JBG SMITH Announces Fourth Quarter 2019 Results

CHEVY CHASE, Md.--(BUSINESS WIRE)--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-K for the year ended December 31, 2019 and reported its financial results.

Additional information regarding our results of operations, properties and tenants can be found in our Fourth Quarter 2019 Investor Package, which is posted in the Investor Relations section of our website at www.jbgsmith.com.

Fourth Quarter 2019 Financial Results

• Net income attributable to common shareholders was $34.4 million, or $0.25 per diluted share.
• Funds From Operations (“FFO”) attributable to common shareholders was $30.4 million, or $0.23 per diluted share.
• Core Funds From Operations (“Core FFO”) attributable to common shareholders was $52.8 million, or $0.39 per diluted share.

Year Ended December 31, 2019 Financial Results

• Net income attributable to common shareholders was $65.6 million, or $0.48 per diluted share.
• FFO attributable to common shareholders was $150.6 million, or $1.15 per diluted share.
• Core FFO attributable to common shareholders was $210.2 million, or $1.61 per diluted share.

Operating Portfolio Highlights

• Annualized Net Operating Income (“NOI”) for the three months ended December 31, 2019 was $328.2 million, compared to $313.2 million for the three months ended September 30, 2019, at our share.
• The operating commercial portfolio was 91.4% leased and 88.2% occupied as of December 31, 2019, compared to 90.2% and 86.8% as of September 30, 2019, at our share.
• The operating multifamily portfolio was 89.5% leased and 87.2% occupied as of December 31, 2019, compared to 96.5% and 94.9% as of September 30, 2019, at our share. The decreases are due in part to the movement of West Half into our recently delivered operating assets during the quarter. The in service operating multifamily portfolio was 95.1% leased and 93.3% occupied as of December 31, 2019.
• Executed approximately 724,000 square feet of office leases at our share in the fourth quarter, comprising approximately 173,000 square feet of new leases and approximately 551,000 square feet of second generation leases, which generated a 15.5% rental rate increase on a GAAP basis and a 7.6% rental rate increase on a cash basis.
• Executed approximately 2.1 million square feet of commercial leases at our share during the year ended December 31, 2019, comprising approximately 938,000 square feet of new leases and approximately 1.2 million square feet of second generation leases, which generated a 9.7% rental rate increase on a GAAP basis and a 3.5% rental rate increase on a cash basis. The new leases include leases totaling approximately 857,000 square feet to date at five office buildings in our National Landing portfolio executed by Amazon.com, Inc. ("Amazon") in conjunction with the establishment of their additional headquarters, which is inclusive of 272,000 square feet of office space executed in December at 2100 Crystal Drive in National Landing.
• Same Store Net Operating Income (“SSNOI”) at our share increased 1.2% to $74.9 million for the three months ended December 31, 2019, compared to $74.1 million for the three months ended December 31, 2018. SSNOI decreased 7.0% to $292.3 million for the year ended December 31, 2019, compared to $314.1 million for the year ended December 31, 2018. The increase in SSNOI for the three months ended December 31, 2019 is largely attributable to decreased ground rent expense. The decrease in SSNOI for the year ended December 31, 2019 is largely attributable to increased rental abatements and rent reductions, and an increase in assumed lease liability payments. The lease renewals we executed in 2017 and 2018 have reduced our NOI in 2019, primarily due to free rent associated with these early renewals. Because (i) the concessions in our commercial portfolio have burned off to stabilized levels, (ii) we delivered Under Construction assets on or ahead of schedule, and (iii) we acquired F1RST Residences, we expect NOI to rebound in 2020. We do not, however, expect to see this NOI increase immediately flow through to Core FFO in 2020, primarily due to the reduction in capitalized interest from the delivery of our Under Construction assets. As these assets stabilize, we expect the increase in earnings to offset the increase in interest expense which will increase Core FFO.

The reported same store pools as of December 31, 2019 include only the assets that were in service for the entirety of both periods being compared.

Development Portfolio Highlights

Under Construction

• During the quarter ended December 31, 2019, there were seven assets under construction (four commercial assets and three multifamily assets), consisting of approximately 821,000 square feet and 833 units, both at our share.
• During the quarter ended December 31, 2019, we completed 4747 Bethesda, Atlantic Plumbing C and 1900 N Street, all delivered on or ahead of schedule and below budget.

Near-Term Development

• As of December 31, 2019, there were no assets in near-term development.

Future Development Pipeline

• As of December 31, 2019, there were 40 future development assets consisting of 18.7 million square feet of estimated potential density at our share, including the 4.1 million square feet held for sale to Amazon.

Third-Party Asset Management and Real Estate Services Business

For the three months ended December 31, 2019, revenue from third-party real estate services, including reimbursements, was $29.1 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 $16.0 million, primarily driven by $5.1 million of property management fees, $4.7 million of development fees, $3.4 million of asset management fees and $2.0 million of leasing fees.

Balance Sheet

• We had $1.6 billion of debt ($2.0 billion including our share of debt of unconsolidated real estate ventures) as of December 31, 2019. Of the $2.0 billion of debt at our share, approximately 75% was fixed-rate and rate caps were in place for approximately 33% of our floating rate debt.
• The weighted average interest rate of our debt at share was 4.03% as of December 31, 2019.
• As of December 31, 2019, our total enterprise value was approximately $8.1 billion, comprising 149.3 million common shares and units valued at $6.2 billion (calculated using our closing share price as of February 21, 2020) and debt (net of premium / (discount) and deferred financing costs) at our share of $1.9 billion, less cash and cash equivalents at our share of $136.2 million.
• As of December 31, 2019, we had $126.4 million of cash and cash equivalents ($136.2 million of cash and cash equivalents at our share), $898.5 million of capacity under our credit facility, and an unencumbered multifamily borrowing base of approximately $811.0 million, including our Under Construction multifamily assets.
• Net Debt to Annualized Adjusted EBITDA at our share for the three months and year ended December 31, 2019 was 5.8x for both periods and our Net Debt / Total Enterprise Value was 22.5% as of December 31, 2019 (calculated using our closing share price as of February 21, 2020). Pro forma Net Debt to Annualized Adjusted EBITDA at our share would have been 5.3x for the three months and year ended December 31, 2019, and pro forma Net Debt / Total Enterprise Value would have been 21.0% as of December 31, 2019, which includes the $155.0 million of net proceeds from the sale of Metropolitan Park in January 2020.

Financing and Investing Activities

• Acquired F1RST Residences, a 325-unit multifamily asset in the Ballpark submarket of Washington, DC with approximately 21,000 square feet of street level retail, for a purchase price of approximately $160.5 million. The multifamily portion of the building is 91.7% occupied as of December 31, 2019. We used F1RST Residences as a replacement property in a like-kind exchange for the proceeds from the sale of Metropolitan Park to Amazon, which was completed in January 2020.
• Sold a 50.0% interest in a real estate venture that owns Central Place Tower, a 552,000 square foot commercial asset located in Arlington, Virginia.
• Sold Vienna Retail, an 8,600 square foot commercial asset located in Vienna, Virginia, for $7.4 million.
• Drew $200.0 million under the revolving credit facility, which was repaid in 2020.

Subsequent to December 31, 2019:

• Sold Metropolitan Park to Amazon for $155.0 million, which represents an $11.0 million increase over the previously estimated contract value resulting from an increase in the approved development density on the sites.
• Amended our credit facility to extend the maturity date of the revolving credit facility to January 2025.
• Entered into a mortgage loan with a principal balance of $175.0 million collateralized by 4747 and 4749 Bethesda Avenue.

Dividends

In December 2019, our Board of Trustees declared a quarterly dividend of $0.225 per common share, which was paid on January 8, 2020 to shareholders of record as of December 27, 2019.

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 pipeline encompassing 18.7 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. We also note the following forward-looking statements: our anticipated dispositions and like-kind exchanges, our indicated 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 of any Amazon transactions not yet closed, planned infrastructure improvements related to Amazon's additional headquarters; the economic impacts of Amazon's additional headquarters on the DC region and National Landing; our development plans related to Amazon's additional headquarters; the expected accretion to our net asset value ("NAV") as a result of the Amazon transaction and our future NAV growth rate; 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, estimated square feet, estimated number of units, the estimated construction start and occupancy dates, estimated incremental investment, projected NOI yield; and in the case of our future development opportunities, estimated potential development density. 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, 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” 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 after the date hereof.

We are reiterating the assumptions in our estimated NOI bridge and the potential estimated NAV impact from Amazon in National Landing, which can be found in our Spring 2019 Investor Day presentation on our website at http://investors.jbgsmith.com/presentations.

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 December 31, 2019 multiplied by four. Due to seasonality in the hospitality business, annualized NOI for Crystal City Marriott represents the trailing 12-month NOI as of December 31, 2019. 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.

Formation Transaction

"Formation Transaction" refers collectively to the spin-off on July 17, 2017 of substantially all of the assets and liabilities of Vornado’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)
in thousands	December 31, 2019			December 31, 2018
ASSETS
Real estate, at cost:
Land and improvements	$	1,240,455		$	1,371,874
Buildings and improvements	3,880,973			3,722,930
Construction in progress, including land	654,091			697,930
	5,775,519			5,792,734
Less accumulated depreciation	(1,119,571		)	(1,051,875		)
Real estate, net	4,655,948			4,740,859
Cash and cash equivalents	126,413			260,553
Restricted cash	16,103			138,979
Tenant and other receivables, net	52,941			46,568
Deferred rent receivable, net	169,721			143,473
Investments in unconsolidated real estate ventures	543,026			322,878
Other assets, net	253,687			264,994
Assets held for sale	168,412			78,981
TOTAL ASSETS	$	5,986,251		$	5,997,285
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgages payable, net	$	1,125,777		$	1,838,381
Revolving credit facility	200,000			—
Unsecured term loans, net	297,295			297,129
Accounts payable and accrued expenses	157,702			130,960
Other liabilities, net	206,042			181,606
Liabilities related to assets held for sale	—			3,717
Total liabilities	1,986,816			2,451,793
Commitments and contingencies
Redeemable noncontrolling interests	612,758			558,140
Total equity	3,386,677			2,987,352
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY	$	5,986,251		$	5,997,285
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Note: For complete financial statements, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
in thousands, except per share data	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
REVENUE
Property rentals	$	127,571		$	129,048		$	493,273		$	513,447
Third-party real estate services, including reimbursements	29,121			26,421			120,886			98,699
Other revenue	8,185			7,786			33,611			32,036
Total revenue	164,877			163,255			647,770			644,182
EXPENSES
Depreciation and amortization	50,004			67,556			191,580			211,436
Property operating	37,535			40,076			137,622			148,081
Real estate taxes	18,252			17,030			70,493			71,054
General and administrative:
Corporate and other	11,934			8,512			46,822			33,728
Third-party real estate services	26,910			25,274			113,495			89,826
Share-based compensation related to Formation Transaction and special equity awards	11,959			9,118			42,162			36,030
Transaction and other costs	13,307			15,572			23,235			27,706
Total expenses	169,901			183,138			625,409			617,861
OTHER INCOME (EXPENSE)
Income (loss) from unconsolidated real estate ventures, net	(2,042		)	23,991			(1,395		)	39,409
Interest and other income, net	3,022			9,991			5,385			15,168
Interest expense	(11,831		)	(18,184		)	(52,695		)	(74,447		)
Gain on sale of real estate	57,870			6,394			104,991			52,183
Loss on extinguishment of debt	(3,916		)	(617		)	(5,805		)	(5,153		)
Reduction of gain on bargain purchase	—			—			—			(7,606		)
Total other income (expense)	43,103			21,575			50,481			19,554
INCOME BEFORE INCOME TAX (EXPENSE) BENEFIT	38,079			1,692			72,842			45,875
Income tax (expense) benefit	613			(698		)	1,302			738
NET INCOME	38,692			994			74,144			46,613
Net income attributable to redeemable noncontrolling interests	(4,302		)	(178		)	(8,573		)	(6,710		)
Net (income) loss attributable to noncontrolling interests	—			(106		)	—			21
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	34,390		$	710		$	65,571		$	39,924
EARNINGS (LOSS) PER COMMON SHARE:
Basic	$	0.25		$	(0.01	)	$	0.48		$	0.31
Diluted	$	0.25		$	(0.01	)	$	0.48		$	0.31
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING :
Basic	134,129			120,917			130,687			119,176
Diluted	134,129			120,917			130,687			119,176
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Note: For complete financial statements, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2019.

EBITDA, EBITDAre AND ADJUSTED EBITDA (NON-GAAP)
(Unaudited)
dollars in thousands	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
EBITDA, EBITDAre and Adjusted EBITDA
Net income	$	38,692		$	994		$	74,144		$	46,613
Depreciation and amortization expense	50,004			67,556			191,580			211,436
Interest expense ^(1)	11,831			18,184			52,695			74,447
Income tax expense (benefit)	(613		)	698			(1,302		)	(738		)
Unconsolidated real estate ventures allocated share of above adjustments	10,050			10,253			36,877			42,016
Net income attributable to noncontrolling interests in consolidated real estate ventures	(2		)	(182		)	(7		)	(53		)
EBITDA^(2)	$	109,962		$	97,503		$	353,987		$	373,721
Gain on sale of real estate	(57,870		)	(6,394		)	(104,991		)	(52,183		)
Gain on sale from unconsolidated real estate ventures	—			(20,554		)	(335		)	(36,042		)
EBITDAre^(2)	$	52,092		$	70,555		$	248,661		$	285,496
Transaction and other costs ^(3)	13,307			15,572			23,235			27,706
Loss on extinguishment of debt, net of noncontrolling interests	3,916			617			5,805			5,029
Reduction of gain on bargain purchase	—			—			—			7,606
Share-based compensation related to Formation Transaction and special equity awards	11,959			9,118			42,162			36,030
Losses and distributions in excess of our investment in unconsolidated real estate venture ^(4)	(518		)	(7,374		)	(7,356		)	(13,676		)
Unconsolidated real estate ventures allocated share of above adjustments	(1,345		)	1,542			(1,345		)	1,572
Lease liability adjustments	(1,829		)	(7,422		)	162			(9,965		)
Adjusted EBITDA ^(2)	$	77,582		$	82,608		$	311,324		$	339,798
Net Debt to Annualized Adjusted EBITDA ^(5) (6)	5.8x			6.5x			5.8x			6.3x
	December 31, 2019			December 31, 2018
Net Debt (at JBG SMITH Share)
Consolidated indebtedness ^(7)	$	1,620,001		$	2,130,704
Unconsolidated indebtedness ^(7)	329,056			298,588
Total consolidated and unconsolidated indebtedness	1,949,057			2,429,292
Less: cash and cash equivalents	136,200			273,611
Net Debt (at JBG SMITH Share)	$	1,812,857		$	2,155,681

____________________
Note: All EBITDA measures as shown above are attributable to operating partnership common units.
(1)	Interest expense includes the amortization of deferred financing costs and the ineffective portion of any interest rate swaps or caps, net of capitalized interest.
(2)	Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $2.2 million and $6.5 million for the three months and year ended December 31, 2018).
(3)	Includes fees and expenses incurred for the relocation of our corporate headquarters, demolition costs, fees and expenses incurred in connection with the Formation Transaction (including amounts incurred for transition services provided by our former parent, integration costs and severance costs), pursuit costs related to other completed, potential and pursued transactions, as well as other expenses.
(4)	As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized.
(5)	Adjusted EBITDA for the three months ended December 31, 2019 and 2018 is annualized by multiplying by four.
(6)	Pro forma Net Debt to Annualized Adjusted EBITDA would have been 5.3x for the three months and year ended December 31, 2019, which includes the $155.0 million of net proceeds from the sale of Metropolitan Park in January 2020.
(7)	Net of premium/discount and deferred financing costs.

FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
in thousands, except per share data	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
FFO and Core FFO
Net income attributable to common shareholders	$	34,390		$	710		$	65,571		$	39,924
Net income attributable to redeemable noncontrolling interests	4,302			178			8,573			6,710
Net income (loss) attributable to noncontrolling interests	—			106			—			(21		)
Net income	38,692			994			74,144			46,613
Gain on sale of real estate	(57,870		)	(6,394		)	(104,991		)	(52,183		)
Gain on sale from unconsolidated real estate ventures	—			(20,554		)	(335		)	(36,042		)
Real estate depreciation and amortization	47,001			64,891			180,508			201,062
Pro rata share of real estate depreciation and amortization from unconsolidated real estate ventures	6,407			6,079			20,577			25,039
Net income attributable to noncontrolling interests in consolidated real estate ventures	(2		)	(182		)	(7		)	(51		)
FFO Attributable to Operating Partnership Common Units^(1)	$	34,228		$	44,834		$	169,896		$	184,438
FFO attributable to redeemable noncontrolling interests	(3,804		)	(5,741		)	(19,306		)	(25,798		)
FFO attributable to common shareholders ^(1)	$	30,424		$	39,093		$	150,590		$	158,640
FFO attributable to the operating partnership common units	$	34,228		$	44,834		$	169,896		$	184,438
Transaction and other costs, net of tax ^(2)	11,725			14,509			21,139			25,625
(Gain) loss from mark-to-market on derivative instruments	—			(542		)	50			(1,941		)
Loss on extinguishment of debt, net of noncontrolling interests	3,916			617			5,805			5,029
Losses and distributions in excess of our investment in unconsolidated real estate venture ^(3)	(518		)	(7,374		)	(7,356		)	(13,676		)
Reduction of gain on bargain purchase	—			—			—			7,606
Share-based compensation related to Formation Transaction and special equity awards	11,959			9,118			42,162			36,030
Lease liability adjustments	(1,829		)	(7,422		)	162			(9,965		)
Amortization of management contracts intangible, net of tax	1,288			1,287			5,150			5,148
Unconsolidated real estate ventures allocated share of above adjustments	(1,407		)	1,921			100			1,440
Core FFO Attributable to Operating Partnership Common Units ^(1)	$	59,362		$	56,948		$	237,108		$	239,734
Core FFO attributable to redeemable noncontrolling interests	(6,598		)	(7,292		)	(26,895		)	(33,536		)
Core FFO attributable to common shareholders ^(1)	$	52,764		$	49,656		$	210,213		$	206,198
FFO per diluted common share	$	0.23		$	0.32		$	1.15		$	1.33
Core FFO per diluted common share	$	0.39		$	0.41		$	1.61		$	1.73
Weighted average diluted shares	134,129			120,917			130,687			119,176
See footnotes on page 12.

FFO, CORE FFO AND FAD (NON-GAAP)
(Unaudited)
in thousands, except per share data	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
FAD
Core FFO attributable to the operating partnership common units	$	59,362		$	56,948		$	237,108		$	239,734
Recurring capital expenditures and second generation tenant improvements and leasing commissions		(27,689	)		(35,836	)		(84,934	)		(72,113	)
Straight-line and other rent adjustments ^(4)		(8,464	)		(6,692	)		(34,359	)		(10,351	)
Third-party lease liability assumption payments		(1,450	)		(1,130	)		(5,182	)		(3,133	)
Share-based compensation expense		5,512			4,666			22,665			19,762
Amortization of debt issuance costs		671			1,140			3,217			4,660
Unconsolidated real estate ventures allocated share of above adjustments		(386	)		747			(2,820	)		1,426
Non-real estate depreciation and amortization		1,234			893			3,987			3,286
FAD available to the Operating Partnership Common Units (A) ^(1)	$	28,790		$	20,736		$	139,682		$	183,271
Distributions to common shareholders and unitholders ^(5) (B)	$	34,011		$	31,284		$	133,307		$	125,100
FAD Payout Ratio (B÷A) ^(6)		118.1	%		150.9	%		95.4	%		68.3	%
Capital Expenditures
Maintenance and recurring capital expenditures	$	11,748		$	14,445		$	31,495		$	28,230
Share of maintenance and recurring capital expenditures from unconsolidated real estate ventures		561			978			1,340			2,821
Second generation tenant improvements and leasing commissions		13,426			19,211			48,651			37,980
Share of second generation tenant improvements and leasing commissions from unconsolidated real estate ventures		1,954			1,202			3,448			3,082
Recurring capital expenditures and second generation tenant improvements and leasing commissions		27,689			35,836			84,934			72,113
First generation tenant improvements and leasing commissions		20,057			8,215			51,751			23,519
Share of first generation tenant improvements and leasing commissions from unconsolidated real estate ventures		2,672			17			3,831			2,572
Non-recurring capital expenditures		16,410			15,375			36,967			25,401
Share of non-recurring capital expenditures from unconsolidated joint ventures		488			112			602			1,174
Non-recurring capital expenditures		39,627			23,719			93,151			52,666
Total JBG SMITH Share of Capital Expenditures	$	67,316		$	59,555		$	178,085		$	124,779

_______________
Note: FFO attributable to operating partnership common units.
(1)	Due to our adoption of the new accounting standard for leases, beginning in 2019, we no longer capitalize internal leasing costs and expense these costs as incurred (such costs were $2.2 million and $6.5 million for the three months and year ended December 31, 2018).
(2)	Includes fees and expenses incurred for the relocation of our corporate headquarters, demolition costs, fees and expenses incurred in connection with the Formation Transaction (including amounts incurred for transition services provided by our former parent, integration costs and severance costs), pursuit costs related to other completed, potential and pursued transactions, as well as other expenses.
(3)	As of June 30, 2018, we suspended the equity method of accounting for our investment in the real estate venture that owns 1101 17th Street as our investment had been reduced to zero and we did not have an obligation to provide further financial support to the venture. All subsequent distributions from the venture have been recognized as income, which will continue until our share of unrecorded earnings and contributions exceed the cumulative excess distributions previously recognized.
(4)	Includes straight-line rent, above/below market lease amortization and lease incentive amortization.
(5)	The distribution for the year ended December 31, 2019 excludes a special dividend of $0.10 per common share that was paid in January 2019.
(6)	The FAD payout ratio on a quarterly basis is not necessarily indicative of an amount for the full year due to fluctuation in timing of capital expenditures, the commencement of new leases and the seasonality of our operations. Q4 2019 and Q4 2018 were impacted by increases in recurring capital expenditures, which is consistent with historical seasonality trends.

NOI RECONCILIATIONS (NON-GAAP)
(Unaudited)
dollars in thousands	Three Months Ended December 31,						Year Ended December 31,
	2019			2018			2019			2018
Net income attributable to common shareholders	$	34,390		$	710		$	65,571		$	39,924
Add:
Depreciation and amortization expense	50,004			67,556			191,580			211,436
General and administrative expense:
Corporate and other	11,934			8,512			46,822			33,728
Third-party real estate services	26,910			25,274			113,495			89,826
Share-based compensation related to Formation Transaction and special equity awards	11,959			9,118			42,162			36,030
Transaction and other costs	13,307			15,572			23,235			27,706
Interest expense	11,831			18,184			52,695			74,447
Loss on extinguishment of debt	3,916			617			5,805			5,153
Reduction of gain on bargain purchase	—			—			—			7,606
Income tax expense (benefit)	(613		)	698			(1,302		)	(738		)
Net income attributable to redeemable noncontrolling interests	4,302			178			8,573			6,710
Less:
Third-party real estate services, including reimbursements	29,121			26,421			120,886			98,699
Other revenue ^(1)	1,686			1,454			7,638			6,358
Income (loss) from unconsolidated real estate ventures, net	(2,042		)	23,991			(1,395		)	39,409
Interest and other income, net	3,022			9,991			5,385			15,168
Gain on sale of real estate	57,870			6,394			104,991			52,183
Net income (loss) attributable to noncontrolling interests	—			(106		)	—			21
Consolidated NOI	78,283			78,274			311,131			319,990
NOI attributable to unconsolidated real estate ventures at our share	6,052			8,741			21,797			36,684
Non-cash rent adjustments ^(2)	(8,465		)	(6,691		)	(34,359		)	(10,349		)
Other adjustments ^(3)	3,913			3,915			13,979			15,061
Total adjustments	1,500			5,965			1,417			41,396
NOI	$	79,783		$	84,239		$	312,548		$	361,386
Less: out-of-service NOI loss ^(4)	(2,817		)	(1,090		)	(7,013		)	(4,395		)
Operating Portfolio NOI	$	82,600		$	85,329		$	319,561		$	365,781
Non-same store NOI ^(5)	7,653			11,266			27,298			51,646
Same store NOI ^(6)	$	74,947		$	74,063		$	292,263		$	314,135
Change in same store NOI	1.2		%				(7.0		)%
Number of properties in same store pool	54						53

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(1)	Excludes parking revenue of $6.5 million and $6.3 million for the three months ended December 31, 2019 and 2018, and $26.0 million and $25.7 million for the year ended December 31, 2019 and 2018.
(2)	Adjustment to exclude straight-line rent, above/below market lease amortization and lease incentive amortization.
(3)	Adjustment to include other revenue and payments associated with assumed lease liabilities related to operating properties and to exclude commercial lease termination revenue and allocated corporate general and administrative expenses to operating properties.
(4)	Includes the results for our Under Construction assets and Future Development Pipeline.
(5)	Includes the results for properties that were not in service for the entirety of both periods being compared and properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared. The decrease in non-same store NOI is primarily attributable to lost income from disposed assets.
(6)	Includes the results of the properties that are owned, operated and in service for the entirety of both periods being compared except for properties for which significant redevelopment, renovation or repositioning occurred during either of the periods being compared.