JBG Smith Sells 80% Stake In Its Own Headquarters For $196M
Three years after wrapping up construction on its new headquarters building, JBG Smith has sold a majority stake in the property in a deal that values it at $245M.
JBG Smith sold an 80% interest in 4747 Bethesda Ave. in Bethesda for $196M, the REIT revealed in its first-quarter earnings release Tuesday. The developer realized a $40M gain on the sale, it said in its earnings supplement.
JBG Smith retained a 20% interest in the building and will continue to provide management and leasing services. It didn't disclose the buyer of the majority interest.
In his quarterly letter to investors, JBG Smith CEO Matt Kelly said the sale was part of the company's strategy to reduce its debt and recycle capital — it has spent $60.2M so far this year buying back its stock to shore up its price.
"The asset’s new trophy-quality construction, credit tenancy, and in-place, assumable, interest-only debt made it an attractive sale candidate with a strong valuation ($815 per square foot)," Kelly wrote.
The REIT, which has focused much of its efforts in recent years on developing the National Landing area centered around Amazon HQ2, has maintained its headquarters in Montgomery County. It was previously located at 4445 Willard Ave. in Chevy Chase before announcing in 2017 it would relocate to its new 4747 Bethesda project.
It made that shift in November 2019, and it was joined by several other office tenants. Host Hotels & Resorts leased around 55K SF in the building for its headquarters. Booz Allen Hamilton signed on for 65K SF. French nuclear power company Orano leased 22K SF, and CBRE took 8K SF for its Bethesda office.
The 15-story, 291K SF office building was one of four trophy towers built around the same time that represented the first new wave of trophy office development in Downtown Bethesda in a generation. Those also included office towers from Carr Properties and Stonebridge, plus Marriott International's headquarters building.
Also in the first quarter, JBG Smith sold a development site in Arlington for $5.5M, taking a $53K loss on the transaction, it disclosed in its earnings report. The transaction appears to be a sale of the Fern Gardens apartment building, a 30-unit property at 2868 Fort Scott Drive not far from HQ2.
Arlington property records show an LLC registered to 4747 Bethesda Ave. sold the 61-year-old building on March 17 for $5.5M to a company managed by Arlington resident Laurence McKenney. JBG Smith's affiliate purchased the property in December 2020 for $5M.
For the first three months of 2023, the REIT posted $33M in funds from operations, down from the $51.3M it reported at the end of March 2022. Its commercial portfolio was 88.5% leased at the end of 2022, but that dipped to 87.6% three months later. It did report $21.2M of net income after posting a slight loss a year prior.
Ethan Rothstein contributed reporting for this article.
