District Officials Say State Department Is Threatening to "Blow Up" Walter Reed Redevelopment

District officials are keen on the site of Walter Reed Army Medical Center redeveloping into a residential and commercial hub that kickstarts the neighborhoods along upper Georgia Avenue, Northwest, but recently, Mayor Vince Gray and others have started to worry that the State Department will torpedo the plans in a land grab.

When Walter Reed closed in 2011, the federal Base Realignment and Closing process split the 110-acre hospital site between DC and the State Department. The city was awarded 67 acres, while the State Department received the remainder, facing 16th Street, Northwest, to use as a new campus for embassies. But with nearly a year remaining before the Army turns over the keys, DC and the State Department are haggling over land, with Children’s National Medical Center and possibly upper Northwest’s economic vitality in the middle.

Here’s the backstory: Children’s wants a 13.2-acre slice of Walter Reed for a new genetics research facility. It was a partner in a development bid presented by Roadside Development, one of the applicants for the master contract the DC government considered last year for its side of Walter Reed. But after the District went with a team comprised of Hines, Urban Atlantic, and Triden, Children’s took its case directly to Congress. Washington Business Journal reported in September that the hospital got language inserted into a fiscal 2015 defense spending bill for an immediate transfer of several Walter Reed buildings, including the eight-story Building 54, all of which are on the side of the campus slated for the State Department.

But the State Department is responding by asking the Army to redraw the Walter Reed division again to replace the 13.2 acres it stands to lose to Children’s with a chunk of the DC turf, a move Gray and other city officials say would effectively ruin the redevelopment plans.

“Such a change would drastically shrink the land area the District would receive and would have a devastating impact on the District’s ability to deliver on the priorities the Congress, the Army, and our residents have expressed,” Gray writes in a letter to Army Secretary John McHugh.

The Hines-led development group plans to turn the District’s side of Walter Reed into 2,000 new housing units and 250,000 square feet of retail, including a grocery store, and a hotel. There are also plans to for a medical facility, but no specific hospital group is attached to the project. Hines currently plans to build 318 affordable units, some of which would be set aside for homeless veterans. In his letter, Gray writes that the affordable units would be most threatened by downsizing the city’s project.

A mayor’s office staffer with direct knowledge of the Walter Reed process tells Washingtonian the fallout could be much more severe, possibly to the point of sending the city back to step one. The lame-duck Gray administration is trying to leave its successors a legislative package concerning Walter Reed to send to the DC Council next year, but an Army decision to accommodate the State Department’s sudden request would blow up the project by forcing the city to reopen its land reuse process. That would delay Walter Reed’s development by three to five years and risk prompting the Hines team to walk away from the site.

In his letter, Gray writes the Army can assauge things by guaranteeing the District its full 67 acres. He also suggests that if the Army can’t figure out how to make the State Department happy with just 30 acres, it consider giving the whole thing to DC.

Read Gray’s letter below:

Mayor Vince Gray Letter to Army

Find Benjamin Freed on Twitter at @brfreed.

Benjamin Freed

Staff Writer

Benjamin Freed joined Washingtonian in August 2013 and covers politics, business, and media. He was previously the editor of DCist and has also written for Washington City Paper, the New York Times, the New Republic, Slate, and BuzzFeed. He lives in Adams Morgan.