- JBG Smith is moving away from multifamily and focusing on buying discounted office properties and repurchasing its stock.
- The company bought three office buildings in Tysons for $42.3M, with plans to turn one into apartments.
- It sold $452M in multifamily assets during Q2 and continues to sell more after the quarter.
- CEO Matt Kelly says current office pricing offers one of the best buying chances in 20 years.
Strategic Shift
Bisnow says that JBG Smith is making a sharp turn in its investment approach. The D.C.-based REIT is using funds from multifamily sales to buy distressed office properties and repurchase stock. In a Q2 letter to shareholders, CEO Matt Kelly said the firm sees a rare chance to buy offices at deep discounts.
Recent Office Deals
In the second quarter, JBG bought three office buildings in Tysons for $42.3M. One of the buildings will be turned into a 300-unit apartment project. The firm also repurchased 11.2M shares for $184.9M in Q2. Year-to-date, it has spent $376.9M buying back 23.6M shares.
Kelly said the market had undervalued JBG’s distressed office portfolio. Buying back shares, he noted, was the best use of capital under current conditions.
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Multifamily Sales Fuel the Strategy
To fund these moves, JBG sold $452M in apartment assets last quarter. This included a 283-unit property in the West End for $186M. It also sold a 40% stake in the 465-unit West Half building for $100M. A long-held development site in NoMa sold for $11M. After the quarter, the firm also sold a 432-unit apartment building in NoMa for $155M.
Portfolio Faces Pressure
Leasing has fallen in both of JBG’s main property types. At the end of Q2, its apartment portfolio was 94.8% leased and 92.9% occupied. That’s a slight drop from Q1. Kelly said the D.C. rental market showed strength, despite political uncertainty earlier in the year.
The firm’s office portfolio was 76.5% leased and 74.8% occupied. JBG signed 208K SF in new office leases in Q2. But it saw a 6.1% drop in rent for second-generation leases.
Focus on Long-Term Potential
In National Landing, JBG has removed 1M SF of outdated office space. The firm plans to redevelop those properties into housing, hotels, and other uses. Kelly said JBG is concentrating leasing efforts in transit-friendly areas with strong growth potential.
Why This Matters
As office values hit new lows and apartment assets still sell at high prices, JBG sees a window to buy low. The REIT is betting on long-term value in office real estate, especially with its redevelopment experience.
What’s Next
JBG will likely continue selling apartments and buying more office buildings. The firm aims to invest in locations where it can add value through mixed-use development.
