This Company is Shedding Multifamily Assets to Buy Offices at Discount
July 31, 2025
JBG Smith is betting that the tides in the office market will turn. In a letter to shareholders at the end of the second quarter, CEO Matt Kelly explained that the real estate investment trust is “strategically repositioning the portfolio to align with evolving market conditions.” The company is moving capital away from its traditionally strong multifamily holdings and instead taking a chance on office assets—at a time when that sector remains out of favor with many investors.
“With office values at historically low levels and multifamily assets still commanding attractive pricing, we are executing a deliberate pivot: reallocating capital from multifamily assets toward office investments through both opportunistic acquisitions and share repurchases, reinforcing our focus on long-term NAV per share growth,” Kelly wrote. He added that the new strategy stems from a belief that office properties now “offer a more compelling risk-adjusted return profile.”
That conviction is grounded in a tough local environment. In its previous shareholder letter from the first quarter, JBG Smith had described “continued uncertainty and buffeting headwinds to the DC metro economy.” Slowing growth and government layoffs were pressuring Washington, D.C.’s office market, leaving the company’s share price so low, at times, that the implied value of its office portfolio was zero. Instead of selling assets at what Kelly termed “historically distressed pricing levels”—a move the company considered “value destructive”—JBG Smith opted to fund share buybacks by selling off higher-valued multifamily assets.
In the second quarter, the company disposed $452 million in assets at a 4.6% capitalization rate, as well as multifamily holdings at a 4.9% cap rate. “We continue to dispose of select multifamily and land assets to match-fund, either before or after the fact, our share repurchases and other opportunistic investments,” Kelly said.
More notably, JBG Smith acquired Tysons Dulles Plaza, a three-building office complex in Tysons, Virginia, for $42.3 million, a purchase that translated to a more than 20% in-place capitalization rate. One of the 491,500-square-foot buildings is slated for a major redevelopment, with plans to convert it into 300,000 square feet—around 300 units—of multifamily space.
“Given our extremely low basis, we have the ability to offer attractive lease terms to incentivize external demand while maintaining the flexibility to relocate existing tenancy while we re-entitle one of the buildings for residential use,” the company noted in its letter.
During the same period, JBG Smith completed 208,000 square feet in office leasing, with a weighted average lease term of 5.8 years, including 82,000 square feet of new deals in National Landing.
Kelly argued that these moves position the company to capitalize on what he calls “some of the most attractive office investment opportunities in nearly two decades.” By acquiring assets at low prices and maintaining flexibility in property use, JBG Smith believes it is prepared to weather current market distress and emerge stronger if the office sector recovers.
