.4 million and $6.7 million were included in "Other assets, net." |
(4) | The interest rate for our revolving credit facility excludes a 0.15% facility fee. |
(5) | As of September 30, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the respective term loan and provide a weighted average interest rate of 1.39% for the Tranche A-1 Term Loan and 1.34% for the Tranche A-2 Term Loan. |
Our existing floating rate debt instruments, including our credit facility, with a principal balance totaling $1.6 billion and our hedging arrangements with a notional value totaling $1.7 billion currently use as a reference rate the U.S. dollar London Interbank Offered Rate ("LIBOR"), and we expect a transition from LIBOR to another reference rate due to plans to phase out the reference rate by the end of 2021, after which point its continuation cannot be assured. Though an alternative reference rate for LIBOR, the Secured Overnight Financing Rate ("SOFR"), exists, significant uncertainties still remain. We can provide no assurance regarding the future of LIBOR and when our LIBOR-based instruments will transition from LIBOR as a reference rate to SOFR or another reference rate. The discontinuation of a benchmark rate or other financial metric, changes in a benchmark rate or other financial metric, or changes in market perceptions of the acceptability of a benchmark rate or other financial metric, including LIBOR, could, among other things, result in increased interest payments, changes to our risk exposures, or require renegotiation of previous transactions. In addition, any such discontinuation or changes, whether actual or anticipated, could result in market volatility, adverse tax or accounting effects, increased compliance, legal and operational costs, and risks associated with contract negotiations.
Common Shares Repurchased
In March 2020, our Board of Trustees authorized the repurchase of up to $500 million of our outstanding common shares. During three and nine months ended September 30, 2021, we repurchased and retired 2.3 million and 2.9 million common shares for $68.9 million and $88.1 million, an average purchase price of $29.73 and $29.99 per share. During the three and nine months ended September 30, 2020, we repurchased and retired 1.4 million and 2.9 million common shares for $38.4 million and $79.6 million, an average purchase price of $26.64 and $27.82 per share. Since we began the share repurchase program, we have repurchased and retired 6.7 million common shares for $192.9 million, an average purchase price of $28.71 per share.
Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price,
44
applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice.
Liquidity Requirements
Our long-termprincipal liquidity needs for the next 12 months and beyond include:
● | normal recurring expenses; |
● | debt service and principal repayment obligations, including balloon payments on maturing debt; |
● | capital expenditures, including major renovations, tenant improvements and leasing costs; |
● | development expenditures; |
● | dividends to shareholders and distributions to holders of OP Units; |
● | common share repurchases; and |
● | acquisitions of properties, either directly or indirectly through the acquisition of equity interests therein. |
We expect to satisfy these needs using one or more of the following:
● | cash and cash equivalent balances; |
● | cash flows from operations; |
● | distributions from real estate ventures; and |
● | proceeds from financings, recapitalizations and asset sales. |
While we do not expect the need to do so during the next 12 months, we also can issue securities to raise funds.
While we have not experienced a significant impact to date in this regard, we expect COVID-19 to continue to have an adverse impact on our liquidity and capital requirements consist primarilyresources. Future decreases in cash flows from operations resulting from tenant defaults, rent deferrals or decreases in our rents or occupancy, would decrease the cash available for the capital uses described above.
As of maturitiesSeptember 30, 2021, we had $998.6 million of availability under our credit facility and mortgage loans, construction commitments for development and redevelopment projects and costs related to growing our business, including acquisitions. We intend to fund these requirements through a combination(net of sources including debt proceeds, proceeds from asset recapitalizations and sales, capital from institutional partners that desire to form real estate venture relationships with us and available cash.
Total | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | ||||||||||||||||||||||||
Contractual cash obligations (principal and interest): | (In thousands) | ||||||||||||||||||||||||||||||
Debt obligations (1) | $ | 2,480,892 | $ | 23,597 | $ | 464,528 | $ | 294,361 | $ | 276,060 | $ | 261,943 | $ | 371,899 | $ | 788,504 | |||||||||||||||
Operating leases (2) | 914,903 | 1,974 | 8,391 | 8,170 | 7,825 | 7,496 | 6,580 | 874,467 | |||||||||||||||||||||||
Capital lease obligation | 15,767 | 235 | 953 | 972 | 992 | 1,011 | 1,032 | 10,572 | |||||||||||||||||||||||
Total contractual cash obligations (3) | $ | 3,411,562 | $ | 25,806 | $ | 473,872 | $ | 303,503 | $ | 284,877 | $ | 270,450 | $ | 379,511 | $ | 1,673,543 |
Contractual Obligations and Commitments
During the nine months ended September 30, 2021, there were no material changes to certainthe contractual obligation information presented in Item 7 of Part II of our unconsolidated investments totaling approximately $50.6 million, which we anticipate will be primarily expended over the next two to three years.
As of September 30, 2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.1 million.
As of September 30, 2021, we had committed tenant-related obligations totaling $76.9 million ($73.6 million related to our consolidated entities and $3.3 million related to our unconsolidated real estate ventures at our share). The timing and amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.
We launched the WHI with the Federal City Council in June 2018 as a scalable market-driven model that uses private capital to help address the scarcity of housing for middle income families. We are the manager for the WHI Impact Pool, which is the social impact debt financing vehicle of the WHI. As of September 30, 2021, the WHI Impact Pool had
45
completed closings of capital commitments totaling $114.4 million, which included a commitment from us of $11.2 million. As of September 30, 2021, our remaining commitment was $8.3 million.
On October 27, 2021, our Board of Trustees declared a quarterly dividend of $0.225 per common share, payable on November 30, 2017 to shareholders of record on November 20, 2017.
Summary of Cash Flows
The following summary discussion of our cash flows is based on theour statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.
Nine Months Ended September 30, | |||||||||||
2017 | 2016 | Change | |||||||||
(In thousands) | |||||||||||
Net cash provided by operating activities | $ | 23,393 | $ | 101,383 | $ | (77,990 | ) | ||||
Net cash provided by (used in) investing activities | 88,184 | (204,105 | ) | 292,289 | |||||||
Net cash provided by financing activities | 227,319 | 63,040 | 164,279 |
| | | | | | |
| | Nine Months Ended September 30, | ||||
|
| 2021 |
| 2020 | ||
| | (In thousands) | ||||
Net cash provided by operating activities | | $ | 154,412 | | $ | 127,855 |
Net cash used in investing activities | |
| (96,751) | |
| (57,696) |
Net cash (used in) provided by financing activities | |
| (91,820) | |
| 280,038 |
Cash Flows for the Nine Months Ended September 30, 2017
Cash and cash equivalents, were $367.9and restricted cash decreased $34.2 million atto $229.2 million as of September 30, 2017,2021, compared to $29.0$263.3 million atas of December 31, 2016, an increase of $338.9 million.2020. This increasedecrease resulted from $23.4 million of net cash provided by operating activities, $88.2$91.8 million of net cash used in investingfinancing activities and $227.3$96.8 million of net cash provided by financing activities. Our outstanding debt was $2.1 billion at September 30, 2017, a $974.8 million increase from the balance at December 31, 2016.
Net cash provided by operating activities of $101.4$154.4 million primarily comprised: (i) $147.7 million of net income of $49.3 million, (ii) $92.4(before $185.4 million of non-cash items and $11.3 million gain on sale of real estate), (ii) $13.2 million of return on capital from unconsolidated real estate ventures and (iii) $6.5 million of net change in operating assets and liabilities. Non-cash income adjustments whichof $185.4 million primarily include depreciation and amortization lossexpense, share-based compensation expense, net income from unconsolidated real estate ventures, deferred rent and accretionamortization of below-market lease intangibles and (iii) distributions of income from unconsolidated real estate ventures of $1.0 million, partially offset by (iv) the net change in operating assets and liabilities of $45.5 million.
Net cash used in investing activities of $204.1$96.8 million comprised: (i) $185.4$108.4 million of development costs, construction in progress and real estate additions, (ii) $20.0$32.7 million of investments in and advances to unconsolidated real estate ventures and other, and (iii) $1.9$10.3 million of deposits for real estate and other investments,acquisitions, partially offset by (iv) a decrease$40.2 million of $3.2 million in restricted cash.
Net cash used in financing activities of $91.8 million primarily comprised: (i) $88.9 million of net contributions from our former parent,dividends paid to common shareholders, (ii) $82.3 million of common shares repurchased, (iii) $13.7 million of distributions to redeemable noncontrolling interests, (iv) $5.7 million of debt issuance costs, and (v) $4.5 million of repayments of mortgages payable, partially offset by (iii) $8.9(vi) $85.0 million for the repayments of borrowings.
Off-Balance Sheet Arrangements
Unconsolidated Real Estate Ventures
We consolidate entities in which we own less than a 100% equity interest if we have a controlling interest or are the primary beneficiary in a variable interest entity. From time to time, we may have off-balance-sheet unconsolidated real estate ventures and other unconsolidated arrangements with varying structures.
As of September 30, 2017,2021, we have investments in and advances to unconsolidated real estate ventures totaling $285.0$486.1 million. For the majority of these investments, we exercise significant influence over but do not control these entities and, therefore, account for these investments using the equity method of accounting. For a more complete description of our jointreal estate ventures, see Note 54 to the financial statements.
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From time to time, we (or ventures in which we have an ownership interest) have agreed, and may in the future agree with respect to unconsolidated real estate ventures, to (1)(i) guarantee portions of the principal, interest and other amounts in connection with their borrowings, (2)(ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) in connection with their borrowings and (3)or (iii) provide guarantees to lenders and other third parties for the completion of development projects. We customarily have agreements with our outside venture partners whereby the partners agree to reimburse the jointreal estate venture or us for their share of any payments made under certain of these guarantees. Amounts that may be required to be paid in future periods in relation to budget overruns or operating losses that areAt times, we also included in somehave agreements with certain of our guarantees are not estimable.outside venture partners whereby we agree to either indemnify the partners and/or the associated ventures with respect to certain contingent liabilities associated with operating assets or to reimburse our partner for its share of any payments made by them under certain guarantees. Guarantees (excluding environmental) customarily terminate either upon the satisfaction of specified circumstances or repayment of the underlying debt. At times,Amounts that we have agreementsmay be required to pay in future periods in relation to guarantees associated with our outside partners whereby we agree to reimburse our partner for their share of any payments made by them under certain guarantees. budget overruns or operating losses are not estimable.
As of September 30, 2017, the aggregate amount2021, we had additional capital commitments and certain recorded guarantees to our unconsolidated real estate ventures totaling $66.1 million. As of ourSeptember 30, 2021, we had no principal payment guarantees was approximately $63.8 million forrelated to our unconsolidated real estate ventures.
A reconsideration event could cause us to consolidate thesean unconsolidated real estate ventures and partnershipsventure in the future.future or deconsolidate a consolidated entity. We evaluate reconsideration events as we become aware of them. Some triggersReconsideration events include amendments to be considered are additional contributions required by each partnerreal estate venture agreements and each partners’changes in our partner's ability to make those contributions.contributions to the venture. Under certain of these circumstances, we may purchase our partner’spartner's interest. Our unconsolidated real estate ventures are held in entities which appear sufficiently stable to meet their capital requirements; however, if market conditions worsen and our partners are unable to meet their commitments, there is a possibility we may have to consolidate these entities.
Commitments and Contingencies
Insurance
We maintain general liability insurance with limits of $200.0$150.0 million per occurrence and in the aggregate, and property and rental value insurance coverage with limits of $2.0$1.5 billion per occurrence, with sub-limits for certain perils such as floods and earthquakes on each of our properties. We also maintain coverage, through our wholly owned captive insurance subsidiary, for a portion of the first loss on the above limits and for both terrorist acts and for nuclear, biological, chemical or radiological terrorism events with limits of $2.0 billion per occurrence and in the aggregate, and $2.0 billion per occurrence and in the aggregate for nuclear, biological, chemical and radiological terrorism events, as definedoccurrence. These policies are partially reinsured by the Terrorism Risk Insurance Program Reauthorization Act, which expires in December 2020. Insurance premiums are charged directly to each of the properties.
We will continue to monitor the state of the insurance market, and the scope and costs of coverage for acts of terrorism. We cannot anticipate what coverage will be available on commercially reasonable terms in the future. We are responsible for deductibles and losses in excess of the insurance coverage, which could be material.
Our debt, consisting of mortgage loansmortgages payable secured by our properties, a revolving credit facility and unsecured term loans, containcontains customary covenants requiring adequate insurance coverage. Although we believe that we currently have adequate insurance coverage, we may not be able to obtain an equivalent amount of coverage at reasonable costs in the future. If lenders insist on greater coverage than we are able to obtain, it could adversely affect theour ability to finance or refinance our properties.
Construction Commitments
As of September 30, 2017,2021, we havehad assets under construction in progress that will, require an additional $707.8 million to complete ($611.1 million related to our consolidated entities and $96.7 million related to our unconsolidated real estate ventures at our share), based on our current plans and estimates, require an additional $320.3 million to complete, which we anticipate will be primarily expended over the next two to three years. These capital expenditures are generally due as the work is performed, and we expect to finance them with debt proceeds, proceeds from asset recapitalizations and sales, issuance and sale of securities, and available cash.
Other
As of September 30, 2021, we had committed tenant-related obligations totaling $76.9 million ($73.6 million related to our consolidated entities and $3.3 million related to our unconsolidated real estate ventures at our share). The timing and
47
amounts of payments for tenant-related obligations are uncertain and may only be due upon satisfactory performance of certain conditions.
There are various legal actions against us in the ordinary course of business. In our opinion, the outcome of such matters will not have a material adverse effect on our financial condition, results of operations or cash flows.
With respect to borrowings of our consolidated entities, we have agreed, and may in the future agree, to (i) guarantee portions of the principal, interest and other amounts, (ii) provide customary environmental indemnifications and nonrecourse carve-outs (e.g., guarantees against fraud, misrepresentation and bankruptcy) or (iii) provide guarantees to lenders, tenants and other third parties for the completion of development projects.As of September 30, 2017, we expect to fund additional capital to certain2021, the aggregate amount of principal payment guarantees was $8.3 million for our unconsolidated investments totaling approximately $50.6 million, which we anticipate will be primarily expended over the next two to three years.
Environmental Matters
Under various federal, state and local laws, ordinances and regulations, an owner of real estate is liable for the costs of removal or remediation of certain hazardous or toxic substances on such real estate. These laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of such hazardous or toxic substances. The costs of remediation or removal of such substances may be substantial and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner’sowner's ability to sell such real estate or to borrow using such real estate as collateral. In connection with the ownership and operation of our assets, we may be potentially liable for such costs. The operations of current and former tenants at our assets have involved, or may have involved, the use of hazardous materials or generated hazardous wastes. The release of such hazardous materials and wastes could result in us incurring liabilities to remediate any resulting contamination. The presence of contamination ifor the responsible party is unablefailure to remediate contamination at our properties may (i) expose us to third-party liability (e.g., for cleanup costs, natural resource damages, bodily injury or unwillingproperty damage), (ii) subject our properties to do so.liens in favor of the government for damages and costs the government incurs in connection with the contamination, (iii) impose restrictions on the manner in which a property may be used or which businesses may be operated, or (iv) materially adversely affect our ability to sell, lease or develop the real estate or to borrow using the real estate as collateral. In addition, our assets are exposed to the risk of contamination originating from other sources. While a property owner generally ismay not be responsible for remediating contamination that has migrated onsite from an identifiable and viable offsite source, the contaminant’scontaminant's presence can have adverse effects on operations and the redevelopment of our assets.
Most of our assets have been subject, at some point, to environmental assessments that are intended to evaluate the environmental condition of the subject and surrounding assets. These environmental assessments generally have included a historical review, a public records review, a visual inspection of the site and surrounding assets, screening for the presencevisual or historical evidence of asbestos‑containing materials, polychlorinated biphenyls and underground storage tanks, and the preparation and issuance of a written report. Soil and/or groundwater subsurface testing is conducted at our assets, when necessary, to further investigate any issues raised by the initial assessment that could reasonably be expected to pose a material concern to the property or result in us incurring material environmental liabilities.liabilities as a result of redevelopment. They may not, however, have included extensive sampling or subsurface investigations. In each case where the environmental assessments have identified conditions requiring remedial actions required by law, we have initiated the appropriate actions.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest Rate Risk
We have exposure to fluctuations in interest rates, which are sensitive to many factors that are beyond our control. OurThe following is a summary of our annual exposure to a change in interest rates is summarized in the table below.
| | | | | | | | | | | | | | | | |
|
| September 30, 2021 | | December 31, 2020 |
| |||||||||||
|
| | |
| Weighted |
| | | |
| | |
| Weighted |
| |
| | | | | Average | | | Annual | | | | | Average |
| ||
| | | | | Effective | | | Effect of 1% | | | | | Effective |
| ||
| | | | | Interest | | | Change in | | | | | Interest |
| ||
| | Balance | | Rate | |
| Base Rates | | Balance | | Rate |
| ||||
| | (Dollars in thousands) |
| |||||||||||||
Debt (contractual balances): | | | | | | | | | | | | | | | | |
Mortgages payable: | | |
|
| |
|
| | |
|
| |
|
|
| |
Variable rate (1) | | $ | 762,246 |
| | 2.08% | | | $ | 7,728 | | $ | 678,346 |
| 2.18% | |
Fixed rate (2) | |
| 922,161 |
| | 4.32% | | |
| — | |
| 925,523 |
| 4.32% | |
| | $ | 1,684,407 | | | | | | $ | 7,728 | | $ | 1,603,869 | | | |
Credit facility: | | | | | | | | | | | | | | | | |
Revolving credit facility (3) | | $ | — | |
| 1.13% | | | $ | — | | $ | — |
| 1.19% | |
Tranche A-1 Term Loan (4) | |
| 200,000 | |
| 2.59% | | |
| — | |
| 200,000 |
| 2.59% | |
Tranche A-2 Term Loan (4) | |
| 200,000 | |
| 2.49% | | |
| — | |
| 200,000 |
| 2.49% | |
| | $ | 400,000 | | | | | | $ | — | | $ | 400,000 | | | |
Pro rata share of debt of unconsolidated real estate ventures (contractual balances): | | | | | | | | | | | | | | | | |
Variable rate (1) | | $ | 281,752 | |
| 2.57% | | | $ | 2,857 | | $ | 319,057 |
| 2.47% | |
Fixed rate (2) | |
| 83,707 | |
| 4.46% | | |
| — | |
| 79,989 |
| 4.36% | |
| | $ | 365,459 | | | | | | $ | 2,857 | | $ | 399,046 | | | |
2017 | 2016 | |||||||||||||||
(Amounts in thousands) | September 30, | Weighted Average Interest Rate | Effect of 1% Change in Base Rates | December 31, | Weighted Average Interest Rate | |||||||||||
Balance | Balance | |||||||||||||||
Consolidated debt (contractual balances): | ||||||||||||||||
Mortgages payable | ||||||||||||||||
Variable rate (1) | $ | 1,152,106 | 2.95 | % | $ | 11,681 | $ | 547,291 | 2.11% | |||||||
Fixed rate (2) | 836,141 | 4.79 | % | — | 620,327 | 5.52% | ||||||||||
$ | 1,988,247 | $ | 11,681 | $ | 1,167,618 | |||||||||||
Credit facility (variable rate): | ||||||||||||||||
Revolving credit facility | $ | 115,751 | 2.34 | % | $ | 1,174 | — | — | ||||||||
Tranche A-1 Term Loan | 50,000 | 2.44 | % | $ | 507 | — | — | |||||||||
Pro rata share of debt of unconsolidated entities (contractual balances): | ||||||||||||||||
Variable rate (1) | $ | 159,169 | 4.08 | % | $ | 1,614 | $ | 17,050 | 1.87% | |||||||
Fixed rate (2) | 230,541 | 3.90 | % | — | 150,150 | 3.65% | ||||||||||
$ | 389,710 | $ | 1,614 | $ | 167,200 |
(1) | |
Includes variable rate mortgages payable with interest rate |
(2) | |
Includes variable rate mortgages payable with interest rates |
(3) | The interest rate for our revolving credit facility excludes a 0.15% facility fee. |
(4) | As of September 30, 2021 and December 31, 2020, the outstanding balance was fixed by interest rate swap agreements. The interest rate swaps mature concurrently with the term loan and provide a weighted average interest rate of 1.39% for the Tranche A-1 Term Loan and 1.34% for the Tranche A-2 Term Loan. |
The fair value of our consolidated debtmortgages payable is calculatedestimated by discounting the future contractual cash flows of these instruments using current risk‑adjustedrisk-adjusted rates available to borrowers with similar credit profiles based on market sources. The fair value of our unsecured term loans is calculated based on the net present value of payments over the term of the facilities using estimated market rates for similar notes and remaining terms. As of September 30, 20172021 and
Hedging Activities
To manage, or hedge, our exposure to interest rate risk, we follow established risk management policies and procedures, including the use of a variety of derivative financial instruments. We do not enter into derivative financial instruments for speculative purposes.
Derivative Financial Instruments Designated as Cash Flow Hedges
Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are designated as cash flow hedges, and are carried at their estimated fair value on a recurring basis. We assess the effectiveness of our cash flow hedges
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both at inception and on an ongoing basis. If the hedges are deemed to be effective, the fair value is recorded in “Accumulated other comprehensive loss” in our balance sheets and is subsequently reclassified into "Interest expense" in our statements of operations in the period that the hedged forecasted transactions affect earnings. Our cash flow hedges become less than perfectly effective if the critical terms of the hedging instrument and the forecasted transactions do not perfectly match such as notional amounts, settlement dates, reset dates, calculation period and interest rates. In addition, we evaluate the default risk of the counterparty by monitoring the creditworthiness of the counterparty. While management believes its judgments are reasonable, a change in a derivative's effectiveness as a hedge could materially affect expenses, net income and equity.
As of September 30, 2021 and December 31, 2020, we had interest rate swap agreements with an aggregate notional value of $862.7 million, which were designated as cash flow hedges. The fair value of our interest rate swaps designated as cash flow hedges consisted of liabilities totaling $28.4 million and caps,$44.2 million as of September 30, 2021 and December 31, 2020, included in "Other liabilities, net" in our balance sheets.
Derivative Financial Instruments Not Designated as Hedges
Certain derivative financial instruments, consisting of interest rate swap and cap agreements, are considered economic hedges, but not designated as accounting hedges, and are carried at their estimated fair value on a recurring basis with realizedbasis. Realized and unrealized gains are recorded into earningsin "Interest expense" in our statements of operations in the period in which the change occurs.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), that are designed to provide reasonable assurance that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended September 30, 20172021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 1. LEGAL PROCEEDINGS
We are, from time to time, involved in legal actions arising in the ordinary course of business. In our opinion, the outcome of such matters is not expected to have a material adverse effect on our financial position, results of operations or cash flows.
ITEM 1A. RISK FACTORS
There werehave been no material changes to the Risk Factorsrisk factors previously disclosed in our Information Statement on Form 10, as amended,Annual Report for the year ended December 31, 2020, filed with the SEC on June 20, 2017.February 23, 2021.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
(a) | Not applicable. |
(b) | Not applicable. |
(c) | Purchases of equity securities by the issuer and affiliated purchasers: |
| | | | | | | | | | | |
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 |
July 1, 2021 - July 31, 2021 | | - | | $ | - | | | - | | $ | 376,038,752 |
August 1, 2021 - August 31, 2021 | | 972,766 | | | 29.70 | | | 972,766 | | | 347,130,941 |
September 1, 2021 - September 30, 2021 | | 1,344,318 | | | 29.75 | | | 1,344,318 | | | 307,107,767 |
Total for the three months ended September 30, 2021 | | 2,317,084 | | | 29.73 | | | 2,317,084 | | | |
Total for the nine months ended September 30, 2021 | | 2,936,833 | | | 29.99 | | | 2,936,833 | | | |
Program total since inception in March 2020 | | 6,713,185 | | | 28.71 | | | 6,713,185 | | | |
In March 2020, our Board of Trustees authorized the repurchase of up to $500 million of our outstanding common shares. Purchases under the program are made either in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by us at our discretion and will be subject to economic and market conditions, share price, applicable legal requirements and other factors. The program may be suspended or discontinued at our discretion without prior notice.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4
Not applicable.
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ITEM 6. EXHIBITS
(a) Exhibit Index
| | ||
---|---|---|---|
Exhibits | Description | ||
3.1 |
3.2 | |
3.3 | |
3.4 | |
10.1† | |
10.2**† | |
10.3† | |
10.4† | |
31.1** |
31.2** | |
32.1** | |
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 | |
Inline XBRL Taxonomy Extension Schema | |
101.CAL | |
Inline XBRL Extension Calculation Linkbase | |
101.LAB | |
Inline XBRL Extension Labels Linkbase | |
101.PRE | |
Inline XBRL Taxonomy Extension Presentation Linkbase | |
101.DEF | |
Inline 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. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | |
| |||
JBG SMITH Properties | |||
| |||
Date: | November 2, 2021 | /s/ M. Moina Banerjee | |
| M. Moina Banerjee | ||
| Chief Financial Officer | ||
| (Principal Financial |
| | |
| JBG SMITH Properties | |
| ||
Date: | November 2, 2021 | /s/ Angela Valdes |
| Angela Valdes | |
| Chief Accounting Officer | |
| (Principal Accounting Officer) |
53