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JBG Smith Cuts Dividend In Bid To Preserve Cash

The developer of Amazon HQ2 and much of the surrounding National Landing area, JBG Smith, is reducing its distributions to shareholders as it seeks to shore up its financial position. 

The Bethesda-based REIT is cutting its quarterly dividend to 17.5 cents per share, amounting to an indicated annual rate of 70 cents per share, down 22.2% from its prior dividend. The move comes amid an effort to unload properties that aren't central to its core development vision of placemaking in Northern Virginia.

JBG Smith CEO Matt Kelly speaks at Bisnow's Amazon HQ2-Apalooza in February 2019.

JBG cited three reasons for the move: “(i) our on-going capital recycling strategy, (ii) the expected performance and capital requirements of our commercial portfolio, and (iii) the upcoming delivery of our 1,583 under-construction multifamily units,” the REIT said in a news release.

“We believe the reduced dividend rate will help preserve JBG SMITH’s financial flexibility, reinforce our already strong financial position, continue to cover our taxable income distribution requirements, and enhance the Company’s ability to take advantage of compelling opportunities, such as share repurchases, as they arise,” the release says.

JBG Smith declined to comment further on the news.

The move comes as the REIT hones in on its development in Northern Virginia’s National Landing and Potomac Yard neighborhoods. Two-thirds of JBG’s holdings are in National Landing.

In addition to developing Amazon HQ2 and much of the surrounding retail and residential properties, the company is building out Virginia Tech's $1B Innovation Campus at Potomac Yard. It was also chosen as the developer for Potomac Yard's planned $2B arena-anchored sports and entertainment district, where the Washington Capitals and Wizards are planning to relocate. 

The company has sold a number of properties over the past year that it doesn't consider core to its strategy.

This week it sold the 31-story Central Place office tower in Rosslyn to CoStar Group. The price was $339M, Bisnow first reported.

Last month, JBG sold the Crystal City Marriott, one of the properties that came from its merger with Vornado Realty Trust's D.C. portfolio in 2017, for $66M. And in May, JBG sold an 80% stake in its own Bethesda headquarters for $196M. 

Large, stable corporations rarely make dividend cuts, according to a McKinsey & Co. article published in November, unless “they have low earnings or when challenging economic conditions force their hand.”

Vornado made a similar move last April when it postponed its dividend payment until the end of the year, and it later slashed its fourth-quarter dividend by 20%.