- The Washington Times - Monday, January 22, 2001

The District sealed its biggest real estate deal in history last month when it sold prime city property to the Newseum, but the six-month negotiation was shaky right up until the deed was signed before Christmas.

Key players say they encountered obstacles at every turn, including D.C. Mayor Anthony A. Williams, who was initially cool to the idea of the journalism-history museum moving from Arlington to the city, and the District's financial control board, which questioned the agreement at the 11th hour.

"We always had to be three or four steps ahead of the city," said Lois A. Zambo, the D.C. real estate broker who represents the Freedom Forum, the private journalism foundation that runs the Newseum.

The group started seeking a new home for its fast-growing museum in September 1999, and offered the District $100 million in July 2000 for a city government building at the corner of Pennsylvania Avenue and Sixth Street NW.

The deal closed six months later, record time for a project of its size.

It was the highest amount ever offered for city property, beating the record set in 1992 when the World Bank paid $90 million for its building at 2121 Pennsylvania Ave. NW.

But the Newseum's path to the District was paved with pitfalls.

In addition to a skeptical city hall and Control Board, the Freedom Forum had to deal with New York City, which was also courting the Newseum, and the federal government, which wanted a piece of the action if the museum came to the District.

"Our biggest challenge was this: We needed to move fast. We didn't have time to dilly-dally," said Charles L. Overby, chairman and chief executive of the Freedom Forum.

Room to grow

The Newseum opened in 1997 in 75,000 square feet of leased space in the Rosslyn section of Arlington. Within three years, it had received more than 1 million visitors.

The Freedom Forum decided it needed more space to continue its growth, so Mr. Overby asked Ms. Zambo to scout new sites in the District and New York, where the Newseum has a satellite campus.

"We needed to be in a neighborhood with foot traffic, and there just isn't much of that in Rosslyn," he said.

Ms. Zambo presented Mr. Overby with a map of 12 potential sites in the District, including the old Woodward & Lothrop building at 12th and F streets NW.

Mr. Overby, the plainspoken former editor of the Clarion-Ledger in Jackson, Miss., and a Pulitzer Prize winner, dropped his index finger on the part of the map that showed the D.C. Department of Employment Services (DOES) at Pennsylvania Avenue and Sixth Street NW.

"This is where I want to be," he said, noting the site's close proximity to downtown tourist attractions like the White House and the MCI Center.

Buying that site would be easier said than done. For years, rumors had circulated the city would move DOES and free up the site for a developer willing to shell out big bucks for the property.

The city usually sells land by putting it out for bid. Mr. Overby did not want to wait for that process, which could take years. He decided to make the city an unsolicited offer.

Meanwhile, Ms. Zambo looked at locations in Times Square in New York in case the Freedom Forum needed a backup plan. She also met with Mayor Rudolph W. Giuliani's office.

"They were very interested in us," she said, though Mr. Giuliani's office declined to comment.

Mr. Overby was doing his own schmoozing back in the District He met with several city leaders to get advice on what to include in his offer to Mr. Williams.

On May 10, 2000, Mr. Overby visited the office of D.C. Council member Jack Evans, the chairman of the council's Finance and Revenue Committee.

Mr. Evans said he did not know much about the Newseum, other than his favorite television show, "The West Wing," had recently filmed its season finale there.

But the Ward 2 Democrat told Mr. Overby he would support the Freedom Forum's offer for the DOES site if the organization offered to build housing there, too.

"I'm interested in something that will bring life to the site 24 hours a day. Another museum is not something I'm interested in," Mr. Evans told Mr. Overby.

Mr. Overby returned to his office and requested a meeting with Mr. Williams. But the mayor's office said he would have to meet first with one of Mr. Williams' deputies, D.C. economic development chief Eric Price.

"I was a little put off by that," Mr. Overby said, adding that he later came to "appreciate" the mayor's busy schedule.

The offer

On May 17, Mr. Overby and the Freedom Forum's president, Peter S. Prichard, took Mr. Price and District Planning Director Andrew Altman to dinner at the Ritz-Carlton hotel in Arlington.

Over steak, Mr. Overby sketched his vision for the DOES site: a roughly 300,000-square-foot complex with museum space, the headquarters of the Freedom Forum and a conference center. He also proposed condominiums, a restaurant and retail space.

To his surprise, he said Mr. Price and Mr. Altman seemed unimpressed.

Mr. Price said the project could appear unattractive to some city leaders because nonprofit groups like the Freedom Forum do not have to pay property taxes in the District.

"I don't think Eric was suggesting we should offer to pay taxes. He was just stating a fact for our benefit," Mr. Overby said.

At about the same time, Ms. Zambo was compiling a list of "every possible project" that could be built at the DOES site, including offices, apartments and hotels. Based on her calculations, no developer would be able to pay more than $72 million for the property.

A meeting was scheduled so Ms. Zambo could turn her data over to the Freedom Forum. Mr. Overby was unable to attend because he was on a business trip in Africa, but he sat in on the meeting via speakerphone.

Mr. Overby told the attendees he wanted to make sure no developer could compete with his offer.

The Freedom Forum was flush with money thanks to the booming stock market. The Gannett Co. founded the precursor to the Freedom Forum with an initial donation of $100,000 in Gannett stock in 1935. By July 2000, the group had amassed a $1 billion portfolio of 200 stocks.

Mr. Overby suggested the group offer the District $100 million $75 million for the DOES site and an extra $25 million to spend on one of Mr. Williams' pet projects, affordable housing.

Everyone listening at the Freedom Forum's office in Rosslyn gasped.

"We could do $72 million and another $12 million [for affordable housing], but there's no magic in $84 million. People understand a figure like $100 million," Mr. Overby said.

To sweeten the pot, he also said the Freedom Forum should waive its exemption from the city's tax on the property, which has been assessed at $44 million.

Heaven and earth

Mr. Overby asked Ms. Zambo to fly to London to help him pitch the $100 million proposal to the Freedom Forum Board of Trustees, comprised of USA Today founder Allen H. Neuharth, former Canadian Prime Minister Brian Mulroney and other luminaries.

The board approved the deal unanimously, saying the Newseum's growth would be stunted if it stayed in Rosslyn. Now it was time for Mr. Overby to take his offer to the District.

Mr. William was unavailable for comment for this story. Mr. Overby said that when he met the mayor in late June, he responded coolly to the Freedom Forum's offer. Mr. Williams had never been to the Newseum and did not know much about it, Mr. Overby said.

The mayor also tried to talk Mr. Overby out of holding a press conference to announce its offer, but Mr. Overby insisted, saying the news was bound to leak anyway.

Mr. Price said the mayor wanted to proceed with caution.

"He likes the idea of a competitive process, but once he saw what they were proposing, he believed it was the best use for the site," Mr. Price said.

The press conference was set for July 11. A few days before the meeting, Mr. Overby met with executives from Westfield Realty Inc., the Newseum's landlord in Rosslyn, to break the news.

"That was the hardest thing. They had been with us from the beginning," he said.

He also called Barbara A. Favola, who was chairman of the Arlington County Board, to give her a heads up.

Arlington County spokesman Richard Bridges said the county did not want to lose the Newseum its third-biggest tourist attraction, behind Arlington National Cemetery and the Iwo Jima Memorial and tried to convince Mr. Overby to stay in Rosslyn.

Mr. Williams planned to skip the July 11 press conference because he wanted to fly to Atlanta to watch baseball's All-Star Game that night, according to sources involved in the deal who asked to not be identified.

But when the mayor learned Ms. Zambo had invited Terry Lynch, a housing activist who sometimes clashed with the Williams administration, he delayed his trip, the sources say.

At the conference, Mr. Williams stopped short of endorsing the proposal, but he told the reporters he took the Freedom Forum's offer "very, very seriously" and would "move heaven and earth" to determine the deal's feasibility.

It was music to Mr. Overby's ears.

"When the mayor made the 'heaven and earth' comment, I began to believe this thing could really happen," Mr. Overby said.

Ms. Zambo's next step was risky: She went to work lobbying developers interested in the property to support the Freedom Forum's proposal. After all, she figured, there was no way they could compete with its offer.

The gamble paid off. On July 21, nine downtown developers including Robert O. Carr, chairman and president of CarrAmerica Urban Development Inc. and Kaempfer Co. President Mitchell N. Schear wrote Mr. Williams to urge him to accept the Freedom Forum's offer.

"We are certain that by formalizing this process, the city will not achieve a better result, and it may have the adverse consequence of delaying the use of the site," the developers wrote.

On Aug. 7, Mr. Williams returned to the DOES building for another press conference. This time he announced he was endorsing the offer, but stressed that it was up to the D.C. Council to decide if the site could be sold without soliciting bids from other developers.

The decision to back the proposal gave the mayor an opportunity to fulfill a campaign promise to move city agencies out of downtown and into neighborhoods, where they would be closer to residents.

The mayor began scouting locations east of the Anacostia River the city's poorest area for the new DOES building. In October, he chose a vacant lot near the Metrorail station on Minnesota Avenue NE.

By November, the council had decided the mayor could accept the Freedom Forum's offer. Final approval rested with the D.C. control board, the five-member panel that helps manage the District's affairs.

"We expected the control board to be a formality, a rubber stamp. That wasn't the case," Ms. Zambo said.

A done deal

Edward M. Rogers, the Freedom Forum's lawyer, said the control board wanted to make sure the District was not breaking its own rules by selling the DOES site without putting it up for bid.

Ms. Zambo said her team also had to submit a big stack of paperwork to the board to review. "It was a complicated deal. We had to educate them," she said.

The board finally signed off on the deal Dec. 19.

There was another hurdle to cross. The U.S. Department of Labor had revealed it owned roughly 67 percent of the DOES property and wanted its fair share.

Sources in the department say outgoing Labor Secretary Alexis M. Herman considered asking for 67 percent of the money the District got from the sale, but eventually agreed to take two-thirds equity in the new DOES building in Northeast.

A final press conference was held Dec. 21, in which Mr. Williams signed over the deed to the DOES site to the Freedom Forum.

Ms. Zambo said she breathed a sigh of relief when the deal was done. She estimates the Freedom Forum consumed about half her work time for more than a year.

The journey was riddled with twists, but she said it was fun.

"This was a case of real teamwork. Every member of the team played a critical part," she said.

Her job will not be done until the new Newseum is built. The DOES building is scheduled to be demolished during the second half of 2001, with construction of the Newseum complex slated to last through 2004.

"Charles wants to be open in time for the next inauguration," she said.

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