CEO Insight: The JBG Companies Brian Coulter Managing Partner NAIOP. Do not distribute or reproduce without permission.
Brian Coulter The JBG Companies 27+ years of experience in Washington DC metropolitan area real estate Member of JBG s Executive, Management and Investment Committees Board member Federal City Council, former President of Rosslyn Renaissance, former Board Member of the District of Columbia Building Industry Association and a founding member of both the Washington DC Downtown and Rosslyn Business Improvement Districts B.A., Summa Cum Laude, Phi Beta Kappa, Rutgers College; M.B.A., Harvard University NAIOP. Do not distribute or reproduce without permission. 2
What are the five things we will cover today? 1. Who is JBG? 2. JBG s Evolution over its 53 Years of Business 3. Lessons Learned 4. Organizational Changes, Challenges and Transitions 5. Present and Future Opportunities NAIOP. Do not distribute or reproduce without permission. 3
Who is JBG? Creating and Enhancing Value for more than 50 Years It is the mission of The JBG Companies to be a world-class investor, owner, developer and manager of real estate properties in the Washington Metropolitan Area. We seek to generate superior, risk-adjusted returns for our investors while actively mitigating risk. JBG is committed to being an engaged and responsible member of the communities in which we operate. NAIOP. Do not distribute or reproduce without permission. 4
JBG Focus: Greater Washington DC Metro Area NAIOP. Do not distribute or reproduce without permission. 5
Who is JBG? Largest Mixed Use Developer and Investor in the Washington Metropolitan area Focused on Urban/Mixed Use and Transit oriented projects 53 Years Opportunistic Driven Focused and demanding yet collaborative environment NAIOP. Do not distribute or reproduce without permission. 6
How Things Have Changed 1960 2010+ World Population 3.039 Billion 6.849 Billion US Population 179 Million 313 Million DC Metro Area Population 1.99 Million 9.33 Million Average Price of Gasoline $.31 per gallon $3.53 per gallon Average Income Per Family $6,691 > $50,000 US Minimum Wage $1.00 per hour $7.25 per hour US Unemployment Rate 5.5% 7.5% JBG Employees 4 550 (today) NAIOP. Do not distribute or reproduce without permission. 7
1960: Donald Brown and Joseph Gildenhorn found the firm 1962: Ben Jacobs joins, creating JBG 1998: JBG sells entire 26-building portfolio to TrizecHahn Corp. for approximately $600M 2002 2005: JBG raises approx $1.3 billion in Funds II V 2002: JBG raises its first institutional investment fund, Fund III, consisting of $210M 2010: JBG raises $576M Fund VII 2011: JBG raises $752M Fund VIII 1960s 1970s 1980s 1998 1999 2002 2005 2007 2010-2011 1980s: Three new Partners named 1990s: Two new Partners named 2007: $2.5B recapitalization with JBG Urban 1970s 1980s: JBG acquires and develops some of DC s most exciting properties including Four Seasons Hotel in Georgetown and develops projects for the World Bank and Geico 1999: JBG raises its first co-investment fund, Fund I, consisting of $28M 2007: JBG raises $600M Fund VI NAIOP. Do not distribute or reproduce without permission. 8
Current Portfolio Composition 2.8 M 4.8 M 10.5 M Office Residential Hotel Retail 4.8 M NAIOP. Do not distribute or reproduce without permission. 9
How has JBG managed change over its 53 years Privately owned/private equity model with difference NAIOP. Do not distribute or reproduce without permission. 10
Real Estate Companies Forms of Ownership 1. Public 2. Public or private intuitionally owned 3. Private family owned 4. Private non-family owned NAIOP. Do not distribute or reproduce without permission. 11
How has JBG managed change over its 53 years Privately owned/private equity model with difference Reward ability - meritocracy Managed a number of generational transitions Adapted with a changing investor base NAIOP. Do not distribute or reproduce without permission. 12
CEO Insights: The JBG Companies Investor Profile NAIOP. Do not distribute or reproduce without permission. 13
Investor History 1960s 1980s Primarily High Net Worth (HNW) Individuals Late 1980s-1997 Combination of HNW and institutional - Deal by Deal Late 1990s Relationship with JER Partners, institutional joint venture partners but still Deal by Deal 1999 JBG Fund I 2013/2014 Raise JBG Fund IX Continue working with institutional joint venture partners Partnering with other developers/competitors NAIOP. Do not distribute or reproduce without permission. 14
JBG Investors NAIOP. Do not distribute or reproduce without permission. 15
Equity Raised Since 1999 NAIOP. Do not distribute or reproduce without permission. 16
What have we learned over the past 53 years? CEO Insights: The JBG Companies NAIOP. Do not distribute or reproduce without permission. 17
Lessons Learned Organizational Issues Sizing the Organization Finding the right size Just in time hiring Investment management vs. development staffing keeping the bench warm Construction administration staffing Benefits of Developing All Product Types NAIOP. Do not distribute or reproduce without permission. 18
How do you manage growth CEO Insights: The JBG Companies in this industry? NAIOP. Do not distribute or reproduce without permission. 19
CEO Insights: The JBG Companies Investment Advisor New Investment Development Team Leader & Asset Manager Pursuit Underwriting Development Advisor If acquired, Dev. Team & Asset Manager execute Business Plan Draft Business Plan Prepared Investment Committee Approval NAIOP. Do not distribute or reproduce without permission. 20
Culture Lessons Learned Team work and collaboration NAIOP. Do not distribute or reproduce without permission. 21
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Lessons Learned Culture Team work and collaboration Don t Underestimate impact of your own work environment NAIOP. Do not distribute or reproduce without permission. 23
Culture NAIOP. Do not distribute or reproduce without permission. 24
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Lessons Learned Culture Team work and collaboration Don t Underestimate impact of your own work environment Entrepreneurship and Grit NAIOP. Do not distribute or reproduce without permission. 26
Lessons Learned Culture Team work and collaboration Don t Underestimate impact of your own work environment Entrepreneurship and Grit Fun NAIOP. Do not distribute or reproduce without permission. 27
Lessons Learned Culture Team work and collaboration Don t Underestimate impact of your own work environment Entrepreneurship and Grit Fun Community Involvement NAIOP. Do not distribute or reproduce without permission. 28
Internal and External Community JBG Cares Women s Initiative Recruitment Initiative NAIOP. Do not distribute or reproduce without permission. 29
The importance of long standing relationships Investors Lenders Brokers Architects and Planners Contractors All Service providers NAIOP. Do not distribute or reproduce without permission. 30
Great Design Great Places Great Results NAIOP. Do not distribute or reproduce without permission. 31
Great Design Great Places Great Results NAIOP. Do not distribute or reproduce without permission. 32
CEO Insights: The JBG Companies Organizational Change NAIOP. Do not distribute or reproduce without permission. 33
Organizational Changes, Challenges and Transitions How have we been organized in the past o Small partnership format o Areas of specialization but very flat structure How are we organized today? NAIOP. Do not distribute or reproduce without permission. 34
JBG Executive Committee Brian Coulter, Michael Glosserman (Chair), James Iker, Matt Kelly and Rob Stewart JBG Management Committee Brian Coulter, James Iker (Chair), Leslie Ludwig, Dave Paul and Michele Smith Investment Management Corporate Development Asset Management James Iker, Matt Kelly Leslie Ludwig Brian Coulter Dean Cinkala, Rod Lawrence, Kai Reynolds Dave Paul NAIOP. Do not distribute or reproduce without permission. 35
Organizational Changes, Challenges and Transitions Generational Transitions o Have successfully managed retirement Brown and Gildenhorn in 1998 Jacobs and Dawson in 2011 o Mandatory retirement age Pros Cons NAIOP. Do not distribute or reproduce without permission. 36
This isn t much of a succession plan. NAIOP. Do not distribute or reproduce without permission. 37
CEO Insights: The JBG Companies How often to reorganize o Message it sends to company o Goal setting/prioritizing o Hard conversations o Transition planning o Dealing with change How often is too often to reorganize? Many rules or best practices should be tested (not always appropriate or right) NAIOP. Do not distribute or reproduce without permission. 38
The role of the organizational consultant From the violent nature of the multiple stab wounds, I d say the victim was probably a consultant. NAIOP. Do not distribute or reproduce without permission. 39
CEO Insights: The JBG Companies Investment Strategy NAIOP. Do not distribute or reproduce without permission. 40
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Investment Characteristics Singular Washington metropolitan area focus High barrier to entry, transit oriented investments with sustainable advantage through all market cycles Investments with asymmetric risk profiles (limited downside/significant upside) that requires specialized expertise (redevelopment potential with in-place income) Structure to maximize near-term value and preserve long-term upside through residual participation Focus on long-term appreciation and multiples of equity (versus IRR) 10 year underwriting approach grounded in replacement cost economics Discipline to exit when market prices exceed replacement cost NAIOP. Do not distribute or reproduce without permission. 42
Leverage JBG Investment Advantages Nuanced Local Market Insight 50-Year Experience Across Economic Cycles Established and Broad Relationship Network In-House Development Acumen and Know-How Mixed Use Expertise Proprietary Opinions of Market NAIOP. Do not distribute or reproduce without permission. 43
Trends Efficiency / Space Utilization Investment Opportunities Pre-leased trophy office development GSA Backlog Pre-leased build-to-suit Mixed-Use Urban/ Suburban Renewal Flight to Quality Infill retail anchored mixed-use Amenitize suburban locations Aggressive selling & recapitalization Oversold suburban assets Class B/C long-term redevelopments For Sale Housing Shortage Infill condo & townhouse development Asymmetric risk/reward profile Near-term downside orientation Embedded/Overt upside optionality NAIOP. Do not distribute or reproduce without permission. 44
Current Market Positive Trends Flight to quality = buying and selling opportunities Possible GSA backlog Very limited pipeline of new supply (except multifamily) Construction costs remain near historic lows Debt & Equity financing remain challenging for non-credit sponsors Retailers continue to expand NAIOP. Do not distribute or reproduce without permission. 45
Property Fundamentals Q2 13 Vacancy Year-over-Year Trend Q2 13 Rental Rate Year-over-Year Trend Office Hotel Residential 15.7% 24.2% 3.8% $36 +1.1% +0.5% +2.0% FSG $155 ADR $1,504 Monthly -1.1% -0.2% +0.5% Retail 4.3% $24 0.0% -0.9% NNN Source: Jones Lang LaSalle, REIS, CoStar as of Q2 2013; Numbers for Office/Hotel represent total/overall vacancy (incl. sublease) NAIOP. Do not distribute or reproduce without permission. 46
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77 H Street: Mixed-Use Retail & Residential 303 residential units above 83,000 SF Walmart with 10,000 SF of additional retail Located at the southwestern corner of NoMa, less than ½ mile from Union Station and Gallery Place Phase II will bring ~400,000 SF of office Walmart lease covers entirety of ground lease payments Currently under contract to sell to core buyer upon final completion NAIOP. Do not distribute or reproduce without permission. 48
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77 H Street 801 NJ 77 H 55 H NAIOP. Do not distribute or reproduce without permission. 52
77 H Street Construction Time Lapse NAIOP. Do not distribute or reproduce without permission. 53
77 H Street NAIOP. Do not distribute or reproduce without permission. 54
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