Fannie Mae Quits SW Office Deal

Fannie Mae had said it needed the additional space at the Waterside Mall because it was outgrowing the brick building on its grassy campus on Wisconsin Avenue near Quebec Street NW and several other leased offices in the region. Executives said they wanted to consolidate and own another complex for their 4,000 employees.

Raines said in a recent speech that the move to Southwest reflected the company's commitment to be in the District permanently "and to use our presence to bring about as much positive change as we possibly can."

The Waterside Mall, near the District's fish market, was built in the late 1960s as part of a program to revive a residential neighborhood. But the mall never took off. The drab, concrete office buildings at Waterside have been mostly empty since the Environmental Protection Agency moved away in 2002.

The redevelopment project was to have an estimated 100,000 square feet of shops and restaurants, including a grocery store, and 600,000 square feet of offices -- outside of Fannie Mae's complex. An additional 400,000 square feet of residential units were planned. Fannie will lose about $800,000 it has paid to developers to do plans for the project.

Mitchell N. Schear, president of Charles E. Smith Commercial Realty LP in Crystal City, which owns Kaempfer, said that "clearly we are disappointed" that Fannie Mae is not coming.

Construction on the project was expected to start in 2006 and be completed in 2009. Now the timetable will be delayed at least a year, Dudney said, as developers look for other office tenants.

"It was a coup to get [Fannie Mae] there, and to go and find another user will just take time," said Andrew Altman, head of the Anacostia Waterfront Corp., the group that is heading an effort to revitalize that area. "They would have added a great corporate presence to the waterfront. It would have been a significant catalyst for [that area].

"It is tragic to see that lost," he said. "It's a setback."

Other major housing and office projects have started in Southwest, and the area is starting to make a comeback, say some planners and developers. The mayor and his supporters also said that the recent deal to build a new baseball stadium in Southeast would be a major attraction for other development projects.

"Fannie Mae's moving down there was the 'Good Housekeeping Seal of Approval' so that other brokers could say, 'Fannie Mae is down here, you should move down there too,' " said Gerry Widdicombe, director of economic development for the Downtown DC Business Improvement District. "It was going to be a lot of workers, and you can't come up with something like that every day."

Staff writers David Hilzenrath and Lori Montgomery contributed to this report.