Let the competition begin.
The federal government last week said it is considering three sites for a future FBI headquarters, all of them in the Washington suburbs: Greenbelt and Landover in Prince George’s County in Maryland and Springfield in Fairfax County in Virginia.
The project is a rare economic development prize in a region suffering from the slowdown in federal spending, a chance to claim a high-profile tenant to anchor a new mini-city somewhere in the metropolitan area.
But before anyone gets too excited about the 11,000 federal employees heading their way, it’s useful to remember big federal redevelopment programs rarely move quickly.
Uncle Sam’s landlord, the General Services Administration, is bound by legal constraints every time it has to sell or lease a structure. There are historical preservation rules to be considered. Local stakeholders who should be involved. And public opinion that must be gathered.
Lawmakers have long criticized the GSA for not being more efficient at managing property disposal.
An audit of all federally owned assets during the George W. Bush administration identified at least 14,000 empty buildings and 55,000 more that were under-used nationwide. President Obama followed up by issuing a memo that required civilian agencies to slash $3 billion in real estate costs by 2012 — kickstarting a recent rush to downsize and sell off properties agencies no longer need.
The GSA disposed of 213 properties for the government in 2013, generating $97 million in proceeds, according to the Office of Management and Budget. Overall, the government has reduced its office and warehouse footprint by more than 10 million square feet. This year, government leases expire on 10.7 million square feet of space, pitting current landlords against potential new ones.
Here’s a look at several major local properties put in play in recent years that lend some perspective to the race for the FBI, and what happens when space reverts to the private sector.
Old Post Office Pavilion
The Old Post Office Pavilion on Pennsylvania Avenue NW, a Romanesque Revival-style building, was built in the 1890s. The 315-foot tower with sweeping views of the nation’s capital was home to the postal department’s headquarters until 1914.
The structure was nearly demolished in the 1960s. But Nancy Hanks, chairwoman of the National Endowment for the Arts under presidents Nixon and Ford, led an effort to save the building. It was named a National Historic Landmark in 1973, giving lift to Washington’s historical preservation movement.
In the 1980s, the Old Post Office received a makeover. That wasn’t enough to make it flourish. Over the next three decades, the building housed a handful of federal offices and a food court, losing more than $6 million annually. Under pressure from lawmakers, the GSA sought proposals from private developers to convert the building into a hotel, first in 2005, and then in 2011.
After receiving several competitive bids, an unlikely winner emerged: New York real estate mogul Donald Trump. He and his daughter, Ivanka, signed a 60-year lease to transform the Old Post Office into a 270-room luxury hotel that will open its doors in 2016. The hotel, to be called Trump International, will feature gold-trimmed bathrooms and suites. The $200 million renovation won’t alter the building’s facade, and the Old Post Office’s bell tower will still be accessible to the public when the project is finished.
7550 Wisconsin Ave., Bethesda
This glassy office building in downtown Bethesda was the former headquarters of the National Institutes of Health. Built in the 1960s, the structure had been vacant for eight years before the GSA sold it through an online auction in 2010.
The buyers, Akridge Properties and Rockwood Capital, got a good deal on the project. Although the GSA posted an original asking price of $14 million, the building eventually sold for $12.5 million. Agency officials told lawmakers the property wasn’t able to obtain a better value because of bad market timing.
Located near the Bethesda Metro station, the 10-story, 120,000-square-foot structure was completed in November 2012. The building signed six tenants this summer, including energy solutions company SunEdison and Sandy Spring Bank.
Federal Trade Commission headquarters
The Federal Trade Commission’s headquarters is located on Pennsylvania Avenue NW in what is known as the Apex building. The most distinctive feature of the nine-story, Classical Revivalist structure is the semi-circular colonnade on its east side.
Since it was completed in 1938, the 300,000-square-foot building has been home to the FTC, and the agency has said it has no interest in relocating. But one member of Congress has been especially vocal about his idea to boot the FTC from this prime real estate so it can instead be used to display art.
In 2011, Rep. John L. Mica (R-Fla.) aggressively pushed for the building to become part of the National Gallery of Art, a move that would grow one of the nation’s premier art museums from two buildings to three. As chairman of the House committee that oversees the GSA, he had a powerful perch to advocate for such a change.
In 2012, GSA Administrator Dan Tangherlini told Mica that his proposals to move the FTC elsewhere were either too expensive or infeasible.
Because of term limits, Mica no longer heads the House Transportation and Infrastructure Committee, so he’s likely lost his best chance of making his plan a reality. But he told The Washington Post last year that he plans to keep fighting for his reimagining of the Apex building.
— Sarah Halzack
Heating plant at Armed Forces Retirement Home
The historical Armed Forces Retirement Home sits on 320 acres of land in the heart of the District. Informally known as the Old Soldier’s Home, this government-owned property was built in 1851 to provide a safe haven for the country’s retired veterans.
Abraham Lincoln wrote his final draft of the Emancipation Proclamation in the Anderson Cottage, now a tourist spot on the northern edge of the grounds.
More than 1,000 veterans still live here, and the campus includes a nine-hole golf course, its own bank and post office.
The home put its brick steam heating plant up for lease in March. The 33,372-square-foot plant was constructed in 1910 and features three English boilers. It was decommissioned last year and is now up for grabs as a potential office building, energy plant or warehouse. The plant is also the first step in a larger redevelopment plan for the retirement home property.
Between 2004 and 2008, neighbors objected to a proposal that would overhaul more than 100 acres, arguing that some land should be preserved for park space. The plan was shelved during the financial crisis.
Now, the home is working in conjunction with GSA to potentially convert 77 acres worth of land into a mixed-use neighborhood.
West Heating Plant
The West Heating Plant, an Art Deco-style facility at 29th and K streets NW in Georgetown, was built in 1948 to generate steam heat to be piped to nearby federal buildings.
But after the six-story, 100,000-square-foot building had been vacant for more than a decade, the General Services Administration looked to unload it by putting it up for auction in 2012. Developers The Levy Group and the Georgetown Co. were the winners of the auction, offering up $19.5 million for the property. They plan to turn it into 80 condominiums.
There are a host of challenges associated with the redevelopment: For one, the building is filled with a labyrinth of pipes and machinery that would have to be cleared out. The heating plant is located in the Georgetown Historic District, meaning developers have to clear extra hurdles to modify the structure. For example, the building doesn’t have many windows, which could be unappealing to luxury condo buyers. It remains to be seen whether the developers will be allowed to make these and other changes.
In 2012, the GSA notified real estate developers that it was interested in redeveloping five buildings located on Independence Avenue SW just south of the National Mall, a plan that could dramatically transform a 22-acre stretch of Southwest Washington from a staid cluster of monolithic office buildings to a bustling neighborhood that could include new residential space.
One of those properties is the Cotton Annex, an 118,000-square-foot building on 12th Street SW. Recently, the GSA proposed a swap that includes the Cotton Annex and some of the GSA’s own regional office space. Tangherlini wants to identify a private-sector partner to help GSA with some underfunded federal projects; he would give them these two properties in exchange for that work.
Companies had until May 22 to respond to the GSA’s solicitation. It is not yet known which companies, if any, threw their hats in the ring.
Arlington has been hit hard by the Defense Department’s sweeping cost-cutting effort known as the Base Closure and Realignment Commission, which was set into motion in 2005, and perhaps no neighborhood took it on the chin quite like Crystal City.
A majority of the jobs shifted to places such as Fort Belvoir in Fairfax came from Crystal City, dealing a second blow to an urban corridor still reeling from the loss of the Patent and Trademark Office headquarters to Alexandria. It was enough to prompt one Arlington County Board member to propose changing Crystal City’s name in an attempt to rethink and remarket the neighborhood.
With the neighborhood’s woes came challenges for the area’s biggest landlord, Vornado Realty Trust, which owns about half the buildings in Crystal City and was left with a total of 2.4 million square feet of vacancies in Northern Virginia following the Defense Department’s personnel reshuffling.
Nearly a decade later, though, Crystal City and Vornado have started to recover. In 2010, the country adopted a master plan to develop an additional 16 million square feet of real estate in Crystal City, giving Vornado incentive to begin tearing down some of its decade-old office buildings and start erecting more-modern towers, complete with ground-level retail, in their place. By 2012, the company had released or redeveloped roughly a third of the vacancies it was left with following BRAC.
Vornado is also rethinking the way it outfits and leases its space in the area. For example, at one of its many vacated buildings in Crystal City, the company recently partnered with a half-dozen architecture firms in a competition to design and build relatively small ready-to-go office suites that showcase the perceived “office of the future.” The result is tech-heavy work spaces complete with movable walls, white boards everywhere and virtual receptionists. Vornado also lured TechShop, a new-age manufacturing workshop (think 3-D printers and laser cutters), to one of its nearby buildings.
Arlington has been bleeding federal agencies of late, with Ballston suffering perhaps the biggest one-two punch with a pair of key departures announced within a three-month span last year.
In June of 2013, the GSA announced that the National Science Foundation and its 2,100 employees would be moving in 2017 from their current home at Stafford Place in Ballston to Hoffman Town Center in Alexandria. On its own, the move represented one of the largest transfers of federal workers in the Northern Virginia area in the past decade.
Then in September, Arlington officials learned that the Fish and Wildlife Service was leaving, too, heading for space in Falls Church that had been vacated as part of the BRAC process.
The NSF move will leave behind about 750,000 square feet of office space split between two buildings at Stafford Place. Dweck Properties, which bought one of them for $73 million back in 2005, and then its sister property a year later for $197 million, has put the former building on the market. Meanwhile, Fish and Wildlife will leave vacant another 220,000 square feet at Arlington Square in Ballston.
But Ballston isn’t Arlington’s only neighborhood losing federal leases. Just last week, Rosslyn suffered a similar blow when GSA announced it has inked a deal to move the Labor Department from its current location on Wilson Boulevard to one of Vornado’s previously vacated buildings in Crystal City. That will leave Monday Properties looking for new tenants for about 90,000 square feet of office space in its office tower overlooking the District.
Walter Reed Army Medical Center
It has been three years since physicians, nurses and patients strolled the corridors of the former Walter Reed Army Medical Center in the District. The hospital, which had treated the nation’s wounded warriors for more than a century, was moved to Bethesda during the summer of 2011 as part of a broader consolidation effort by the Defense Department.
After a long search, D.C. officials in November selected a development team comprised of two local companies, Urban Atlantic and Triden Development, and Houston-based Hines Interests (which is also leading the District’s CityCenterDC project) to transform the historical grounds into a sprawling, mixed-use town center. The 66-acre project has been christened the Parks at Walter Reed.
Over the next two decades, and at an expected cost of roughly $1 billion, the team plans to build 2,000 residential units (one fifth of which will be offered at below-market rates), 250,000 square feet of retail space and 90,000 square feet of office space, in addition to a science center, a hotel and conference center, and possibly an upscale grocery store. City officials have also hired component developers Weingarten REIT and Toll Bros. to lead the search for retail and residential occupants.
Developers plan to preserve the more-than-100-year-old brick buildings that line the campus, and they’ll leave about 20,000 feet of open space. All told, construction is expected to create 4,500 temporary jobs, and once completed, the development will create nearly 3,000 new permanent positions. The development team estimates the Parks will contribute local tax revenues of around $37 million annually.
Nearly $100 billion in debt and prohibited from borrowing any more money, the U.S. Postal Service has been looking at any and all options to improve its financial standing. In large part, that has meant shedding thousands of post offices across the country, including several here in the Washington region.
EastBanc, for instance, last year purchased the historical post office building in the District’s Georgetown neighborhood for $1.9 million. Working with Core Architects, the company is in the process of turning the upper floors of the building into office space that will house its tech-focused subsidiary, EastBanc Technologies. Architects are also outfitting the building with a new environmentally friendly green roof.
In addition, in keeping with many of its property sales so far, the post office will remain in place but only take up the front portion of the lower level. Originally, EastBanc had plans to add condominiums to the site, but those ideas were shelved in the wake of a decision that an adjoining building could not be demolished.
A year earlier, McLean-based Insight Property Group, which specializes in rehabbing old apartment buildings, nabbed the post office in Silver Spring for $7.1 million. Instead of renovating, though, Insight has since demolished the building to make way for a new $74 million, six-story apartment complex. Construction began last February.
Among the other postal locations sold in the past few years were the two post offices in Bethesda — one on Wisconsin Avenue and the other at Arlington Road — as well as the Arlington Main Post Office and the National Capitol Station Post Office.
Jonathan O’Connell contributed to this report.