Vornado Spinning Off Assets in Washington, D.C.

Vornado Realty Trust (NYSE: VNO) said Oct. 31 it plans on merging its Washington, D.C.-area properties with select assets of The JBG Companies, a real estate firm based in Chevy Chase, Maryland.

The new, combined company will become a publicly traded REIT known as JBG SMITH Properties. The transaction is valued at approximately $8.4 billion, and is expected to be completed in the second quarter of 2017.

Following the transaction, Vornado will be a pure play New York office and street retail REIT. In January 2015, the company spun off 81 strip shopping centers and four malls into a new REIT, Urban Edge Properties (NYSE: UE).

During a Nov. 1 conference call, Steven Roth, chairman and CEO of Vornado, described the deal as “transformative.”

“This is a great deal for Vornado and its shareholders,” Roth said.

Roth added that once its Washington assets are removed, Vornado will become “much more transparent.” He noted that Vornado’s stock has traded at a discount to net asset value. Following the completion of the deal, “investors will reward [Vornado] with appropriate pricing,” he observed.

Vornado shareholders are expected to hold approximately 74 percent of the new combined company, with JBG entities holding the remaining equity in the company.

The portfolio will consist of 50 office properties, totaling approximately 11.8 million square feet; 18 multifamily properties with 4,451 residential units; and 11 other properties totaling approximately 700,000 square feet. The assets are located in the downtown area of Washington and the city’s suburbs in Virginia and Maryland.