Washington Biz Journal.........1/21/2011
What were they thinking?
The Securities and Exchange Commission made big news last August when it signed a lease for 900,000 square feet at Constitution Center, the former Department of Transportation headquarters in Southwest D.C.
Since then, it’s been pretty much downhill for the agency.
○ On Sept. 30, the inspector general released an audit of the SEC’s leasing practices, saying the SEC “does not have adequate policies in place and, until very recently, had no final leasing policies and procedures.”
○ On Nov. 2, Republicans won control of Congress, casting doubt on whether the SEC’s fiscal 2011 funding for new employees would be approved.
○ On Dec. 10, the agency came clean, notifying the General Services Administration that it wouldn’t need 600,000 of the square feet it had leased just four months earlier.
And now comes word that the inspector general has launched a formal investigation into the whole thing. And you can be sure the Republicans on the Hill are keeping a close eye on the developments.
For anyone in Washington business, this is a tough issue. It’s hard for us to reconcile our views about bloated government with our aspirations for the Washington economy. Every million-square-foot lease or billion-dollar contract, however bad for taxpayers, is a boon for us. The trickledown effect is undeniable.
It’s hard not to root for a local landlord’s huge win. We all know the risk the landlord, David Nassif Associates, took in its effort to rehab the former DOT headquarters into a state-of-the-art, highly secure building perfect for a federal tenant. We know that the building sat empty for a while after it was finished, and we know removing nearly 1 million square feet from the area’s building inventory will help other landlords bidding for major government leases. We also know the SEC lease lowered the office vacancy rate, strengthening the market for all landlords.
But none of that justifies signing the federal lease, the largest in a decade, at a cost of more than $400 million over 10 years. What could possibly have been the motivation for inking this deal, which came just months after the SEC leased 200,000 square feet at its Station Place headquarters near Union Station? Did the SEC tap an intern to handle its real estate? Was the intern drunk? Was the leasing rate too good to refuse — lease one square foot, get one free?
The SEC said the space would support 800 workers it wanted to hire to help implement financial regulatory reform. But even if Congress had appropriated the SEC’s full funding request, the agency still wouldn’t have needed that much space. Let’s face it: There is absolutely no formula available to justify that amount of space per employee. If the SEC wanted to help the local economy, it should have hired a good interior architecture firm to do some space planning.
No one likes to have decisions second-guessed, but sometimes it can’t be avoided. This lease was a major flub, a business blunder right up there with Toyota’s recalcitrance, Conan O’Brien’s “Tonight Show” and Gap’s attempt at a new logo.
This is the kind of thing someone should lose their job over.
We’d like some answers, but few are talking. Our reporter Sarah Krouse has repeatedly asked the SEC for details on what it will do with the space, how it will release it and why it leased it in the first place. But no clear answers have come. GSA officials aren’t commenting; it’s not their problem, after all. David Nassif Associates isn’t saying much. That’s probably wise. The company has a signed lease for 70 percent of the building, so it can pretty much sit back and watch the carnage.
I’m by no means an anti-government critic, but this lease represents what’s wrong with Washington. Just because it’s good for Washington business does not mean it’s good for America.
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