On the first Friday in June, a team of Washington real estate brokers celebrated what many in the business considered an impressive feat.
Working for a family developer, they had persuaded the federal government to sign a $22 million lease that would move the National Science Foundation from its longtime headquarters in Ballston to an un-built office complex in southern Alexandria.
After a heated competition, the brokers had won for their largely unknown client the opportunity to build a 668,000-square-foot government complex on what is now a parking lot next to the AMC Hoffman Center 22 movie theater.
The celebration didn’t last long.
Five weeks later, the brokerage firm, Jones Lang LaSalle, sued its client, alleging its brokers had been cheated out of a $6.7 million commission for the NSF deal.
In a nine-page complaint filed in Aug. 16 in U.S. District Court in Alexandria, the firm alleged that after the lease was inked, the landowner, Hoffman Family LLC, refused to pay the commission outlined in a 2007 leasing agreement, despite the first payment of $3,365,169.83, having already come due.
The leasing agreement, submitted to the court by Jones Lang, calls for Hoffman to pay 2 percent of the base rent for the length of the 15-year lease, with half due at the lease signing and the second half due once the government began paying rent.
“Under the Leasing Agreement, the Hoffman Entities were obliged to pay a commission to JLL, but, despite due demand, the Hoffman Entities have refused to do so,” the firm said in the complaint.
Hoffman Family LLC is among the companies created to manage the properties acquired by family patriarch Hubert N. Hoffman in the 1950s, according to the Web site of the Hoffman Co. Hoffman has planned a town center project that includes 7 million square feet over 56 acres, of which the NSF, with its 2,100 headquarters employees, contractors and scientists, will serve as the centerpiece.
The family responded to the suit by saying Jones Lang was not owed $6.7 million for its work but $1 million, citing a July 2012 letter Jones Lang’s brokers submitted in pursuit of the NSF deal listing “$1M” for the landlord’s representative.
According to the Hoffman response: “The Defendants agreed with JLL that, in the event the Defendants were successful in obtaining a Lease from the NSF for their property on Eisenhower Avenue, the Defendants would pay a fee or commission to JLL in the amount of $1,000,000.00, 50% payable on lease execution, 50% payable on lease occupancy.”
The Hoffman’s attorney said the family had already attempted to make the first $500,000 payment.
Shareholders and partners in the family’s real estate include Hoffman Family Trust, Holly Nolting, Thomas Hoffman, Nancy Connor, Timothy Hoffman, Hoffman Development and Hoffman Buildings Management Co., according to court filings. An attorney for the Hoffmans, Michael J. Perine, did not return calls requesting comment.
A spokeswoman for Jones Lang said the firm does not comment on matters in litigation.
Hoffman won the deal by aggressively underbidding other competitors. The General Services Administration has dramatically cut back on leasing and new construction, making each of its major real estate decisions far more competitive.
Though the NSF lease was subsidized by millions of dollars from the city of Alexandria, it calls for the government to pay $33.95 per square foot in base rent, or $22.4 million annually. Developers of new buildings in Arlington and even Tysons Corner often ask $50 or more per square foot. The GSA, which negotiated the lease, claimed that the NSF rent was 30 percent below market rate and would save the government $35 million over the course of the lease.
Jones Lang suggested in its suit that Hoffman backed out of paying the commission because the rental rate was so low. Once the government announced the deal, Joe Brennan, a managing director at Jones Lang, called Perine to congratulate him and request payment, according to the complaint.
“During this conversation, Mr. Brennan reminded Mr. Perine of the commissions due and payable to JLL under the terms of the Leasing Agreement, but Mr. Perine stated that the Hoffman Entities refused to pay such commissions because the ‘economics’ of the NSF Lease transaction would not ‘support’ the payment,” the complaint reads.
Hoffman’s attorneys acknowledged that the phone call took place, but denied the substance of the call alleged by JLL.
Attorneys for Jones Lang requested a jury trial and have been attempting to procure documents from Hoffman to build their case. The court has imposed a Jan. 10 deadline for the procurement of documents.