Jbg Smith Properties · NYSE:JBGS
Jbg Smith Properties — Corporate Update (December 2018)
37 slides from Jbg Smith Properties's corporate update, Dec 13, 2018
Slide 1: Summary of Amazon Impact
Summary of Amazon Impact · Real Estate Transaction NAV Accretive on a Stand-Alone Basis · Leases for approximately 537,000 square feet, with approximately $95 million of incremental JBG SMITH investment, expected to generate a combined net effective rent of approximately $35 per square foot · $294 m
Slide 2: Source: BLS, Eastdil
Source: BLS, Eastdil
Slide 3: Impact of technology companies on office rent growth
Source: Eastdil The following chart shows the impact technology companies have had on office market rent growth. The overall Metro DC office market has seen limited rent growth post-downturn (2010 to 2018) of just 1.6% annually. By contrast, markets with strong concentrations of consumer technology
Slide 4: Amazon's impact on occupancy and office rent growth in South Lake Union
Source: JLL Research The following chart shows Amazon’s impact on occupancy and office rent growth in South Lake Union. Beyond the catalyst from the expected introduction of a significant tech industry concentration into the broader Metro market, we believe that Amazon will have a similar impact on
Slide 5: Amazon's impact on Class B office rent growth in South Lake Union
Source: JLL Research for all except as noted above, 2018 reflects Q1 statistics (1) National Landing was previously known as Crystal City (2) National Landing 2018 Occupancy is based on Q3 2018 JBGS Portfolio (market is at 79%) The following chart shows Amazon’s impact on Class B office rent growth
Slide 6: Impact of a technology catalyst on multifamily rent growth
Source: JLL Research, 2018 reflects Q1 statistics (1) National Landing was previously known as Crystal City The following chart shows the impact a technology catalyst has on multifamily rent growth. A diverse economy with a technology catalyst doesn’t just drive office rents — it attracts new consum
Slide 7: Ample Capacity to Fund Growth
Source: JLL Research Ample Capacity to Fund Growth As of September 30, 2018, our Net Debt/Adjusted EBITDA ratio was 6.7x, and our Net Debt/Total Enterprise Value was 30.8%. We expect to invest approximately $565 million in the Amazon leases at 241 18 th Street S. and 1800 South Bell Street, 1770 Cry
Slide 8: Disclosures: Forward-Looking Statements
2 DISCLOSURES Forward-Looking Statements Certain statements contained in this Investor Update 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-look
Slide 9: Disclosures
3 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
Slide 10: Key Takeaways – Amazon HQ at National Landing
4 KEY TAKEAWAYS – AMAZON HQ AT NATIONAL LANDING Illustrative Pen Place Public Plaza Illustrative National Landing (North District) Reflects (a) $2.5 billion investment by Amazon; (b) up to $295 million of non-general fund money in transportation projects that will improve mobility in the region; (c)
Slide 11: Situation Overview: Amazon Selected JBG SMITH as Partner
5 SITUATION OVERVIEW AMAZON HAS SELECTED JBG SMITH AS ITS PARTNER TO HOUSE AND DEVELOP HQ AT NATIONAL LANDING (1) JBG SMITH REACHED AN AGREEMENT GIVING AMAZON EXCLUSIVE RIGHTS TO LEASE SPACE IN SEVERAL JBG SMITH BUILDINGS AND TO PURCHASE LAND OWNED BY JBG SMITH IN NORTHERN VIRGINIA’S NATIONAL LANDIN
Slide 12: What Is National Landing?
6 WHAT IS NATIONAL LANDING? PEDESTRIAN BRIDGE TO DCA TRANSIT HUB WITH NEW RAIL STATION JBG SMITH AMAZON N NATIONAL LANDING IS THE NEWLY DEFINED INTERCONNECTED AND WALKABLE NEIGHBORHOOD THAT ENCOMPASSES CRYSTAL CITY, THE EASTERN PORTION OF PENTAGON CITY AND THE NORTHERN PORTION OF POTOMAC YARD AMAZON
Slide 13: Amazon HQ at National Landing Deal – NAV Accretive Transaction
7 AMAZON HQ AT NATIONAL LANDING DEAL – NAV ACCRETIVE REAL ESTATE TRANSACTION ON A STAND-ALONE BASIS Proposed Amazon Deal Terms(1) Key terms of the proposed HQ at National Landing transaction include: Amazon is expected to lease approximately 537,000 square feet of existing office space at 241 18th S
Slide 14: National Landing – Amazon Impact and Future Opportunities
8 NATIONAL LANDING – AMAZON IMPACT AND FUTURE OPPORTUNITIES JBGS EXISTING Approximately 6.2M SF of Office 4.9 Years Weighted Average Remaining Lease Term Approximately 2,850 Multifamily Units JBGS INVESTMENT OPPORTUNITIES Approximately 7.4M SF (1) AMAZON LEASE FROM JBGS Approximately 537K SF Initial
Slide 15: Summary of Near-Term Investment Opportunities in National Landing
9 SUMMARY OF NEAR-TERM INVESTMENT OPPORTUNTIES IN NATIONAL LANDING ANTICIPATED WEIGHTED AVERAGE TARGETED NOI YIELD OF 6.7%-7.1% (1) ON ESTIMATED INCREMENTAL INVESTMENT OF $550M FOR 1770 CRYSTAL DRIVE, CENTRAL DISTRICT RETAIL, AND 1900 CRYSTAL DRIVE FIRST TRANCHE OF DEVELOPMENT OPPORTUNITY AMAZON LEA
Slide 16: Amazon Lease Transactions and JBG SMITH Investment Opportunities
REAGAN NATIONAL AIRPORT N JBGS EXISTING JBGS INVESTMENT OPPORTUNITIES LEGEND AMAZON LEASE FROM JBGS AMAZON PURCHASE FROM JBGS 10 AMAZON HQ AT NATIONAL LANDING LEASE TRANSACTIONS + JBG SMITH INVESTMENT OPPORTUNITIES 1900 Crystal Drive (North Tower) 1900 Crystal Drive (South Tower) 1770 Crystal Drive
Slide 17: First Tranche of Development – Central District Retail
11 NATIONAL LANDING FIRST TRANCHE OF DEVELOPMENT – CENTRAL DISTRICT RETAIL 109K NET RENTABLE SQUARE FEET (130K GROSS SQUARE FEET) $100M OF ESTIMATED INCREMENTAL INVESTMENT NEW METRO ENTRANCE AMENITY RETAIL GROCERY ANCHOR IMPROVED STREETSCAPE ALAMO THEATRE ANCHOR Illustrative Crystal Drive Retail
Slide 18: First Tranche of Development – 1900 Crystal Drive
12 NATIONAL LANDING FIRST TRANCHE OF DEVELOPMENT – 1900 CRYSTAL DRIVE ~ 750 UNITS OF MULTIFAMILY IN TWO BUILDINGS ~ 30K SQUARE FEET OF RETAIL $370M OF ESTIMATED INCREMENTAL INVESTMENT 2019 CONSTRUCTION START Illustrative Central District Retail Illustrative 1900 Crystal Drive (South Tower in Foregro
Slide 19: Investment Opportunities in National Landing
13 INVESTMENT OPPORTUNITIES IN NATIONAL LANDING Note: Approximate estimated potential development densities based upon initial planning. Uses may change based on market conditions. 1800 South Bell Street Land ~500K Square Feet 1770 Crystal Drive ~280K Square Feet 2001 Jefferson Davis Highway Land ~6
Slide 20: HQ South Lake Union and HQ National Landing Comparable Scale
14 HQ SOUTH LAKE UNION AND HQ NATIONAL LANDING HAVE COMPARABLE SCALE AND ROOM TO GROW HQ AT SOUTH LAKE UNION (SEATTLE) HQ AT NATIONAL LANDING SEATTLE CBD CURRENT AMAZON LOCATIONS SOUTH LAKE UNION N INITIAL AMAZON LOCATIONS JBG SMITH ASSETS N
Slide 21: Fast-Growing Companies Like Amazon Are Catalysts for the Market
15 Seattle’s long-term growth rate from 1991-2009 (pre-HQ1) was 1.4% annually Amazon grew from about 6,000 employees to 45,000 employees FAST-GROWING COMPANIES LIKE AMAZON ARE CATALYSTS FOR THE ENTIRE MARKET Source: BLS, Eastdil Since HQ1, Seattle saw 169,000 jobs above what would be implied by thei
Slide 22: HQ1 Drove Job Growth Beyond Amazon Alone
16 Since HQ1, these are just some of the companies who have expanded to Seattle and driven that follow-on job growth. HQ1 DROVE JOB GROWTH BEYOND AMAZON ALONE – IT BROUGHT OTHER HIGH-TECH COMPANIES INTO THE MARKET Source: Eastdil 83,000 SF 295,300 SF 321,700 SF 649,300 SF 1.3M SF 2.8M SF 167,000 SF
Slide 23: Tech Catalysts Have Driven Dramatic Outperformance in the Office Market
17 TECH MARKETS: Avg. $15.39 Growth TRADITIONAL MARKETS: Avg. $6.19 Growth TECH CATALYSTS HAVE DRIVEN DRAMATIC OUTPERFORMANCE IN THE OFFICE MARKET Source: JLL Research MARKETS WITH STRONG CONCENTRATION OF CONSUMER TECHNOLOGY COMPANIES HAVE SEEN GREATER OFFICE RENT GROWTH THAN THE MARKETS WITHOUT THE
Slide 24: South Lake Union Before Amazon Had Similar Office Fundamentals
18 SOUTH LAKE UNION BEFORE AMAZON HAD SIMILAR OFFICE FUNDAMENTALS TO NATIONAL LANDING TODAY IN SEATTLE, SOUTH LAKE UNION WAS A SLOW GROWTH MARKET LIKE NATIONAL LANDING BEFORE AMAZON ARRIVED OCCUPANCY IMPROVED AND RENT GROWTH SWITCHED FROM NEGATIVE TO POSITIVE AS AMAZON EXPANDED ITS CAMPUS (2) Source
Slide 25: Class B Office Rents in South Lake Union Benefited from Amazon
19 CLASS B OFFICE RENTS IN SOUTH LAKE UNION BENEFITED FROM AMAZON’S ARRIVAL Source: JLL Research, 2018 reflects Q1 statistics (1) National Landing was previously known as Crystal City. IT WASN’T JUST CLASS A OR NEW BUILDING OFFICE RENTS THAT GREW AS AMAZON EXPANDED IN SOUTH LAKE UNION SURROUNDING CL
Slide 26: Tech Catalysts Also Driven Outperformance in Multifamily Market
20 TECH CATALYSTS HAVE ALSO DRIVEN OUTPERFORMANCE IN THE MULTIFAMILY MARKET Source: JLL Research TECH MARKETS TRADITIONAL MARKETS MARKETS WITH STRONG CONCENTRATION OF CONSUMER TECHNOLOGY COMPANIES ALSO SEE INCREASED DEMAND FOR EMPLOYEE HOUSING, DRIVING OUTPERFORMANCE IN RESIDENTIAL RENT GROWTH 0.0%
Slide 27: Conclusion – Amazon HQ at National Landing
21 CONCLUSION – AMAZON HQ AT NATIONAL LANDING Illustrative Pen Place Public Plaza Illustrative National Landing (North District) Reflects an investment of (a) $2.5 billion investment by Amazon; (b) to $850 million in local infrastructure projects that will improve mobility in the region; (b) up to $
Slide 28: Appendix
APPENDIX Illustrative 1770 Crystal Drive
Slide 29: Future Development Opportunities (at JBG SMITH Share)
23 FUTURE DEVELOPMENT OPPORTUNITIES (AT JBG SMITH SHARE) Illustrative Central District Retail Estimated Potential Development Density (SF) as of September 30, 2018 (1) Region Number of Assets Total Office Multifamily Retail Owned DC DC Emerging 7 1,678,400 312,100 1,357,300 9,000 DC Mature 2 336,200
Slide 30: Future Development Opportunities
24 FUTURE DEVELOPMENT OPPORTUNITIES Illustrative Central District Retail “Estimated Potential Development Density” reflects management’s estimate of developable gross square feet based on our current business plans with respect to real estate owned or controlled as of September 30, 2018. Our busines
Slide 31: Strong Balance Sheet to Fund Future Growth
25 STRONG BALANCE SHEET TO FUND FUTURE GROWTH Significant Liquidity and Access to Capital Capitalization Borrowings and draws from construction loans and our credit facility Opportunities to capitalize on attractive market conditions to raise capital through asset sales and recapitalizations Since a
Slide 32: Definitions: Non-GAAP Measures
26 DEFINITIONS Non-GAAP Measures This Investor Update includes non-GAAP 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
Slide 33: Definitions: Estimated Incremental Investment
27 DEFINITIONS Estimated Incremental Investment “Estimated incremental investment” means management’s estimate of the remaining cost to be incurred in connection with the development of an asset as of September 30, 2018 adjusted for the Amazon transaction, including all remaining acquisition costs,
Slide 34: Definitions
28 DEFINITIONS We caution you not to place undue reliance on the targeted yields on incremental investment we present in this Investor Update because they are based solely on our estimates, using data available to us in our development underwriting processes. Our actual initial full year NOI, actual
Slide 35: EBITDA and Adjusted EBITDA Reconciliation (Non-GAAP)
29 EBITDA and ADJUSTED EBITDA RECONCILIATION (NON-GAAP) Interest expense includes the amortization of deferred financing costs and the marking-to-market of interest rate swaps and caps, net of capitalized interest. Includes amounts incurred for transition services provided by our former parent, inte
Slide 36: EBITDA and Adjusted EBITDA Reconciliation (Non-GAAP)
EBITDA and ADJUSTED EBITDA RECONCILIATION (NON-GAAP) Tvee Months Ended Nine Months Ended dollars in thousonds September 30,2018 __September 30,2018, EBITDA, EBITDA and Adjusted EBITDA ‘Net income $ 26382 $ 45,619 Depreciation and amortization expense 45603 143,880 Interest expense 18979 55,263 Incom
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