Trophy DC Office Building Trades for $167M

500 L’Enfant Plaza. Image courtesy of JBG Smith

JBG Smith continues its capital recycling program with the disposition of 500 L’Enfant Plaza, a Washington, D.C., trophy office tower that the developer co-owned with Landmark Partners, an Ares Company. The partners sold the newly developed, 215,000-square-foot asset to an unidentified buyer in a transaction valued at $167 million.

JBG Smith and Landmark relied on JLL’s Jim Meisel and Matt Nicholson to find a new owner for 500 L’Enfant Plaza, a ZGF Architects-designed building. And the appearance of the two-year-old, LEED Gold certified asset on the market likely came as no surprise to the investment community. In his publicly available annual letter to shareholders on Feb. 23, 2021, W. Matthew Kelly, JBG Smith CEO, wrote, “While the capital markets remain too uncertain to estimate how much recycling we will accomplish in 2021, we nonetheless expect to market for sale approximately one-third of the $1.5 billion of assets that we intend to opportunistically sell in the coming years.”

JBG Smith, which had owned a 49 percent interest in 500 L’Enfant Plaza, completed development of the 12-story office building overlooking the city’s southwest waterfront in 2019, two years after anchor tenant Urban Institute triggered the start of construction with the prelease of 121,000 square feet for its global headquarters.

Today, the property is 96 percent leased to a total of seven tenants, including the Office of the Inspector General for the Washington Metropolitan Area Transit Authority, nonprofit science & technology firm Noblis and management consulting firm Cobec Consulting.

The U.S. office sector may not be an investor favorite at the moment, but certain office assets remain highly coveted, and for good reason. As JLL notes in its executive summary on the property, 500 L’Enfant Plaza affords investors “pristine cash flow” from a diverse roster of credit tenants, as well as upside potential via embedded rental rate increases at the property and throughout the Southwest submarket.

Transitioning a portfolio

Owner of an enviable portfolio of premier, mixed-use properties in metropolitan Washington, D.C., JBG’s capital recycling goals center on its plan to shift its focus away from office to the multifamily sector by divesting of non-core office assets and investing proceeds in acquisitions and development of apartment communities.

Year-to-date, the company has completed transactions resulting in proceeds exceeding $92 million and has utilized the funds to deleverage its balance sheet and line its pockets for future multifamily acquisition opportunities.