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Could the sale of Metro’s headquarters help its bottom line? Could the sale of Metro’s headquarters help its bottom line?
(2 days later)
Buried in the details of Metro General Manager Paul J. Wiedefeld’s plan to fix the region’s beleaguered transit system is an intriguing strategy for shoring up its shaky finances: selling the agency’s 5th Street headquarters. Buried in the details of Metro General Manager Paul J. Wiedefeld’s plan to fix the region’s beleaguered transit system is an intriguing strategy for shoring up its shaky finances: selling the agency’s Fifth Street NW headquarters.
An eight-story fixer-upper on prime real estate in the heart of Penn Quarter? Sure, why not? After all, it is Metro-friendly.An eight-story fixer-upper on prime real estate in the heart of Penn Quarter? Sure, why not? After all, it is Metro-friendly.
“The new GM wants to take a fresh look at the idea to determine whether conditions have changed and whether a sale of the building could generate money that could be used to improve customer service,” Metro spokesman Dan Stessel said. “Beyond that, we are going to wait until the analysis is complete.”“The new GM wants to take a fresh look at the idea to determine whether conditions have changed and whether a sale of the building could generate money that could be used to improve customer service,” Metro spokesman Dan Stessel said. “Beyond that, we are going to wait until the analysis is complete.”
[Metro chief: Here’s how we’re going to fix Metro][Metro chief: Here’s how we’re going to fix Metro]
Wiedefeld’s idea comes as many government agencies and private companies are re-evaluating their real estate portfolios. In October, Fannie Mae put three buildings, including its main campus on Wisconsin Avenue just north of the National Cathedral on the market. National Public Radio traded in its rickety old headquarters in Mount Vernon Square for swanky new digs in the up-and-coming NoMa neighborhood. Most famously, the government is looking for a deal to help it unload the FBI’s downtown headquarters on Pennsylvania Avenue so it can relocate to a more modern, state-of-the-art building — gasp — outside of the District. Wiedefeld’s idea comes as many government agencies and private companies are re-evaluating their real estate portfolios. In October, Fannie Mae put three buildings, including its main campus on Wisconsin Avenue just north of the National Cathedral, on the market. NPR traded in its rickety old headquarters in Mount Vernon Square for swanky new digs in the up-and-coming NoMa neighborhood. Most famously, the federal government is looking for a deal to help it unload the FBI’s downtown headquarters on Pennsylvania Avenue so it can relocate to a more modern, state-of-the-art building — gasp — outside of the District.
Such efforts have met with mixed results. While enticing, old buildings like Metro’s 1970’s-era headquarters can present their own challenges to redevelopment. Such efforts have met with mixed results. While enticing, old buildings such as Metro’s 1970s-era headquarters can present challenges to redevelopment.
“This WMATA thing is like Groundhog Day,” said Paul Hanafin, corporate managing director at the real estate firm Savills Studley referring to the Bill Murray movie. “Every so many years, it comes up again.” “This WMATA thing is like ‘Groundhog Day,’ ” said Paul Hanafin, corporate managing director at the real estate firm Savills Studley, referring to the Bill Murray movie. “Every so many years, it comes up again.
“But it doesn’t surprise me that this has been resurrected again,” he added. “It follows a discernible trend right now of public and private institutions taking a very hard look at their own real estate.”“But it doesn’t surprise me that this has been resurrected again,” he added. “It follows a discernible trend right now of public and private institutions taking a very hard look at their own real estate.”
In 2005, Metro received an unsolicited proposal from a developer to sell the building and relocate, but turned down the plan because it didn’t make financial sense. Two years later, then-D.C. Mayor Adrian Fenty (D) approached Metro with the idea of moving to Anacostia – part of an ambitious effort by the mayor to jump start economic development in the area. In 2005, Metro received an unsolicited proposal from a developer to sell the building and relocate, but it turned down the plan because it didn’t make financial sense. Two years later, then-D.C. Mayor Adrian M. Fenty (D) approached Metro with the idea of moving to Anacostia — part of his ambitious effort to jump-start economic development in the area.
[Fenty proposes Metro moves its headquarters to Anacostia] [Fenty proposes Metro move its headquarters to Anacostia]
Under the deal the city would have been given the rights to sell the building, which it estimated would have fetched $68 million or more. To sweeten the pot, Fenty offered an additional $40 million to build a tunnel that would link the Metro Center and Gallery Place stations. The tunnel, which would allow passengers to connect with all five rail lines at two of the busiest downtown stations, had been discussed by Metro planners for years, but lacked funding. Under the deal, the city would have been given the rights to sell the building, which it estimated would have fetched $68 million or more. To sweeten the pot, Fenty offered an additional $40 million to build a tunnel that would link the Metro Center and Gallery Place stations. The tunnel, which would allow passengers to connect with all five rail lines at two of the busiest downtown stations, had been discussed by Metro planners for years, but the agency lacked funding.
“D.C wanted Metro to relocate near the Anacostia station,” said Peter Benjamin, who was on the Metro board when Fenty broached the idea. “The problem was to move it somewhere else at any kind of reasonable price would have been difficult.” “D.C. wanted Metro to relocate near the Anacostia station,” said Peter Benjamin, who was on the Metro board when Fenty broached the idea. “The problem was, to move it somewhere else at any kind of reasonable price would have been difficult.”
Even so the board thought the plan was worth exploring and hired a real estate consulting firm to study whether it made sense. Even so, the board thought the plan was worth exploring and hired a real estate consulting firm to study whether it made sense.
The 2008 report, which put the headquarters value at roughly $90 million, laid out the pros and cons.The 2008 report, which put the headquarters value at roughly $90 million, laid out the pros and cons.
The location was prime, but the building had a number of shortcomings, including a significant lack of natural light, which analysts politely characterized as a “substandard proportion of windows to floor area.” The building’s elevator banks also were situated in a way that would make “redevelopment to Class A office space difficult.” The location was prime, but the building had shortcomings, including a significant lack of natural light, which analysts politely characterized as a “substandard proportion of windows to floor area.” The building’s elevator banks also were situated in a way that would make “redevelopment to Class A office space difficult.”
Consultants also looked at redevelopment options for the property, including residential or hotel use but found that substantial portions of the building would have to be demolished to increase the amount of natural light, reducing the density.Consultants also looked at redevelopment options for the property, including residential or hotel use but found that substantial portions of the building would have to be demolished to increase the amount of natural light, reducing the density.
In the end, the report’s authors concluded: “The easiest way to remedy the building’s existing problems is to demolish and start anew, however, the new construction would be encumbered by the very significant on-site Metro-related specialty assets.” The report’s authors concluded: “The easiest way to remedy the building’s existing problems is to demolish and start anew, however, the new construction would be encumbered by the very significant on-site Metro-related specialty assets.”
In addition to office space for employees, Metro’s headquarters also sits atop a Red Line tunnel, which runs through the building’s basement; on its roof are chillers that serve the Gallery Place-Chinatown, Judiciary Square and Archives-Navy Memorial-Penn Quarter stations. There also are miles of fiber optic cable that connect all Metrorail stations with a backup Rail Operations Control Center, the central communications hub for the buses, trains and Metro Transit Police.In addition to office space for employees, Metro’s headquarters also sits atop a Red Line tunnel, which runs through the building’s basement; on its roof are chillers that serve the Gallery Place-Chinatown, Judiciary Square and Archives-Navy Memorial-Penn Quarter stations. There also are miles of fiber optic cable that connect all Metrorail stations with a backup Rail Operations Control Center, the central communications hub for the buses, trains and Metro Transit Police.
In the end, Chris Zimmerman, another Metro board member, said selling the building was “a deal that simply didn’t pencil out.” In the end, Chris Zimmerman, then a Metro board member, said selling the building was “a deal that simply didn’t pencil out.”
Despite its central location – just footsteps away from several Metro stations: “There are peculiar things to the building itself that make it harder for someone to take advantage of,” Zimmerman said. “It seemed like valuable real estate – but there were other costs.” Despite its central location — just footsteps from several Metro stations — “there are peculiar things to the building itself that make it harder for someone to take advantage of,” Zimmerman said. “It seemed like valuable real estate — but there were other costs.”
The matter was abruptly dropped later that year.The matter was abruptly dropped later that year.
But with new leadership in place, it’s possible the idea may be revived. According to the most recent data available, the D.C. government assessed the 5th Street, NW property at $116.3 million. But with new leadership in place, it’s possible the idea may be revived. According to the most recent data available, the D.C. government assessed the Fifth Street NW property at $116.3 million.
Hanafin said Metro’s headquarters may have issues, but it’s hard to ignore its prime location — the building spans an entire block — in a city where there’s very little buildable land. Hanafin said Metro’s headquarters may have issues, but it’s hard to ignore its prime location — the building spans an entire block — in a city where there’s little buildable land.
“You could do something very, very cool there,” he said. “It’s not Verizon Center prime but it’s pretty darn close.” “You could do something very, very cool there,” he said. “It’s not Verizon Center-prime, but it’s pretty darn close.”
According to Stessel no decision has been made on whether the new assessment will be done by Metro’s staff or an outside firm. According to Stessel, no decision has been made on whether the new assessment will be done by Metro’s staff members or an outside firm.
“I applaud WMATA General Manager Paul Wiedefeld for his plan to focus the entire agency on getting better at the basics as step one of restoring our public transit system,” said D.C. Council member Jack Evans (D-Ward 2), chairman of the Metro board. “He is turning over every stone to find what works and what doesn’t and reorganize an agency where “too many vertical silos remain, and staffing is not mission focused or aligned in key priority areas, most importantly, the customer experience.” “I applaud WMATA General Manager Paul Wiedefeld for his plan to focus the entire agency on getting better at the basics as step one of restoring our public transit system,” said D.C. Council member Jack Evans (D-Ward 2), chairman of the Metro board. “He is turning over every stone to find what works and what doesn’t and reorganize an agency where too many vertical silos remain, and staffing is not mission-focused or aligned in key priority areas, most importantly, the customer experience.”