Jbg Smith Properties · NYSE:JBGS
Jbg Smith Properties — Investor Presentation (November 2019)
53 slides from Jbg Smith Properties's investor presentation, Nov 12, 2019
Slide 1: Investor Presentation November 2019
INVESTOR PRESENTATION NOVEMBER 2019 Illustrative Central District Retail
Slide 2: Disclosures: Forward-Looking Statements
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
Slide 3: Disclosures: Market Data, Definitions and Reconciliations
DISCLOSURES 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 in
Slide 4: Agenda
AGENDA HIGHLIGHTS & STRATEGY 1 2 2019 UPDATES 3 STATE OF THE MARKET 4 GROWTH AND CAPITALIZATION 4
Slide 5: Highlights & Strategy
o) HIGHLIGHTS & STRATEGY
Slide 6: JBG SMITH at a Glance
HIGHLIGHTS & STRATEGY: JBG SMITH AT A GLANCE OPERATING PORTFOLIO UNDER CONSTRUCTION FUTURE DEVELOPMENT PIPELINE COMMERCIAL SF 11.0M MULTIFAMILY UNITS 4,537 COMMERCIAL SF 821K MULTIFAMILY UNITS 1,298 COMMERCIAL SF 8.4M MULTIFAMILY SF 10.3M Q3 2019 ANNUALIZED NOI $313.2M WEIGHTED AVERAGE LEASE TERM ME
Slide 7: Highlights & Strategy: Summary
HIGHLIGHTS & STRATEGY: SUMMARY EVERY DECISION IS EVALUATED THROUGH THE LENS OF MAXIMIZING LONG-TERM NET ASSET VALUE (NAV) PER SHARE SUBMARKET CONCENTRATION Invested in high growth urban submarkets in Washington, DC Metro Area HIGH-GROWTH ASSETS Own and operate high risk-adjusted return assets, with
Slide 8: Submarket Concentration
HIGHLIGHTS & STRATEGY: SUBMARKET CONCENTRATION CONCENTRATION OF HIGH-GROWTH ASSETS IN THE BEST SUBMARKETS Bethesda MD TOTAL PORTFOLIO COMPOSITION NORTHERN VIRGINIA NATIONAL LANDING 57% RESTON 9% RB CORRIDOR 5% Washington, DC WASHINGTON, DC DC EMERGING 16% DC MATURE 5% MARYLAND BETHESDA CBD 2% OTHER
Slide 9: Common Submarket Characteristics
HIGHLIGHTS & STRATEGY: COMMON SUBMARKET CHARACTERISTICS OUTPERFORMING SUBMARKETS HAVE SHARED CHARACTERISTICS + + = WALKABLE AMENITY BASE Restaurants, theaters, TRANSIT ACCESS DIVERSITY OF OFFERINGS A balanced mix of office and residential sustains 18-hour retail environments FUTURE DEMAND POTENTIAL
Slide 10: JBG SMITH Office Submarkets
HIGHLIGHTS & STRATEGY: JBG SMITH OFFICE SUBMARKETS RENT GROWTH AND OCCUPANCY IN OUR OFFICE SUBMARKETS OUTPERFORM OTHER SUBMARKETS 2018 ASKING RENTS RELATIVE TO MARKET 2008-2018 ASKING RENT GROWTH 2008-2018 AVERAGE OCCUPANCY 30.3% 86.5% 30.0% 87.0% 25.0% 25.0% 86.0% 20.0% 20.0% 85.0% 15.0% 14.1% 15.0
Slide 11: JBG SMITH Multifamily Submarkets
HIGHLIGHTS & STRATEGY: JBG SMITH MULTIFAMILY SUBMARKETS RENT GROWTH AND NET ABSORPTION IN OUR MULTIFAMILY SUBMARKETS OUTPERFORM OTHER SUBMARKETS 2018 ASKING RENTS RELATIVE TO MARKET 2008-2018 ASKING RENT GROWTH 2008-2018 NET ABSORPTION AS % OF STARTING INVENTORY 20.0% 39.0% 37.6% 15.3% 70.0% 59.7% 3
Slide 12: 2019 Updates
2019 UPDATES 12
Slide 13: 2019 Updates: Amazon HQ2
2019 UPDATES: AMAZON HQ2 AMAZON LEASING TO DATE AMAZON LAND SALE INITIAL CONSTRUCTION START OF AMAZON DEVELOPMENT 2020 585K SF 4.1M SF REAGAN NATIONAL AIRPORT to Grade KEY AMAZON LEASING TO DATE AMAZON LAND SALE INFRASTRUCTURE/EDUCATION (STATE & LOCAL FUNDED) JBG SMITH OWNERSHIP 13 Route One Virgini
Slide 14: National Landing Overview
2019 UPDATES: NATIONAL LANDING OVERVIEW UNDER CONSTRUCTION ASSETS FUTURE DEVELOPMENT PIPELINE CENTRAL DISTRICT RETAIL 1770 CRYSTAL DRIVE 272K SF NATIONAL LANDING PIPELINE SUBMITTED FOR ENTITLEMENT (1) 109K SF 6.9M SF 4.2M SF REAGAN NATIONAL AIRPORT 9 10 3 7 10 6 5 to Grade UNDER CONSTRUCTION ASSETS
Slide 15: Capital Recycling
2019 UPDATES: CAPITAL RECYCLING SOLD OR RECAPITALIZED $337M OF ASSETS YEAR-TO-DATE(1) $999M Reduced DC Commodity Class A Office exposure from 7.3% to 3.4% since the inception of JBG SMITH 1 $1,000 $900 $800 Continued focus on DC office dispositions and monetizing land; market conditions evolving 2 0
Slide 16: Commercial Performance and Trends
2019 UPDATES: COMMERCIAL PERFORMANCE AND TRENDS FOCUS ON RISK MITIGATION IN DC AND POSITIONING PORTFOLIO FOR GROWTH IN NATIONAL LANDING COMMERCIAL PORTFOLIO MIX(1) Under Construction Generated $231.5M of Annualized NOI in Q3 2019 versus $286.5M in Q3 2018 Capital recycling and early blend-and-extend
Slide 17: National Landing Leasing Activity
2019 UPDATES: NATIONAL LANDING LEASING ACTIVITY CONTINUED OFFENSIVE LEASING POSTURE WITH FOCUS ON SHORTER TERM LEASES OR LONGER TERM LEASES WITH MARK-TO-MARKET RENT BUMPS INDUSTRY DIVERSIFICATION LEASING ACTIVITY 1,200 1,000 Health and Educational Services 4% Other Private Sector 24% 800 6 00 Associ
Slide 18: National Landing Lease Expirations
2019 UPDATES: NATIONAL LANDING LEASE EXPIRATIONS NATIONAL LANDING LEASE EXPIRATIONS ALIGN WITH THE AMAZON HIRING FORECASTS NATIONAL LANDING LEASE EXPIRATIONS(1) GSA leases 2.0M SF across 47 leases in our National Landing portfolio 1 1,00 0 9 00 12,000 Retained 82% of expiring GSA tenants since 2017,
Slide 19: Coworking Composition
2019 UPDATES: COWORKING COMPOSITION 3.5% (525K SF) OF OUR OVERALL PORTFOLIO, DIVERSIFIED GEOGRAPHICALLY AND BY OPERATOR WEWORK COMPOSITION One Democracy 17K SF 2221 SOUTH CLARK STREET 165K SF 2014 Lease Execution WeWork 7200 Wisconsin Ave 28K SF Early WeWork/ WeLive Build Out UNIVERSAL BUILDINGS Uni
Slide 20: Multifamily Performance and Trends
2019 UPDATES: MULTIFAMILY PERFORMANCE AND TRENDS GREW MULTIFAMILY NOI AND MAINTAINED HIGH LEVEL OF OCCUPANCY Generated $81.7M of Annualized NOI in Q3 2019 versus $78.5M in Q3 2018 • MULTIFAMILY PORTFOLIO MIX(1) Class B 34% Under Construction 22% 94.9% occupied • West Half completed Q3 2019, 22.4% le
Slide 21: Under Construction Assets
2019 UPDATES: UNDER CONSTRUCTION ASSETS ALL EIGHT UNDER CONSTRUCTIONASSETS ARE ON SCHEDULE AND ON BUDGET, WITH GUARANTEED MAXIMUM PRICE CONTRACTS IN PLACE COMMERCIAL ASSETS 4 SQUARE FEET 821K MULTIFAMILY ASSETS 4 UNITS 1,298 COMMERCIAL PRE-LEASED 85.2% West Half ESTIMATED INCREMENTAL INVESTMENT $284
Slide 22: Under Construction Pipeline
2019 UPDATES: UNDER CONSTRUCTION PIPELINE EXPECTED TO DELIVER STRONG NEAR-TERM GROWTH SINCE THE INCEPTION OF JBG SMITH, 5 DELIVERIES, ALL AHEAD OF SCHEDULE AND BELOW BUDGET WEIGHTED AVERAGE COMPLETION DATE WEIGHTED AVERAGE STABILIZATION DATE Q2 2020 Q3 2021 2019 2020 2021 Q4 Q4 Q2 Q3 Q4 Q2 Q2 4747 B
Slide 23: Future Development Pipeline
2019 UPDATES: FUTURE DEVELOPMENT PIPELINE STAGE OF ENTITLEMENT ACTIVELY ADVANCING ENTITLEMENTS THROUGHOUT THE PORTFOLIO Actively advancing entitlements for 8.8M SF 1 Submitted entitlement applications for 4.2M SF in National Landing 2 National Landing Submitted for Entitlement, Awaiting Approval Act
Slide 24: Advanced Entitlement of 1900 Crystal Drive
2019 UPDATES: ADVANCED ENTITLEMENT OF 1900 CRYSTAL DRIVE FILLS CRITICAL RETAIL AND ACTIVITY GAP ON CRYSTAL DRIVE 750 UNITS OF MULTIFAMILY IN TWO BUILDINGS 30K SQUARE FEET OF RETAIL $362M 2020 OF ESTIMATED INCREMENTAL INVESTMENT CONSTRUCTION START 24 Illustrative 1900 Crystal Drive Retail and Public
Slide 25: Advancing Additional Entitlements in National Landing
2019 UPDATES: ADVANCING ADDITIONAL ENTITLEMENTS IN NATIONAL LANDING SUBMITTED ENTITLEMENT APPLICATIONS FOR 4.2M SF 25 Illustrative 223 23rd Street (Multifamily) Illustrative RiverHouse Apartments (Multifamily) Illustrative 2525 Crystal Drive (Multifamily) Illustrative 2300 Crystal Drive (Commercial)
Slide 26: National Landing Estimated Development and Delivery Timeline
NATIONAL LANDING ESTIMATED DEVELOPMENT AND DELIVERY TIMELINE 2019 2020 2021 2022 2023 2024 (2025+ 245 cae —_ 8 1800 South Bell Steet. = 241 18th Servet = + crnatoie — aretoaeerR — | eee es FE ware — iy’ i 10 cae SE a eee —— & Onvopment [g& newvaestaon WLM Sen L$ Route One Improvements L$ man Bdge 0A
Slide 27: Washington Housing Initiative
2019 UPDATES: WASHINGTON HOUSING INITIATIVE (WHI) LAUNCHED THE WASHINGTON HOUSING INITIATIVE TO PRODUCE OR MAINTAIN AFFORDABLE WORKFORCE HOUSING IN HIGH-IMPACT LOCATIONS • Produce or maintain up to 3,000 units of affordable workforce housing over 10 years • Impact pool funded by third-party capital
Slide 28: State of the Market
STATE OF THE MARKET 28
Slide 29: DC Economy
STATE OF THE MARKET: DC ECONOMY NORMALIZING JOB GROWTH THROUGH FIRST HALF OF THE LARGELY CONCENTRATED IN NORTHERN VIRGINIA YEAR: 80.0 AVERAGE ANNUAL JOB GROWTH (THOUSANDS) 60.0 40.0 20.0 0.0 -20.0 -40.0 -60.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD RECOVERY BRAC + SEQUESTRATION So
Slide 30: DC Tech Talent
STATE OF THE MARKET: DC TECH TALENT AMAZON AND VIRGINIA TECH SHOULD HELP BOLSTER AND RETAIN THE DC REGION’S ALREADY–STRONG TECH LABOR POOL, ATTRACTING MORE EMPLOYERS TO THE REGION TOP 10 REGIONS BY TECH TALENT LABOR POOLS (2017) TOP 10 REGIONS BY TECH DEGREE COMPLETIONS TOP 10 TECH “BRAIN GAIN/DRAIN
Slide 31: Federal Government Cloud Awards
STATE OF THE MARKET: FEDERAL GOVERNMENT CLOUD AWARDS OVER THE NEXT 24 MONTHS, THE FEDERAL GOVERNMENT PLANS TO AWARD AN ADDITIONAL $14.5B IN MAJOR CLOUD COMPUTING CONTRACTS C2E Commercial Cloud Enterprise DIA $10.0B Multiple Q2 2020 NMITS NOAA Mission IT Services NOAA $2.5B Single Q2 2020 CMDCO Cloud
Slide 32: Amazon Follow-On Demand
STATE OF THE MARKET: AMAZON FOLLOW-ON DEMAND SEATTLE SAW TECH-DOMINATED GROWTH AROUND AMAZON POST 2010 SEATTLE NATIONAL LANDING KEY AMAZON BUILDINGS KEY JBG SMITH BUILDINGS Washington, DC 0.4 miles AMAZON BUILDINGS 32
Slide 33: DC Metro Office Market
STATE OF THE MARKET: DC METRO OFFICE MARKET METRO MARKET NET ABSORPTION APPROACHING FULL YEAR 2018 LEVELS THROUGH Q3 2019 — DRIVEN LARGELY BY NORTHERN VIRGINIA METRO MARKET DIRECT NET ABSORPTION COMPARISON (SF) 4.9M 3.6M 2.8M 931K 1.5M -370K -1.9M -2.8M 2009 2010 2011 2012 2013 2014 2015 2016 2017 2
Slide 34: DC Proper Office Market: Pipeline
STATE OF THE MARKET: DC PROPER OFFICE MARKET DC PROPER PIPELINE REMAINS ELEVATED, LIKELY PUTTING ADDITIONAL PRESSURE ON COMMODITY A AND CLASS B SECTORS DC PROPER OFFICE PIPELINE 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Estimated Source: JLL
Slide 35: DC Proper Office Market: Class B Vacancy
STATE OF THE MARKET: DC PROPER OFFICE MARKET CLASS B VACANCY BEGINS TO FLUCTUATE IN RESPONSE TO COMMODITY CLASS A SOFTNESS DC PROPER OFFICE DIRECT DC PROPER OFFICE DIRECT VACANCY AVERAGE ASKING RENTS $66 $70 20% $65 18% 16% $60 14% $52 14% $55 12% 12% $50 10% $45 8% $40 8% 6% $35 4% $30 2% $25 0% So
Slide 36: Post-Amazon National Landing Rents
STATE OF THE MARKET: DC PROPER OFFICE MARKET POST-AMAZON, NATIONAL LANDING RENTS HAVE GROWN CLOSER TO HISTORIC PARITY WITH RB CORRIDOR, WHILE A SIGNIFICANT SPREAD STILL EXISTS WITH DC PROPER DIRECT AVERAGE ASKING RENT (OFFICE) DIRECDTCVOACfAicNeCVYa(cOaFnFcIyCE) 25% National Landing $65 23% $59 21%
Slide 37: DC Investment Sales Volume
STATE OF THE MARKET: DC PROPER OFFICE MARKET SLOWING DC INVESTMENT SALES VOLUME ACCELERATED IN AHEAD OF TRANSFER TAX IMPLEMENTATION Q3 2019 DC PROPER OFFICE INVESTMENT SALES VOLUME $6. 0 $5.1B $4.7B $4.6B $5.0 $3.8B $4.0 $3.1B $3. 0 Q3 2019 $2.1B in sales volume $2.0 $1.0 $0. 0 200 9 2010 2011 2012
Slide 38: DC Metro Multifamily Market: Pipeline
STATE OF THE MARKET: DC METRO MULTIFAMILY MARKET MULTIFAMILY PIPELINE DECLINING WITH FOR NEW STARTS LIMITED WINDOW MULTIFAMILY PIPELINE 15.0K 16,000 13.0K 14,000 12.0K 10.4K 12,000 9.2K 10,000 7.2K 6.8K 8,000 6,000 4,000 2,000 0 200 9 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Estim
Slide 39: DC Metro Multifamily Market: Emerging Market Rents
STATE OF THE MARKET: DC METRO MULTIFAMILY MARKET EMERGING MARKET RENTS CONTINUE TO CONVERGE WITH STILL-GROWING MATURE MARKETS, DRIVEN BY STRONG CONSUMER DEMAND DC EMERGING MARKET GROWTH TRAJECTORY AVERAGE MONTHS TO STABILIZATION (ASSETS DELIVERED 2015) 20.0 Q4 2018 Q3 2019 25.0 $5.00 $4.80 20.0 $4.6
Slide 40: DC Metro Office Market: Cap Rates
STATE OF THE MARKET: DC METRO OFFICE MARKET LITTLE MOVEMENT IN OFFICE CAP RATES IN ARLINGTON OR DC DESPITE SLOWING VOLUME IN CORE DC AND PROSPECTIVE EFFECT IN ARLINGTON AMAZON 2016-2019 YTD AVG. OFFICE CAP RATE Q4 2018 Q3 2019 6. 6% 6. 4% 6.1% 6.0% 6. 2% 6. 0% 5.8% 5.6 % 5.4% 5.2% 5.0% 4.8% Arlingto
Slide 41: DC Metro Multifamily Market: Cap Rates
STATE OF THE MARKET: DC METRO MULTIFAMILY MARKET CAP RATES IN ARLINGTON NOW SIGNIFICANTLY INSIDE DC DRIVEN AMAZON-PROXIMATE TRADES BY 2016-2019 YTD AVG. MULTIFAMILY CAP RATE COMPARISON (CLASS A) 4.7% 4.9% Q4 2018 Q3 2019 4.6% 4.6% 4.7% 4.5% 4.3% 4.1% 3.9% 3.7% 3. 5% Arlington Class A Co re DC Source
Slide 42: Growth and Capitalization
GROWTH AND CAPITALIZATION 42
Slide 43: Estimated NOI Bridge
GROWTH AND CAPITALIZATION: ESTIMATED NOI BRIDGE EXCLUDES ADDITIONAL POTENTIAL VALUE CREATION FROM MONETIZATION OF 14.8M SF(1) FUTURE DEVELOPMENT PIPELINE NOI Bridge 5.3% CAGR: -3.0% Market on Office Rents: 93.0% Occupancy: 95.0% Occupancy: NOI GROWTH IS BACK-END WEIGHTED Note: This is a hypothetical
Slide 44: Strong Balance Sheet to Fund Future Growth
GROWTH AND CAPITALIZATION: STRONG BALANCE SHEET TO FUND FUTURE GROWTH ACCESS TO MULTIPLE SOURCES OF CAPITAL WITH OVER $2B OF LIQUIDITY NET DEBT/ TOTAL ENTERPRISE VALUE: 22.9%(2) 1 Secured and unsecured debt Secured Debt 19.4% 2 Opportunistic capital recycling Term Loan 3.5% 3 Select joint ventures E
Slide 45: Expected Leverage Profile
GROWTH AND CAPITALIZATION: EXPECTED LEVERAGE PROFILE 1 Our long-term leverage targets remain unchanged: • 25% to 35% Net Debt/ Total Enterprise Value • 6x to 7x Net Debt/Adjusted EBITDA, with peak levels in the mid-8x’s during periods of more active development 2 We expect a temporary increase in le
Slide 46: Definitions: Annualized Rent
DEFINITIONS ANNUALIZED RENT “Annualized rent” is defined as (i) for commercial assets, or the retail component of a mixed-use asset, the in-place monthly base rent before free rent, plus tenant reimbursements as of September 30, 2019, multiplied by 12, with triple net leases converted to a gross bas
Slide 47: Definitions: FFO, Core FFO and FAD
DEFINITIONS 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 (co
Slide 48: Definitions: In Service, Metro-Served, NOI
DEFINITIONS 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 September 30, 2019. METRO-SERVED “Metro-served” means locations, submarkets or assets that are generally nearby an
Slide 49: Definitions: Non-GAAP Future Estimates
DEFINITIONS The Company does not provide reconciliations for non-GAAP estimates on a future basis, including adjusted annualized NOI and estimated stabilized NOI because it is unable to provide a meaningful or accurate calculation or estimate of reconciling items and the information is not available
Slide 50: Definitions: Recently Delivered, Same Store
DEFINITIONS RECENTLY DELIVERED “Recently delivered” refers to commercial and multifamily assets that are below 90% leased and have been delivered within the 12 months ended September 30, 2019. Same Store and Non-Same Store “Same store” refers to the pool of assets that were in service for the entire
Slide 51: EBITDA, EBITDAre and Adjusted EBITDA (Non-GAAP)
EBITDA, EBITDARE AND ADJUSTED EBITDA (NON-GAAP) (UNAUDITED) TTD EBITDA ond AdjrtelEBTOA Net ica Fuss rer crcl ro Deprctn nd orton expen 02 400s ists 165280 Incometox pense (bene) 2 ay wn 080) tox 7975 Ea Sra S20 Gem en oa otralotoe eae) a3) wen (789) Goin an nn of uctnlated ol nota vers = sat) 35) 8
Slide 52: NOI Reconciliations (Non-GAAP)
NOI RECONCILIATIONS (NON-GAAP) (UNAUDITED) Nt incame()otrtuabe a carmen hrehoes Tos F000) Tanaat 770 Faas Deresedan nd enerien wpe soa 15905 wane 7586 505 Capen” oss ns tas as a2 pre bosed eiperetin ltd eaten Tonacton end spel gut ver 950 9533 mt on o307 Tidpory a ena ans ning imbues ser 08 2188 2 o
Slide 53: JBG SMITH
o) JBG SMITH
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