The Washington Post

Landlord: SEC owes nearly $8M in rent for unused space

The U.S. Securities and Exchange Commission disputes the charge, saying it does not owe rent because the space’s interior has not been completed. (Jonathan Ernst/Reuters)

The Securities and Exchange Commission owes nearly $8 million in past-due rent on a Washington office building, according to the building’s owner.

The agency disputes the charge, saying it does not owe rent because the space’s interior has not been completed.

“Under the lease, rent does not begin until the build out of the space is substantially completed and accepted by the government,” SEC spokesman John Nester said in a statement. “Since these events have not occurred, the SEC has advised the landlord in writing that there is no basis for paying the rent invoices.”

The agency signed a $556.8 million lease in July 2010 for 900,000 square feet in Constitution Center, in Southwest D.C., only for the price tag to immediately draw scrutiny from Congress . After SEC Chairwoman Mary Schapiro acknowledged mistakes, the agency said it would not fill most of the space.

But about a quarter of the building remains under contract to the SEC. Tim Jaroch, managing general partner of David Nassif Associates, which owns the building, said the lease required the agency to begin paying $1.3 million monthly on Nov. 1 of 2011, meaning it will owe $7.75 million by April 30 and $18 million by Dec. 31.

After the lease drew political heat, David Nassif agreed to seek other tenants, leasing parts of the building to the Office of Comptroller of the Currency and the Federal Housing Finance Agency. Jaroch said SEC staff coordinated with him for months on designs for the interior build-out. “We were to the point where we had started choosing the fabrics,” he said.

But in February, he said, the agency stopped communicating altogether. SEC leaders no longer want any space. Nester said it is now “working with the General Services Administration to transfer the remaining space to it for use by other government tenants, a process we hope to complete shortly.”

But Jaroch, who is also trying to sell the building, said that will not address the unpaid rent. Why did David Nassif allow the SEC out of its lease in the first place?

“Because we’re dumb,” Jaroch said. “We’re trying to do the right thing by people. The SEC in early October called us in and said we know we just leased 900,000 square feet from you just a few months ago, but now we only need the southwest quadrant.”

Jonathan O'Connell has covered land use and development in the Washington area for more than five years.
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