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Breaking: $8.4B JBG-New York REIT Merger Terminated

The proposed $8.4B merger between The JBG Cos and New York REIT will not go through, after NYRT announced the sides will terminate the deal, effective immediately.

JBG Matt Kelly First Potomac Bob Milkovich

After news of the merger caused New York REIT's stocks to plummet and some shareholders to berate the deal, its board has decided it is in the best interests of its shareholders to sell off its assets rather than merge with the DC-based developer. 

"The company's board has determined that, following the termination of the proposed JBG transaction," NYRT board chairman Randolph Read said in a release, "selling the company's assets pursuant to the asset sale plan is both prudent and, in the board's view, the best way to monetize and realize the current value of our assets." 

JBG managing partner Matt Kelly tells Bisnow he was disappointed to see the deal fall through, calling it a "missed opportunity." Since announcing the merger, Matt says JBG spoke with all of New York REIT's largest shareholders and while many of them looked at the deal favorably, many investors wanted a more immediate return.

"A lot of investors were more interested in getting cash today than waiting to realize upside of longer-term growth," Matt, snapped above at Bisnow's State of the Market, says. "We could have done things to make the deal, but those things would have come at the expense of our investors, and that was a sacrifice we were not prepared to make."

New York REIT must pay JBG $9.5M under the termination agreement to reimburse it for certain costs. The deal would have brought the Chevy Chase-based developer into the New York market, an opportunity Matt says he is still looking to pursue.

"We had been looking at it very seriously before this arose, and we're going to continue taking a hard look at that," Matt says. "But there isn’t another deal that we're about to make in New York."

The merger also would have made JBG a public company. Matt says now that the deal has fallen through, he doesn't see JBG going public any time soon. 

"Now that we've terminated the transaction, our intention is to keep going in the private fund business," Matt says. "I don’t see a stand-alone IPO or a public transaction right now, there's nothing in front of us at the moment that looks all that appealing." 

Westin Arlington Gateway

In preparation of the merger, JBG had planned to sell some assets to deleverage its portfolio. It has already agreed to sell the 338-key Westin Arlington Gateway in Ballston for $97.3M (above). It has also placed the 95% occupied, 317k SF office building at 1025 Thomas Jefferson St NW on the market.

Matt says JBG had intended to sell many of these assets anyway, and will continue with these plans despite the merger falling through. 

New York REIT, which has no employees outside of CEO Michael Happel, plans to buy the 51% of Manhattan's Worldwide Plaza that it doesn't currently own, raise capital to repay its $485M credit facility, then liquidate its roughly 3.4M SF of office holdings, all in NYC.

Related Topics: The JBG Cos, New York REIT