JBG SMITH, Fortress Recapitalize DC Office Portfolio for $580M


JBG SMITH’s offloading of $1.5 billion in assets in 2021 has primed the firm for a joint venture with global investment manager, Fortress Investment Group, to reposition buildings already under JBG’s ownership.

The two firms have partnered up to recapitalize a 1.6 million-square-foot portfolio valued at $580 million, which includes seven office buildings in the Washington, D.C. metro area. The portfolio includes 7200 Wisconsin Avenue in Bethesda, Md., 1730 M Street in Washington, D.C., RTC West I, II and III in Reston, Va., and Courthouse Plaza I and II in Arlington, Va.

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The transaction is expected to close in the first half of 2022, pending any unforeseen changes to financing or closing conditions, according to JBG Smith (JBGS).

“In 2021, we announced plans to sell at least $1.5 billion of non-core office and land assets, primarily outside National Landing, to deleverage our balance sheet and provide capacity for multifamily development and acquisition opportunities and share repurchases,” George Xanders, JBG SMITH’s CIO, said in a prepared statement. 

The move allows the firm to focus on National Landing, the Northern Virginia submarket where over half its portfolio is concentrated, and where it is developing Amazon (AMZN)’s HQ2.

“This partnership with Fortress, a top-tier investment management firm, accelerates our capital recycling initiatives and advances our planned portfolio shift to majority multifamily, with an office concentration in National Landing.”

Eastdil Secured served as an adviser for JBG SMITH in the transaction. It wasn’t immediately clear who brokered the deal on behalf of Fortress.

This strategy serves to further secure JBG SMITH’s status in the D.C. market  while helping the firm take advantage of “sustainable, amenity-rich, mixed-use properties,” Apostolos Peristeris, a managing director at Fortress, told Commercial Observer.

JBG SMITH owns up to 17.1 million square feet of office, multifamily and retail assets, of which 98 percent are in areas served by either the Washington Metropolitan Area Transit Authority or other mass transit options. 

Mark Hallum can be reached at mhallum@commercialobserver.com.