The Federal Housing Finance Agency’s inspector general Thursday spoke out on the growing construction costs associated with Fannie Mae’s new Washington, D.C., headquarters, saying that some of the amenities the GSE wants are not appropriate for an enterprise that’s been under FHFA’s conservatorship for eight years.
According to the report, Fannie did not make anyone at FHFA aware of rising cost estimates for it new headquarters in the former Washington Post building downtown. Originally, the cost-per-square-foot was projected to be $164. But between January 2015 and March 2016, that estimated cost inflated to $253 per square foot, a spike of by 53 percent and somewhere around $40 million from what was expected, FHFA stated.
The report claims that it was not until May, when a revised estimate of $223 per square foot was given, that FHFA knew about the swelling costs of the project. The Office of the Inspector General said these growing expenses are a “significant financial and reputation risk” to Fannie Mae.
According to the report, FHFA originally expected the project to cost around $115 million, and Fannie’s 15-year lease of the property was valued at just north of $770 million (lowered by the property owner, Carr properties, from $858 million, though Fannie’s own estimates put the site value at about $1.1 billion). But thanks to the addition of several expensive features, such as a spiral staircase and three enclosed glass bridges linking two towers at the site, costs have soared.
FHFA Director Melvin Watt defended the project, saying that construction costs are always fluid and that there is nothing extravagant in the construction. The idea of moving Fannie downtown was originally an effort to consolidate the agency onto one location, and Watt said that amendments to the original project are less intrusive and more likely to boost interaction between employees at the campus.
Watt also pointed out that the consolidated new facility will represent 300,000 less square feet for the agency’s operations, and reminded that Fannie got the site for significantly less than it was on the market for. Additionally, he said, the divesting of properties currently occupied by Fannie “will result in additional substantial financial benefit.”