On Solid Ground

It took two years of focused work by the condo association, as well as a dedicated association president, a clever lawyer and a lot more money than anyone ever imagined. "You hear a lot about condo boards that don't work; this is the story of a condo board that did something right," said Robert Diamond, the association's lawyer.

Most of the owners are happy and relieved that they finally secured their principal asset, said Linda Egerton, president of the condo association.

And they're also somewhat amazed that their "little group of regular people" was able to match a competing bid from a big New York developer, who wanted the ground lease as part of a bigger offer for 40 acres of Tauber holdings. Developer Richard D. Cohen offered $100 million for the whole lot, including the Kenwood Park ground lease. The retail and office parcels off Westbard Avenue are considered ripe for redevelopment.

Tauber's estate said yes to Cohen, but the condo association said wait a minute.

The association claimed the lease gave them the right to match any offer. And since Cohen had given them the number to shoot for -- their percentage of the $100 million deal was about $9 million, excluding closing fees -- they were able to put together a realistic financing proposal and then copy Cohen's contract, Egerton said.

Over the years, the association had tried several times to buy the lease, but Tauber and his management company always said the offers were "too low," Egerton said. The association started with a bid of about $2 million and was up to $5.5 million in February 2004, in response to the estate's official announcement that Tauber's holdings were all on the market.

With Cohen's bigger bid on the table, it's not surprising that the association's $5.5 million proposal was rejected.

When Cohen's bid was accepted, though, the association had another chance. Under the lease, it could exercise its right of first refusal, as it is called, to match his bid.

And that's what the association did next, although lawyer Diamond, who's with Reed Smith in Falls Church, had to do some very fancy legal detective work on the original 1973 ground lease. Back then, Tauber had set it up so that his own ownership partnership paid ground rent to his own management company; years later, the association inherited that lease and continued to pay rent. Diamond needed to establish that the association, rather than each individual owner, now had the right of first refusal.

Diamond also had to puzzle out other complicated legal maneuvers.

For example, the contract had to be signed by all of the owners, but the deeds to the land and the deeds to the units, which were then separate legal documents, had to be combined. Diamond reached back into common law, to the "doctrine of merger," he said, to tie all the ends back together. As far as he was able to determine, it was the first time the merger principle was applied this way, he said.

"It was a very significant undertaking, and we're very happy it worked out," Egerton said recently, as she ran through the details of the complicated negotiating process. "This was the most arcane deal you could have ever had."