The Real Deal New York

JBG keeping nearly $2B in assets out of NY REIT merger

DC-area landlord withholding nearly three dozen resi, hotel properties from proposed deal

June 01, 2016 06:20PM

New York REIT JBG

From left: Matt Kelly and Michael Happel

New York REIT’s proposed merger with Washington, D.C.-area landlord JBG Companies comes with a slight catch. JBG is withholding around $1.8 billion in assets from the combined company.

Regulatory filings detailing the deal – which will see JBG and New York REIT merge to form a new publicly traded company, JBG Realty Trust, valued at $8.4 billion – indicate that JBG is planning to retain nearly three dozen properties and keep them separate from the merger.

Those assets, according to the Washington Business Journal, consist mostly of residential and hotel properties located in and around Washington, D.C. – Maryland-based JBG’s core market. While some of those properties are either under contract for sale or on the market, others are either only partially owned by JBG or in markets that JBG Realty Trust will consider non-core.

The news could further discourage New York REIT investors who still need to approve the merger and have greeted the deal with skepticism, if the public markets are an indicator.

New York REIT shares dropped around 8 percent the day after the merger was announced last week, while analysts covering the company have expressed wariness about the transaction – with one claiming the company “owes its shareholders a lot more transparency” on why the deal with JBG is better than “all viable alternatives.”

Should the transaction go through, however, it would end a tumultuous chapter for New York REIT largely characterized by questions over its ties to Nicholas Schorsch’s AR Global – the company’s external adviser.

The deal with JBG would terminate New York REIT’s management contract with AR Global, which was hit by an accounting scandal in late 2014 that threw Schorsch’s real estate empire into disarray. [Washington Business Journal]Rey Mashayekhi

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