JBG SMITH: Innovative Infrastructure for Washington's Vibrant Neighborhoods - Essay Sample

Introduction

JBG SMITH Properties is a company that owns, invests in, develops, and operates a portfolio of mixed-use real estate properties around Washington, DC. Through innovative and modernized infrastructure, JBG smith creates an amenity-rich and vibrant neighborhood through Washington, like National Landing, which consists of the eastern section of Pentagon City and Crystal City. Some of the key projects include 500 L'Enfant Plaza, which rises over the Southwest Waterfront and is 215,000 square-foot trophy premises that consist of 12 stories of flow to ceiling glass; Central Place Tower, which is the tallest tower in the DC locality with 31 stories and is 560,000 square-foot jewel-box office building; 4747 Bethesda Avenue located in the heart of Bethesda downtown; 1221 Van Street, which has 291 residences; and 1900 N Street.

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In a quick overview of the company, we had a total enterprise value of $7.0B in 2018, 1.1 Million commercial SF plus 1,568 multifamily units under construction, 5.6 years as the weighted average lease term, 86 walk score, and 33.7% net debt to total enterprise value. Also, we had an operating portfolio of 12.2 million commercial SF plus 4232 multifamily units as of 2018. The future development pipeline was at 5.6 million commercial SF plus 12.3 million multifamily SF. The investment rationale is based on the company's differentiated strategy, the tremendous opportunity for the DC market growth, the concentration of high-quality assets in exceptional urban submarkets, and significant liquidity and financial strength that are likely to support the growth of the company. JBG's company strategy is based on three primary urban product types (retail, multifamily, and office), which maximize the value through mixed-use placemaking and investment concentration.

With a view on the project's information, the operating office owns the larger composition of the portfolio, which is 65%, operating multifamily and 20%, 13% under development, and 3% representing other portfolios. As the market is a crucial function in the company's operations, it is driven by amenity rich submarkets, walkability, federals pending rebound, continued strong job growth, pocketing of office opportunities, and the declining multifamily supply pipeline. Focusing on the operating and financial information, we had a net loss attributable to common shareholders at $4.2Million or $0.04 per diluted share, funds from operations of $41.2M or $0.35 per share, core FFO of $52.2M or $0.44 per share, annualized NOI of $371.3M compared to $363.3M in Q4 2017. However, the same-store NOI increased by 11.3% to $71.4M compared to $64.2M in Q1 2017. The operating portfolio includes; operating office portfolio at 87.8% leased and 87.0% occupied, operating multifamily portfolio at 96.1% leased, and 94.2% occupied, operating other portfolios at 94.2% leased and 94.2% occupied (excluding Crystal City Marriott hotel) at of 2018.

In a quick review of the company's future value metrics, it is targeting to lease-up around 91.5% of the office portfolio with the present market rates, ensure a 2.25% average contractual rent growth on non-GSA office leases with a term beyond 2022, maintain a -5.0% mark-to-market on office rents as leases roll, 2.0% annual office market rent growth, 2.75% multifamily yearly market rent growth, and finally ensure stabilization of Under Construction assets.

As for the equity offer to the investment, the offer stands at 10% of the company for $400 million. Each multiple equity investor will be entitled to a 10%* non-compounding annual return for the next three years, which will occur after senior debt service and before the sponsor acquired any returns. Meanwhile, the order of the profit distribution will be 100% pro-rata back to the investors until an accumulation of 10% preferred return and 30% to sponsor and 70% to the investors. Finally, the exit strategy revolves around acquisition by firms like Vornado Realty, financial buying, or IPO.