Fannie Mae is drastically reducing the size of its downtown Washington, D.C., headquarters while committing to stay at the corner of 15th and L streets northwest beyond 2040.

The government-backed mortgage giant has signed a long-term lease at Carr Properties’ Midtown Center for 340K SF, the landlord announced. Fannie announced the new lease Monday afternoon but didn't elaborate on the details of the deal.

A source familiar with the deal told Bisnow the new lease, which is for roughly half of what Fannie Mae occupies today, begins in June 2029 and has a 16-year term.

“We are pleased to have come to a new lease agreement with Carr Properties to maintain our presence at Midtown Center in Washington, DC,” Fannie Mae's statement says. “Our reduced office footprint will allow us to continue to best meet the needs of our employees and business operations while being fiscally responsible. We thank Carr Properties for their collaboration as we worked toward a new agreement.”

The new lease comes after Fannie Mae put its 720K SF footprint on the sublease market in January, Bisnow first reported. At the time, the company had notified Carr Properties that it planned to exercise its early termination clause, allowing it to vacate the building in May 2029.

The company has been the 869K SF property’s anchor tenant since 2018. It signed a 15-year lease in 2015 for the $650M project at the site of The Washington Post’s former headquarters. The lease was set to run out in 2033 if not for the early termination clause.

“We are proud to continue our relationship with Fannie Mae and want to thank them for their partnership as we worked together to complete a new lease for their headquarters at Midtown Center,” Carr Properties CEO Oliver Carr said in a statement. “We are thrilled to have Fannie Mae as a customer for many more years to come.”

Carr remains the property’s majority owner but sold a 49% stake in 2021 to South Korean investor syndicate IGIS Asset Management. The deal valued the property at $980M.

The complex, which also counts WeWork as a tenant even after the coworking firm's bankruptcy, is tied to a $525M debt package, more than $400M of which is securitized into a CMBS loan.

D.C. Deputy Mayor for Planning and Economic Development Nina Albert said in a statement the city looks forward to having Fannie Mae downtown “for decades to come.”

“Fannie Mae’s decision to remain in Downtown DC shows what we already know – DC is a great place to do business,” Albert said. “Leading national organizations want to be here and leverage all our city has to offer – world-class institutions, talent, amenities, transit, and more.”

DowntownDC Business Improvement District CEO Gerren Price said he is “delighted” by Fannie Mae's decision and thinks it could create momentum for the city's office district.

“This announcement has the potential to influence other employers to choose downtown and we believe this is a positive market signal that recovery is in the future,” Price said in a statement.

UPDATE, AUG. 6, 9:25 A.M. ET: This story has been updated with statements from Nina Albert and Gerren Price.