Lerner loses Tysons Corner land price case
Sunday, November 28, 2010; 5:24 PM
In the arduous process of acquiring the land needed to extend Metrorail to Tysons Corner, the Virginia Department of Transportation won a small battle recently with a big foe, real estate magnate and Washington Nationals owner Theodore N. Lerner.
The state, needing some of Lerner's land in Tysons to build a Metro station and tracks there, took it by eminent domain and paid the developer about $24 million for the property two years ago. Construction is underway on the new station, slated for the corner of Chain Bridge Road and Tysons Boulevard.
But that price - set just a few months before real estate values went into a freefall - almost immediately appeared to the cash-strapped state to be too high. The discrepancy led the transportation department and the hard-bargaining developer into a court battle over what the property was worth at the time it was taken, in November 2008.
Earlier this month, a Fairfax County jury agreed with the state that it had overpaid for the property, saying that one Lerner parcel was worth only $19.3 million, less than the $22.8 million Lerner was originally paid. It ruled that a much smaller parcel was worth just $313,000, not the $1.5 million that was originally paid.
Fairfax County Circuit Court Judge David S. Schell confirmed the decision Nov. 19, ordering that the Lerners pay the state $5.1 million for the excess and interest. Calls to Lerner Enterprises and its attorneys were not returned.
The ruling allows the state to recapture some of the money it had paid using appraisals that it viewed as inaccurate because they were performed in March 2008, shortly before the economy collapsed. A second round of appraisals of the Lerner land in November 2008 - two months after Lehman Brothers filed for bankruptcy - put the value at only $11.8 million, less than half the initial price.
"The public should know that the Department of Transportation is trying to protect their money as best they can," said Robert J. Beagan, partner at Flinn & Beagan, who represented Virginia in the case.
Financially, the ruling is a small setback for the developer, who built the Tysons Galleria shopping mall, the Ritz-Carlton and office buildings leased to high-end legal and financial firms. Founded in 1952, the Rockville-based company has developed and currently manages more than 15 million square feet of real estate. In September, Forbes estimated Lerner's net worth at $3 billion, which would make him one of the country's 400 wealthiest Americans.
The $19 million that the developer will keep, however, could figure in the zoning approvals it has negotiated in Tysons Corner. With the second easternmost station set to open on the doorstep of Tysons Galleria in 2013, Lerner Enterprises has been moving to capitalize, planning six more office buildings, two condominium towers and a hotel.
But in receiving zoning approvals in 2003, Lerner Enterprises agreed that in exchange for density increases it would provide the land needed for Metro construction and would, "make such dedication or conveyance without monetary consideration."