JBG Smith Properties (JBGS) is a $6 billion REIT that invests in both commercial and multifamily real estate. The company is the most active developer in the Washington, D.C. area, with over 60 commercial and multi-family properties, notes John Freund, contributing editor of Bull Market Report.
The big story with JBG is the company being the primary landlord for the National Landing area, owning 6 million square feet there. Washington, D.C. is one of the hottest Real Estate markets in the United States (and has some of the best staying power, unless our nation’s capital moves back to Philly).
National Landing is prime real estate amidst greater D.C., housing both the Pentagon and Potomac Yard. The area is entirely walkable and boasts residential and commercial buildings, offices spaces and hotels.
What makes National Landing especially attractive is the November 2018 announcement that Amazon (AMZN) will be its newest tenant. JBG sold over 4 million square feet for Amazon’s HQ2.
Over 25,000 new employees are expected, which could lead to 100,000 new residents over the next several years thanks to over $4 billion of investment into the area. Think restaurants, retail, fitness centers, and whatever else the wealthy tech elite spend their money on.
JBG not only scores a huge reputational win with the Amazon sale, it also boosts the value of its own portfolio as Washington, D.C. is about to become an even hotter Real Estate market.
On the financial side of things, the company had a strong 1Q19, with revenue coming in at $155 million for the quarter. That’s 5% lower than 1Q18, but $30 million more than Wall Street expected.
JBG disposed of numerous assets over the course of the year, so it was expected that their 1Q19 numbers would come in lower than the previous year’s (normal for the real estate industry). The company also has nine assets under development, including five commercial and four multifamily.
The stock has flat-lined over over the last couple of months, but we’re still up 18% year-to-date after a red-hot January. This company has too much going for it to overlook, and the likelihood is management builds on the reputational reward of being Amazon’s landlord.
It’s impossible to predict future deals, but JBG has the clout to court other big name clientele, and even expand out of the D.C. area now, should management wish to do so.
Management just raised $470 million after a 10 million share offering. That spooked some investors, who typically don’t like it when a company issues shares to raise money. That’s understandable.
But if you think about it, now is the perfect time for management to get aggressive. They’ve got the wind at their backs after the Amazon deal, so why not raise half-a-billion and make some moves in an increasingly hot real estate market?
We’re not investing in JBG for the short term. We believe in the company’s long term prospects, especially after the Amazon deal.
Management has a decades-long track record of success, so we’re confident they’ll put this $470 million to use wisely. Expect more big moves from JBG over the coming year, and for the stock to continue its upward trajectory well into 2020.
