JBG SMITH Forms JV to Recapitalize $580M Office Portfolio

7200 Wisconsin Ave. in Bethesda, Md. Image courtesy of Sam Kittner

As it continues to focus more on multifamily and the National Landing submarket in northern Virginia, owner-developer JBG SMITH has agreed to form a joint venture with affiliates of Fortress Investment Group to recapitalize a 1.6 million­-square-foot portfolio of seven office buildings in the Washington, D.C., metro valued at $580 million.

The properties are: 7200 Wisconsin Ave. in Bethesda, Md.; 1730 M St. in Washington, D.C.; RTC West I, II and III in Reston, Va.; and Courthouse Plaza I and II in Arlington, Va. The properties are all located in amenity-rich, Metro-served locations. The transaction is expected to close in the first half of the year. Eastdil Secured served as exclusive advisor to JBG SMITH.

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Citing JBG SMITH’s expertise and the strong competitive position of the office properties, Fortress Managing Director Apostolos Peristeris said in prepared remarks Fortress sees significant opportunity for profitable growth across the portfolio. A global investment manager, Fortress manages $54.2 billion of assets under management on behalf of approximately 1,800 institutional clients and private investors.

National Landing Focus

George Xanders, JBG SMITH chief investment officer, said in a prepared statement the firm had announced plans last year to sell at least $1.5 billion of non-core office and land assets, primarily outside National Landing to deleverage its balance sheet and provide more capacity for multifamily development and acquisitions and share repurchases. He said the partnership with Fortress accelerates its capital recycling initiatives and advances the firm’s planned portfolio shift to majority multifamily, with an office concentration in National Landing.

7200 Wisconsin Ave. in Bethesda, Md. Image courtesy of Sam Kittner

More than half of JBG SMITH’s holdings are in the National Landing submarket, where it serves as the developer for Amazon’s new headquarters and Virginia Tech’s planned $1 billion Innovation Campus. In May 2021, JBG SMITH and institutional investors advised by J.P. Morgan Global Alternatives formed a joint venture to own, design, develop and manage about 2 million square feet of new mixed-use development in Potomac Yard, adjacent to the Amazon HQ2 and the Innovation Campus. As part of the project, JBG SMITH will develop two multifamily buildings totaling 419,000 square feet of space, with the remaining 1.6 million square feet of development to follow in subsequent years.

The Bethesda, Md.-based firm’s portfolio currently comprises 17.1 million square of high-growth office, multifamily and retail assets. It also has a development pipeline of about 16.6 million square feet of mixed-use development opportunities.