The JBG Companies

The JBG Companies
Private
Industry Real estate development
Predecessor MBG Associates
Founded 1957
Headquarters 4445 Willard Avenue, Suite 400, Chevy Chase, Maryland, United States
Area served
 Washington, D.C., metropolitan area
Key people
 Michael J. Glosserman, Managing Partner and Chair, Executive Committee[1]
Products Office buildings, apartment buildings, hotels
Total assets $10 billion (2011)[1]
Number of employees
 500 (2012)[2]
Website JBG.com

The JBG Companies (also known as The JBG Cos.) is a privately owned real estate investment and management firm based in Chevy Chase, Maryland, in the United States. Founded as a law firm in 1957, the company became known as MBG Associates and moved into loan syndication in 1958. In 1960, the firm ceased the practice of law and incorporated as a real estate development company. With the departure and addition of a founding partner in 1969, the firm became known as JBG Associates. It changed its named to The JBG Companies in 1985. The firm engages in development and redevelopment of properties primarily "inside the Beltway" in the Washington, D.C., metropolitan area.

Corporate history

Founding and early years

In 1957, three attorneys — Gerald J. Miller, Donald A. Brown, and Joseph Gildenhorn — formed a law practice in Rockville, Maryland. The following year, they entered the loan syndication business, helping to secure private loans from wealthy investors to finance building projects brought to them by real estate developers.[3]

By 1962, the company had more than $50 million in real estate under its control. Among the projects it completed in the District of Columbia were a $4 million office building at 2121 Pennsylvania Avenue NW, the $2.7 million Jefferson Building at 19th Street NW and Jefferson Place NW, an $8.5 million office building at 19th and M Streets NW, and a $12 million large apartment complex at Tunlaw Road NW and Watson Place NW. None of them had a rate of return of less than 13 percent.[3] That year, the company formed its own real estate development arm, MBG Associates.[4] Benjamin A. Jacobs, a 23-year-old law student who expressed deep interest in the law firm's real estate practice, joined the real estate division.[1]

Miller left the company in 1969, and Jacobs was made a partner in the firm. MBG Associates changed its name to JBG Associates and formed two subsidiaries, JBG Properties Inc. and JBG Construction Co.[4]

Growth and first portfolio sale

In the 1970s, the firm hired a number of individuals who are now top managers at the company, including Robert H. Braunohler, Michael J. Glosserman, and Lewis Rumford.[2] Managers Brian P. Coulter and Robert A. Stewart joined the company in the 1980s.[1]

In the late 1980s, The JBG Cos. was among the first real estate development firms in the D.C. area to redevelop properties for third-party clients for a set fee. This then-innovative strategy helped the company survive the early 1990s recession.[5]

The JBG Cos. aggressively acquired a wide range of properties after the early 1990s recession. With 26 buildings in its portfolio in the early 1990s, Gilderhorn, Brown, and Jacobs considered taking the company public but did not do so.[1] By 1997, The JBG Cos. had an ownership interest in 21 commercial properties. Most were office buildings, but two were hotels and one was a shopping center.[5] They sold nearly the entire $580 million portfolio to TrizecHahn Corp. in 1997. The deal did not include 10 apartment projects owned by The JBG Cos.[5] The sale helped raise capital for the firm. But with a smaller portfolio, The JBG Cos. also shed most of its staff, and only 15 people remained with the firm at the end of the year.[2] In 2012, the Washington Business Journal named the transaction one of the 30 most significant local business stories of the past 30 years.[6]

Creation of investment funds and second portfolio sale

After the divestment, Brown and Gildenhorn retired from daily management of The JBG Cos. With Glosserman as the firm's new Managing Partner,[1] the company decided on a new investment strategy in 1999.[2] Instead of putting together syndicates for specific projects, the company sought out individual, and later institutional, investors. This gave the firm access to funds it could use at is discretion. Its first institutional investor was the Yale Endowment. The first investment fund closed in 2002,[1] and by fall 2012 The JBG Cos. had established eight investment funds and raised $5.5 billion.[2] Several of the funds were specifically created just for the Yale Endowment, and Yale remains the company's most important institutional investor.[2] The company told the Washington Post that the gross annual rate of return for investors since 1999 was about 30 percent. New partners were added as well, including Porter Dawson, Kenneth F. Finkelstein, James L. Iker, and W. Matt Kelly.[1]

JBG sold an 82 percent stake in its portfolio in August 2007 to MacFarlane Partners for $2 billion and another 9 percent from Morgan Stanley for an undisclosed sum.[1]

As of 2011, The JBG Cos. had $10 billion in assets. That year, Jacobs retired as managing member.[1] The firm had 15 owners by 2012, and more than 500 employees.[2]

In November 2013, the Washington D.C. Economic Partnership—a nonprofit dedicated to promoting business opportunities and facilitating economic development in the District of Columbia—issued its 2013-2014 Development Report. The report ranked The JBG Cos. as "the most active private developer" in the District of Columbia for 2013 with 23 completed projects, 10 projects in development, and eight projects under construction. The JBG Cos. far outran its nearest competitors, WC Smith (30 projects), Jair Lynch Development Partners (30 projects), Douglas Development Corp. (27 projects), and PN Hoffman (18 projects).[7][8] The Washington Business Journal noted that many of the firm's projects are along the rapidly developing 14th Street NW and U Street NW commercial corridors.[7]

On December 18, 2013, The JBG Cos. announces it intended to build a 140.5 feet (42.8 m) high glass and steel mixed-use building with a Modernist steel armature as an adornment at 1920 N Street NW. The company purchased both 1920 N Street NW, 1924 N Street NW, and 1233 20th Street NW for $113 million in 2012. Company officials said they wanted to tear down the existing structures at 1920 and 1924 N Street NW, and would combine the new structure with the old one at 1233 20th Street.[9] The company sold two buildings in Rockville, Maryland, to another developer for $48.6 million in January 2014.[10]

In 2014, The JBG Cos. partnered with MRP Realty to redevelop 965 Florida Aveue NW. The firm had bid on a chance to develop the city-owned parcel, but lost out to MRP Realty in July 2013.[11] Citizens in the area decried the selection and D.C. City Council member Jim Graham threatened to oppose the deal in August.[12] But in February 2014, The JBG Cos. and MRP Realty announced a joint venture to redevelop the site. It was not clear how MRP's plan to build low-income housing and ground-floor retail would mesh with JBG's plan to build upper- and middle-income condos, a hotel, office space, and a Harris Teeter grocery store on the site.[13]

The JBG Cos. opened a new real estate fund (JBG/Fund IX) on March 17, and by April 25 had raised $6.5 million. The Washington Business Journal speculated that the new fund would exceed the record $753 million raised by the company for its last investment fund between 2011 and 2013.[14] The company raised $680 million ($80 million more than its target) by September 2014.[15]

In late April 2014, The JBG Cos. broke ground on the first of two 355-foot (108 m) high, 31-story towers in Rosslyn, Virginia. The tower will contain 377 condominiums and apartments, 25,000 square feet (2,300 m2) of ground-level retail space, and a six-level underground parking garage, is next to a public plaza and the Rosslyn Metro station. The second tower, expected to break ground in 2016, will contain office space. The project, known as Central Place, was co-financed by the State Teachers Retirement System of Ohio, and is the centerpiece of the Realize Rosslyn project—approved by the Arlington County Board and backed by Representative Jim Moran—designed to transform Rossyln from an office park into a mix-used area with residential and retail as well.[16]

A major JBG Cos. project on U Street NW began construction in May 2014. The company razed five buildings making up half of 1300 U Street NW to begin construction on an eight-story, 165-unit, mixed-use development with street-level retail. The development included a very expensive community benefits package. The JBG Cos. will donate $150,000 to improve Harrison Recreation Center, another $150,000 to improve the athletic field at Garrison Elementary School, $150,000 to establish a U Street Business Improvement District, $15,000 for a styrene-butadiene rubber playground surface at Westminster Playground, and $10,000 for the creation and installation of a memorial plaque at Metropolitan Baptist Church to commemorate Camp Barker (a Union Army camp for "contrabad" runaway slaves established nearby during the American Civil War). Additionally, The JBG Cos. will contribute to a fund operated by the District of Columbia Department of Transportation (DDOT) to improve transportation options in the area. JBG Cos. will donate $55,000 to install a Capital Bikeshare station at Garrison Elementary School, $30,000 to build 60 bicycle parking racks racks on nearby, $30,000 to for 20 new street lights in the area, and $10,000 to restore and improve pedestrian crossing markings in the area.[17]

In October 2014, the Gallaudet University board of trustees announced a 10-year, $450 million redevelopment of its campus along 6th Street NE. The development, which includes both campus property as well as college-owned residential and retail property across the street, will be overseen by The JBG Cos.[18]

The Woodley

JBG Cos. allegedly sued to stop the Washington Marriott Marquis project in order to obtain favorable action by Marriott on condo conversions at the Marriott Wardman Park (pictured).

The JBG Cos. and another firm, CIM Group, purchased a hotel, the Marriott Wardman Park, from Thayer Lodging Group in July 2005 for $300 million. The JBG Cos. planned to convert the 199 hotel rooms located in the Park Tower portion of the hotel into luxury condominiums. The JBG Cos. also said it will demolish the hotel's parking garage and main ballroom, and spend $50 million to renovate the guest rooms, add dining space, build a new fitness center, and improve the exhibition and meeting space.[19] The deal included a clause that allowed Marriott, which continued to manage the hotel, to veto the conversion of hotel rooms into condos if revenues on the remaining hotel section fell below a specified number.[20] The JBG Cos. later disclosed that it would consturct a 200-unit condminium unit on a 16 acres (65,000 m2) lot adjacent to the hotel.[21]

Hotel revenues declined significantly during the Great Recession, and Marriott exercised its right to stop the condo conversions.[20]

Lawsuit with Marriott

Meanwhile, in 2002, the Marriott company won the right to construct the 1,224-room Washington Marriott Marquis in downtown Washington, D.C. A subsidiary of the JBG Cos., Wardman Investor LLC, filed a notice with the city's Contract Appeals Board in early 2009 to have the entire project set aside for being an "invalid sole source procurement". The JBG Cos. argued that the original proposal required the hotel to be built on private land and financed with private money. JBG did not submit a proposal because it could not meet these conditions. Subsequently, the city negotiated only with Marriott, eliminated the private investment requirement, added $272 million in public financing, and gave Marriott an "extraordinarily favorable" (in JBG's view) lease. JBG argued that these changes so altered the terms of the project that it should be put out for public bid again. The appeals board said in July 2009 that JBG Cos. lacked standing to protest the award since it never bid on the job. Even if the company did have standing, the appeal board said, it lost the right to protest after the council passed legislation removing the project from the regular contracting process in 2006.[22] The JBG Cos. motive for filing the lawsuit may not have been to contest the construction of the convention headquarters hotel, however. The Washington Business Journal, quoting unnamed business sources, said that the lawsuit was really prompted by a dispute between JBG Cos. and Marriott over converting a portion of the Marriott Wardman Park into condos.[20]

Marriott counter-sued The JBG Cos. on January 14, 2010, accusing JBG Cos. of tortious interference in its contractual relations. In support of its claim, Marriott told the court that JBG Cos. officials had threatened Marriott with a lawsuit if it did not renegotiate its Wardman Park deal.[23] On January 21, the Washington Convention and Sports Authority filed suit against JBG Cos. for tortious interference as well.[24] The city followed suit with its own tortious interference claim on February 18.[25]

On March 29, 2010, D.C. Superior Court Judge Natalia Combs Greene granted partial summary judgment and a motion to dismiss to Marriott, the city, and WCSA. A partial out-of-court settlement had already been reached by the parties giving JBG Cos. some limited ability to move forward on the condo project, but that agreement now seemed unnecessary given the court's ruling.[26] The parties suspended litigation against one another to negotiate, but litigation resumed on June 8, 2010.[27]

The parties in the various lawsuits resolved their legal dispute on July 1, 2010.[28] Although terms were not fully disclosed, the agreement permitted construction to go ahead on the Marriott Marquis[29] and precluded a legal appeal by all parties.[30]

Sale of The Woodley

The collapse of the housing market during the Great Recession, The JBG Cos. decided to construct an apartment building on the vacant acreage rather than condominiums. D.C.-based architect David M. Schwarz designed an eight-story, 212-unit building for the company. Originally called Wardman West, the name was later changed to 2700 Woodley[21] and then later to The Woodley.

The JBG Cos. continued to seek to convert the hotel rooms to condos, however. In June 2013, the company signed an agreement with commercial real estate services firm Cassidy Turley either pre-sell units or find equity partners to finance the conversion of 37 units. The JBC Cos. hoped to begin conversion in November 2013 and finish in 2014.[31] North America Sekisui House LLC, the North American division of the largest homebuilding corporation in Japan, invested roughly $54 million in the project in February 2014, allowing the project to move forward. Construction began in early 2014, and the units were scheduled for delivery in 2015.[32]

The JBG Cos. sold The Woodley in June 2014 for $195 million. TIAA-CREF set a record for the highest price-per-unit ever paid for a multifamily project in the D.C. metropolitan region ($920,000 per unit) with the sale.[33]

Operations

The JBG Cos. has an internal personnel structure much like a law firm. Young professionals in their 20s and 30s are hired as managers, and actively groomed to move into ownership. Decision-making involves both young and veteran project managers, who have an equal voice in decisions. Projects are undertaken only if consensus is achieved.[1]

The firm's investment strategy has been two-fold. First, it looks for new construction opportunities which have a high rate of return.[1] Second, it acquires existing properties which it can renovate.[1] Under both strategies, The JBC Cos. does not intend to hold properties for the long term, but rather seeks to sell them quickly (albeit at the right moment).[34] Geography appears to be a third concern. John Schlichting, managing director of development for the firm, said the majority of the firm's developments are inside the Beltway and near Metro stations.[35]

As of fall 2012, The JBG Cos. has developed, owned, or managed more than 30,000,000 square feet (2,800,000 m2) of office space; 15,000 apartments; 5,500,000 square feet (510,000 m2) of retail space; and 15 hotels with more than 4,500 rooms.[2]

"Green" buildings

The JBG Cos. has a long history of developing sustainable buildings. It joined the U.S. Green Building Council (USGBC) soon after the organization's founding, and helped to develop and promote the Leadership in Energy and Environmental Design (LEED) program for the design, construction, operation, and maintenance of green buildings, homes, and neighborhoods.[2]

As of 2012, The JBG Cos. has built or redeveloped 14 Energy Star buildings totalling 4,800,000 square feet (450,000 m2), 11 LEED Certified buildings totalling 11,450,000 square feet (1,064,000 m2), and 52 LEED Registered buildings totalling 22,631,000 square feet (2,102,500 m2).[2]

Performance

According to Preqin, a research and consultancy firm which reports on real estate investment funds, The JBG Cos. consistently ranks as one of the top-performing private real estate investment funds in the United States. In 2012, Preqin analyzed 97 firms and 551 funds; The JBG Cos. earned a perfect score. The return on investment in each of its funds was in the top quartile despite the difficult economic environment created by the Great Recession.[2]

NAIOP, the Commercial Real Estate Development Association, selected The JBG Companies as its Developer of the Year in 2012.[2]

References

  1. 1 2 3 4 5 6 7 8 9 10 11 12 13 O'Connell, Jonathan. "As Jacobs Steps Aside, JBG Aggressively Repositions Itself Again." Washington Post. January 10, 2011. Accessed 2013-11-09.
  2. 1 2 3 4 5 6 7 8 9 10 11 12 Derven, Ron. "Developer of the Year: The JBG Companies - Building a Sustainable Advantage." Development. Fall 2012. Accessed 2013-11-09.
  3. 1 2 "They're Both Lawyers and Syndicators." Washington Post. August 18, 1962.
  4. 1 2 "Jacobs Joins JBG Group." Washington Post. May 24, 1969.
  5. 1 2 3 Fruehling, Douglas. "JBG Breaking Up." Washington Business Journal. September 29, 1997. Accessed 2013-11-09.
  6. ↑ Sernovitz, Daniel J. "The Secret to JBG's Success." Washington Business Journal. March 16, 2012. Accessed 2013-11-09.
  7. 1 2 Neibauer, Michael. "It's Not Just You: JBG Is Everywhere." Washington Business Journal. November 13, 2013. Accessed 2013-11-13.
  8. ↑ Washington, D.C. Economic Partnership. D.C. Development Report 2013/2014 Edition. Washington, D.C.: Washington, D.C. Economic Partnership, November 12, 2013, p. 12. Accessed 2013-11-13.
  9. ↑ Neibauer, Michael. "After $110M Buy, JBG Plans Something Big for Dupont Circle." Washington Business Journal. December 18, 2013. Accessed 2013-12-18.
  10. ↑ Sernovitz, Daniel J. "The JBG Co. Sells Two FDA-Leased Buildings in Rockville." Washington Business Journal. January 22, 2014. Accessed 2014-01-22.
  11. ↑ Neibauer, Michael. "MRP Tops JBG in Bid to Develop D.C.-Owned Florida Avenue Parcel." Washington Business Journal. July 30, 2013. Accessed 2014-02-03.
  12. ↑ Neibauer, Michael. "D.C. Councilman Suggests Fight to Come Over MRP Realty Selection." Washington Business Journal. August 3, 2013. Accessed 2014-02-03.
  13. ↑ Sernovitz, Daniel J. "MRP, The JBG Cos. to Join Forces on Shaw Redevelopment." Washington Business Journal. February 3, 2014. Accessed 2014-02-03.
  14. ↑ Sernovitz, Daniel J. "JBG's Next Multimillion-Dollar Cash Raise." Washington Business Journal. April 30, 2014. Accessed 2014-04-30.
  15. ↑ Sernovitz, Daniel J. (September 9, 2014). "How D.C.'s Sputtering Real Estate Market Helped JBG Raise $680 Million". Washington Business Journal. Retrieved September 9, 2014.
  16. ↑ Neibauer, Michael. "JBG, Arlington Leaders Break Ground on Rosslyn's Central Place." Washington Business Journal. April 23, 2014. Accessed 2014-04-30.
  17. ↑ Neibauer, Michael (May 5, 2014). "JBG Bids to Knock Down Half of the 1300 Block of U Street". Washington Business Journal. Retrieved May 5, 2014.
  18. ↑ Clabaugh, Jeff (October 10, 2014). "Gallaudet Selects JBG for Campus Development". Washington Business Journal. Retrieved October 13, 2014.
  19. ↑ Ghouse, Mahhen (July 6, 2005). "JBG, CIM Group Acquire Marriott Wardman Park Hotel". CoStar Realty Informatnion. Retrieved August 5, 2014.
  20. 1 2 3 O'Connell, Jonathan (October 5, 2009). "What's Behind JBG's Convention Hotel Lawsuit?". Washington Business Journal. Retrieved January 12, 2013.
  21. 1 2 O'Connell, Jonathan (April 13, 2012). "What's Going On With...Construction at the Marriott Wardman Park Hotel?". The Washington Post. Retrieved August 5, 2014.
  22. ↑ Castro, Melissa (September 30, 2009). "JBG Sues D.C. Over Convention Hotel Deal With Marriott". Washington Business Journal. Retrieved January 12, 2013.
  23. ↑ O'Connell, Jonathan (January 15, 2010). "Marriott International Sues JBG Cos. Over Convention Center Hotel". Washington Business Journal. Retrieved January 12, 2013.
  24. ↑ "Washington Convention and Sports Authority Sues JBG Over Hotel Deal". Washington Business Journal. January 22, 2010. Retrieved January 12, 2013.
  25. ↑ "D.C. Sues JBG Over Convention Center Hotel". Washington Business Journal. February 22, 2010. Retrieved January 12, 2013.
  26. ↑ Krouse, Sarah (March 30, 2010). "No Word Yet From JBG After Judge Dismisses Convention Hotel Lawsuit". Washington Business Journal. Retrieved January 12, 2013.
  27. ↑ "Attorney General: D.C. Lawsuit Against JBG Back On". Washington Business Journal. June 9, 2010. Retrieved January 12, 2013.
  28. ↑ "Marriott, JBG Agreement Clears Convention Hotel". Washington Business Journal. July 7, 2010. Retrieved January 12, 2013.
  29. ↑ O'Connell, Jonathan (July 7, 2010). "Deal Reached on Convention Center Hotel". Washington Post.
  30. ↑ Temple-West, Patrick (October 18, 2010). "Debt Reopens Door to D.C. Project". The Bond Buyer.
  31. ↑ Sernovitz, Daniel J. (June 25, 2013). "JBG Seeking Investors on Long-Planned Wardman Park Condo Conversion Project". Washington Business Journal. Retrieved August 5, 2014.
  32. ↑ Sernovitz, Daniel J. (February 28, 2014). "Japanese Investor Partners on Wardman Tower Condos". Washington Business Journal. Retrieved August 5, 2014.
  33. ↑ Sernovitz, Daniel J. (June 26, 2014). "With The Woodley, TIAA-CREF Sets New Record Last Held By... TIAA-CREF". Washington Business Journal. Retrieved August 5, 2014.
  34. ↑ Sernovitz, Daniel J. "Clarion Partners Buys 77 H St. NW Walmart Site." Washington Business Journal. January 15, 2014. Accessed 2014-01-15.
  35. ↑ "JBG Companies Take a Proactive Approach." Fairfax Times. April 16, 2008.
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