Top contender exits competition to sign DHS to large office space lease

By Jonathan O'Connell
Capital Business Staff Writer
Tuesday, August 3, 2010; 9:53 PM

The presumed frontrunner in a contentious battle for the rights to lease more than 1 million feet of office space to the Department of Homeland Security has pulled out of the competition, opening the door to several other commercial property owners eager for a government tenant.

The highly secure and newly renovated former Department of Transportation headquarters in Southwest Washington, owned by David Nassif Associates, was considered the likely winner of a solicitation by the General Services Administration for 1.1 million square feet to accommodate portions of the Department of Homeland Security.

But the Securities and Exchange Commission said Tuesday that it had signed a 10-year lease for 900,000 square feet at the site, allowing the agency to expand beyond its headquarters at 100 F Street NE. The SEC plans to add hundreds of staffers to meet its new regulatory duties granted by the recently passed financial overhaul.

"There is not enough room at our headquarters to house the additional staff and equipment we need to discharge our current and future responsibilities," SEC spokesman John Nester said in a statement.

Tim Jaroch, managing general partner at David Nassif Associates, said he had already informed GSA officials that the property, known as Constitution Center and located on Seventh Street Southwest within blocks of the National Mall, was no longer a candidate for the homeland security space. "They've been made aware of it," he said.

David Nassif's exit will likely heat up a competition that has already prompted two protests from competing developers and revived political battles on Capitol Hill over the location of federal facilities.

"I think it would be a very good day for anybody that is in that competition," said P. Brian Connolly, senior vice president at Akridge. Connolly said a number of companies with properties atop stations along Metro's Green Line, both in Prince George's County and Southeast Washington, were likely in play. The majority of the Department of Homeland Security's operations are being consolidated on the St. Elizabeths Hospital campus, near the Anacostia Green Line Metro station.

The JBG Cos., a Chevy Chase developer, and Eisenhower Real Estate Holdings, each filed protests saying that their sites -- in Temple Hills and Alexandria, respectively -- were unfairly being discounted by the solicitation's terms. The Government Accountability Office denied the Eisenhower protest last week and has not yet ruled on JBG's case.

Connolly added that with Constitution Center out of the bidding, the government may also have to alter the terms of its search, because many of the other respondents proposed buildings that have not yet been built.

"I think that's excellent news for those people that would like to bid," he said, "However, which one of those bidders for the DHS consolidation can still meet that deadline?"

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