JBG Smith Gives Up On Georgetown Office Building
JBG Smith isn't putting any more money into The Foundry office building in Georgetown and doesn’t expect any near-term cash flow from the property.
The Bethesda-based REIT gave that update in a footnote in its fourth-quarter investor package Tuesday, explaining why it had excluded the property's performance metrics from the report.
“Beginning in Q4 2023, The Foundry, which is owned by an unconsolidated real estate venture, has been excluded from the occupancy, non-GAAP financial measures, leverage metrics, operating assets and operating metrics presented in our investor package as our investment in this asset is zero, we do not anticipate receiving any near-term cash flow distributions and we have not guaranteed their obligations or otherwise committed to providing financial support,” it says.
A spokesperson for JBG Smith declined to comment further.
JBG and CBRE's independent investment arm acquired the 232K SF building at 1055 Thomas Jefferson St. NW as part of a joint venture fund in 2014. It was the first transaction for the venture, which launched with $250M to invest in D.C. metro area property on behalf of a pool of investors.
Deed records show that JBG/Foundry Office LLC purchased the property in 2014 for $79.5M with a loan from JPMorgan Chase.
The six-story building was built in 1973 and renovated in 2017. Federal government contractor Obsidian Global is located there, according to its website, as is The Searle Freedom Trust, the International Law Institute and CorePower Yoga.
JBG reported a 79.2% office occupancy and 100% retail occupancy at the property in its third-quarter investor package. The property has 84K SF advertised for lease on LoopNet.
Glenn Figurski and Constantinos Panagopoulos were appointed as substitute trustees of the property on Dec. 15, according to records filed with the D.C. Recorder of Deeds. In a separate trust document filed at the end of the year, a December 2019 loan for $58M for the property from JPMorgan Chase was transferred to a subsidiary of the lender.
The loan had an initial maturity date of Dec. 12, 2023, and an extended maturity date of Dec. 12, 2024, according to JBG's Q3 investor packet.
Over the past few years, JBG Smith has shifted its focus to the National Landing area in Northern Virginia where it is developing Amazon HQ2 and the surrounding neighborhood as well as Virginia Tech’s $1B Innovation Campus near the newly delivered Potomac Yard Metro station. It is also the developer behind Monumental Sports' proposed $2B arena-anchored sports district in Potomac Yard, where the Washington Wizards and Capitals are planning to relocate.
JBG has also been redeveloping a series of aging office buildings in the area. It announced in its earnings release it began taking another office building out of service at 2200 Crystal Drive as tenants' leases expire. It did the same with 1800 S. Bell St. and 2100 Crystal Drive after Amazon left its short-term leases there.
"We expect to repurpose these older, obsolete, and under-leased buildings for redevelopment, conversion to multifamily, hospitality, or another specialty use, ultimately reducing cannibalistic competitive inventory in National Landing," the REIT's Q4 investor letter says.
JBG Smith also commented for the first time on the sale of the Central Place office building to CoStar Group, which plans to relocate its headquarters out of D.C. in a deal Gov. Glenn Youngkin announced last week.
"This sale further fuels the trend of businesses seeking out lower-cost, more business-friendly Virginia over DC; it also sources valuable liquidity and capital at (or above) NAV to allocate to more accretive uses," the investor letter says.
