The Washington PostDemocracy Dies in Darkness

Inside the battle for Washington’s biggest real estate prize: the Hoover Building

The J. Edgar Hoover Building on Pennsylvania Ave.
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Until now, the public tug-of-war over the FBI and its headquarters has been over where the agency will relocate. Will it go to Prince George’s County, giving an economic boost to either Greenbelt or Landover? Or to Springfield, creating a new federal enclave of 11,000 employees?

On Tuesday, the opening bell rang on a related competition, this one for a half-a-billion-dollar prize: the J. Edgar Hoover Building on Pennsylvania Avenue.

The property beneath aging building– nearly 6.7 acres in the booming Penn Quarter neighborhood — represents one of the most valuable development opportunities ever to become available in downtown Washington. 

There is a wide spectrum of estimates about how much the Hoover Building may be worth, in part because the property has not yet been re-zoned for buildings to replace it. The D.C. government assesses the complex at $652 million. Private sector real estate officials estimate that it could fetch between $300 million and $1 billion in a sale.

Strapped for construction money to build new projects, the General Services Administration, which manages real estate for the federal government, proposed trading away the Hoover Building to pay for most or all of a suburban headquarters for the FBI. The GSA has not chosen a site yet, but told interested developers that it hoped to build the new headquarters on one of three properties, in Greenbelt, Landover or Springfield. It asked interested firms to make an offer.

Citing procurement rules, GSA officials say they would not disclose which companies submitted bids by the Tuesday deadline.

But according to developers, investors, architects and general contractors that have joined teams bidding for the work, the competition likely includes about a half dozen teams and will be a largely homegrown affair, with some of Washington’s biggest name firms in real estate lining up to take their best shot at the Hoover Building prize.

Members of six development teams confirmed their submissions. One is led by Theodore D. Lerner, owner of the Washington Nationals and founder of Lerner Enterprises, which built much of Tysons Corner. Lerner partnered with Silverstein Properties, of New York, the main private developer behind the newly rebuilt World Trade Center complex.

The bid gives Lerner two potential stakes in the FBI headquarters decision. It could be named developer of the new headquarters, giving the company control of the Hoover Building in return. It also owns one of the three sites being considered, the former Landover Mall property in Prince George’s County.

Members of teams led by Boston Properties, the JBG Cos., Hines Interests, Trammell Crow Co. and the Peterson Cos. also confirmed their bids. Boston Properties, Hines Interests and Trammell, while not headquartered locally, are three of the biggest developers of offices in Washington. JBG, based in Chevy Chase, has the largest Washington real estate portfolio. Peterson, based in Fairfax, is developer of the Fair Lakes area of Fairfax County and National Harbor, the waterfront complex in Prince George’s County.

The process for completing the swap is as complicated as it is competitive. GSA officials have preserved the right to choose whatever combination of site and developer that provides the best return to taxpayers and the best facilities for the agency. Developers, in turn, are free to propose building a new FBI complex on any or all of the three sites.

Lerner and Silverstein, for instance, may propose building a new FBI complex at Greenbelt even though Lerner has been lobbying county and state officials to bring the FBI to Landover. Garth Beall, an attorney that has been preparing the Greenbelt site for the FBI, said he fully expected the Lerner team to submit a Greenbelt proposal.

“There’s no question in my mind that they will,” he said. An official with Lerner declined to comment.

Even if it takes years for the GSA to make a decision, the competition is already providing a shot in the arm to local architects, engineers and designers who are preparing bids. For instance the architecture firm Gensler, with offices on K Street, is on multiple teams, a company spokeswoman confirmed.

But there are numerous hurdles for the GSA to get the new headquarters built, among them cost concerns and skepticism from some corners of Capitol Hill that a swap should be used to complete such a huge project.

Some of the entrants suggested that the Springfield site, which is still home to a classified CIA facility that may need to be relocated and in need of major transportation improvements, might not receive many bids.

“I think Springfield is there for political optics,” said one entrant who spoke anonymously because of agreements with his partners.

Follow Jonathan O’Connell on Twitter: @oconnellpostbiz