JBG Smith: A Real Estate Play on Amazon?

10/25/2019 5:00 am EST

Focus: REITS

Todd Shaver

Founder and Editor-in-Chief, BullMarket.com

When it comes to managing office properties, there’s perhaps no better tenant in the world than Amazon (AMZN) — which is why JBG Smith (JBGS) is in such great shape going forward, notes Todd Shaver, editor of BullMarket Report.

The real estate investment trust is a regional commercial real estate operator that manages a portfolio in Washington, D.C.

After Amazon announced part of its HQ2 would be housed in the district, JBG Smith scooped up tenancy, as Amazon wanted to be in the historic National Landing section of our nation’s capital. And National Landing just happens to be mostly-owned by JBG Smith.

Not only does the Amazon deal bring direct revenue to the company, but it also boosts the real estate value of the entire surrounding area.

That’s why JBG Smith just submitted plans to redevelop six properties adjacent to National Landing, including five multi-family properties and one office building.

All six are within half a mile of Amazon’s new headquarters. The company has already announced two redevelopments in the area, as well as a pair of entirely new developments.

JBG Smith knows an opportunity when it sees one. That’s why it landed the Amazon deal, and is now capitalizing on that agreement as much as possible with all of this development activity.

We love this company because they are already a major regional player, but have yet to go national. We expect management to turn its eyes outward in 2020 and 2021 and look to conquer other major CRE markets across the country. That’s when JBG Smith will transform from a strong regional company into a dominant one.

As one might expect with the Amazon announcement, this has been a strong year for JBG’s stock, which is up 12% YTD and then the 2.3% annual yield is the icing on the cake.

Given that the stock was trading above $40 earlier this year, we’re expecting even more price appreciation here as the year ticks on. There is a true growth story emerging with JBG Smith, which is something you can’t say about most REITs. Such is the power of having Amazon as your tenant.

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