JBG Smith

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JBG Smith
Public company
Traded as
Industry Real estate development
Predecessor The JBG Companies
Charles Smith Companies
Miller, Brown & Gildenhorn
Founded 1957
Headquarters Chevy Chase, Maryland, United States
Area served
Washington, D.C., metropolitan area
Key people
W. Matt Kelly, CEO
David Paul, COO
Steve Theriot, CFO
James Iker, Chief Investment Officer
Steven Roth, Chairman[1]
Michael Glosserman, Trustee[2][3]

Mitchell Schear, Consultant and Trustee[4]
Products Office buildings, apartment buildings, hotels
Revenue Increase US$0.357 billion (2016)[5]
Increase US$0.087 billion (2016)[5]
Increase US$0.046 billion (2016)[5]
Total assets Increase US$3.703 billion (2016)[5]
Total equity Increase US$2.191 billion (2016)[5]
Number of employees
1,100 (2016)[5]
Website JBGSmith.com

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

The company owns 20.9 million square feet of income producing assets and has a development pipeline of 18 million square feet, all of which is in the Washington, D.C., metropolitan area, mostly inside the Beltway, and 98% of which accessible by the Washington Metro.[6]

The company has a long 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.[7]

Corporate history[edit]

Founding and early years[edit]

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.[7]

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.[8]

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)[edit]

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.[7] Managers Brian P. Coulter and Robert A. Stewart joined the company in the 1980s.[8]

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.[9]

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.[8]

Portfolio sale to TrizecHahn (1997)[edit]

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.[9][10] The deal did not include 10 apartment projects owned by JBG.[9][11] 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.[7]

Creation of investment funds and second portfolio sale[edit]

After the divestment, Brown and Gildenhorn retired from daily management of the company.[8] With Glosserman as the firm's new Managing Partner, the company decided on a new investment strategy in 1999.[7] 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. Its first institutional investor was the Yale Endowment. The first investment fund closed in 2002,[8] and by fall 2012, JBG had established eight investment funds and raised $5.5 billion.[7] Several of the funds were specifically created just for investment by the endowment of Yale University.[7] New partners were added, including Porter Dawson, Kenneth F. Finkelstein, James L. Iker, and W. Matt Kelly.[8]

In 2005, JBG recapitalized several office buildings by selling a stake in the buildings to Morgan Stanley for $644 million.[12][13]

In August 2007, JBG sold most of its portfolio to MacFarlane Partners for $2 billion.[14]

By 2011, the company had $10 billion in assets. That year, Jacobs retired as managing member.[8] The firm had 15 owners by 2012, and more than 500 employees.[7]

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.[7]

In 2013, the company was named as the most active real estate developer in the Washington, D.C. metropolitan area.[15][16]

1920 N Street NW[edit]

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 it intended to build a 140.5 feet (42.8 m) high glass and steel mixed-use building with a Modernist steel armature as an adornment at 1920 N Street NW. Company officials said they wanted to tear down the existing structures at 1920 and 1924 N Street NW, and would combine the new structure with the old one at 1233 20th Street.[17]

Sale of Rockville office buildings[edit]

In 2014, the company sold two buildings in Rockville, Maryland that were leased to the Food and Drug Administration, for $48.6 million.[18][19]

965 Florida Avenue NW[edit]

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.[20][21] The parcel was sold for $400,000, below an estimated market value of $27 million, and the decision to sell was very controversial, with D.C. City Council member Jim Graham threatening to oppose the deal.[22][23]

Fund IX[edit]

The company opened a new real estate fund called JBG/Fund IX on March 17, 2014, and by September 2014, the company had raised $680 million.[24][25]

Central Place[edit]

In late 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.[26] The property opened in 2016.[27][28]

1300 U Street NW[edit]

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.[29] JBG provided $600,000 in community benefits as part of approval for the building.[30][31] The building will include a restaurant called The Smith.[32]

Gallaudet University Campus[edit]

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.[33][34]

The Woodley[edit]

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 acres (65,000 m2) lot adjacent to the hotel.[35] 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.[36] 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.[37] Hotel revenues declined significantly during the Great Recession, and Marriott exercised its right to stop the conversion of the hotel into condominiums.[37]

Lawsuit with Marriott regarding the Washington Marriott Marquis[edit]

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.[38] 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.[37]

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.[39] On January 21, 2010, the Washington Convention and Sports Authority also filed suit against JBG for tortious interference.[40] The city followed suit with its own tortious interference claim on February 18, 2010.[41]

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.[42] The parties suspended litigation against one another to negotiate, but litigation resumed on June 8, 2010.[43]

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.[44][45]

Construction and sale of The Woodley apartments[edit]

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[35] 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.[46][47]

Condominiums[edit]

JBG also converted a portion of the hotel into 32 condominiums.[48] 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.[49] One of the condominium units sold for $8.4 million.[50]

Merger with Vornado subsidiary and spin off into a public company[edit]

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.[51]

Charles E. Smith Commercial was acquired by Vornado in 2002.[52] At the time, Charles E. Smith Commerical’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.[53]

References[edit]

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  3. ^ "Board of Trustees - JBG Smith". investors.jbgsmith.com. Retrieved 2 August 2017. 
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  5. ^ a b c d e f SEC Filing
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