JBG SMITH Properties (JBGS) Q2 2024 earnings summary

Executive summary

• As of June 30, 2024, the portfolio included 15 multifamily assets (6,318 units), 23 commercial assets (7.2M sq ft), two land assets, and two multifamily projects under construction (1,583 units), with 18 assets in the development pipeline (11.4M sq ft potential).

• The portfolio transformation toward a majority multifamily focus is nearly complete, with strong demand drivers in National Landing, including Amazon HQ2, Virginia Tech Innovation Campus, and the Pentagon.

• Construction was completed on 1900 Crystal Drive, The Grace, and Reva, with 49.5% of 808 units at 1900 Crystal Drive leased as of July 28, 2024; multifamily occupancy was 94.3% and leased at 96.9%.

• Net loss attributable to common shareholders was $24.4M ($0.27/share) for Q2 2024, compared to $10.5M ($0.10/share) in Q2 2023; six-month net loss was $56.6M ($0.63/share) vs. net income of $10.6M ($0.09/share) in 2023.

• Office leasing saw its strongest quarter in three years, with 166,000 SF of new leases and defense/tech tenants driving 88% of 248,000 SF total activity, but office occupancy declined 250 bps sequentially to 80.6%.

Financial highlights

• Q2 2024 property rental revenue was $112.5M, down 6.7% year-over-year; six-month revenue was $235.2M, down 3.9%.

• Core FFO attributable to common shareholders was $16.1M ($0.18/share) for Q2 2024; FFO per share was $0.16.

• Same Store NOI increased 3.2% to $71.4M for Q2 and 5.2% to $145.1M for six months.

• Interest expense rose 23.8% in Q2 and 18.0% for six months, driven by higher debt, rising rates, and lower capitalized interest.

• Annualized NOI for Q2 2024 was $286.4M, down from $307.5M in Q1 2024; excluding sold/out-of-service assets, annualized NOI was $283.9M.

Outlook and guidance

• Multifamily effective rents increased 4.6% blended and 8.6% on renewals in Q2 2024; renewal rate was 50.9%.

• Downward pressure on office Same Store NOI is expected to persist through at least the end of 2025 due to known tenant vacates.

• Interest expense will rise as under-construction assets are delivered and interest capitalization ceases.

• Rent growth in the multifamily portfolio is expected to continue, supported by limited new supply in the DC metro area.

• Asset sales pace slowed due to market conditions; proceeds to be redeployed to multifamily and growth projects.