real estate

Vornado, Arlington County’s biggest private landowner — with major collections of properties in Crystal City and Rosslyn — announced today that it is spinning off and merging its D.C. area operations with Chevy Chase, Md.-based JBG Companies.

The combined company would have both office and residential properties throughout Crystal City, Pentagon City and the Rosslyn-Ballston corridor. Among JBG’s properties in Arlington are the under-construction Central Place project in Rosslyn and the iconic “Bob Peck” office building at 800 N. Glebe Road in Ballston.

In 2014, Vornado’s properties in Arlington were assessed at $3.8 billion, or 5.7 percent of the total assessed value of all property in the county, according to the Washington Business Journal. JBG’s properties in Arlington were assessed at $1.31 billion.

From a press release, issued late this afternoon:

VORNADO REALTY TRUST (NYSE:VNO) (“Vornado”) announced today that its Board of Trustees has approved a tax-free spin-off of its Washington, DC business, currently known as Vornado/Charles E. Smith, and that it has entered into a definitive agreement to merge SpinCo with the operating company and certain select assets of The JBG Companies (“JBG”), a leading Washington, DC real estate company.

The combined company will be named JBG SMITH Properties. It will be the largest, market-leading, best-in-class, pure-play Washington, DC real estate company. This transaction represents a key milestone in Vornado’s value creation strategy which will have produced three world-class, highly focused REITs – Vornado itself (RemainCo), Urban Edge Properties, and now, JBG SMITH. Each of these companies has a highly focused
management team, unique assets, and a clearly defined mission.

About JBG SMITH

• Vornado shareholders are expected to own approximately 74% of the combined company, JBG limited partners are expected to own approximately 20%, and JBG management is expected to own approximately 6% (all percentages subject to closing adjustments).
• JBG SMITH will be led by JBG’s senior management team which has a proven track record of superior execution in the Washington, DC market over the long term and through numerous cycles.
• The combined company’s portfolio will consist of 50 office properties totaling approximately 11.8 million square feet, 18 multifamily properties with 4,451 residential units, and 11 other properties totaling approximately 0.7 million square feet. These assets are located in premier submarkets within the Washington, DC metropolitan area, concentrated in Downtown District of Columbia, Crystal City and Pentagon City, the Rosslyn-Ballston Corridor, Reston, and Bethesda.
• Importantly, JBG SMITH will have a pipeline of projects under construction and land for future development that could add over 20 million square feet to the portfolio, positioning the company for strong growth and attractive shareholder returns.
• JBG SMITH will be the largest landlord to the U.S. Government in the nation’s capital.
• The Company will be well capitalized, have substantial liquidity and a strong balance sheet.
• The combination is expected to result in approximately $35 million of synergies producing an overhead structure in line with best-in-class peers.
• The new company will continue to manage the JBG funds’ assets that are not being contributed for customary fees. The company will not raise new investment funds. JBG SMITH Board and Management
• JBG SMITH’s Board of Trustees will consist of twelve members, a majority of whom will be independent. Vornado and JBG will each designate six trustees.
• Steven Roth, Vornado’s Chairman and Chief Executive Officer, will be Chairman of the Board.
• W. Matt Kelly, a Managing Partner of JBG, will be Chief Executive Officer of JBG SMITH and a member of the Board.
• Rob Stewart, a Managing Partner of JBG, will be Executive Vice Chairman of the Board.
• The Board will also include seven independent trustees including Alan Forman of the Yale University Investments Office, JBG’s largest investor.
• Michael Glosserman, a Managing Partner of JBG, will also join the Board, as will Mitchell Schear, current President of Vornado/Charles E. Smith.
• From JBG, David Paul will be President and Chief Operating Officer, James Iker will be Chief Investment Officer, and Brian Coulter and Kai Reynolds will be Co-Chief Development Officers.
• From Vornado/Charles E. Smith, Mitchell Schear will be a member of the Executive Committee, Patrick Tyrrell will be Chief Administrative Officer, Jim Creedon will be Executive Vice President responsible for Office Leasing, and Laurie Kramer will be Executive Vice President focused on integration of the teams.
• The new company will look outside for a Chief Financial Officer and intends to have that individual in place before the close of the transaction.
• The new company will integrate the best talent from each of Vornado/Charles E. Smith and JBG.
• Vornado will provide transition services to JBG SMITH, in areas such as IT, tax and SEC reporting for an interim period.