JBG SMITH Properties — Q3 2023 Form 10-Q
Business and period. This unaudited filing covers the quarter and nine months ended September 30, 2023, compared with the same 2022 periods. JBG SMITH owns, operates and develops mixed-use properties in the Washington, D.C. area, with about two-thirds of its holdings in National Landing, Northern Virginia. Its portfolio included 30 commercial assets, 16 multifamily assets and development projects; it also earns fees from third-party real estate services.
Financial and operating results
Amounts below are in millions, except per-share data and where noted.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Total revenue | $151.6 | $147.6 | $456.6 | $455.1 |
| Net income (loss) attributable to common shareholders | $(58.0) | $(19.3) | $(47.4) | $104.0 |
| Diluted earnings (loss) per share | $(0.58) | $(0.17) | $(0.45) | $0.86 |
| Consolidated NOI | $72.9 | $72.9 | $225.6 | $221.0 |
| FFO attributable to common shareholders | $40.1 | $40.1 | $106.5 | $125.0 |
For the nine months, net cash from operations was $114.9 million, versus $130.4 million a year earlier. Investing activities used $123.2 million, compared with $674.4 million provided in 2022, when real estate sale proceeds were substantially higher. Financing activities used $96.9 million. Cash and restricted cash totaled $168.8 million at quarter-end, including $130.5 million of unrestricted cash.
Debt was approximately $2.6 billion at September 30, 2023, compared with $2.5 billion at year-end 2022. Balance-sheet debt included $1.7 billion of mortgage loans, $92.0 million drawn on the revolving facility and $720.0 million of term loans. The company reported $657.5 million of revolver availability. Mortgage loans had weighted-average effective rates of 6.16% on variable-rate debt and 4.78% on fixed-rate debt; the revolver rate was 6.71%. Interest expense rose 55.6% in Q3 to $27.9 million and 60.4% for the nine months to $80.6 million. A 1% change in base rates was estimated to affect annual interest expense by about $2.5 million across the specified consolidated and proportionate venture debt exposures.
Same-store NOI increased 3.7% in Q3 to $76.9 million and 0.5% for the nine months to $225.9 million. Q3 commercial NOI fell 11.2% to $41.2 million, while multifamily NOI rose 13.4% to $27.7 million. The office portfolio was 84.4% occupied and 85.6% leased at quarter-end; multifamily occupancy was 95.6% and leased occupancy 96.9%.
Changes, outlook and risks
- Q3 common-shareholder loss widened from $19.3 million to $58.0 million. A $59.3 million impairment charge, relating to 2101 L Street, 2100 Crystal Drive and a development parcel, was a principal unusual item. The company recorded a $6.0 million litigation-settlement gain in interest and other income.
- Nine-month results shifted from $104.0 million of common-shareholder income to a $47.4 million loss. The prior-year period included $158.6 million of real estate sale gains, versus $41.6 million in 2023; 2023 also included the impairment charge. Higher debt and rates contributed to higher interest expense.
- Commercial rental revenue and NOI declined, in part due to dispositions and lower occupancy and rents. Multifamily revenue and NOI improved, reflecting the consolidation of Atlantic Plumbing and 8001 Woodmont and higher occupancy and rents. Q3 office occupancy improved sequentially by 40 basis points; multifamily occupancy rose 190 basis points.
- The company sold Falkland Chase properties and an 80% interest in 4747 Bethesda Avenue during the period, and reported $162.1 million in real estate sale proceeds. It repurchased 18.4 million shares for $276.7 million during the first nine months. After quarter-end it sold 5 M Street Southwest, drew an additional $50 million on the revolver, repurchased 2.0 million shares for $28.0 million, and declared a $0.225 quarterly dividend.
- Management expects operating cash flow, financing, asset sales and recapitalizations, together with existing cash, to fund operations, debt service, capital expenditures and distributions over the next 12 months. No numerical earnings or FFO guidance is stated in the provided filing text. Management said constrained lending had slowed asset sales and expected reduced activity to continue for the rest of 2023.
- Construction in progress requires an estimated additional $230.5 million to complete, primarily over the next two years. Debt maturities through 2024 were $121.3 million on a consolidated basis and $135.1 million at the company’s share. Tenant-related commitments were $47.7 million; additional commitments and certain recorded guarantees to unconsolidated ventures and other investments totaled $63.0 million. Environmental liabilities were $18.0 million.
- Risks include refinancing debt on acceptable terms, variable interest rates, leasing and occupancy conditions, construction costs and execution, asset-sale liquidity, insurance availability and potential environmental costs. The filing reports no material change to previously disclosed risk factors and says ordinary-course legal matters are not expected to materially adversely affect results.
Most important facts for investors to verify
- Whether office leasing, occupancy and tenant retention—particularly Amazon lease expirations and planned building removals—support future commercial revenue.
- Whether multifamily performance can offset continuing commercial weakness and higher operating costs.
- Upcoming debt maturities, borrowing costs, covenant headroom and the company’s ability to refinance or sell assets in a constrained lending market.
- Funding and completion costs for the $230.5 million remaining construction commitment, and whether planned asset sales and recapitalizations occur as expected.
- The continuing cash impact of share repurchases and dividends relative to development spending, debt service and liquidity needs.
- The assumptions supporting the $59.3 million impairment valuation and any further impairment risk in the portfolio or unconsolidated ventures.