JBG SMITH Properties — 2021 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. JBG SMITH is a Maryland REIT focused on commercial and multifamily real estate in the Washington, D.C. region, especially National Landing. It also provides third-party real estate services. Its portfolio included 64 operating assets: 42 commercial properties totaling 13.1 million square feet and 22 multifamily properties totaling 8,208 units, at 100% property share.
Key financial results and position
| Metric | 2021 | 2020 | Change / context |
|---|---|---|---|
| Total revenue | $634.4 million | $602.7 million | Up 5.2% |
| Property rental revenue | $499.6 million | $459.0 million | Up 8.9%, including improved rent collection and newly placed-in-service space |
| Net loss attributable to common shareholders | $(79.3) million; $(0.63) per diluted share | $(62.3) million; $(0.49) per diluted share | Loss widened |
| FFO attributable to common shareholders | $159.4 million | $115.9 million | Up; non-GAAP measure |
| Same-store NOI | $299.7 million | $302.3 million | Down 0.9% |
| Cash from operating activities | $217.6 million | $169.0 million | Up $48.6 million |
| Cash used in investing activities | $(368.7) million | $(167.7) million | Higher investment, including The Batley acquisition and development spending |
| Cash from financing activities | $189.9 million | $119.5 million | Included new borrowings, share repurchases and dividends |
| Cash and cash equivalents | $264.4 million | $225.6 million | Plus $37.7 million restricted cash at year-end |
| Consolidated debt principal | $2.5 billion | $2.0 billion | At-share debt, including unconsolidated ventures, was $2.9 billion |
| Credit-facility availability | $699.1 million | — | At December 31, net of letters of credit |
Segment NOI increased: commercial NOI was $229.6 million, up 11.3%, and multifamily NOI was $67.6 million, up 22.6%. These segment gains did not prevent same-store NOI from declining. Commercial occupancy was 82.9% at the company’s share (84.9% leased); in-service multifamily occupancy was 93.4% (95.4% leased).
At year-end, assets totaled $6.39 billion, liabilities $2.93 billion, and shareholders’ equity $2.92 billion. Interest expense rose 9.0% to $68.0 million. The filing reports $1.2 billion of consolidated debt exposed to variable rates without hedges; a 100-basis-point rate increase was estimated to add approximately $11.8 million in annual interest expense. The company also reported $2.0 billion of floating-rate debt and $1.7 billion of hedging arrangements referencing LIBOR.
Material changes versus 2020
- Revenue increased, supported by improved COVID-related rent collection and additional space becoming operational; property operating expenses rose 3.4% and depreciation and amortization rose 6.6%.
- Net loss widened despite the increase in revenue. Key items included $25.1 million of real estate impairment losses, versus $10.2 million in 2020, and lower gains on real estate sales: $11.3 million versus $59.5 million.
- Commercial and multifamily segment NOI improved, but same-store NOI decreased 0.9%, mainly reflecting pandemic-related multifamily concessions and lower commercial occupancy and parking revenue.
- Year-end debt increased by approximately $484 million, primarily from $300 million drawn on the revolving facility and $190 million of mortgage loans. The company repurchased 5.4 million shares for $157.7 million and paid $118.1 million of common-share dividends.
Outlook, risks and unusual items
- Management expected commercial leasing recovery to remain slow and occupancy to be affected through 2022. Commercial parking revenue was about 65% of pre-pandemic levels; multifamily in-place rents were approximately 9% below asking rents, with management expecting rent growth as leases roll.
- Management expected 2022 quarterly dividends to be comparable with 2021’s $0.225 per share per quarter ($0.90 for the year); future dividends remain subject to Board discretion. No formal earnings or NOI guidance is provided in the filing text.
- Growth plans center on National Landing, Amazon’s headquarters, Virginia Tech’s Innovation Campus, development, and a strategic shift toward a majority-multifamily portfolio. The sale of Pen Place to Amazon for $198.0 million was expected to close in Q2 2022, subject to customary conditions. Two multifamily towers totaling 775 units began construction in January 2022.
- One 808-unit multifamily project was under construction at year-end and was expected to require a further $291.4 million to complete. The near-term development pipeline was estimated at 5.3 million square feet; those estimates depend on entitlements, financing, design and market conditions.
- COVID-19 continued to affect office demand, rent collection, retail and coworking tenants, and construction. Rent deferrals of $10.1 million had been granted for 2020–2021; $4.0 million was abated and $1.2 million collected. The company received $4.5 million of COVID-related business interruption insurance proceeds in Q4 2021.
- Other principal risks include geographic concentration in Washington, D.C. and National Landing; federal government and GSA tenant exposure; Amazon and Virginia Tech execution and demand assumptions; development cost, labor and supply-chain pressures; refinancing and interest-rate exposure; and environmental, regulatory, cyber and REIT-qualification risks.
- Unusual and material items include the $25.1 million impairment of non-core assets, a $23.9 million share of an unconsolidated venture impairment, an $11.3 million gain on contributed land, and a $28.3 million share of gains on unconsolidated venture asset sales. The Tranche A-1 loan was amended in January 2022, extending maturity to January 2025 and transitioning its rate reference to SOFR.
- Debt and contractual commitments warrant attention: consolidated mortgages of $107.5 million were scheduled to mature in 2022; construction commitments were $291.4 million; tenant-related obligations totaled $76.0 million; and capital commitments and certain recorded guarantees to unconsolidated ventures totaled $66.9 million. Long-dated finance-lease payments were reported at $1.34 billion, largely reflecting ground leases.
Most important facts for investors to verify
- Whether office leasing, occupancy and parking revenue recover as management expects, and how GSA work-from-home policies and lease expirations affect demand.
- Whether Amazon’s headquarters, Pen Place sale and Virginia Tech campus progress on schedule and deliver the anticipated spillover demand.
- Whether multifamily rent growth and lease-up offset concessions, new supply and development costs.
- Debt maturities, available credit, variable-rate exposure, hedge coverage and the consequences of the LIBOR-to-SOFR transition.
- The assumptions behind impairment valuations, development-pipeline density and timing, and the completion budget for projects under construction.
- Cash available for dividends and repurchases given investment needs, debt service and REIT distribution requirements. The auditor issued unqualified opinions on the financial statements and internal controls; management also concluded disclosure controls were effective.