ALEXANDRIA, Va.-When the NCUA Board determined to move from its Washington D.C. headquarters, near other federal financial institutions regulators and the White House, to Alexandria, Va. the move was unpopular with the credit union movement and apparently the rest of the real estate seekers.
In a controversial 2-1 vote, with then-Chairman Roger Jepsen and Board Member Shirlee Bown? voting in favor and sole Democrat Board Member Bob Swan against, the agency began the process of building construction and moving.
"I took loads of heat for it.some criticism and some wild rumors for it," Jepsen said. "There was an emotional feeling by some that it was extravagant and not needed."
He defended the board's decision, noting that NCUA needed more room and the space at its headquarters at 1776 G Street, NW in Washington D.C. (in close proximity to the other federal financial institution regulators) was becoming increasingly expensive to lease. Additionally, it was becoming more difficult and expensive for employees to commute into Washington with no sign of relief. Looking back, he said he still feels the board made the right decision.
Since then, the city of Alexandria has had a booming real estate market with several businesses and associations building up around NCUA's headquarters, such as the Society for Human Resource Management, the National HeadStart Association, Time/Life, and Charles Schwab. NCUA even rents some space on the first floor to Merrill Lynch. Also in the King Street Station is an Embassy Suites Hotel and former Redskin Quarterback Joe Theisman's restaurant. Just over a block from NCUA is a metro station.
While Alexandria is an entity unto itself, neighboring Fairfax County is boasting marked increases in property values, up 20% from 1996 through 2001, the American Banker reported. According to the City of Alexandria Department of Real Estate Assessments, aggregate commercial property values (excluding apartment buildings) have increased from $3.7 billion in 1998 to nearly $4.7 billion for 2001.
The "100% whole ball of wax" turned out in the agency's favor, Jepsen said.
The investment in the building was primarily aimed at saving the agency money. Board Action Memoranda from closed board meetings held in 1991 claim that savings to credit unions should range between $30 and $50 million in the first 15 years. However, those numbers have remained unverified by NCUA and the agency has no plans to reassess those statements, according to Director of Public and Congressional Affairs Cliff Northup.
"Now a good eight-plus years down the pike, it would be good to look at the numbers." CUNA Senior Vice President and Associate General Counsel Kathy Thompson commented. "It would make sense."
In true NCUA fashion, the agency budgeted $37.4 million for the building project, but it came in under budget at $37.1 million, NCUA Chief Financial Officer Dennis Winans said. NCUA made a "cost plus with maximum guaranteed price" contract with King Street IV Associates, which meant that any savings accrued during construction went to NCUA and not the developer.
The NCUA reviewed approximately 60 different sites in making its decision and the price of the current location at 1775 Duke Street was lower than one comparable property that NCUA seriously considered, according to an internal audit performed by NCUA's Inspector General Frank Thomas shortly following NCUA taking possession of the building.
While NCUA is on the title of the structure, the National Credit Union Share Insurance Fund (NCUSIF), fully supported by credit unions, provided the loan to the Operating Fund. The internal audit found this arrangement to be highly sensible as NCUA would pay a lower than competitive rate on the loan and based on what the NCUSIF would make if it had invested the money and the Fund would make the same money it would anyway. NCUA ultimately borrowed about $41 million to help cover furnishings, architecture, and legal costs the audit revealed. The 30-year note has a current balance of $29.3 million, Winans said.
The CFO did perform unofficial assessments on savings for 2001. According to Winans, operating fees for the agency in 2001, including the principle on the loan, depreciation, interest, and utilities, totaled approximately $2.8 million. In a comparable building owned by the same management company across the street from NCUA, he figured the price to lease the same amount of square footage would cost the agency and additional $1.5 to $2 million per year at the rate of $27 to $31 per square foot that Carr Real Estate Services charges.
While NCUA paid $37.1 million for the property on the sale date in 1993, the agency has not performed an appraisal since. Data from the city's Department of Real Estate Assessments places the property value at about $28 million as of January 2001, but tax assessments are notoriously lower than the actual property value. Particularly with tax-exempt entities, Alexandria's Deputy Director of Real Estate Assessments Cindy Smith Page said. Because the NCUA does not pay taxes on most of the building, the property "is not revalued as closely as possible." However, she said that a reassessment due this February 15 would place the building's value "much closer or above" the original sale price. NCUA does pay taxes to the city of Alexandria on the leased space-19,371 square feet-on the first floor. NCUA also pays taxes on the 294 parking spaces it owns in the parking garage below the building. The nontaxable portion of the building totals 151,419 square feet, according to the real estate assessment. Playing by the rules
While NCUA may have saved credit unions money over time, the agency still could have done better, according to the internal audit. Inspector General Thomas found the purchase and sale contract "generally good" but "exceedingly complex and did not adhere to the Federal Acquisition Regulation (FAR) provisions." While some FAR provisions were included in the contract, it "did not include many advantageous clauses generally found in government contracts," the audit said.
The agency also did not obtain an independent appraisal of the cost of the building. Instead, NCUA paid according to historical costs estimated by the builder and did not take into account a 15% drop at the time in the assessed valuation of two other buildings in the same complex. Thomas said this could have resulted in overpayment to the builder.
Additionally, the audit found that NCUA did not perform an internal legal review of the contract before it was signed, which would have been beneficial. The audit stressed, however, "Our findings do not provide conclusive indications that NCUA paid an unreasonable price for the building. However, we believe that NCUA could have strengthened its negotiating position had it (1) obtained an independent appraisal, and (2) expended a greater effort in determining the reasonableness of land and historical costs."
Overall though, the Office of Inspector General concluded, "The idea of having outside experts and only one NCUA employee on the `acquisition team,' with little independent review by NCUA, was unique and in our opinion not a sound decision."
When the agency made the decision to move to Alexandria, one floor would remain empty. Region II discussed obtaining separate lodgings for its headquarters, which credit unions could not comprehend. At the January 1992 board meeting, however, the board voted to include an appropriation of $750,000 for construction and relocation costs for Region II to move into the new headquarters, occupying approximately 12,000 to 13,000 square feet.
The NCUSIF is also housed in these headquarters. According to Winans, an agency/insurance fund split would not have any implications unless one of the entities wanted to leave the building. Laying out the money for the building did not have any effect on credit union insurance coverage and the fund did not have any trouble lending the money, despite limited investment authorities, because it was considered a loan and not an investment. [email protected]
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
