After months of planning a major expansion to accommodate rapid growth, MCI Corp.'s negotiations for more than 1 million square feet of office space in Arlington County's Pentagon City is entering its crucial stage.
If an agreement can be reached with Rose Associates of New York, developers of the 116-acre Pentagon City tract, it would be what is believed the biggest single transaction involving private office space in metropolitan Washington.
Although "substantive issues" are yet to be negotiated, MCI, a major telecommunications company based in the District, is hopeful of reaching an agreement that would permit it to occupy 1.25 million square feet of space in a two-building office complex at Pentagon City. The first building, a 12-story structure, although finished, has stood vacant for several months.
One source close to the negotiations said MCI had, at one point, offered $68.5 million to purchase 1 million square feet of the office space and leave another 250,000 for the developers to lease.
Before MCI signs off on the deal, however, the developers must first obtain a critical zoning change that would permit MCI to consolidate its offices on a single site.
A letter to the zoning commission from the law firm that represents the developers emphasizes that they are in the "final stages of negotiations with a major local corporation which, subject to this approval, would relocate its corporate headquarters within Pentagon City."
MCI officials say, however, that the company intends to retain its corporate headquarters in Washington and consolidate several of its operations at offices in the two buildings at Pentagon City.
Failure to get the zoning change would make negotiations "moot" and MCI would consider other development sites in the area as alternatives, said Senior Vice President Charles Skibo.
The Arlington County Board will consider the zoning request at a hearing on Saturday.
Documents on file at the Arlington County zoning and planning offices show that Pentagon Tract Development Corp. has requested an amendment to the phased-development site plan for Pentagon City, which has been divided into five parcels.
The zoning change reqested by the developers would allow them to transfer 490,000 square feet of planned office space from parcels two and three to parcel one. In return, planned residential and hotel units would be transferred from parcels two and three to parcel one.
The staff of the planning board has recommended approval of the zoning request. However, the planning commission itself has recommended that the Arlington Board defer the request because citizens groups in the vicinity of Pentagon City have not been given an opportunity to comment on the matter.
An official in the planning office said representatives of a citizens group have indicated concern over the request for a zoning change at Pentagon City.
Concern over high density development and potential traffic problems prompted a South Arlington citizens group to sue the board, although unsuccessfully, for rezoning Pentagon City five years ago.
Meanwhile, several "substantive issues" are yet to be negotiated between MCI and Rose Associates, said Skibo. "If we're not able to resolve everything, then, we'll pass on the zoning," he said.
For the time being, however, Skibo added, "There's so much to be laid out and we're not even 25 percent of the way yet."
For example, he said, whether MCI leases or buys all of the office space is still a matter of negotiation.
Contrary to reports that have been circulating, MCI has not signed a letter of intent to proceed with the deal, said the company's chairman, William McGowan. "We've agreed to negotiate," McGowan emphasized.
MCI began looking for additional space in the area about six months ago, because, McGowan said, "We're expanding so fast."
Although the company moved its headquarters to a new building in downtown Washington fairly recently, its operations are scattered in other buildings throughout the area.
Pentagon City is one of Northern Virginia's largest mixed-use developments. The site, which has been the subject of considerable controversy for the last three decades, is located between I-395 and Crystal City, near the Pentagon.
Besides being accessible to a major interstate highway, the site is only a short distance from National Airport and is being developed around a Metro station.
Development, which is planned over a 10-year period, will include 1.25 million square feet of office space, 5,900 condominimum apartment units, 2,000 hotel rooms and 800,000 square feet of commercial space.
Initial estimates have put the gross value of the completed project at $1 billion.;Picture, One of the two buildings at Pentagon City in which MCI hopes to expand offices. By M. C. Valada for The Washington Post