CRE in DC

[Anonymous]

This was just announced, not only will a huge space be vacant, it's notable that they are exiting the lease EARLY. The conventional wisdom had been that when CRE leases and fed leases expired they would be renegotiated for a smaller footprint. This seems to accelerate that timetable.

I used to work nearby and even pre-cv when newly developed it was a bit of a ghost town in that area.

This does not seem to bode well, but anyone who knows more about CRE, can you give us some context?

Fannie Mae to exit its D.C. headquarters lease years early

The mortgage giant, whose 15-year, $770 million lease at 1100 15th St. NW was among the most rich such deals in D.C. history, first occupied Midtown Center in 2018.

[Anonymous]

More excerpts from article. Seems like it would be prudent for DC to start making adjustments to expected revenue.

That news comes less a month after Monumental Sports & Entertainment revealed it had a
framework in place to relocate the Washington Wizards and Capitals, and its own headquarters,
to Potomac Yard in Alexandria. Combined, the two moves are representative of the pain D.C. is
experiencing amid the widespread flip to hybrid work, a surge in crime, elevated office and
retail vacancies and the general ongoing impacts of the Covid-19 pandemic. They threaten to
drain downtown of thousands of employees and visitors — and key economic activity during the
workday and evening hours.

Per Fannie Mae’s career website, the company has embraced remote work, offering a hybrid
work option, flex hours and flex Fridays, all of which suggest that nearly 700,000 square feet is
likely well above what it needs as an office footprint. The region's largest public company
remains under federal government conservatorship, now in its 15th year.
Midtown Center is Carr’s 865,000-square-foot redevelopment of the former Washington Post
headquarters, which the D.C. real estate firm had acquired in 2014. A year later, it snagged the
coveted Fannie Mae headquarters lease, and broke ground on the project in May 2016.

Midtown Center, which, pre-pandemic, was expected to house 3,500 Fannie Mae employees, is
the most valuable taxable property in the District, with a 2024 assessment of $739 million,
though that is down from $781.8 million in 2023 and $830 million in 2022. The property is
subject to a $525 million loan — itself a refinancing of a prior construction loan — originated in
2019 by Wells Fargo Bank, Bank of America and Goldman Sachs Bank, according to the D.C.
Recorder of Deeds. The loan reportedly comes due in 2029.

The property, comprising two towers linked by glass skybridges, includes 45,000 square feet of
retail and restaurants (some of which may soon be available for lease), a 1,300-square-foot
bike room, conference center, fitness center and large rooftop terrace. It is home to one of the
few remaining D.C. WeWork locations, which spans more than 100,000 square feet of the office
space not consumed by Fannie Mae.

[Anonymous]

Fannie Mae has a huge work from home contingent and also a large Reston presence. I work in CRE (though not on this deal) and it would make sense to consolidate in their NoVA building. With people doing a lot of WFH, a lot more people can occupy that space. At least for now, EEs can go to lunch or commute to Reston without having to worry about being carjacked, mugged at gunpoint, clobbered on the back of the head, or having a bucket of urine dumped on their head---all instances which have occurred within several blocks of Fannie Mae's downtown location. As to the effect---DC depends on CRE tax revenue to fund a lot of city government. When that building is empty, its value plummets precipitiously and the tax revenues along with it. Too bad there is no one on the Council who has enough experience in the private sector to understand that fiscal reality.

[Anonymous]

This is terrible news for DC. Is Fannie Mae also moving to VA?

[Anonymous]

BIG tax hit for DC but their well paid employees also help support a lot of downtown businesses.

Are DC government workers as flush or as likely to do spend downtown during the work day and after work?

[Anonymous]

Anonymous wrote:Fannie Mae has a huge work from home contingent and also a large Reston presence. I work in CRE (though not on this deal) and it would make sense to consolidate in their NoVA building. With people doing a lot of WFH, a lot more people can occupy that space. At least for now, EEs can go to lunch or commute to Reston without having to worry about being carjacked, mugged at gunpoint, clobbered on the back of the head, or having a bucket of urine dumped on their head---all instances which have occurred within several blocks of Fannie Mae's downtown location. As to the effect---DC depends on CRE tax revenue to fund a lot of city government. When that building is empty, its value plummets precipitiously and the tax revenues along with it. Too bad there is no one on the Council who has enough experience in the private sector to understand that fiscal reality.

Thanks for weighing in. This seems really bad and that again, it may have taken DC by surprise?

[Anonymous]

Death spiral

[Anonymous]

Anonymous wrote:Death spiral

The Council can't afford these blunders anymore, from the CHAIR no less.

DC crime is a national/international story. Gotta try to hang onto some of that tourist revenue.

[Anonymous]

Hooray! More affordable housing.

[Anonymous]

Anonymous wrote:Death spiral

They seem very in denial re: spending, given the changing revenue projections.

[Anonymous]

Anonymous wrote:Hooray! More affordable housing.

Those buildings were recently constructed and could not easily or affordably be repurposed. Of course, it is TAX REVENUE, including CRE taxes that pay for ALL city services.

[Anonymous]

It’s a disaster. Not just for CRE, but residential too as their highly paid workers find the commute from upper NW to Reston cumbersome.

[Anonymous]

Not a single member of the Council has any private sector experience. They’re all “community activists”. Not great during the boom years, but an absolute liability heading into this storm.

[Anonymous]

Don't worry, the powerful suits that pull the strings behind the curtain of this country won't let CRE fail. Too many banks and billionaires have their money on the line. That's why they want to kill WFH. They need the middle class worker making $50k per year to prop up their CRE values.

[Anonymous]

Anonymous wrote:It’s a disaster. Not just for CRE, but residential too as their highly paid workers find the commute from upper NW to Reston cumbersome.

Most Fannie May employees make the equivalent of federal GS-13 and GS-14 employees ($125K to $175K). I know an about a dozen Fannie May employees and nearly all who regularly go into the DC office, rent in DC. They can’t afford to buy a home in DC.