JBG Eager to Enter New York

JBG has not been a company to move beyond its roots. Except for the one off project here and there — it has developed the King of Prussia Town Center in Pennsylvania, for example — it has largely stuck to the District, Virginia and Maryland.

But it has had its eye on entering New York City for some time, according to JBG Cos. CEO W. Matt Kelly.
“We believe the combined company will be positioned for strong stockholder returns with an attractive, stabilized in-place portfolio combined with substantial growth potential,” he said in a prepared statement.

Pressure from Shareholders

New York REIT was an attractive candidate, or least a company that could be persuaded to negotiate, in part because it has been under pressure from shareholders to do something to raise its value.

Earlier this month WW Investors LLC, an entity owned and controlled by Michael L. Ashner and Steven Witkoff, released a letter they sent to the Board of Directors of New York REIT chastising them for its poor treatment of a potential suitor for the REIT. They wrote:

We are advised that the interested party sent a proposal to the Board of Directors on or about May 4th with a deadline for response of close of business May 11th. We did not and have not reviewed the contents of that proposal and have no knowledge as to its terms and conditions. We naively assumed the Board would do so open-mindedly. We have been informed that the Board of NYRT allowed the one week deadline to pass with no response. When I say “no response”, I mean not a counter offer, not a suggestion to meet, not a blow off letter, not even telephone call. Nada. Nothing. In my twenty years of personal involvement in public companies, I cannot recall such an egregious disregard of process, nay simple courtesy. The Board announced a strategic review process. Board members specifically requested the activist community to stand down during this process. The Board cancelled the last two quarterly investor calls based on this process. Yet, when given the opportunity to further the process, the Company and its advisors demonstrate both a clear disdain of duty and ugly discourtesy to potential suitors.

The timing outlined in the letter suggests the “interested party” could have been JBG as around that time Reuters broke a story that JBG and New York REIT were in discussions for an acquisition.

Also, the resulting management of the company is largely from JBG. The companies announced that NYRT's external management contract will be terminated upon closing and the combined company will be internally managed by JBG's current management team. W. Matt Kelly will be named CEO, David Paul will be named president and COO, James Iker will be named chief investment officer and Interim CFO, and Brian Coulter will be named chief development officer. Michael Happel, NYRT's current President and Chief Executive Officer has agreed to assist in the transition and will serve as a consultant to the combined company for a transition period. “We believe that the expertise of the JBG management team is recognized throughout the industry and that this combination will provide the NYRT stockholders with a unique opportunity to participate in the value creation potential that this combination will bring,” NYRT Chair Randolph C. Read, said in a prepared statement.

However the deal came about, it is moving to closure now.

CHEVY CHASE, MD—Local developer JBG Cos. is acquiring New York REIT, a deal that will create an $8.4 billion real estate company focusing on two of the leading CRE markets in the US. The combined entity will be a public REIT called JBG Realty Trust, with JBG owning 65.2% of the company.

The combined company will be headquartered in Chevy Chase, MD with a regional office in New York City.

Its portfolio will consist of some 14.5 million square feet of office, residential and retail properties in New York City and Washington DC. JBG is contributing the majority of the properties to the trust with 78% of the portfolio to be located in the Washington DC area, with the remaining 22% in New York City.

The combined portfolio includes over 9.7 million square feet of office assets, one-million-square feet of retail assets, and 4,500 residential units.

JBG Eager to Enter New York

JBG has not been a company to move beyond its roots. Except for the one off project here and there — it has developed the King of Prussia Town Center in Pennsylvania, for example — it has largely stuck to the District, Virginia and Maryland.

But it has had its eye on entering New York City for some time, according to JBG Cos. CEO W. Matt Kelly.
“We believe the combined company will be positioned for strong stockholder returns with an attractive, stabilized in-place portfolio combined with substantial growth potential,” he said in a prepared statement.

Pressure from Shareholders

New York REIT was an attractive candidate, or least a company that could be persuaded to negotiate, in part because it has been under pressure from shareholders to do something to raise its value.

Earlier this month WW Investors LLC, an entity owned and controlled by Michael L. Ashner and Steven Witkoff, released a letter they sent to the Board of Directors of New York REIT chastising them for its poor treatment of a potential suitor for the REIT. They wrote:

We are advised that the interested party sent a proposal to the Board of Directors on or about May 4th with a deadline for response of close of business May 11th. We did not and have not reviewed the contents of that proposal and have no knowledge as to its terms and conditions. We naively assumed the Board would do so open-mindedly. We have been informed that the Board of NYRT allowed the one week deadline to pass with no response. When I say “no response”, I mean not a counter offer, not a suggestion to meet, not a blow off letter, not even telephone call. Nada. Nothing. In my twenty years of personal involvement in public companies, I cannot recall such an egregious disregard of process, nay simple courtesy. The Board announced a strategic review process. Board members specifically requested the activist community to stand down during this process. The Board cancelled the last two quarterly investor calls based on this process. Yet, when given the opportunity to further the process, the Company and its advisors demonstrate both a clear disdain of duty and ugly discourtesy to potential suitors.

The timing outlined in the letter suggests the “interested party” could have been JBG as around that time Reuters broke a story that JBG and New York REIT were in discussions for an acquisition.

Also, the resulting management of the company is largely from JBG. The companies announced that NYRT's external management contract will be terminated upon closing and the combined company will be internally managed by JBG's current management team. W. Matt Kelly will be named CEO, David Paul will be named president and COO, James Iker will be named chief investment officer and Interim CFO, and Brian Coulter will be named chief development officer. Michael Happel, NYRT's current President and Chief Executive Officer has agreed to assist in the transition and will serve as a consultant to the combined company for a transition period. “We believe that the expertise of the JBG management team is recognized throughout the industry and that this combination will provide the NYRT stockholders with a unique opportunity to participate in the value creation potential that this combination will bring,” NYRT Chair Randolph C. Read, said in a prepared statement.

However the deal came about, it is moving to closure now.