The Navy announced yesterday it will not purchase two Harvard owned buildings in Virginia that have long housed two of its departments and will instead move the offices to government property in suburban Maryland.

The decision was a blow to Harvard Management Company (HMC), which had hoped to sell the two Crystal, City, Va., buildings to the Navy.

The announcement follows a six month Navy study on the economic consequences of staying in Crystal City. The study determined that the Navy would save $600 million in the long run by moving to Maryland.

This ended a year-long saga, during which the Navy had first announced it would vacate the rented buildings as part of the cost-cutting associated with nationwide military cutbacks.

Then, after lobbying by Harvard and U.S. Rep. James P. Moran (D-Va.), the Navy decided to begin the study. That study recommended the Naval Air Systems Command and Naval Sea Systems Command be moved out of the 12-story Harvard owned buildings just across the river from Washington, D.C.

The Navy's decision leaves Harvard with somehigh-priced real estate and no tenant. TheUniversity had earned slightly more than $20million annually from the Navy, which leased about85 percent of the two buildings.

Harvard was offering to sell theproperty--which is valued at more than $120million--to the government for $90 million toavoid leaving the buildings vacant or payingremodeling costs.

The loss of revenue is significant because ofthe possible difficulty of finding a buyer ortenant given the weak real estate market andnationwide glut of office space.

The announcement is also a setback to the realestate division of HMC which had a zero percentreturn for fiscal 1993, while the endowment as awhole returned 16.7 percent. Over the last twofiscal years, the real estate portfolio lost 3.5percent of its value.

It was also a re-evaluation of real estatewhich caused a $200 million devaluation of HMC'shigh-risk Aeneas Group in fiscal 1991.

The University had attempted to convince thegovernment to stay in the buildings, even afterHMC President Jack R. Meyer said it would not doso.

Crystal Holdings Corp., an HMC subsidiary whichmanages the property, hired the Washington firm ofMcAuliffe, Kelly & Raffaelli to lobby about a"base closure" according to documents it filedwith the government last year.

While the fight may be over for Harvard, stateofficials said they felt the Navy's financialcalculations were incorrect and swore they wouldcontinue the efforts to keep the Navy offices intheir Virginia location.

New Partnership

In other HMC real estate activity, the companyrecently entered into a $200 million real estatepartnership with a Houston company, in the latestaddition to its high-risk Aeneas Group portfolio.

An advertisement placed in Wednesday's WallStreet Journal announced the formation of FinvestLimited Partnership, a joint venture between theFinger Companies and HMC.