JBG Smith

JBG SMITH Properties
Public company
Traded as NYSE: JBGS
S&P 400 component
Industry Real estate investment trust
Predecessor The JBG Companies
Charles Smith Companies
Miller, Brown & Gildenhorn
Founded 1957 (1957)
Headquarters Chevy Chase, Maryland
Area served
 Washington metropolitan area
Key people
 W. Matthew Kelly, CEO
David P. Paul, COO
Steven W. Theriot, CFO
Steven Roth, Chairman
Revenue Increase $0.543 billion (2017)
Increase -$0.079 billion (2017)
Total assets Increase $6.071 billion (2017)
Total equity Increase $2.974 billion (2017)
Number of employees
 1,020 (2017)
Website www.jbgsmith.com
Footnotes / references
[1]

JBG SMITH Properties is a publicly traded real estate investment trust based in Chevy Chase, Maryland.

The company owns 69 properties and has 10 additional properties under construction, all of which are in the Washington metropolitan area, mostly inside the Beltway, and almost all of which are accessible by the Washington Metro.[1]

The company has a history of developing sustainable buildings and is a member of the U.S. Green Building Council. It helped develop the Leadership in Energy and Environmental Design (LEED) program for the design, construction, operation, and maintenance of green buildings, homes, and neighborhoods.[2]

Corporate history

Founding and early years

In 1957, three attorneys — Gerald J. Miller, Donald A. Brown, and Joseph Gildenhorn — formed a law practice in Rockville, Maryland called Miller, Brown & Gildenhorn. By 1960, the firm stopped practicing law and instead began securing private loans from wealthy investors to finance building projects brought to them by real estate developers.[2]

By 1962, the company controlled more than $50 million in real estate. Among the projects it completed in Washington, D.C. were a $4 million office building at 2121 Pennsylvania Avenue NW, the $2.7 million Jefferson Building at 19th Street NW and Jefferson Place NW, an $8.5 million office building at 19th and M Streets NW, and a $12 million large apartment complex at Tunlaw Road NW and Watson Place NW. That year, the company formed its own real estate development arm, MBG Associates. Benjamin A. Jacobs, a 23-year-old law student who expressed deep interest in the law firm's real estate practice, joined the real estate division.[3]

Miller left the company in 1969, and Jacobs was made a partner in the firm. MBG Associates changed its name to JBG Associates to reflect the initials of the new partners and formed two subsidiaries, JBG Properties Inc. and JBG Construction Co.

Growth (1970-1996)

In the 1970s, the firm hired several people who later became top managers at the company, including Robert H. Braunohler, Michael J. Glosserman, and Lewis Rumford.[2] Managers Brian P. Coulter and Robert A. Stewart joined the company in the 1980s.[3]

In the late 1980s, the company was among the first real estate development firms in the D.C. area to redevelop properties for third-party clients for a set fee. This strategy helped the company survive the early 1990s recession.[4]

The company aggressively acquired several properties after the early 1990s recession. With 26 buildings in its portfolio in the early 1990s, Gilderhorn, Brown, and Jacobs considered an initial public offering for the company, although it did not happen.[3]

Portfolio sale to TrizecHahn (1997)

By 1997, the company had an ownership interest in 21 commercial properties, including many office buildings, two hotels and one shopping center. It sold most of its assets to Trizec Properties in 1997 for $560 million.[4][5] The deal did not include 10 apartment projects owned by JBG.[4][6] The sale helped raise capital for the firm. But with a smaller portfolio, the company also shed most of its staff, and only 15 people remained with the firm at the end of the year.[2]

Creation of investment funds and second portfolio sale

After the divestment, Brown and Gildenhorn retired from daily management of the company.[3] In 1999, with Glosserman as the firm's new Managing Partner, the company decided on a new investment strategy.[2] Instead of putting together syndicates for specific projects, the company sought out individual, and later institutional, investors. This gave the firm access to funds it could use at is discretion. The first investment fund closed in 2002, and its first institutional investor was the financial endowment of Yale University.[3] By fall 2012, JBG had established 8 investment funds and raised $5.5 billion; several of the funds were specifically created just for investment by Yale.[2] New partners were added, including Porter Dawson, Kenneth F. Finkelstein, James L. Iker, and W. Matt Kelly.[3]

In 2005, JBG recapitalized several office buildings by selling a stake in the buildings to Morgan Stanley for $644 million.[7][8]

In August 2007, JBG sold most of its portfolio to MacFarlane Partners for $2 billion.[9]

By 2011, the company had $10 billion in assets. That year, Jacobs retired as managing member.[3] The firm had 15 owners by 2012, and more than 500 employees.[2]

By the fall 2012, The company had developed, owned, or managed more than 30,000,000 square feet (2,800,000 m2) of office space; 15,000 apartments; 5,500,000 square feet (510,000 m2) of retail space; and 15 hotels with more than 4,500 rooms.[2]

In 2013, the company was named as the most active real estate developer in the Washington, D.C. metropolitan area.[10][11]

1900 N Street NW

In 2012, JBG purchased 1920 N Street NW, 1924 N Street NW, and 1233 20th Street NW for $113 million. On December 18, 2013, the company announced plans to build a 140.5 feet (42.8 m) high glass and steel mixed-use building with a modern steel armature, tearing down the structures at 1920 and 1924 N Street NW, and combining the new structure with the old one at 1233 20th Street.[12] In 2018, the company sold a 45% interest in the development to CPP Investment Board for $101 million.[13][14]

Sale of Rockville office buildings

In 2014, the company sold two buildings in Rockville, Maryland that were leased to the Food and Drug Administration, for $48.6 million.[15][16]

965 Florida Avenue NW

In 2014, the company partnered with MRP Realty to redevelop 965 Florida Avenue NW, anchored by Whole Foods. The firm had bid on a chance to develop the city-owned parcel, but lost out to MRP Realty in July 2013.[17][18] The parcel was sold for $400,000, below an estimated market value of $27 million, and the decision to sell was very controversial, with Jim Graham of the Council of the District of Columbia threatening to oppose the deal.[19][20]

Fund IX

The company opened a real estate investment fund called JBG/Fund IX on March 17, 2014, and by September 2014, the company had raised $680 million.[21][22]

Central Place

In April 2014, the company broke ground on Central Place, two 355-foot (108 m) high, 31-story towers in Rosslyn, Virginia, containing 377 condominiums and apartments, 350,000 square feet of office space, 25,000 square feet (2,300 m2) of ground-level retail space, and a six-level underground parking garage, next to a public plaza and the Rosslyn Metro station. The project was co-financed by the State Teachers Retirement System of Ohio.[23] The property opened in 2016.[24][25]

1300 U Street NW

In 2014, the company began construction on an eight-story, 129-apartment unit, mixed-use development with 15,750 square feet of street-level retail and 48-underground parking spaces at the intersection of 13th and U Streets NW. Balfour Beatty Construction is handling construction of the property.[26] JBG provided $600,000 in community benefits as part of approval for the building.[27][28] The building will include a restaurant called The Smith.[29]

Gallaudet University Campus

In October 2014, the Gallaudet University board of trustees announced a 10-year, $450 million redevelopment of its campus along 6th Street NE. The development, which includes both campus property as well as college-owned residential and retail property across the street, will be overseen by JBG.[30][31]

The Woodley

Marriott Wardman Park Tower

In 2005, JBG and CIM Group, purchased the Marriott Wardman Park hotel from Thayer Lodging Group for $300 million. JBG planned to convert a portion of the hotel into luxury condominiums and construct a 200-unit condominium building on a 16-acre (65,000 m2) lot adjacent to the hotel.[32] JBG also said it will demolish the hotel's parking garage and main ballroom, and spend $50 million to renovate the guest rooms, add dining space, build a new fitness center, and improve the exhibition and meeting space.[33] The deal included a clause that allowed Marriott, which continued to manage the hotel, to veto the conversion of hotel rooms into condos if revenues on the remaining hotel section fell below a specified number.[34] Hotel revenues declined significantly during the Great Recession, and Marriott exercised its right to stop the conversion of the hotel into condominiums.[34]

Lawsuit with Marriott regarding the Washington Marriott Marquis

In 2002, Marriott International received the right to construct the 1,224-room Washington Marriott Marquis in downtown Washington, D.C. A subsidiary of JBG, Wardman Investor LLC, filed a notice with the city's Contract Appeals Board in early 2009 to have the entire project set aside for being an "invalid sole source procurement". JBG argued that the original proposal from D.C. required the hotel to be built on private land and financed with private money. JBG did not submit a proposal because it could not meet these conditions. Subsequently, the city negotiated only with Marriott, eliminated the private investment requirement, added $272 million in public financing, and gave Marriott an "extraordinarily favorable" lease. JBG argued that these changes altered the terms of the project and that it should be put out for public bid again. The appeals board said in July 2009 that JBG lacked standing to protest the award since it never bid on the job. Even if the company did have standing, the appeal board said, it lost the right to protest after the council passed legislation removing the project from the regular contracting process in 2006.[35] JBG's motive for filing the lawsuit may not have been to contest the construction of the convention headquarters hotel. JBG allegedly sued to stop the Washington Marriott Marquis project in order to obtain favorable action by Marriott on condo conversions at the Marriott Wardman Park.[34]

Marriott counter-sued JBG on January 14, 2010, accusing JBG of tortious interference in its contractual relations. In support of its claim, Marriott told the court that JBG officials had threatened Marriott with a lawsuit if it did not renegotiate its Wardman Park deal.[36] On January 21, 2010, the Washington Convention and Sports Authority also filed suit against JBG for tortious interference.[37] The city followed suit with its own tortious interference claim on February 18, 2010.[38]

On March 29, 2010, Superior Court of the District of Columbia Judge Natalia Combs Greene granted partial summary judgment and a motion to dismiss to Marriott, the city, and WCSA. A partial out-of-court settlement had already been reached by the parties giving JBG some limited ability to move forward on the condo project, but that agreement now seemed unnecessary given the court's ruling.[39] The parties suspended litigation against one another to negotiate, but litigation resumed on June 8, 2010.[40]

The parties in the various lawsuits resolved their legal dispute on July 1, 2010, allowing construction to resume on both the Marriott Marquis and the Wardman Park renovation.[41][42]

Construction and sale of The Woodley apartments

After the collapse of the housing market during the financial crisis of 2007-2008, JBG decided to construct an apartment building on the vacant acreage rather than condominiums. D.C.-based architect David M. Schwarz designed an eight-story, 212-unit building for the company. Originally called Wardman West, the name was later changed to 2700 Woodley[32] and then later to The Woodley. In June 2014, after the building was completed, but before it was leased, JBG sold The Woodley for $195 million, or $920,000 per unit, to TIAA-CREF, which set a record for the highest price-per-unit ever paid for a multifamily project in the D.C. metropolitan area.[43][44]

Condominiums

JBG also converted a portion of the hotel into 32 condominiums.[45] The project was financed by a $54 million investment from North America Sekisui House LLC (NASH), the North American division of the largest homebuilding corporation in Japan, in February 2014.[46] One of the condominium units sold for $8.4 million.[47]

Merger with Vornado subsidiary and spin off into a public company

In July 2017, the company merged with Charles E. Smith Companies, a subsidiary of Vornado Realty Trust that owned its assets in the Washington, D.C. metropolitan area. The company changed its name to JBG Smith and was spun off into a public company.[48]

Charles E. Smith Commercial was acquired by Vornado in 2002.[49] At the time, Charles E. Smith Commercial’s portfolio included 14 million square feet of space in 50 buildings throughout the Washington, D.C. region, including 7.2 million square feet in Crystal City, Virginia.[50]

Redevelopment of Crystal City properties

In 2017, the company announced plans to redevelop certain of its properties in Crystal City, Virginia.[51][52][53]

References

  1. 1 2 "JBG SMITH Properties 2017 Form 10-K Annual Report". U.S. Securities and Exchange Commission.
  2. 1 2 3 4 5 6 7 8 Derven, Ron (Fall 2012). "Developer of the Year: The JBG Companies - Building a Sustainable Advantage". NAIOP.
  3. 1 2 3 4 5 6 7 O'Connell, Jonathan (January 10, 2011). "As Jacobs steps aside, JBG aggressively repositions itself again". The Washington Post.
  4. 1 2 3 Fruehling, Douglas (September 29, 1997). "JBG selling portfolio to TrizecHahn". American City Business Journals.
  5. ↑ Greenberg, Larry M. (September 29, 1997). "TrizecHahn Agrees to Buy JBG, Increasing Washington Assets". The Wall Street Journal. (subscription required)
  6. ↑ Sernovitz, Daniel J. (March 16, 2012). "The secret to JBG's success". American City Business Journals.
  7. ↑ "The JBG Companies Completes Sale and Recapitalization of Six Properties" (Press release). Business Wire. October 4, 2005.
  8. ↑ "Morgan Stanley Real Estate's Prime Property Fund Acquires Class A Office Portfolio from The JBG Companies for $644 Million" (Press release). Business Wire. October 3, 2005.
  9. ↑ Natarajan, Prabha (August 20, 2007). "JBG and MacFarlane to team up in Washington area projects". American City Business Journals.
  10. ↑ Neibauer, Michael (November 13, 2013). "It's not just you: JBG is everywhere". American City Business Journals.
  11. ↑ "DC Development Report" (PDF). Washington DC Economic Partnership.
  12. ↑ Neibauer, Michael (December 18, 2013). "After $110M buy, JBG plans something big for Dupont Circle". American City Business Journals.
  13. ↑ Banister, Jon (February 26, 2018). "Canadian Pension Fund Pays $100M For Minority Stake In JBG Smith's 1900 N Project". Bisnow Media.
  14. ↑ Neibauer, Michael (February 26, 2018). "Canadian fund takes major stake in JBG Smith's Dupont Circle project". American City Business Journals.
  15. ↑ Sernovitz, Daniel J. (January 22, 2014). "The JBG Co. sells two FDA-leased buildings in Rockville". American City Business Journals.
  16. ↑ Goldreich, Sonny (January 24, 2014). "JBG sells pair of Rockville buildings leased by FDA for $48.6 million". The Gazette.
  17. ↑ Neibauer, Michael (July 30, 2013). "MRP tops JBG in bid to develop D.C.-owned Florida Avenue parcel". American City Business Journals.
  18. ↑ Sernovitz, Daniel J. (February 3, 2014). "MRP, The JBG Cos. to join forces on Shaw redevelopment". American City Business Journals.
  19. ↑ Neibauer, Michael (August 3, 2013). "D.C. councilman suggests fight to come over MRP Realty selection". American City Business Journals.
  20. ↑ Davis, Aaron C. (September 25, 2015). "How D.C. turned $27 million into $400,000". The Washington Post.
  21. ↑ Sernovitz, Daniel J. (April 30, 2014). "JBG's next multimillion-dollar cash raise". American City Business Journals.
  22. ↑ Sernovitz, Daniel J. (September 9, 2014). "How D.C.'s sputtering real estate market helped JBG raise $680 million". American City Business Journals.
  23. ↑ Neibauer, Michael (April 23, 2014). "JBG, Arlington leaders break ground on Rosslyn's Central Place (Video)". American City Business Journals.
  24. ↑ Cooper, Rebecca (September 26, 2016). "Rosslyn's Central Place lands fast-casual restaurants, coffee shop". American City Business Journals.
  25. ↑ Lerner, Michele (February 23, 2017). "Luxury apartment tower with river views is rising in Rosslyn". The Washington Post.
  26. ↑ Meyers, Bryce (July 24, 2015). "The JBG. Cos. Taps Balfour Beatty Construction to Develop 13th & U Project in D.C." CoStar Group.
  27. ↑ Lerner, Michele (August 4, 2015). "Apartments and retail coming to U Street". The Washington Post.
  28. ↑ GOLDCHAIN, MICHELLE (August 4, 2015). "What to Expect from the New Construction at 1300 U Street NW". Curbed.
  29. ↑ MITCHELL, TRAVIS (March 22, 2017). "New York City's The Smith Is Coming to U Street". Gothamist. Archived from the original on July 9, 2017.
  30. ↑ "GALLAUDET SELECTS THE JBG COMPANIES FOR 6TH STREET NE DEVELOPMENT" (Press release). Gallaudet University. October 11, 2014.
  31. ↑ Clabaugh, Jeff (October 10, 2014). "Gallaudet selects JBG for campus development". American City Business Journals.
  32. 1 2 O'Connell, Jonathan (April 13, 2012). "What's Going On With...Construction at the Marriott Wardman Park Hotel?". The Washington Post.
  33. ↑ Ghouse, Mahhen (July 6, 2005). "JBG, CIM Group Acquire Marriott Wardman Park Hotel". CoStar Group.
  34. 1 2 3 Castro, Melissa; O'Connell, Jonathan (October 5, 2009). "What's Behind JBG's Convention Hotel Lawsuit?". American City Business Journals.
  35. ↑ Castro, Melissa (September 30, 2009). "JBG Sues D.C. Over Convention Hotel Deal With Marriott". American City Business Journals.
  36. ↑ O'Connell, Jonathan (January 15, 2010). "Marriott International Sues JBG Cos. Over Convention Center Hotel". American City Business Journals.
  37. ↑ "Washington Convention and Sports Authority Sues JBG Over Hotel Deal". American City Business Journals. January 22, 2010.
  38. ↑ "D.C. Sues JBG Over Convention Center Hotel". American City Business Journals. February 22, 2010.
  39. ↑ Krouse, Sarah (March 30, 2010). "No Word Yet From JBG After Judge Dismisses Convention Hotel Lawsuit". American City Business Journals.
  40. ↑ "Attorney General: D.C. Lawsuit Against JBG Back On". American City Business Journals. June 9, 2010.
  41. ↑ "Marriott, JBG Agreement Clears Convention Hotel". American City Business Journals. July 7, 2010.
  42. ↑ O'Connell, Jonathan (July 7, 2010). "JBG and Marriott agree to allow convention center hotel construction to start". The Washington Post.
  43. ↑ Sernovitz, Daniel J. (June 26, 2014). "With The Woodley, TIAA-CREF Sets New Record Last Held By... TIAA-CREF". American City Business Journals.
  44. ↑ Terry, Robert J. (May 1, 2015). "The Woodley". American City Business Journals.
  45. ↑ Lerner, Michele (December 10, 2015). "Wardman Tower to be transformed into 32 luxury condos". The Washington Post.
  46. ↑ Sernovitz, Daniel J. (February 28, 2014). "Japanese Investor Partners on Wardman Tower Condos". American City Business Journals.
  47. ↑ Neibauer, Michael (May 10, 2017). "At $8.4M, Wardman Tower condo nearly sets record for most expensive ever sold in D.C." American City Business Journals.
  48. ↑ "JBG SMITH Properties - FORM 8-K - July 21, 2017". getfilings.com. Retrieved 2 August 2017.
  49. ↑ O'Connell, Jonathan (October 31, 2016). "Merger between JBG and Vornado to create Washington's largest landlord to the federal government". The Washington Post.
  50. ↑ Haggerty, Maryann; Haggerty, Maryann (October 13, 1997). "REIT BUYS STAKE IN SMITH PORTFOLIO". The Washington Post.
  51. ↑ "Meet 'North District,' JBG Smith's partial rebranding of Crystal City". American City Business Journals. September 11, 2017.
  52. ↑ Goff, Karen (July 18, 2017). "JBG Smith's top target: the reinvention of Crystal City". American City Business Journals.
  53. ↑ "JBG Smith Seeking Feedback on Crystal City 'Central District' Development". ARLnow.com. March 15, 2018.
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