CREW DC: News-Program Summary

PROGRAM SUMMARY

January Program – The Best Real Estate Deal of the Year!

CREW DC began the New Year with a terrific program entitled “The Best Real Estate Deal of the Year! The Department of Transportation headquarters in the Southeast Federal Center.

Susan Gschwendtner, Esq. Principal at Gschwendtner Law Firm/Sugi Corporation moderated the panel which represented the development team: Brian Coulter, Managing Partner of The JBG Companies; David Lipson, Executive Managing Director at Julien Studley, Inc.; and John Simeon, Project Executive, Property Development Division, GSA.

In February 2002, The General Services Administration and the JBG Cos. Made D.C. real estate history when they signed a 15-year, 1.35 million square foot lease to move the DOT to the Southeast Federal Center. This was the largest lease ever signed in Washington, D.C. and the first cabinet headquarters transaction in nearly 40 years. The headquarters occupies 11 acres of the 55-acre Southeast Federal Center.

David Lipson began the presentation by giving a little background on the project. It started at the request of Congress as far back as the late 1980's but never went ahead. This time around Congress wanted to know how this kind of public/private development project would work and how the team would approach the procurement. The team developed a detailed financial model and cost models from the cheapest to the most expensive. They also addressed the considerable risks.

John Simeon stressed the importance of understanding the market analysis provided by Studley and making sure the market felt this was a real procurement. They also did not want to preclude participation because of onerous costs in preparing a response.

John outlined a few unique aspects of the process. These included offering a piece of land, providing a strategic plan, and issuing the solicitation in draft to the market asking for comments. In order to increase competition, there was no requirement to design the building before award. This approach to keeping the cost of the competition low also reduced the risk of lawsuits and protests. In the end, by streamlining the procurement process and prepping the market they received over a dozen offers

It took one year to get to best value and the entire process from project inception to award was two years and three months. This is significant since it is not unusual for government selection processes to take from three to five years.

Brian Coulter said that JBG went through a lot of due diligence to determine whether the procurement would go through. They looked at the user agency and determined that they had a need and were ready to move forward. They began by gathering as much information as possible about the building. Its many complexities made it difficult to price. First of all, the offer was being made based on acquiring a site that was unzoned, so the team understood they would have to go through zoning and do enough design to put construction costs together. Also of concern was the chance of delay because of protests and lawsuits. At the same time they wanted to take advantage of the current positive financial markets. Then the unanticipated events of 9/11 changed security requirements; new setbacks impacted zoning and a blast expert was added to the team.

The final result is a building that represents “world class” architecture and one that contributes to the Anacostia Waterfront Development Initiative and the future of our region.