​

Quarterly Investor Package

​

JBGS Divider

​

​

Table of Contents

​

​

​

Section One – Mgmt Letter

​

​

Management Letter

​

May 5, 2020

​

To Our Fellow Shareholders:

​

First and foremost, we sincerely hope that all of you, your families, friends and colleagues are healthy and out of harm's way during this trying time.  The impact of this terrible pandemic on our loved ones, our communities, and our economy is heart breaking. At the same time, we have seen this ordeal bring out the best in so many of our fellow citizens, especially those on the front lines. At JBG SMITH we are focused on ensuring the health and safety of our customers, our business partners, our team, and our community, where the collaboration and generosity on display has been both impressive and inspiring.  How we behave in times of crisis defines who we are and what we have seen thus far gives us great hope that not only will we thrive again, but that we will come through this ordeal stronger than before.

​

In keeping with our consistent focus on our key stakeholders, we have moved swiftly to help in a variety of ways. We are working with our local Business Improvement Districts (BIDs) to provide resources to enable customers to find and access federal, state, and local assistance, including the CARES Act, which provides forgivable loan funding for payroll, rent, utilities, and other critical expenses. We have expanded resources to ensure that a work-from-home format is available to all employees whose roles can be reasonably performed remotely and to be supportive of our employees who are now responsible for both home schooling children and caring for family members. In addition, we are contributing to a region-wide effort to establish a healthy workplace blueprint to facilitate a safe emergence from this pandemic.

​

As a result of the prudent and disciplined capital allocation decisions we made over the past several years, we believe our company is in a strong position coming into this downturn. A high percentage of our revenues are derived from the government, government contractors and other credit tenants, including Amazon, as well as apartment renters working in these industries. While we do not know what the future holds, we have seen limited disruption in these sectors thus far. In fact, some of our tenants, such as Amazon and certain government agencies, appear poised for faster growth as a result of this crisis. This is not surprising since the Washington, DC region has consistently proven more resilient than the rest of the country in regional economic growth in every recession on record since the Great Depression.

​

Moreover, since our formation in 2017, we have carefully positioned ourselves to manage through an expected downturn. We have low leverage levels, approximately $2 billion of liquidity, and limited near-term liabilities, with only 8% of our total debt coming due before the end of 2021. In addition, we believe that the capital allocation decisions we made over the past several years will allow us to weather this storm and grow our company over the longer term. We fully expect, and are prepared for, a prolonged recession and an extended recovery. As we noted in our second quarter 2018 letter – “who doth not answer to the rudder shall answer to the rock”. We have kept our hand firmly on the wheel, we have kept a vigilant watch for the rocks, and we are well prepared to meet the challenges and opportunities that lie ahead.

​

For details regarding our financial and operating results, as well as cautionary disclosures about forward looking statements, please see our first quarter earnings release and supplemental information, which follow this letter.

​

​

1

COVID-19 Impact

​

This section provides a summary of our region’s response to the COVID-19 pandemic (including regulatory responses that are relevant to our business), as well as JBG SMITH’s response to the crisis, and the early indicators of how our business is performing as a result of the ensuing economic fallout.

​

Washington, DC – Maryland –Virginia Regional Response

In general, our local elected officials have been proactive and responded relatively early. Since we operate in three separate jurisdictions that together comprise the Metropolitan DC area, it is important to understand some of the differences. Below is a table that summarizes the regional response as of the date of this letter:

​

​

JBG SMITH Response

We are proud to be able to provide safe and secure spaces to live and work for all our stakeholders. We are even more proud of the JBG SMITH employees who are working harder than ever both at our properties and remotely to keep our business running and to serve our valued customers. The following summarizes the key measures we are taking for our employees and our customers during this crisis.

​

Ensuring the Safety of Our Team

Our corporate office moved to a work-from-home format on March 12^th. Our teams connect daily via video conference, and the transition has been seamless. Like many of you, members of our team are now responsible for home schooling children and caring for family members while also carrying a full workload from home. To help address some of these burdens we reopened the enrollment period for our health plan and expanded access to mental health coverage.

​

Most of our employees are front-line workers on site at our properties. In these field locations, we have implemented the following protocols:

​

2

​

Supporting the Health and Safety of our Customers

In addition to these measures, we are actively developing protocols to safely manage building operations when stay-at-home orders are lifted and more of our tenants return to their offices. We intend to contribute our work on this front to a region-wide healthy workplace blueprint, including best practices on enhanced social distancing measures and cleaning protocols, as well as how commercial and residential landlords may be able to contribute to critical symptom tracking and testing, as well as contact tracing efforts. We are focused on enabling our customers to use their space, while supporting the health and safety of everyone working in our buildings.

​

The financial health of our customers is also critically important to that of our own business. Although we fully expect to see additional pressure on rent collections as the crisis continues, to date, the vast majority of our customers have paid their rent. Nonetheless, we are working on a case-by-case basis with tenants demonstrating financial need to determine and structure appropriate short-term rent deferral or other measures to help them during this crisis. In addition, we are working with our local BIDs to provide resources to enable tenants to find, and access, applicable federal, state, and local assistance programs.

​

Maintaining the Strength of our Company

We do not know how long this pandemic will last or how long the recovery from the resultant downturn will take. As we always do, we are hoping for the best, but planning for the worst. We take great solace in what we have done over the past several years to prepare ourselves for the next downturn, and we believe that we are well positioned to manage through this crisis and to grow over the longer term. That said, there will be near-term costs to this crisis and its duration is unknown. Consequently, we have taken several additional measures to strengthen our ability to navigate the challenges that lie ahead.

​

3

​

With approximately $2 billion of liquidity, and limited near-term debt maturities and capital obligations, we find ourselves in a strong position to navigate this crisis. With only approximately $234 million in contractual tenant improvements and construction expenditures through the end of 2021 and 8% of our debt maturities over the same period, we are well positioned to focus on the long-term growth and expansion of our business during this period.

​

Near-Term Financial Impact

While we are always focused on the long term, we are sharing the following data on a one-time basis to provide investors with an early read on how the pandemic has impacted rent collections subsequent to quarter end. Investors should understand that these statistics are unaudited and preliminary, and we make no assurances that our experience to date will be indicative of future performance. The early returns on our business through April 30, 2020 are as follows:

​

​

(1) Assumes government tenants who pay in arrears have paid.

​

In addition, our commercial parking revenue was down 54% for the month of April compared to the average monthly first quarter revenue of $2.6 million. We also temporarily closed the Crystal City Marriott in National Landing, which produced $1.8 million of NOI in 2019.

​

While substantially all accommodations to date have been structured as rent deferrals, we expect our rent collection rate will deteriorate the longer this crisis drags on.  To the extent our confidence in rent collections declines, we expect to increase reserves and write-offs against both billed and deferred (straight-line) rent receivables.  Given how early we are in this crisis, recent monthly rent collection data is not a meaningful indicator of long-term impact, other than as a measure of how many businesses in our region have been affected. We believe it will be significantly more meaningful to see how many impacted businesses survive this crisis, as that will dictate our ultimate ability to collect some or all of the rents deferred during this period, as well as the amount of capital that will be needed to re-tenant any prematurely vacated commercial space.

4

Although we anticipate supply chain and labor delays as a result of new job site procedures, as of the date of this letter, all our construction projects are active and on schedule, apart from 7900 Wisconsin Avenue, which is delayed by two quarters. Likewise, we are not aware of any material impact on the construction timeline for Amazon’s new headquarters. For predevelopment projects that are in various stages of entitlement, many of these processes have slowed due to reduced or eliminated public meetings. Thankfully, we were able to obtain the entitlements associated with approximately 820,000 square feet in National Landing immediately prior to Virginia’s stay-at-home order.

​

We also expect that our ongoing asset sales efforts will be negatively impacted by the downturn. Fortunately, we were successful in executing over $1.6 billion of capital recycling transactions (including the Pen Place land that is under firm contract to Amazon) over the past two and a half years. However, our target of an additional $200 million of sales in 2020 will likely be more difficult to achieve. That said, we will continue with our marketing efforts as certain of these assets may still price at attractive levels. Where we can continue to transact at or above net asset value (NAV) or at pricing that is accretive relative to other uses of capital, we intend to do so. Finally, as we discuss below, for the same reason that this downturn will make it more difficult for us to sell assets at or above NAV, we believe it will likely usher in a period of more attractive acquisitions.

​

Potential Long-Term Impact

When we have more clarity on the length and severity of this downturn, we intend to update our long-term NOI bridge. Until that time, we believe it is prudent to withdraw our prior projections. While the short-term impact of this crisis is relatively easy to measure, the degree to which it will impact our business over the long term depends entirely on the severity and duration of the ensuing recession and the resultant scale of business failures in our market. Our cash planning and underwriting of future results assume the duration and scale of this contraction will be severe. Although we assume the worst when we make decisions, it does not mean we have a better crystal ball than others, and, hopefully, we will be proven wrong. That said, this “plan for the worst” approach is designed to ensure that we maintain our solid position in both defense (liquidity, tenant restructurings, and pricing our capital) and offense (growth assumptions and return expectations), and that we are well positioned to grow our company over the long term.

​

Our planning for the worst does not necessarily mean that every variable will perform at its worst.  For example, Amazon’s public announcements regarding the acceleration of its hiring efforts would suggest that its space needs and growth plans may have increased. We also expect that we will grow in the coming years by eventually acquiring and building more income-producing assets, with a specific focus on multifamily.  In the short term, we may see some co-working tenants fail and vacate space, and overall densification reverse until social distancing measures are behind us. Longer term, we expect that co-working will return, but in a diminished form and with fewer players. Likewise, we expect that densification will return and could even be enhanced with more widely adopted teleworking. In turn, however, that trend may drive demand for slightly more residential square footage, but not necessarily in close-in locations. While we continue to believe that consumers will demand well-amenitized, walkable urban places, a sustained increase in teleworking may make non-gateway cities with lower-cost housing more attractive. In bigger cities such as Washington, DC, those who can afford to drive and park will avoid mass transit for some period of time (likely driving higher parking revenue), but we believe that sustainability, cost, and convenience will ultimately drive a return to historic commuting patterns. Each of these considerations, as they always do, will factor heavily into our strategy in the coming years.

​

Capital Allocation Will Drive Long-Term Impact

​

Maximizing long-term NAV per share has always been, and remains, our primary goal. Over the past two and a half years pursuit of this goal drove us to recycle approximately $1.6 billion of assets, including non-income producing land sites and office assets that we believed were valued in excess of NAV. It also drove our aggressive effort to execute early blend-and-extend transactions with tenants facing near-term lease maturities, which reduced the number of renewal discussions necessary over the next several years. This goal has driven us to entitle land sites in our Future Development Pipeline, bringing them to a shovel-ready condition, so that we can monetize otherwise unproductive assets by preparing these sites for new development, ground lease or sale.

5

Our focus on long-term NAV per share growth also motivated us to issue equity last year at $42 per share, realizing net proceeds of approximately $472 million. At the same time, we have been disciplined buyers, investing only approximately $200 million in new acquisitions over the past two and a half years, of which $161 million was the like-kind-exchange of F1RST Residences for the Metropolitan Park land we sold to Amazon. In addition, as construction costs rose above long-term historical averages, we held new development starts to a high bar – limiting new construction over the past two years to only two new assets with a combined estimated total investment of less than $240 million, of which only approximately $76 million remains to be spent. Further, our asset-level borrowing strategy has been focused on preserving borrowing capacity on stabilized multifamily assets, which has proven to be uniquely valuable during periods of economic decline. During the Global Financial Crisis (GFC) agency lenders were one of the most active sources of capital, and we anticipate a similar dynamic during this downturn. Finally, we experienced fortunate timing with the early refinancings of several asset level loans, as well as our unsecured corporate revolving credit facility, which was recast in January with a new term through early 2025.

​

Our disciplined approach to capital allocation has positioned us extremely well coming into the current downturn. We now expect to enter a period during which good value will be easier to find, thereby creating opportunities for us to be a more active acquirer and developer in the years ahead.

​

Not knowing the depth and duration of the current downturn, we intend to “average in” the investment of our valuable liquidity over a potentially long period of attractive opportunity. We intend to seek out good long-term fundamental value, rooted in value relative to long-term replacement costs, and invest when and where we find it. Being prudent with our liquidity and mapping the severity of this downturn means that our investment activity will likely be more limited in the immediate term. As we experienced during the GFC, it may take time, possibly a year or more, before price adjustments for asset acquisitions and construction costs fully infiltrate the market. During that time some of our best opportunities may be share buybacks, but this must be balanced with our desire to maximize liquidity, especially in the early days of the downturn when visibility on the future is lowest. As we “average in” and pace ourselves, we will seek the optimal balance between preserving enough liquidity to be active investors over an extended period of time and not passing up objectively attractive near-term opportunities in the hopes that pricing may be more attractive later. Consequently, it is likely that some of our investments may later prove not to have been at the lowest price possible. That said, not knowing if we are at the absolute bottom is a poor excuse for not investing in obviously compelling opportunities. If we are buying at good fundamental values relative to long-term replacement cost, then those new investments will still prove to be an attractive allocation of our capital.

​

Finally, the Washington DC metro area has historically proven to be more resilient than other gateway markets during downturns. We believe that our concentration in such a recession resilient market and the fact that a high percentage of the square footage in our commercial portfolio is leased to government, government contractors, and Amazon should soften much of the impact of any recession on our business. With a $2.7 trillion federal recovery package, we expect to see an increase in agency and contractor spending locally. In addition, we continue to see strong hiring from Amazon, and this crisis seems to be beneficial for many of its business lines from online shopping to cloud computing and grocery. The fact that Amazon is also hiring recently displaced workers during this downturn means that they may grow faster, not slower. For these reasons we remain confident in both the government and Amazon demand drivers in the DC metro area. Nonetheless, we remain cautious on the short-term outlook for our business as the longer-term impact of COVID-19 remains incredibly difficult to predict.

​

Balance Sheet and Liquidity

​

Maintaining prudent leverage levels, ample liquidity, and internal investment capacity are fundamental elements of maximizing long-term NAV per share. We have deliberately created the capacity and flexibility to position our company to be an active investor when market conditions are right. We primarily finance our business with non-recourse, asset-level financing, and our currently unencumbered multifamily assets can serve as a valuable source of potential liquidity, especially when other sources of capital are less attractive.

6

As noted earlier, including cash, undrawn capacity on our credit facility, and potential financings on our unencumbered multifamily Operating and Under Construction assets our total estimated liquidity is approximately $2 billion. Subsequent to March 31, 2020, to provide a substantially larger cash reserve, we drew an additional $300 million on our credit facility and the remaining $100 million on our Term Loan. These draws, in addition to the $90 million of net proceeds from financing two of our commercial assets, resulted in a proforma cash balance of approximately $800 million at share as of March 31, 2020. We have $500 million of remaining availability on our credit facility. Additionally, we have approximately $715 million of estimated multifamily borrowing capacity from our Operating and Under Construction multifamily assets, of which approximately $440 million is from our stabilized Operating multifamily assets. We are fortunate that we do not have immediate required uses for these funds, but they are an important component of our overall liquidity strategy and our expectation that we will be an active investor during this period. Based on current conditions, even in the most severe downside scenario, we believe we have sufficient liquidity to meet the required obligations for our operating portfolio, to continue funding our active Under Construction assets, and to continue pursuing strategic projects in our Future Development Pipeline while also maintaining ample capacity for net new investment.

​

As of the date of this letter, we have only 8% of our loans maturing before the end of 2021. As of March 31, 2020, our debt maturities for 2020 totaled $213 million. Since the end of the first quarter, we have addressed approximately $200 million of this exposure, including the refinancing of the loan collateralizing RTC West which increased the loan to $117.3 million and generated additional net cash proceeds of approximately $20 million.  Consistent with our strategy for sourcing attractively priced capital during a downturn, debt capital remains available from the government-sponsored entities (GSEs) for stabilized multifamily assets, and we understand that Fannie and Freddie are processing enormous volumes supported by recent stimulus measures. The GSEs have instituted LIBOR floors and spreads have widened, but borrowing costs remain attractive.

​

As of March 31, 2020, our Net Debt/Total Enterprise Value was 27.8% and our Net Debt/Adjusted EBITDA was 6.2x. Given that these leverage metrics include the debt incurred to date to develop our four Under Construction and five recently delivered assets, but not all of the estimated stabilized NOI from those assets, we believe Net Debt/Total Enterprise Value is the most meaningful measure to evaluate our leverage. As is the case for many of our REIT peers, our Net Debt/Total Enterprise Value has been significantly impacted by the decline in share prices due to the COVID-19 crisis. As such we view our current 27.8% ratio to be more reflective of equity market volatility than of leverage on underlying real estate values. While these NAVs will almost certainly be negatively impacted in the near-term, it is too early to measure the magnitude of this impact. Our long-term leverage targets remain unchanged at 25% to 35% Net Debt/Total Enterprise Value and between 6x and 7x Net Debt/Adjusted EBITDA, with peak levels in the mid-8x’s during periods of more active capital deployment.

​

State of the Markets

​

The latest cumulative estimate of regional unemployment claims exceeds 300,000 since the state of emergency was declared in mid-March. Nationally, the same Department of Labor data now reports unemployment claims of over 26 million – a level not seen since the Great Depression. To date, most of the job losses nationally and regionally have come from the retail and hospitality sectors, which together, make up approximately 18% of regional employment.  It remains unclear how many other sectors will begin to see job losses as a result of the crisis, but we believe that retailers and hotels will not be the only impacted sectors, as a collapse in travel and consumer spending ripples through other industries.  In prior recessions, the Washington, DC metro region was largely insulated relative to other gateway markets, shrinking only 1% on average versus an average reduction of 3% in other gateway markets. However, it is unclear the degree to which the current economic fallout will impact our market. 

On the office front, first quarter estimates from Avison Young show leasing volume down 40%, representing the slowest first quarter since 2000, with tour volume down 87%. Unsurprisingly, JLL reports that new transactions have been put almost entirely on hold unless driven by lease expirations or deals which were already in negotiation. First quarter vacancy for the DC metro region was not impacted with no change from the fourth quarter of 2019, according to JLL. We

7

should start to see the impact more clearly in the second quarter and beyond. While the long-term economic outlook remains uncertain, the Washington, DC office market has historically been relatively insulated during downturns, with an average rent decline of 8% in the past two recessions versus 34% in other gateway markets, according to JLL data.  Rent recovery to pre-recession levels in DC in the last two recessions was also three times faster than rent recovery in other gateway markets, also according to JLL.

​

Turning to multifamily, with tour volume down, renewals are likely to be prevalent – benefitting existing buildings even as new supply comes online, much of which will face significant near-term headwinds due to a slowdown in leasing velocity. Based on CBRE data, the DC metro region saw the lowest rent declines during the last downturn compared to other gateway markets, dropping just 2.3% from peak to trough over five quarters, and it took the DC region just two quarters to recover. The same data set shows an 11.4% decline in New York City over six quarters with six quarters of recovery. San Francisco experienced a 10.6% decline from peak to trough with six quarters needed for recovery. In nearly all markets, while rents were extremely variable, vacancy increased just 180 basis points nationally, suggesting that landlords cut rents rather than losing occupancy in the last downturn.

​

Class B rent growth, which is largely tied to wage growth in service sector and other low to medium wage jobs, will likely start to demonstrate weakness as this sector faces the greatest economic stress in the near term. That said, all Class B buildings are not created equal, and we believe that distress will be heavily correlated with both the income and occupation of residents. Newly delivered buildings are also likely to face headwinds as they try to lease up in the face of restrictive “stay-at-home” guidance from authorities. As discussed below, we have three assets that were recently delivered into our operating portfolio and are still in lease up – West Half delivered in the fourth quarter of 2019, and 900 W Street and 901 W Street (formerly collectively Atlantic Plumbing C) delivered in the first quarter of 2020. In the near term, we believe that the white collar sectors that drive leasing demand in brand new buildings will remain insulated from an employment perspective and could lead to pent-up demand if restrictions lift quickly and consumers in this demographic move to execute new leases before another potential lockdown.  On the supply side, annual starts have been slowing since 2017 with approximately 6,000 units starting construction in 2019 compared to more than 8,000 in 2018, according to CoStar data and JBG SMITH estimates. By comparison, year-to-date construction starts are just over 2,000 units and additional starts for the year may be delayed or canceled.  

​

Across the investment sales market nationally, brokers saw deal flow drop to 50% of standard volumes by mid-March with re-pricings between 5% and 10% on deals in progress. Most deals that were firm or had committed financing are closing, but brokers have indicated that deal flow has nearly evaporated, at least temporarily. Similarly, lenders continue to close on committed deals, but CMBS and highly leveraged debt funds appear less likely to perform, according to broker commentary. The biggest open question in the investment sales market is whether prospective buyers will face liquidity constraints that hamper their ability to do deals even in what could be an opportunistic buying environment.

​

Avison Young’s early first quarter estimates put office sales activity in DC down year-over-year, with volume 38% lower in the first quarter of 2020 versus the first quarter of 2019, based solely on the slowdown in the latter half of March. On the multifamily front, CoStar reports first quarter 2020 sales volume of nearly $780 million. This was down from the approximately $1.5 billion of volume in the first quarter of 2019, which was an outlier driven by large portfolio transactions. The first quarters of 2017 and 2018 were approximately $820 million and $860 million respectively, putting 2020 volumes down only slightly from normal first quarter volumes. We expect sales activity from the second quarter and beyond to decline dramatically reflecting the environment brokers describe, apart from deals that are in progress, which may see pricing adjustments if they move forward. However, distressed selling has yet to appear given the relative lack of lender distress and the continued availability of debt and equity capital. That said, we expect to see this trend manifest in second and third quarter transaction volumes.

8

Financial and Operating Metrics

​

For the three months ended March 31, 2020, we reported net income attributable to common shareholders of $42.9 million and Core FFO attributable to common shareholders of $52.1 million or $0.39 per share. Same store NOI increased 5.2%, and our operating portfolio ended the quarter at 89.8% leased and 87.5% occupied. For second generation leases, the rental rate mark-to-market was negative 0.7%.

​

Operating Portfolio

​

Given that COVID-19 did not significantly impact our operating portfolio until later in the first quarter, our assets performed in line with our expectations during this time period. Our same store NOI increased 5.2% across our operating portfolio during the first quarter.

​

For the three months ended March 31, 2020, our 11.1 million square foot operating commercial portfolio generated $250 million of annualized NOI and was 91.0% leased and 88.7% occupied. We completed 26 office lease transactions in our operating commercial portfolio totaling over 299,000 square feet, including 74,000 square feet of new leases and 225,000 square feet of renewals. For second-generation leases, the rental rate mark-to-market was negative 0.7%. This quarter, we added two new development assets to the recently delivered commercial operating portfolio –1900 N Street and 4747 Bethesda Avenue. These two assets were 83.4% leased in aggregate as of the end of the first quarter.

​

Our operating multifamily portfolio, comprising approximately 5,583 units, generated $85 million of annualized NOI. Multifamily assets comprise 30.1% of our portfolio (based on square footage at share). As mentioned earlier, we have three assets that were recently delivered into the operating portfolio and are still in lease up – West Half was delivered in the fourth quarter of 2019 and 900 W Street and 901 W Street (formerly collectively Atlantic Plumbing C) were delivered in the first quarter of 2020. Our operating multifamily portfolio was 87.0% leased and 84.5% occupied at the end of the first quarter. Excluding our recently delivered assets, our operating multifamily portfolio was 93.4% occupied at the end of the first quarter.

​

Capital Allocation

​

Acquisitions

As we discussed earlier, we believe this downturn will present potentially attractive investment opportunities, and we intend to maintain discipline. We expect to complete the sale of the Pen Place land to Amazon in 2021, and we intend to complete a like-kind exchange acquisition for the proceeds from that sale.

​

In March, we announced that our Board of Trustees authorized a share repurchase plan for up to $500 million of outstanding common shares. As of March 31, 2020, we had repurchased 1.4 million shares at an average price of $29.01, totaling $41.2 million. We evaluate share repurchases relative to other investment opportunities available to us, with additional consideration for the impact on our liquidity. Prudent capital allocation demands that we target the investment opportunities with the highest return which, at times, may be share buybacks. We have limited our share repurchase activity to a relatively low level until we have better visibility on the long-term impact of the COVID-19 crisis both on our operating business and on future investment opportunities.

​

Dispositions

In January, we completed the sale of the Metropolitan Park land to Amazon for approximately $155 million, $11 million above the estimated contract value due to the additional development density that was ultimately approved. As discussed earlier, given the impact of COVID-19 on the investment sales market, we believe our target of an additional $200 million of sales for 2020 will likely be more difficult to achieve. Where we can continue to transact at or above NAV or at pricing that is accretive relative to other uses of capital, we intend to do so.

​

9

Development Portfolio

​

As of March 31, 2020, our development portfolio consisted of four assets totaling 883,000 square feet currently under construction and a Future Development Pipeline totaling 16.7 million square feet. Excluding the land at Pen Place held for sale to Amazon, our pipeline was 14.7 million square feet. Of the 883,000 square feet in our Under Construction portfolio, 503,000 square feet is multifamily and 380,000 square feet is commercial, the latter of which is 91.3% pre-leased.

​

Under Construction

Throughout our operating portfolio, we combine the amenity retail at the base of our office and multifamily buildings with the related asset. Accordingly, beginning next quarter, we will combine Central District Retail with 1770 Crystal Drive and 1550 Crystal Drive. During the first quarter we completed the core and shell of Central District Retail, ahead of schedule and under budget, and we are preparing to turn over spaces to tenants for their build-outs.  While the asset is relatively small in square footage terms, it is important to our overall placemaking and repositioning strategy for National Landing.  Central District Retail is 75.2% pre-leased to five tenants. 

​

At the end of the first quarter, our three remaining assets under construction all had guaranteed maximum price construction contracts in place.  These three assets have weighted average estimated completion and stabilization dates of the first quarter of 2021 and the fourth quarter of 2021, respectively, with a projected NOI yield based on Estimated Total Project Cost of 6.3%.  When stabilized, we expect these three assets to deliver $22.9 million of annualized NOI.

​

Near-Term Development

We did not have any assets in the Near-Term Development pipeline at the end of the first quarter. As a reminder, we only place assets into our Near-Term Development pipeline when they have completed the entitlement process and when we intend to commence construction within 12 to 18 months, subject to market conditions.

​

We were fortunate to have obtained final entitlements for 1900 Crystal Drive in March. These entitlements secured development rights for approximately 820,000 square feet of multifamily and retail development, representing an increase of over 8% (approximately 65,000 square feet) in the square footage previously carried in our Future Development Pipeline. As noted earlier, while we are committed to building this asset as part of our National Landing repositioning, we intend to time our construction commencement to capture the benefit of an expected decline in construction costs. Earlier this year, we started demolition and enabling work at 1900 Crystal Drive to ensure that we are ready for construction start when market conditions and construction pricing warrant.

​

We are continuing the entitlement and design of the approximately 2,100 units in the next tranche of multifamily development opportunities in National Landing, including 2000 and 2001 South Bell Street, 223 23^rd Street, and 2525 Crystal Drive, all of which are within a ½ mile of Amazon’s new headquarters. These opportunities will be subject to the same capital allocation discipline governing all new investment. Approval processes are expected to continue in Arlington County during the pandemic, and we expect these developments will receive final entitlements sometime in 2021.

​

Future Development Pipeline

As of March 31, 2020, our Future Development Pipeline comprises 16.7 million square feet, with an Estimated Total Investment per square foot of approximately $46.14. Excluding the land at Pen Place that is under firm contract to Amazon, our Future Development Pipeline was 14.7 million square feet. At the end of the first quarter, 54.1% of this pipeline was in National Landing, 20.7% was in DC, 15.5% was in Reston, and the remaining 9.7% was in other Virginia and Maryland submarkets. Our DC holdings are concentrated in the fast-growing emerging submarkets of Union Market and the Ballpark, and our Reston holdings include what we believe is one of the most attractive development sites on the Metro, adjacent to Reston Town Center.

​

10

Over the course of 2020, we expect to continue to advance the entitlement and design of approximately 10.2 million square feet, which represents approximately 70% of our Future Development Pipeline. This includes 6.5 million square feet in National Landing, representing approximately 93% of our Estimated Potential Development Density in the submarket. We continue to seek opportunities to monetize our Future Development Pipeline, either through internal development, land sales, ground lease structures, and in cases where continued control is important, recapitalizations with third-party capital. This is most applicable to opportunities where we can achieve mark-ups on our land, thereby preserving our own capital capacity for other, higher-return opportunities.

​

Third-Party Asset Management and Real Estate Services Business

​

Revenue from our third-party asset management and real estate services business was $15.2 million in the first quarter, primarily driven by $5.5 million in property management fees, $2.8 million in development fees, and $2.6 million in asset management fees. The portion of total revenues associated with the JBG Legacy Funds was $5.4 million (approximately 35.4% of total third-party revenue). The JBG Legacy Funds continued to focus on disposing of assets in accordance with their underlying business plans. We expect the fees from retaining management and leasing of sold assets, the Amazon-related fees that we expect to continue to receive, fee income associated with the Washington Housing Initiative, and other third-party fee income streams to offset the wind down of the JBG Legacy Fund business over time.

​

Environmental, Social, and Governance

​

In April we released our environmental, social, and governance (ESG) report, which highlights accomplishments, key performance metrics, and our ESG management strategy. We believe that strong environmental sustainability, social responsibility, and corporate governance practices are essential to maximizing long-term NAV per share. We achieved overall reductions in both energy usage and carbon emissions across our portfolio in 2019. In addition, we continue to take advantage of opportunities to make our operating assets more efficient users of energy and water, and we carefully examine the impacts of our development strategy. That said, we recognize that new development can foster challenging growth dynamics, with social equity at the forefront. We strive to work alongside community members, leaders, local governments and the federal government to appropriately respond to these challenges. By aligning our business and governance practices with the principles of sustainable growth, responsible project development, and high-performance operations, we demonstrate our commitment to the long-term sustainability of our portfolio and our region. We urge you to access our annual sustainability report by visiting our website at https://www.jbgsmith.com/about/sustainability

​

Earlier this year we amended our Bylaws to provide for majority voting in uncontested elections of Trustees. This conforms to the “majority rule” standard underpinning many of our other governance provisions. We are pleased to report that our Annual Meeting of Shareholders resulted in the election of all Trustee nominees, including one new Trustee, Alisa Mall, Managing Director, Investments, at the Carnegie Corporation of New York. In her role at Carnegie, she is primarily responsible for the management of the Corporation’s real estate and natural resources portfolios. In addition, she oversees the Corporation’s diversity and inclusion efforts. Furthermore, Alisa’s addition to our Board moves us closer to our previously stated goal of diversity and gender balance by increasing the representation of women among the group to three members, putting JBG SMITH among the top quartile of all public REITs. While we still have work to do in this area, we are pleased to continue making progress.

​

Finally, good governance is as much about aligned incentives and shared outcomes as anything else. Our management team and Board of Trustees are particularly well aligned with our fellow shareholders, as this group owns or represents approximately 8% of the equity of JBG SMITH. Our 2019 executive team’s compensation was approximately 65% equity based, and our performance equity only pays out when our shareholders make money. At times like these, shareholder alignment matters more than ever.

​

* * *

​

11

​

​

We are in the midst of a terrible crisis with an unknown time horizon. Unfortunately, this crisis is so pervasive that it impacts all of us, and none of us will emerge unscathed. We can only hope that the effects will be minimized by good decisions and decisive action across our communities. Our customers have never needed us more than they do now, and our team has responded with tremendous grit and resilience. We believe our disciplined approach to capital allocation leading up to this crisis has positioned us to weather this storm over the near term, and to capitalize on investment opportunities that will make us even stronger over the long term. Our nation’s capital has consistently proven to be more resilient than the rest of the country in times of historic distress, and we believe that this time is no different. Our heavy concentration in Amazon’s path of growth at a time like this is even more valuable. Finally, our robust liquidity position gives us the capacity both to withstand near-term headwinds and to make the most of investment opportunities that are likely to arise during this downturn.

​

We wish you and your loved ones health and strength during these challenging times, and we appreciate your continued support of our team and our business. Now, more than ever, we will continue to work hard to maintain your trust and confidence.

​

Thank you and stay healthy,

​

W. Matthew Kelly

Chief Executive Officer

​

​

12

​

Section Two – Earnings Release

​

​

​

​

​

Earnings Release

​

CONTACT

Jaime Marcus

SVP, Investor Relations and Corporate Communications

(240) 333-3643

jmarcus@jbgsmith.com

JBG SMITH ANNOUNCES FIRST QUARTER 2020 RESULTS

​

Bethesda, MD (May 5, 2020) - JBG SMITH (NYSE: JBGS), a leading owner and developer of high-growth, mixed-use properties in the Washington, DC market, today filed its Form 10-Q for the quarter ended March 31, 2020 and reported its financial results.

Additional information regarding our results of operations, properties and tenants can be found in our First Quarter 2020 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com. Additional information about the current and potential future impact of COVID-19 and the ensuing economic turmoil on us, as well as our response to it, can be found in our Management Letter in our First Quarter 2020 Investor Package. We encourage investors to consider the information presented here with the information in that document.

First Quarter 2020 Financial Results

Operating Portfolio Highlights

Development Portfolio Highlights

Under Construction

Near-Term Development

Future Development Pipeline

Third-Party Asset Management and Real Estate Services Business

For the three months ended March 31, 2020, revenue from third-party real estate services, including reimbursements, was $29.7 million. Excluding reimbursements and service revenue from our interests in consolidated and unconsolidated real estate ventures, revenue from our third-party asset management and real estate services business was $15.2 million, primarily driven by $5.5 million of property management fees, $2.8 million of development fees, $2.6 million of asset management fees, $1.7 million of leasing fees and $1.5 million of other service revenue.

Balance Sheet

Investing and Financing Activities

Subsequent to March 31, 2020:

Dividends

On April 30, 2020, our Board of Trustees declared a quarterly dividend of $0.225 per common share, which will be paid on May 27, 2020 to shareholders of record as of May 13, 2020.

Withdrawal of Estimated Guidance

In light of the uncertainty surrounding the COVID-19 pandemic and its long-term impact on our business, we are withdrawing the guidance contained in the estimated NOI bridge, which can be found most recently in our Investor Presentation from November 2019, and the potential estimated NAV impact from Amazon in National Landing, which can be found most recently in our Spring 2019 Investor Day presentation.

About JBG SMITH

JBG SMITH is an S&P 400 company that owns, operates, invests in and develops a dynamic portfolio of high-growth mixed-use properties in and around Washington, DC. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Capital region, including National Landing where it now serves as the exclusive developer for Amazon’s new headquarters. JBG SMITH’s portfolio currently comprises 20.8 million square feet of high-growth office, multifamily and retail assets, 98% at our share of which are Metro-served. It also maintains a robust future development pipeline encompassing 16.7 million square feet of mixed-use development opportunities. For more information on JBG SMITH please visit www.jbgsmith.com.

Forward-Looking Statements

Certain statements contained herein may 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 performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results of JBG SMITH Properties (“JBG SMITH”, the “Company”, "we", "us", "our" or similar terms) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximate”, "hypothetical", "potential", “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this earnings release. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows, performance, tenants, the real estate market and the global economy and financial markets. The extent to which the COVID-19 pandemic impacts us and our tenants depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. 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, 2019 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. We also note the following forward-looking statements: the impact of COVID-19 and the ensuing economic turmoil on our Company, net operating income, same store net operating income, net asset value and stock price; the impact of disruptions to the credit and capital markets on our ability to access capital, including refinancing maturing debt; changes to the amount and manner in which tenants use space; whether we incur additional costs or make additional concessions or offer other incentives to existing or prospective tenants to reconfigure space; our annual dividend per share and dividend yield; annualized net operating income; in the case of our construction and near-term development assets, estimated square feet, estimated number of units and in the case of our future development assets, estimated potential development density; expected key Amazon transaction terms and timeframes for closing any Amazon transactions not yet closed; planned infrastructure and education improvements related to Amazon’s additional headquarters; the economic impact of Amazon’s additional headquarters on the DC region and National Landing; the impact of our role as developer, property manager and retail leasing agent in connection with Amazon’s new headquarters; our development plans related to Amazon’s additional headquarters; whether any of our tenants succeed in obtaining government assistance under the CARES Act and other programs and use any resulting proceeds to make lease payments owed to us; whether we can access agency debt secured by our currently-unencumbered multifamily

assets timely, on reasonable terms or at all; whether the delay in our planned 2020 discretionary operating asset capital expenditures will have any negative impact on our properties or our ability to generate revenue; and the allocation of capital to our share repurchase plan and any impact on our stock price.

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. These factors include, among others: adverse economic conditions in the Washington, DC metropolitan area, including in relation to COVID-19, the timing of and costs associated with development and property improvements, financing commitments, and general competitive factors. For further discussion of factors that could materially affect the outcome of our forward-looking statements and other risks and uncertainties, see “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Cautionary Statement Concerning Forward-Looking Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 and other periodic reports the Company files with the Securities and Exchange Commission. For these 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. 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 hereof.

Pro Rata Information

We present certain financial information and metrics in this release “at JBG SMITH Share,” which refers to our ownership percentage of consolidated and unconsolidated assets in real estate ventures (collectively, “real estate ventures”) as applied to these financial measures and metrics. Financial information “at JBG SMITH Share” is calculated on an asset-by-asset basis by applying our percentage economic interest to each applicable line item of that asset’s financial information. “At JBG SMITH Share” information, which we also refer to as being “at share,” “our pro rata share” or “our share,” is not, and is not intended to be, a presentation in accordance with GAAP. Given that a substantial portion of our assets are held through real estate ventures, we believe this form of presentation, which presents our economic interests in the partially owned entities, provides investors valuable information regarding a significant component of our portfolio, its composition, performance and capitalization.

We do not control the unconsolidated real estate ventures and do not have a legal claim to our co-venturers’ share of assets, liabilities, revenue and expenses. The operating agreements of the unconsolidated real estate ventures generally allow each co-venturer to receive cash distributions to the extent there is available cash from operations. The amount of cash each investor receives is based upon specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions.

With respect to any such third-party arrangement, we would not be in a position to exercise sole decision-making authority regarding the property, real estate venture or other entity, and may, under certain circumstances, be exposed to economic risks not present were a third-party not involved. We and our respective co-venturers may each have the right to trigger a buy-sell or forced sale arrangement, which could cause us to sell our interest, or acquire our co-venturers’ interests, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. Our real estate ventures may be subject to debt, and the repayment or refinancing of such debt may require equity capital calls. To the extent our co-venturers do not meet

their obligations to us or our real estate ventures or they act inconsistent with the interests of the real estate venture, we may be adversely affected. Because of these limitations, the non-GAAP “at JBG SMITH Share” financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.

Non-GAAP Financial Measures

This release includes non-GAAP financial measures. For these measures, we have provided an explanation of how these non-GAAP measures are calculated and why JBG SMITH’s management believes that the presentation of these measures provides useful information to investors regarding JBG SMITH’s financial condition and results of operations. Reconciliations of certain non-GAAP measures to the most directly comparable GAAP financial measure are included in this earnings release. Our presentation of non-GAAP financial measures may not be comparable to similar non-GAAP measures used by other companies. In addition to "at share" financial information, the following non-GAAP measures are included in this release:

Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA"), EBITDA for Real Estate ("EBITDAre") and Adjusted EBITDA

Management uses EBITDA and EBITDAre, non-GAAP financial measures, as supplemental operating performance measures and believes they help investors and lenders meaningfully evaluate and compare our operating performance from period-to-period by removing from our operating results the impact of our capital structure (primarily interest charges from our outstanding debt and the impact of our interest rate swaps) and certain non-cash expenses (primarily depreciation and amortization on our assets). EBITDAre is computed in accordance with the definition established by the National Association of Real Estate Investment Trusts (“NAREIT”). NAREIT defines EBITDAre as GAAP net income (loss) adjusted to exclude interest expense, income taxes, depreciation and amortization expenses, gains on sales of real estate and impairment losses of real estate, including our share of such adjustments of unconsolidated real estate ventures. These supplemental measures may help investors and lenders understand our ability to incur and service debt and to make capital expenditures. EBITDA and EBITDAre are not substitutes for net income (loss) (computed in accordance with GAAP) and may not be comparable to similarly titled measures used by other companies.

“Adjusted EBITDA,” a non-GAAP financial measure, represents EBITDAre adjusted for items we believe are not representative of ongoing operating results, such as transaction and other costs, gain (loss) on the extinguishment of debt, distributions in excess of our investment in unconsolidated real estate ventures, gain on the bargain purchase of a business, lease liability adjustments and share-based compensation expense related to the Formation Transaction and special equity awards. We believe that adjusting such items not considered part of our comparable operations, provides a meaningful measure to evaluate and compare our performance from period-to-period.

Because EBITDA, EBITDAre and Adjusted EBITDA have limitations as analytical tools, we use EBITDA, EBITDAre and Adjusted EBITDA to supplement GAAP financial measures. Additionally, we believe that users of these measures should consider EBITDA, EBITDAre and Adjusted EBITDA in conjunction with net income (loss) and other GAAP measures in understanding our operating results.

Funds from Operations ("FFO"), Core FFO and Funds Available for Distribution (“FAD")

FFO is a non-GAAP financial measure computed in accordance with the definition established by NAREIT in the NAREIT FFO White Paper - 2018 Restatement issued in 2018. NAREIT defines FFO as net income (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.

"Core FFO" represents FFO adjusted to exclude items (net of tax) which we believe are not representative of ongoing operating results, such as transaction and other costs, gains (or losses) on extinguishment of debt, gain on the bargain purchase of a business, distributions in excess of our investment in unconsolidated real estate ventures, share-based compensation expense related to the Formation Transaction and special equity awards, lease liability adjustments, amortization of the management contracts intangible and the mark-to-market of derivative instruments.

"FAD" is a non-GAAP financial measure and represents FFO less recurring tenant improvements, leasing commissions and other capital expenditures, net deferred rent activity, third-party lease liability assumption payments, recurring share-based compensation expense, accretion of acquired below-market leases, net of amortization of acquired above-market leases, amortization of debt issuance costs and other non-cash income and charges. FAD is presented solely as a supplemental disclosure that management believes provides useful information as it relates to our ability to fund dividends.

We believe FFO, Core FFO and FAD are meaningful non-GAAP financial measures useful in comparing our levered operating performance from period-to-period and as compared to similar real estate companies because these non-GAAP measures exclude real estate depreciation and amortization expense and other non-comparable income and expenses, which implicitly assumes that the value of real estate diminishes predictably over time rather than fluctuating based on market conditions. FFO, Core FFO and FAD do not represent cash generated from operating activities and are not necessarily indicative of cash available to fund cash requirements and should not be considered as an alternative to net income (loss) (computed in accordance with GAAP) as a performance measure or cash flow as a liquidity measure. FFO, Core FFO and FAD may not be comparable to similarly titled measures used by other companies.

Net Operating Income ("NOI") and Annualized NOI

“NOI” is a non-GAAP financial measure management uses to assess a segment’s performance. The most directly comparable GAAP measure is net income attributable to 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, net of free rent and payments associated with assumed lease liabilities) less operating expenses and ground rent, if applicable. NOI also excludes deferred rent, related party management fees, interest expense, and certain other non-cash adjustments, including the accretion of acquired below-market leases and amortization of acquired above-market leases and below-market ground lease intangibles. Management uses NOI as a supplemental performance measure for 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 attributable to common shareholders as presented in our financial statements. NOI should not be considered as an alternative to net income attributable to common shareholders as an indication of our performance or to cash flows as a measure of liquidity or our ability to make distributions. Annualized NOI, for all assets except Crystal City Marriott, represents NOI for the three months ended March 31, 2020 multiplied by four. Due to seasonality in the hospitality business, annualized NOI for Crystal City Marriott represents the trailing 12-month NOI as of March 31, 2020. Management believes Annualized NOI provides useful information in understanding our financial performance over a 12-month period, however, investors and other users are cautioned against attributing undue certainty to our calculation of Annualized NOI. Actual NOI for any 12-month period will depend on a number of factors beyond our ability to control or predict, including general capital markets and economic conditions, any bankruptcy, insolvency, default or other failure to pay rent by one or more of our tenants and the destruction of one or more of our assets due to terrorist attack, natural disaster or other casualty, among others. We do not undertake any obligation to update our calculation to reflect events or circumstances occurring after the date of this earnings release. There can be no assurance that the annualized NOI shown will reflect our actual results of operations over any 12-month period.

Same Store and Non-Same Store

“Same store” refers to the pool of assets that were in-service for the entirety of both periods being compared, except for assets for which significant redevelopment, renovation, or repositioning occurred during either of the periods being compared.

“Non-same store” refers to all operating assets excluded from the same store pool.

Definitions

GAAP

"GAAP" refers to accounting principles generally accepted in the United States of America.

In-Service

‘‘In-service’’ refers to commercial or multifamily assets that are at or above 90% leased or have been operating and collecting rent for more than 12 months as of March 31, 2020.

Formation Transaction

"Formation Transaction" refers collectively to the spin-off on July 17, 2017 of substantially all of the assets and liabilities of Vornado Realty Trust’s Washington, DC segment, which operated as Vornado / Charles E. Smith, and the acquisition of the management business and certain assets and liabilities of The JBG Companies.

​

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

​

Note: For complete financial statements, please refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

​

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

​

Note: For complete financial statements, please refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.

​

EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)

(Unaudited)

​

Note: All EBITDA measures as shown above are attributable to operating partnership common units.

​

FFO, CORE FFO AND FAD (NON-GAAP)

(Unaudited)

​

​

​

​

​

See footnotes on page 13.

​

FFO, CORE FFO AND FAD (NON-GAAP)

(Unaudited)

​

​

NOI RECONCILIATIONS (NON-GAAP)

(Unaudited)

​

​

​

Section Three – Supplemental

​

​

​

​

Supplemental Information Cover

​

​

​

​

Table of Contents

​

​

​

​

Disclosures

Forward-Looking Statements

Certain statements contained herein may 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 performance. They represent our intentions, plans, expectations and beliefs and are subject to numerous assumptions, risks and uncertainties. Consequently, the future results of JBG SMITH Properties (“JBG SMITH”, the “Company”, "we", "us", "our" or similar terms) may differ materially from those expressed in these forward-looking statements. You can find many of these statements by looking for words such as “approximate”, "hypothetical", "potential", “believes”, “expects”, “anticipates”, “estimates”, “intends”, “plans”, “would”, “may” or similar expressions in this earnings release. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows, performance, tenants, the real estate market and the global economy and financial markets. The extent to which the COVID-19 pandemic impacts us and our tenants depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.  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, 2019 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. We also note the following forward-looking statements: the impact of COVID-19 and the ensuing economic turmoil on our Company, net operating income, same store net operating income, net asset value and stock price; the impact of disruptions to the credit and capital markets on our ability to access capital, including refinancing maturing debt; potential net operating income growth and the assumptions on which such growth is premised, our estimated future leverage (Net Debt/Adjusted EBITDA and Net Debt/Total Enterprise Value) profile, the potential effect of Amazon.com, Inc. ("Amazon") on job and growth in the Washington, DC metropolitan area and National Landing; changes to the amount and manner in which tenants use space; whether we incur additional costs or make additional concessions or offer other incentives to existing or prospective tenants to reconfigure space; whether the Washington, D.C. region will be more resilient than to other parts of the country in any recession resulting from COVID-19; our anticipated dispositions and the ability to identify associated like-kind exchanges; our annual dividend per share and dividend yield; annualized net operating income; adjusted annualized net operating income; expected key Amazon transaction terms and timeframes for closing any Amazon transactions not yet closed; planned infrastructure and education improvements related to Amazon’s additional headquarters; the economic impact of Amazon’s additional headquarters on the DC region and National Landing; the impact of our role as developer, property manager and retail leasing agent in connection with Amazon’s new headquarters; our development plans related to Amazon’s additional headquarters; the impact on our net asset value of the Amazon transactions; in the case of any further Amazon lease transactions and our new development opportunities in National Landing, the total square feet to be leased to Amazon and the expected net effective rent; whether any of our tenants succeed in obtaining government assistance under the CARES Act and other programs and use any resulting proceeds to make lease payments owed to us; whether we can access agency debt secured by our currently-unencumbered multifamily assets timely, on reasonable terms or at all; whether the delay in our planned 2020 discretionary operating asset capital expenditures will have any negative impact on our properties or our ability to generate revenue; the allocation of capital to our share repurchase plan and any impact on our stock price; the length of time development assets that have recently been moved to operating assets (1900 N Street, 4747 Bethesda, West Half, 901 W Street and 900 W Street) will take to stabilize; in the case of our construction and near-term development assets, estimated square feet, estimated number of units, estimated construction start, occupancy stabilization dates, estimated incremental investment, projected NOI yield, the estimated completion date, estimated stabilization date, estimated incremental investment, estimated total investment, projected NOI yield, weighted average projected NOI yield, NOI yield or estimated total project cost, estimated total NOI weighted average completion date, weighted average stabilization date and estimated incremental investment, intended type of asset use and potential tenants, and estimated stabilized NOI; whether our Under Construction assets will deliver the annualized NOI that we anticipate;  the timing of any correction to construction costs and our plans to commence construction at 1900 Crystal Drive and any other such projects; and in the case of our future development opportunities, estimated commercial SF/multifamily units to be replaced, estimated remaining acquisition cost, estimated capitalized cost, estimated total investment, estimated potential development density and the potential for delays in the entitlement process, including the approximately 10.1 million square feet of entitlement that we expect to complete in 2020.  

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. These factors include, among others: adverse economic conditions in the Washington, DC metropolitan area, including in relation to COVID-19, the timing of and costs associated with development and property improvements, financing commitments, and general competitive factors. For further discussion of factors that could materially affect the outcome of our forward-looking statements and other risks and uncertainties, see “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Cautionary Statement Concerning Forward-Looking Statements in the Company’s Annual Report on Form 10 K for the year ended December 31, 2019 and other periodic reports the Company files with the Securities and Exchange Commission. For these 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. 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 hereof.

​

Withdrawal of Estimated Guidance

In light of the uncertainty surrounding the COVID-19 pandemic and its long-term impact on our business, we are withdrawing the guidance contained in the estimated NOI bridge, which can be found most recently in our Investor Presentation from November 2019, and the potential estimated NAV impact from Amazon in National Landing, which can be found most recently in our Spring 2019 Investor Day presentation.

Organization and Basis of Presentation

JBG SMITH Properties ("JBG SMITH") was organized as a Maryland real estate investment trust ("REIT") for the purpose of receiving, via the spin-off on July 17, 2017 (the "Separation"), substantially all of the assets and liabilities of Vornado Realty Trust’s Washington, D.C. segment. On July 18, 2017, JBG SMITH acquired the management business and certain assets and liabilities of The JBG Companies ("JBG") (the "Combination"). The Separation and the Combination are collectively referred to as the "Formation Transaction."

The information contained in this Investor Package does not purport to disclose all items required by the accounting principles generally accepted in the United States of America (“GAAP”) and is unaudited information, unless otherwise indicated.

Pro Rata Information

We present certain financial information and metrics in this Investor Package “at JBG SMITH Share,” which refers to our ownership percentage of consolidated and unconsolidated assets in real estate ventures (collectively, “real estate ventures”) as applied to these financial measures and metrics. Financial information “at JBG SMITH Share” is calculated on an asset-by-asset basis by applying our percentage economic interest to each applicable line item of that asset’s financial information. “At JBG SMITH Share” information, which we also refer to as being “at share,” “our pro rata share” or “our share,” is not, and is not intended to be, a presentation in accordance with GAAP. Given that a substantial portion of our assets are held through real estate ventures, we believe this form of presentation, which presents our economic interests in the partially owned entities, provides investors valuable information regarding a significant component of our portfolio, its composition, performance and capitalization.

We do not control the unconsolidated real estate ventures and do not have a legal claim to our co-venturers’ share of assets, liabilities, revenue and expenses. The operating agreements of the unconsolidated real estate ventures generally allow each co-venturer to receive cash distributions to the extent there is available cash from operations. The amount of cash each investor receives is based upon specific provisions of each operating agreement and varies depending on certain factors including the amount of capital contributed by each investor and whether any investors are entitled to preferential distributions.

With respect to any such third-party arrangement, we would not be in a position to exercise sole decision-making authority regarding the property, real estate venture or other entity, and may, under certain circumstances, be exposed to economic risks not present were a third-party not involved. We and our respective co-venturers may each have the right to trigger a buy-sell or forced sale arrangement, which could cause us to sell our interest, or acquire our co-venturers’ interests, or to sell the underlying asset, either on unfavorable terms or at a time when we otherwise would not have initiated such a transaction. Our real estate ventures may be subject to debt, and the repayment or refinancing of such debt may require equity capital calls. To the extent our co-venturers do not meet their obligations to us or our real estate ventures or they act inconsistent with the interests of the real estate venture, we may be adversely affected. Because of these limitations, the non-GAAP “at JBG SMITH Share” financial information should not be considered in isolation or as a substitute for our financial statements as reported under GAAP.

Definitions

See pages 50-54 for definitions of terms used in this Investor Package.

Information herein with respect to the proposed transaction with Amazon is based on executed leases and purchase and sale agreements between us and Amazon. Closing under these agreements is subject to customary closing conditions.

Non-GAAP Measures

This Investor Package includes non-GAAP measures. For these measures, we have provided an explanation of how these non-GAAP measures are calculated and why our management believes that the presentation of these measures provides useful information to investors regarding our financial condition and results of operations. Reconciliations of certain non-GAAP measures to the most directly comparable GAAP financial measure are included in this Investor Package. Our presentation of non-GAAP financial measures may not be comparable to similar non-GAAP measures used by other companies.

​

​

In addition to "at share" financial information, the following non-GAAP measures are included in this Investor Package:

​

​

​

Company Profile

​

JBG SMITH is real estate investment trust that owns, operates, invests in and develops a dynamic portfolio of high-growth mixed-use properties concentrated in leading urban infill submarkets in and around Washington, DC. We own and operate a portfolio of high-growth commercial and multifamily assets, many of which are amenitized with ancillary retail. Our portfolio reflects our longstanding strategy of owning and operating assets within the Metro-served submarkets in the Washington, DC metropolitan area that have high barriers to entry and key urban amenities, including being within walking distance of a Metro station. Our revenues are derived primarily from leases with commercial and multifamily tenants, including fixed 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 third parties, our real estate ventures and the legacy funds formerly organized by JBG ("JBG Legacy Funds").

Q1 2020 Financial Results

Q1 2020 to Q4 2019 Comparison

Below are the key highlights regarding quarter over quarter changes in the JBG SMITH portfolio.

Operating Assets

Under Construction

Near-Term Development

​

Future Development

Investing and Financing Activities

Subsequent to March 31, 2020:

​

​

​