MacFarlane Partners, a San Francisco-based private equity real estate firm that focuses on urban investments, is teaming up with The JBG Companies to develop $10 billion (€7.4 billion) worth of properties in the Washington, DC area.
“It’s a wide array of assets,” said Victor MacFarlane, the managing principal, chairman and chief executive officer of the firm. “It’s a huge mixed-use portfolio. To have a portfolio of this large a scale in a market we like is unusual. ”
The venture, called JBG Urban, is comprised of 93 assets on 42 sites in the District of Columbia and the suburbs of Maryland and Northern Virginia. MacFarlane said the planned uses for the sites include office, retail, hotel, apartments and for-sale condos.
“Washington always ranks at the top for cities most viable for long-term growth and stability,” he said of why he likes the property market in the district.
According to the firms, the venture is being funded with $2.5 billion in equity from various MacFarlane vehicles; investors from JBG’s first five funds and the firm’s executives; and a fund managed by Morgan Stanley. Various lenders are also providing $1.2 billion in debt.
MacFarlane is acquiring 82 percent of the joint venture, according to Victor MacFarlane. The investment will come from California Urban Investment Partners, a joint venture with the California Public Employees’ Retirement System that invests in urban US real estate, and the latest MacFarlane fund, MacFarlane Urban Real Estate Partners II.
While the firm underwrote all of the properties, MacFarlane added that some were noteworthy because of their size. The portfolio includes the 150-acre Mark Center, a mixed-use campus in Alexandria, Virginia; the 26-acre, mixed-use Twinbrook Commons development in Rockville, Maryland; and the 1.6-million-square-foot, mixed-use Capital Square project in Washington.
In total, the portfolio includes the development or renovation of 8.5 million square feet of office space, 2.2 million square feet of retail space, 13,200 residential units and 2,500 hotel rooms, according to the firms.
While MacFarlane Partners hasn’t worked with JBG in the past, MacFarlane said the firms first became acquainted when his firm entered the Washington market two years ago. Earlier this summer, MacFarlane Partners teamed up with developer Monument Realty to develop Half Street, a mixed-use project under construction near the Anacostia River in Southeast Washington.
Victor MacFarlane launched the firm in 1987 and it currently has $15 billion under management. In addition to its San Francisco headquarters, the firm has offices in Washington, Los Angeles and New York.