report Federal Housing Finance Agency's Office of Inspector General Fannie Mae's headquarters relocation project Melvin Watt How It Started Carr Properties Midtown Center DTZ

DTZ's revised NPV was based on a number of assumptions that were identified in its analysis. These included: a 15-year lease for approximately 700,000 square feet at $48.15/square foot in rent (with annual increases of 2.5%); a 4% discount rate; rent abatements by Carr Properties; and build-out costs of $164.32 per square foot to yield turnkey office space. This figure included the design costs, office configurations, and furniture, fixtures, and equipment. Of the $164.32 per square foot, $120 per square foot was to be paid for by Carr Properties through a tenant improvement allowance, and the remaining $44.32 per square foot would be paid for by Fannie Mae.

A 53% Increase In Costs

Over a 14-month period from January 29, 2015, when FHFA approved Fannie Mae's proposal to relocate to 700,000 square feet in a new building on the former Washington Post site with a $770,481,598 NPV, to March 1, 2016, the projected build out costs escalated from $164.32/square foot to $252.81 /square foot, an increase of $88/square foot -- or 53.35%

Even though the total square footage in this budget declined by 3%, the NPV for Fannie Mae's consolidation remained at $770,481,598.

As Carr Properties first broke ground for Midtown Center in May 2016, the square footage costs for the turnkey build-out of Fannie Mae's space have not been finalized by Fannie Mae or approved by FHFA.

• Have adequate internal staff, outside contractors, or both, who have the professional expertise and experience in commercial construction to oversee the build-out plans and associated budget(s), as Fannie Mae continues to revise and refine them.

• Direct Fannie Mae to provide regular updates and formal budgetary reports for review and for FHFA approval through the design and construction of Fannie Mae's leased space in Midtown Center.

Watt's Response

Nor, for that matter, have I ever been under the impression that the overall NPV estimate of $770,481,598 was a dollar cap on the project instead of an analytical tool to be used in making choices among the options and a benchmark that all parties in good faith work to achieve. Based on my experience with construction projects, it would simply have been impractical to expect that final design decisions could be made and costs determined so precisely at such an early stage of the project.

“Our Moving Is Saving Taxpayers $340 Million" report Federal Housing Finance Agency's Office of Inspector General Fannie Mae's headquarters relocation project Melvin Watt Fannie Mae How It Started Carr Properties Midtown Center Washington Post DTZ

DTZ's revised NPV was based on a number of assumptions that were identified in its analysis. These included: a 15-year lease for approximately 700,000 square feet at $48.15/square foot in rent (with annual increases of 2.5%); a 4% discount rate; rent abatements by Carr Properties; and build-out costs of $164.32 per square foot to yield turnkey office space. This figure included the design costs, office configurations, and furniture, fixtures, and equipment. Of the $164.32 per square foot, $120 per square foot was to be paid for by Carr Properties through a tenant improvement allowance, and the remaining $44.32 per square foot would be paid for by Fannie Mae.