Lehman sues Goldman over failed $1.3 billion Rosslyn real estate deal

On Aug. 16, Lehman Bros. and Goldman Sachs agreed to terms on a $1.3 billion real estate deal for a majority stake in 3 million square feet of Arlington County office buildings.

Last week, just two days before the deal was to close, Goldman pulled out. Now the deal is in court.

Lehman, which filed for the largest bankruptcy in U.S. history in 2008, had received approval for the deal from bankruptcy court in August. But on Oct. 6 it sued Goldman for withdrawing from the agreement, saying in court filings that Goldman’s termination of the arrangement was wrongful and groundless. The company asked the court for the rights to a $100 million deposit Goldman made on the properties.

The deal was for a 78.5 percent stake in 10 Rosslyn office buildings of which Monday Properties is co-owner and manager. Among the properties are 1000 and 1100 Wilson Boulevard and the 580,000-square-foot office tower under construction at 1812 N. Moore St.

In the suit, Lehman said a sale agreement was signed on Aug. 16, only for Goldman to pull out of the deal “without any prior notice” on Oct. 4, despite having discussed closing logistics the day before.

Goldman pulled out because the sellers failed to provide certain leasing and management documents, according to Lehman’s complaint. The suit specifically names leasing documents related to tenants Boeing, Northrop Grumman, Raytheon, APA and the Arlington County Board as “not in compliance” with the purchase agreement. A Goldman Sachs spokesman declined to comment.

Lehman, however, called the reasons “a blatant attempt to avoid its contractual obligations.” An attorney representing Lehman declined comment.

Lehman and Monday Properties teamed to buy the properties in 2007 for more than $1.2 billion, and last year they agreed to put up an extra $263 million in equity to retire expiring debt on the portfolio. In October, construction began on 1812 N. Moore, which is expected to be one of the area’s tallest buildings.

Goldman’s withdrawal puts Monday Properties in a difficult spot, said Warren Dahlstrom, president of investment services at Colliers International. “Monday is kind of left in the kind of unenviable position of the only child in a divorce,” he said. “It’s really noisy and you’re going to end up with one side or the other, but you don’t really have a vote.”

A spokesman for Monday Properties declined to comment.

Jonathan O'Connell has covered land use and development in the Washington area for more than five years.
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