JBG Smith Achieves Goal to Preserve 3,000 Housing Units With Washington Housing Initiative Impact Pool

Rhea-AI Summary

JBG Smith surpasses goal to preserve 3,000 housing units with Impact Pool, investing in Franklin Apartments and other properties across Washington region.

Positive

• JBG Smith's Impact Pool has exceeded its target of creating and preserving 3,000 affordable housing units by 2025, achieving this milestone ahead of schedule.
• The Impact Pool has invested in various properties, including the Franklin Apartments in Takoma Park, MD, to combat the loss of housing for middle-income families.
• The Franklin Apartments investment exemplifies the Impact Pool's mission to preserve affordable housing units and provide resources for residents to age in-place.
• JBG Smith's collaboration with Montgomery Housing Partnership (MHP) and other mission-driven sponsors reinforces their commitment to preventing displacement and preserving affordability in the Washington region.

Negative

• None.

Insights

Real Estate Analyst

Observing the recent achievements of JBG Smith's Impact Pool, the acceleration of their affordable housing goals holds significance for both the local community and investors. Achieving the target of preserving over 3,000 housing units well before the 2025 deadline indicates strong operational capabilities and a successful investment strategy. This proactive approach in the affordable housing segment, often characterized by tight margins and high regulatory complexity, can lead to long-term stability for the firm, as it solidifies their position as a socially responsible entity. The surplus capital suggests potential for further growth opportunities within their portfolio.

Furthermore, the partnership with Montgomery Housing Partnership (MHP) underlines an effective collaboration with non-profit entities, which often unlocks access to various subsidies and grants, improving the financial viability of such projects. The dual approach of leveraging private capital and non-profit collaboration may set a precedent in the real estate investment sector, especially in high-demand metro areas facing affordable housing shortages.

Financial Analyst

The financial structure highlighted by the Impact Pool's recent deal, involving mezzanine financing and Freddie Mac loans, is critical to assess. Mezzanine financing is a hybrid of debt and equity financing that provides lenders with rights to convert to an ownership or equity interest in the company in case of default, after senior debt holders are paid. This form of financing is higher risk than senior debt but provides higher returns, which can be attractive to certain investors.

The Impact Pool's ability to secure a $26.2 million Freddie Mac loan also signals confidence by institutional lenders in the viability of their affordable housing investments. The extension of a soft loan from Montgomery County is an additional positive indicator, not only of the project's social value but also of its financial prudence. Investors would find such information reassuring, as it reflects a diversified risk profile and a strategic approach to funding.

Market Research Analyst

With an emphasis on the loss of naturally occurring affordable housing units, JBG Smith's strategy aligns with market needs. The specific focus on workforce housing caters to a critical segment of the market that often falls between the cracks—too high a salary for subsidized housing yet unable to afford market-rate rents in urban areas. The Impact Pool's success could signal an attractive market niche for other investors seeking socially responsible investment opportunities with stable returns.

The societal impact, coupled with the potential economic benefits of stable, affordable housing—such as reduced employee turnover and increased local spending power—should not be underestimated. The model JBG Smith is implementing may yield insights into the scalability of public-private partnerships in addressing housing crises in urban areas, which could be replicable in similar markets nationwide.

Investment in 185-Unit Franklin Apartments in Takoma Park, MD Surpasses Investment Vehicle’s Ambitious Pledge Early

BETHESDA, Md.--(BUSINESS WIRE)-- JBG SMITH (NYSE: JBGS) today announced that the Impact Pool, the affordable housing investment platform it manages, has helped create and preserve more than 3,000 units of quality workforce housing across the Washington region since 2020, outpacing its goal to deliver 3,000 units by 2025 and with capital remaining to invest in additional units.

Franklin Apartments, a 185-unit age-restricted housing community in Takoma Park, MD (Photo: Business Wire)

“The Impact Pool has surpassed what we set out to achieve – the creation and preservation of affordable homes for thousands of workers in communities throughout the Washington region, and we are proud to have reached our goal ahead of schedule and with additional funds to continue our efforts,” said AJ Jackson, EVP of Social Impact Investing at JBG SMITH. “This is a moment of celebration and provides impetus to keep going. Investing at scale allows us to have a meaningful impact, and this milestone reinforces our commitment to preventing displacement and preserving affordability in rapidly changing neighborhoods vulnerable to rising housing costs. Consequently, we plan to continue to finance workforce housing through other vehicles even after the Impact Pool’s funds have been fully deployed.”

The 3,000+ units include: Parkstone Alexandria (Alexandria, VA) 326 units; Crystal House (Arlington, VA) 825 units; Hamilton Manor (Hyattsville, MD) 245 units; Huntwood Courts (Washington, DC) 214 units; Earle Manor (Wheaton, MD) 140 units; The Gale Eckington (Washington, DC) 603 Units; Loree Grand (Washington, DC) 212 units; Falkland Chase (Silver Spring, MD) 268 units; Franklin Apartments (Takoma Park, MD) 185 units.

Launched by JBG SMITH in 2019, the Impact Pool is a key component of the Washington Housing Initiative (WHI) created by JBG SMITH and the Federal City Council. The Impact Pool, managed by a subsidiary of JBG SMITH, leverages private capital to help combat the loss of housing for middle-income families. The Impact Pool works with non-profit and for-profit mission driven sponsors to acquire privately owned and unsubsidized housing that’s affordable to everyday working households, lock in affordability, invest in the buildings, and operate them using strategies designed to stabilize residents rather than push rents.

The Impact Pool surpassed its goal with the deployment of $6 million in mezzanine financing to Montgomery Housing Partnership (MHP) for the refinancing of Franklin Apartments, a 185-unit age-restricted housing community in Takoma Park, MD. Concurrent with the closing of the Impact Pool’s loan, the property obtained a new $26.2 million Freddie Mac loan, provided by Key Bank, along with an extension of an existing $3.75 million soft loan from Montgomery County.

“The Franklin Apartments investment is a perfect example of what we sought to accomplish when we created the Impact Pool. Montgomery County is projected to lose up to 11,000 naturally occurring affordable housing units by 2030. Our collaboration with a non-profit owner, dedicated to the property’s preservation, will provide residents with the ability to age in-place in a resource rich neighborhood of Montgomery County,” commented Jackson.

Located at 7620 Maple Avenue in Takoma Park, MD, the Class B mid-rise Franklin Apartments was built in 1952 and renovated in 2011. The building was acquired by MHP in 2022 and is currently managed by Humphrey Management. The property includes 135 parking spots, green community features, a grilling area, and multi-purpose entertainment room and is pet friendly. MHP provides onsite resources to residents including the operation of a food pantry, health and safety seminars, and programming.

MHP is a 501(c)(3) non-profit organization serving more than 4,000 residents of Montgomery County and neighboring communities by providing more than 2,880 quality affordable homes. The organization is committed to housing people, empowering families, and strengthening neighborhoods. Since 1989, MHP’s mission has been to preserve and expand access to quality, affordable housing.

The Impact Pool previously partnered with MHP to provide financing for the 140-unit Earle Manor apartments, located in Wheaton, MD.

About the Impact Pool

The Washington Housing Initiative Impact Pool is an approximately $115 million investment vehicle that targets after-tax returns equivalent to many traditional investment funds. The Impact Pool is managed by JBG SMITH Impact Manager, a subsidiary of JBG SMITH Properties. To date, the Impact Pool has invested in more than 3,000 units across DC, Maryland and Virginia. For more information on the Washington Housing Initiative and the Impact Pool please visit www.washingtonhousinginitiative.com.

About JBG SMITH

JBG SMITH owns, operates, invests in, and develops mixed-use properties in high growth and high barrier-to-entry submarkets in and around Washington, DC, most notably National Landing. Through an intense focus on placemaking, JBG SMITH cultivates vibrant, amenity-rich, walkable neighborhoods throughout the Washington, DC metropolitan area. Approximately 75.0% of JBG SMITH's holdings are in the National Landing submarket in Northern Virginia, which is anchored by four key demand drivers: Amazon's new headquarters; Virginia Tech's under-construction $1 billion Innovation Campus; the submarket’s proximity to the Pentagon; and JBG SMITH’s deployment of 5G digital infrastructure. JBG SMITH's dynamic portfolio currently comprises 14.2 million square feet of high-growth office, multifamily, and retail assets at share, 99% of which are Metro-served. It also maintains a development pipeline encompassing 8.8 million square feet of mixed-use, primarily multifamily, development opportunities. JBG SMITH is committed to the operation and development of green, smart, and healthy buildings and plans to maintain carbon neutral operations annually. For more information on JBG SMITH please visit www.jbgsmith.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240415001563/en/

Mittie Rooney

Rubenstein

Executive Vice President

(301) 602-8709

mrooney@rubenstein.com

Samantha Schmieder

JBG SMITH

Corporate Communications Manager

(240) 333-7706

sschmieder@jbgsmith.com

Source: JBG SMITH

FAQ

How many housing units has JBG Smith's Impact Pool preserved and created?

JBG Smith's Impact Pool has helped create and preserve more than 3,000 units of quality workforce housing across the Washington region since 2020.

What is the ticker symbol for JBG Smith?

The ticker symbol for JBG Smith is JBGS.

What is the goal that JBG Smith's Impact Pool surpassed?

JBG Smith's Impact Pool surpassed its goal of delivering 3,000 units by 2025 and still has capital remaining to invest in additional units.

Which property did the Impact Pool invest in in Takoma Park, MD?

The Impact Pool invested in the Franklin Apartments, a 185-unit age-restricted housing community in Takoma Park, MD.

What is the mission of the Impact Pool managed by JBG Smith?

The Impact Pool, managed by JBG Smith, leverages private capital to combat the loss of housing for middle-income families and stabilize residents rather than push rents.