New JBG Partnership in Final Negotiations

The JBG Companies, one of Washington's old-line real estate development companies, is finishing a multi-billion dollar deal to sell about 60 percent of the projects it has underway to a new company called JBG Urban, sources close to the transaction are telling me.

The new company is a JBG partnership with the Yale University Endowment, Calpers and Calsters -- the two giant California state pension funds. Calpers represents California public employees and Calsters keeps the state's teachers happy in their retirement.

The transaction could be announced any day, according to a source close to the deal, who spoke on condition of anonymity because the negotiations are not yet final.

The Yale Endowment is one of investing world's best-known success stories. David Swensen, its chief invesment officer, has a Warren Buffett-like record of approximately 17 percent annual returns over the last decade. Swensen's partnering with or investing in JBG shows tremendous confidence in the real estate firm. An investment from Swensen and the Yale Endowment in your hedge fund or private equity fund or, in this case, your real estate company, is considered a mark of excellence in the investment community. The Yale endowment has been investing -- very successfully -- with JBG for years.

JBG stands for the last names of its founders, Benjamin R. Jacobs, Donald A. Brown and Joseph B. Gildenhorn. The company has been an active investor and owner in the local real estate market for nearly 50 years. In the past few years, JBG has enjoyed a good run. The company has built everything from the new Department of Transportation building near the the new Nationals baseball stadium to the Waterview Building in Rosslyn, which is fully leased by the Corporate Executive Board.

Victor MacFarlane, managing principal of San Francisco-based Macfarlane Partners, represents the California pension systems and has been investing their money of late in he Washington area. In January, MacFarlane bought the D.C. United Major League Soccer team and wants to build a new, soccer-only stadium across the Anacostia River from the Nationals Stadium now under construction.

-- Thomas Heath

By Mike Shepard  |  July 14, 2007; 3:10 PM ET  | Category:  Finance
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