Washington real estate developers Jeff Epperson and Rick Powell began snapping up land on Howard Road in Anacostia in 2004. It was an aggressive move in the downtrodden neighborhood.
The potential, after all, was great.
A new headquarters for Homeland Security — the biggest federal construction project in the country since the Pentagon in the 1940s — was on the way. The $3.4 billion project was expected to transform the sweeping grounds of St. Elizabeths Hospital into a national security campus and bring 16,000 jobs to the very poorest of Washington neighborhoods.
Federal and District officials have promoted the project as a savior that would finally bring jobs and prosperity to surrounding Southeast neighborhoods — Anacostia, Buena Vista, Barry Farm, Congress Heights. The work-a-day crowd with cash to spend also has signalled opportunity to commercial real estate developers whose business was kicked sideways in the recession.
Yet after 10 years of planning and two years of construction, progress is dragging to a halt as lawmakers feud over matters big (how to secure the nation) and small (what offices to lease). A tug-of-war over funding has left the project with barely enough money even to finish its first building, the U.S. Coast Guard headquarters.
A larger existential crisis also looms: Some in Washington are asking whether the Department of Homeland Security, an agency created in the days after the 9/11 terrorist attacks, should be dismantled.
For now, the former mental asylum — whose vacant brick buildings and placid grounds once served as a home to patients including the poet Ezra Pound and John Hinckley, who shot President Ronald Reagan in 1981 — is still planned as the agency’s home.
So much, it turns out, depends on Congress, where the Republican-controlled House has slimmed or rejected a series of funding requests. The delays have added an estimated $500 million to the cost, which has ballooned to $3.9 billion, $1.3 billion of which was spent as of December. Initially expected to be completed by 2016, the project could now take until 2021 or later, if it is finished at all.
The chairman of a House committee overseeing the project says most of the plan ought to be scrapped. And even the project’s most fierce advocates cannot say for certain when the project might be finished or even if it will be.
Over on Howard Road, Epperson and Powell have watched their prospects fade. The partners tried to lure Wal-Mart, but it went elsewhere. They tried to land a lease for additional Homeland Security offices, but the government cancelled the offering. In recent months, they tried to secure financing to build apartments on their 10 acres but found no takers.
“We’re in a bit of a holding pattern with not much prospects at this point,” Epperson said. “We don’t know what we’re doing. We’ve lost a tremendous amount of value in the past few years.”
First called the Government Hospital for the Insane, St. Elizabeths was built in the 1850s as a grand demonstration of therapeutic treatment for the mentally ill after furious lobbying of Congress by advocate Dorothea Dix. Bissected by Martin Luther King Jr. Avenue SE, the hospital’s 183-acre east campus is owned by the District, which built a new 450,000-square-foot in-patient mental hospital there in 2010.
Since the last patients left the federally owned west campus in 2003, it has been vacant but for the occasional escorted tour group or film crew (you might remember it from the opening scene of the 1992 Tom Cruise/Jack Nicholson film “A Few Good Men”).
That is, until the Sept. 11, 2001, terrorist attacks. After President George W. Bush and Congress created the new security agency, the eerie and empty brick buildings quickly entered the discussion about where to consolidate.
The plan to house the agency there was forged on a promise that the department, created to coordinate the work of dozens of government agencies that play a role in securing the nation from terrorist threats, would be based near Congress and the White House.
A decade later, the 22 agencies that report to the department — formerly scattered under Justice, Energy, Treasury, Transportation, Agriculture and beyond — operate out of more than 40 office buildings across the region. The department’s headquarters are in a space formerly used by the Navy, in the Nebraska Avenue Complex, but other parts are as far away as Herndon and Springfield — a painfully long drive in the event of an emergency that requires a rapid response. The campus is considered critical.
“It will help us build that culture of ‘One DHS,’ ” DHS Secretary Janet Napolitano told CNN at the groundbreaking in September 2009. Sen. Joseph I. Lieberman (I-Conn.), who helped create the agency, said, “I feel like we’ve finally given a home to this child we’ve created, which is finally reaching maturity.”
The master plan called for nearly all the agencies to relocate to St. Elizabeths, to new buildings and 52 (of 62) renovated ones. After wrangling with historic preservation groups that wanted to protect the quaint quality of the campus, which was designated a National Historic Landmark in 1991, and downsizing its plans, the General Services Administration and the department won approval to pack 3.8 million square feet of office space on the west campus and another 750,000 square feet for the Federal Emergency Management Agency across the street on the District’s east campus.
Since the plan’s approval in 2009, Clark Construction and its subcontractors have removed more than 1.6 million cubic yards of dirt for the Coast Guard headquarters, but the political ground beneath St. Elizabeths has shifted even more dramatically.
Led by House Republicans, the 2011 Congress, amid the throes of deep economic turmoil, brought a renewed focus on austerity that has clamped the revenue streams on which many commercial real estate firms in Washington have long thrived.
The federal government fills roughly one-quarter of the region’s commercial office space. And the slowdown caused something of a panic for landlords wondering where to get their next rent check. Some office buildings that once relied on government tenants are now empty, with owners at risk of defaulting on loans.
Leases for government agencies, which formerly were approved with regularity, now sometimes wait a year or more for Congress to act. Historically, such leases were often signed for 10 or 20 years. Uncertainty about the economy and political infighting have left real estate developers eager to land even two-year lease extensions.
In the 2011 fiscal year, the GSA submitted or resubmitted 19 Washington-area lease prospectuses to Congress; 11 have been approved. Most had been trimmed considerably. For instance, a request for 231,000 square feet for the National Park service was cut to 158,000 square feet. Of the five leases Congress received this fiscal year, it has approved none. The delays require the GSA to allow leases to fall into holdover, which costs extra and which adds to the agency’s administrative burden. It also flummoxes private landlords.
“These tenants are just sitting and these leases are approaching expiration. And the landlords just don’t know what to do,” said Darian A. LeBlanc, director of government services at the brokerage firm Cassidy Turley. “In some cases it is just devastating to the ability to plan what happens within these buildings.”
The government owns other space, some of it valuable and expensive to operate, that it allows to lie vacant or underutilized. After pressure from lawmakers, including Rep. Jeff Denham (R-Calif.), the GSA moved to lease out the Old Post Office pavilion on Pennsylvania Avenue, which was occupied but losing more than $6 million a year. Donald Trump’s hotel company won a bid to turn the landmark into a 250-room luxury hotel.
More often, properties languish. That was the focus of a forum, “GSA Downsizing — A Perfect Storm Looming,” held by the D.C. Building Industry Association, a trade group. Ernest D. Jarvis, the group’s president and senior vice president at First Potomac Realty Trust, said disagreement on the Hill had tempered investment interest in Washington. He hopes the elections will lead to the “re-igniting of the local economy.”
“We hope that one party, from the real estate perspective, will control both the White House and Congress,” he said, “because then I think we’ll see more prospectuses moving.”
If Washington’s austerity spirit holds, the next step could be dismantling the plan for St. Elizabeths and perhaps even the security agency itself. In some ways it’s already begun: For the 2011 fiscal year President Obama requested $668 million for St. Elizabeths construction through the GSA and Homeland Security budgets; Congress provided $107 million.
In the following budget, the department and GSA requested a combined $376 million, which the House initially cut to zero. A deal on the budget ultimately produced $37.3 million for GSA and $56 million for the department, just enough to finish the Coast Guard headquarters. The department postponed work on utilities, a stone facade along an access road and a visitor’s center.
Much bigger, more overt steps may be on the way. Rep. John L. Mica (R-Fla.), chairman of the House Committee on Transportation and Infrastructure, which oversees GSA, says he thinks the master plan for St. Elizabeths ought to be chucked and the combining of dozens of agencies into one department, as Congress and Bush did in 2002 with a law creating Homeland Security, ought to be reconsidered.
“It was a time post-9/11. Bush had resisted efforts to put 22 agencies with over 200,000 people together,” Mica said, “but the pressure was pretty strong and usually government overreacts. And of course that’s what we did.”
It should be turned back, he says. On this point, Mica is joined by a number of the Republican presidential candidates. Rep. Ron Paul (R-Tex.), who voted against creating the department, has repeatedly called for dismantling it and referred to the department’s Transportation Security Administration as “a bureaucratic monster.” Former House speaker Newt Gingrich wants to move its focus to the Mexican border. “I would be willing to take half the people currently serving in Washington, ship them to Texas, Arizona and New Mexico,” he said in a September debate.
Rep. Peter T. King (R-N.Y.), who leads House oversight of the department, supports DHS and its consolidation but acknowledged that “because of our current fiscal challenges, this project will not be completed as quickly as anyone hoped.”
Mica said the agency’s mission did not require so many employees.
“There’s no way you need 16,000 people that close to the White House. And I think there’s no way you need 16,000 people in DHS,” Mica said. “You need some people to connect the dots, which was the recommendation of the 9-11 Commission.” He expects the House to become more conservative after the election, which could lead to a recalibration of the department and its headquarters.
“My prediction,” Mica said, “and remember this conversation a year from now, is that there is a new crowd coming, and they will be refining the DHS mission.”
If the plan for St. Elizabeths falls apart, so too will a second promise on which it was created — that the campus would contribute to the rejuvenation of Southeast Washington, where unemployment has floated above 20 percent in recent years.
Consider the cafeteria at the Coast Guard’s new 1.2 million-square-foot building: It will seat 300, or one of every 12 employees at lunch time.
This was intentional, part of a plan to avoid building an isolated fortress where badge-wearing security workers simply drive through gates fit for the citadel on their way to homes in Virginia or Maryland. Better, it was thought, to bolster the city just outside its gates. Employees could step out for lunch, dry cleaning, haircuts and the like.
The Coast Guard’s building is on a bluff overlooking the Anacostia River and downtown Washington, with views that rival those in Rosslyn skyscrapers. But in terms of food, it’s a long way from anywhere. Employees could get in their cars and take I-295 to Maryland or hop a shuttle bus off of campus to eat at . . . well . . . the former Players Lounge. Now called Georgena’s, the former strip club at 2737 Martin Luther King Jr. Ave. is nearly the only sit-down option nearby.
Retailers and developers have staked positions near the campus. The Curtis family, which built the 19-foot-high “Big Chair” in downtown Anacostia, partnered with Four Points, a real estate firm with expertise in Tysons Corner. Together they plotted a broad renovation of downtown Anacostia, 1.5 million square feet of new development.
Victor MacFarlane, builder of the largest African American-owned real estate investment firm in the country, bought a stake in the city’s professional soccer team, D.C. United, and looked at Anacostia for a new team stadium.
Private developers bought sites near Green Line Metro stations in Prince George’s County and hoped to attract 1.1 million square feet of DHS office space that the agency couldn’t fit on St. Elizabeths.
The D.C. government also moved aggressively to develop Poplar Point, a swath of 110 undeveloped acres along the Anacostia waterfront that mayor Adrian M. Fenty called a “once-in-a-lifetime” opportunity to bring prosperity east of the river. Early in 2008 Fenty picked Clark Realty Capital from a strong pool of development teams to build 40 acres of the site into a $2.5 billion mixed-use community with offices, housing, retail, an international environmental center and 70 acres of parkland.
Soon after, the Obama administration pledged $450 million from the American Reinvestment and Recovery Act for redevelopment of St. Elizabeths, setting a booster rocket to the project.
But by the gray day of the groundbreaking in 2009, storm clouds for St. Elizabeths loomed. Though the plan had been approved only nine months earlier, many of the large streams of private and public investment into the area seemed to run dry.
In the wake of the recession, Four Points and the Curtis family backed off of building new offices. The Fenty administration cut Clark Realty loose as its Poplar Point development partner, as city administrator Neil O. Albert cited the “extremely challenging economic environment.” And MacFarlane sold his stake in D.C. United; the team is looking elsewhere for a stadium.
Epperson, one of the owners of the land on Howard Road, is wondering what it will take to get St. Elizabeths on track again. “I think it’s a political issue,” he said. “If Homeland Security raises to be an important security issue, they start cracking whips and they will make it happen. That’s sort of how politicians work. Today everyone is talking about jobs. But if someone drops a bomb in Washington tomorrow, it will seem pretty important.”
House Del. Eleanor Holmes Norton (D-D.C.), the District’s non-voting member of Congress, says she is committed to seeing the project through. She points out that many of the city’s landmark buildings (National Archives, Federal Trade Commission, the west building of the National Gallery of Art) were built during Franklin D. Roosevelt’s presidency. Partly because the country under Roosevelt spent heavily on public works projects. Partly because he was president for a long time: 12 years.
Norton says a project as ambitious as St. Elizabeths requires many years and multiple compromises and commitments to complete. “To end it,” she said, “would be one of the greatest mistakes of all time.”
Norton and Robert Peck, head of the Public Buildings Service for the GSA, both acknowledge that the master plan may have to change. Norton said the government might have to reconsider the order in which to construct buildings if it can’t be sure the entire campus will be finished. Utility systems may have to be built piecemeal as segments of the campus are funded, rather than building the system at once (though that would cost less).
The GSA, under Peck, is reducing the office space it builds or leases for government workers by encouraging desk-sharing, telecommuting and no longer reserving space for those who are traveling or out sick. Ultimately Peck thinks he could bring more than 16,000 employees to St. Elizabeths, which would save costs elsewhere.
But will Congress come through?
“Homeland Security is still planning to move,” Peck said. “If you ask me when is Homeland Security going to be there, I just don’t have an answer.”
“I predict yes,” Norton said, “but I can’t tell you when.”
The D.C. government, meanwhile, presses on with the east campus, where — after proposing to Northrop Grumman that the contractor move its global headquarters there — it has nearly completed a master plan that calls for a mixed-use neighborhood with convention spaces, offices and cybersecurity research facilities. Mayor Vincent C. Gray, a resident of Southeast, has made development of east-of-the-river neighborhoods a top priority and proposed $113.5 million for the campus. Gray is expected to begin seeking private development partners for the site this year.
Even with the uncertainty that emanates from the federal campus across the street, there is some private sector interest in the District’s parcel.
Microsoft may open an Innovation Center, a hub to help local residents and businesses access new technology opportunities, that would be its first in the nation. Victor Hoskins, the city’s deputy mayor, said Microsoft officials toured St. Elizabeths three times and that the company was “very serious.” about the idea.
“I’d like to see a Johns Hopkins-type of technology park,” Hoskins said.
A California company, MVM Technologies, plans to open an ink-jet manufacturing facility there.
And the Chesapeake Crescent Initiative, an alliance of nine research universities in the region, imagined St. Elizabeths east as a science and innovation hub. Co-founded by former AOL executive George Vradenburg and Georgetown developer Hebert S. Miller, the group helped the city, Carnegie Mellon and Virginia Tech land a $532,000 grant to help spin off opportunities from DHS into the local technology community.
By December, at a meeting on St. Elizabeths convened by Chesapeake Crescent, the innovators were optimistic — even as they puzzled over the delays. Vradenburg asked: “How do you get things moving on the east campus well before things are happening on the west campus?”
Chris Cummiskey, Homeland Security’s deputy under secretary for management, addressed the crowd of academics, government officials and business leaders who were eager to hear about the future of his agency, which procured $83.3 billion in business from the private sector between 2005 and 2010.
“Things have changed,” Cummiskey said. “The ground has shifted. And we’ve had to be agile in response to those challenges. Sometimes better than others, quite honestly.”
Even so, Mica said, these are frugal times. Going forward, he expects the department “will be more of a security, connect-the-dots agency.”
“Congress isn’t going to give it money. And I think in the future things will only go there when we have a need for it,” the congressman said. “It may not be what was initially envisioned.”