JLL's Kurt Haglund

WASHINGTON, DC—Several weeks ago Millennium Challenge Corp. signed a 10-year lease for 96,894 square feet at 1099 14th St. NW, an 11-story, 450,000-square foot office owned by an LLC. The US government agency will be moving from its current location in May 2014, making the entire process of searching for a new home a four-year journey. MCC tapped JLL in July 2011 to find the right place, and according to accounts from broker and client, it did. spoke with JLL Managing Director Kurt Haglund about the process. Everyone wants a government lease, even a small independent agency with MCC, especially when it is this size. You had the upper hand in other words. What else did you do to get MCC the right spot?

Haglund: From the beginning we were very clear about what we wanted with the developers. We didn’t exactly tell them all of our secrets but we were very specific about the requirements and followed through with conversations on bids to show where deficiencies were. And that helped your client how?

Haglund: Because the bidders knew exactly what we wanted they felt comfortable in being very aggressive with pricing. For example we said the maximum rate we would consider was a flat $58 per square foot. Sometimes with government contracts there is some guessing and bidders will start off with their asking rates and that did happen here in the initial phases. But as the phases moved on and the competition increased the asking rates came down pretty substantially. Tell me about some of the concessions that were offered.

Haglund: I can’t get into too much detail about that but the real concessions came in the form of free rent. Other concessions mirrored what you see in the private sector. You announced that all of the bidders agreed to a rolling termination option to meet US government guidelines. How did you manage that?

Haglund: MCC was given strict guidance by OMB as to adherence to the A-11 requirement for a termination provision in the solicitation and eventual lease. We were concerned that the effect of this termination requirement might limit competition, so we came with ideas of how to make the termination clause more palatable. We remained adamant about the fact that a termination provision would be a part of the solicitation and eventual lease, but were open to ideas in the Request for Information phase of the procurement. We took the best of the ideas advanced in the RFI phase of the procurement, calculated the cost to the government for termination, and agreed to language that would be fair to both the landlords and to MCC. The landlords eventually became comfortable with the language, and Congress and OMB approved the MCC’s ongoing termination liability.