CPPIB Takes Minority Stake in JBG Smith’s DC Office Development

By Gail Kalinoski

Rendering of 1900 N St., N.W., Washington, D.C.

JBG Smith and Canada Pension Plan Investment Board have formed a joint venture for 1900 N St. N.W., with CPPIB paying approximately $101 million for a 45 percent interest in the 271,000-square-foot office building under construction in Washington, D.C. The investment values the office asset at approximately $225 million.

JBG Smith, the Washington, D.C.-area commercial real estate powerhouse that was created through a merger of The JBG Cos. and Vornado/Charles E. Smith, will continue to develop, manage and lease the asset. Construction started in the second quarter of 2017 and is expected to be completed by the second quarter of 2020.

“We are pleased to expand our relationship with CPPIB to bring 1900 N Street to market. This transaction represents continued interest from institutional investors in high-quality assets in the Washington, D.C., market, and is consistent with our strategy to bring in well-capitalized partners, deleverage our balance sheet, and position JBG Smith for future growth opportunities within our portfolio,” JBG Smith CEO Matt Kelly said in a prepared statement.

Aerial view of 1900 N St., N.W., Washington, D.C.

The 11-story building is located two blocks from the Dupont Circle Metro Station and four blocks from the Farragut West Metro Station in D.C.’s CBD. In July, JBG Smith said Goodwin Procter had signed a lease for 80,329-square-feet of space, accounting for nearly 30 percent of the DC office project. The law firm is set to take the top floors of the development.

“This investment fits well with our U.S. office strategy to develop and own high-quality assets in our target markets. The investment in 1900 N Street broadens our Washington, D.C., portfolio and we expect it to deliver attractive risk-adjusted returns over the long term,” Hilary Spann, managing director, head of Americas, Real Estate Investments, CPPIB, said in prepared remarks.

Development deals

The joint venture transaction in Washington, D.C., comes about a month after CPPIB, an investment management organization that invests funds from the Canada Pension Plan, teamed up with Oxford Properties Group to acquire a portion of New York City’s historic St. John’s Terminal site along the Hudson River for $700 million. Oxford owns 52.5 percent of the stake, while CPPIB holds the remaining 47.5 percent interest. Oxford and CPPIB are expected to lead the commercial development at the site in the Hudson Square submarket of Midtown South, but have not announced project details.

JBG Smith, which has an operating portfolio of about 20 million square feet in the D.C. metro region and another 17.6 million square feet available in a development pipeline, is building itself a new headquarters in Bethesda, Md. The 14-story, 287,000-square-foot building at 4747 Bethesda Ave. will have 200,000 square feet of office space and 7,000 square feet of retail. JBG Smith will occupy the lowers floors, taking about 95,000 square feet of the tower. The new building is expected to be completed in the third quarter of 2019.

Images courtesy of JBG Smith