D.C. officials touted this week’s groundbreaking on a beleaguered Southeast building as a development deal that will save taxpayers $60 million, even as the city’s total tab is expected to reach $400 million over the next two decades. The city already has spent $100 million on leasing, then buying the long-vacant building in the Nationals Park neighborhood. Plans to move the police headquarters there in 2007 fizzled when the city balked at the additional $100 million in renovation costs.
In its new deal, developer StonebridgeCarras will renovate the property and the District will pay rent to the developer for 20 years, after which the District will own the building outright.
Including the estimated operating costs and rent over 20 years, the District’s total bill is an estimated $400 million.
| The District’s $400m price tag |
| New building will be LEED certified and house three city agencies. |
| $15 million: Rent from 2007-2009 |
| $85 million: Purchase price in 2009 |
| $174.4 million: Rent payments over 20 years |
| $120 million: Estimated 20-year operating cost |
Experts characterized the lease-back deal as a reasonable solution to an unnecessary blunder by the city.
“You might want to question why they leased the building before they knew what the cost to renovate was,” said Tom Murphy, a senior fellow at the Urban Land Institute.
The $60 million officials are praising is money the District expects to save on the rent it is now paying for three city agencies that are slated to move into the building on Second and I streets SE after renovations are complete next year.
The Commission on the Arts and Humanities, Child and Family Services Agency, and the Office of the Chief of Technology Officer will move into the building.
Rent in the new building will cost $174.4 million over 20 years.
Murphy said if the District had sought financing for the renovation, the interest payments likely would have made it a more expensive proposition than its rent deal with StonebridgeCarras.
“Many governments around the country have used this as a way to eliminate immediate costs,” he said, citing instances where a town has even leased back its own city hall.
Officials said the deal was the fastest way to move forward with the cavernous and outdated property, which housed print plants for the Washington Star and Washington Post but has sat empty for more than a decade.
“Otherwise, this could have been sitting here for a while,” said Brian Hanlon, interim director of the city’s Department of Real Estate Services.
