Finance  ·  Industry

JBG Smith Closes $188M Loan Facility to Pay Off Arlington Office Mortgage

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JBG Smith closed on a $187.6 million loan facility in January, encumbering two multifamily buildings in Washington, D.C., part of which was used to repay the mortgage on an office building in Arlington, Va., according to the company’s fourth quarter filings. 

The loan, an advance under a Fannie Mae multifamily credit facility, had a seven-year term at a fixed interest rate of 5.13. JBG Smith (JBGS) used $131.5 million to pay down the debt on the 505-349-square-foot office building 2121 Crystal Drive, which carried a 5.5 percent interest rate.

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The two properties backing the loan are The Wren at 965 Florida Avenue NW and F1RST Residences at 1263 First Street SE, developed in 2020 and 2017, respectively.

“The loan facility provides flexibility for collateral substitutions, future advances tied to performance, ability to mix fixed and floating rates, as well as stagger maturities,” wrote Matt Kelly, CEO of JBG Smith, in the REIT’s quarterly investor letter that was sent out along with its earnings report.

In the fourth quarter of 2023, JBG Smith posted an $18.6 million loss, with a number of upcoming lease expirations in its office portfolio ahead. The REIT’s net loss last quarter was smaller than its $56.4M loss in the final quarter of 2021, and it closed 2022 with a positive net income of $85.4 million. 

“The next two years are prime time for National Landing, which means they are prime time for JBG Smith,” Kelly wrote. “While the exact trajectory of the office and debt markets is impossible to predict, we are well positioned to maximize value whatever the climate.”

In the letter, Kelly was optimistic about JBG Smith’s fortunes improving in 2023, as it completes its multiyear transition to a majority multifamily portfolio. 

“National Landing, where almost 70 percent of our portfolio is located, continues to catalyze our future growth,” he wrote, explaining that Amazon (AMZN) and Virginia Tech are close to finishing their respective headquarters with an increased emphasis on in-person work.

Amazon has three spaces totaling 387,000 square feet across the company’s portfolio set to expire, according to the report. 

Despite a softer office market backdrop, Kelly characterized the submarket as one that continues to attract new tenants thanks to its proximity to the Pentagon.

The company is on track to deliver 1,500 multifamily units over the next 18 months, and open 55 new retail shops within its National Landing properties, per the letter.

JBG Smith deferred all questions back to the report.  

Keith Loria can be reached at Kloria@commercialobserver.com.