JBG SMITH Will Acquire Union Market Mixed-Use Development for $205M
JBG SMITH is set to acquire The Batley, a recently completed, 432-unit development in Washington, D.C.’s Union Market neighborhood, for $205 million, according to the company’s third-quarter earnings report.
PGIM and Trammell Crow Residential, which developed the mixed-use property in 2019, is the seller.
Located at 1270 4th Street NE, The Batley is a 12-story, 300,000-square-foot building designed by Shalom Baranes Associates. Amenities include rooftop pool, penthouse club room, fitness center and pet spa.
The deal is expected to close by the end of the year.
In his quarterly investor letter, JBG SMITH CEO Matt Kelly said the firm expects The Batley to generate annualized net operating income of approximately $8 million to $8.5 million, representing a stabilized capitalization rate of approximately 4 percent.
In 2020, Amazon agreed to buy PenPlace, a 10-acre site in National Landing from JBG SMITH, for a little under $150 million.
“We intend to use The Batley as a replacement property in a like-kind exchange for the expected proceeds from the sale of PenPlace to Amazon, which is expected to close during Q2 2022,” he said.
The building was 90.7 percent occupied as of Sept. 30, 2021.
Kelly noted in the earnings call that the firm’s multifamily portfolio performance continues to improve.
“We experienced strong leasing during the third quarter due to customers returning to urban environments at a faster pace than we anticipated,” he said. “Our portfolio ended the quarter at 90.2 percent occupied, up 390 basis points quarter-over-quarter, and 92.9 percent leased.”
Additionally, JBG SMITH’s residential portfolio saw asking rents increase 2 percent above pre-pandemic levels, after declining 15 percent from March 2020 to December 2020.
In addition to the sale of $1.7 billion of non-core, primarily office assets since JBG SMITH’s formation in 2017, the firm intends to opportunistically sell approximately another $1.4 billion of non-core assets, including office assets outside of National Landing, according to Kelly.
“Our capital allocation strategy is to shift our portfolio to majority multifamily and concentrate our office portfolio in National Landing,” Kelly said in the investor letter. “We expect our portfolio shift to majority multifamily will occur through a combination of investing in multifamily assets and divesting non-core office assets.”
Keith Loria can be reached at Kloria@commercialobserver.com.