On Tuesday, March 22, 1983 -- just two days before the valuable Tysons II real estate parcel was to be auctioned off--two would-be buyers perched in conference rooms no more than 10 feet apart.
In one sat a general partner in a group of Minnesota developers who had come to town only days before, looking for a hotel site, but who were now prepared to bid on one of the Washington area's most valuable pieces of land.
In the other sat Bob Sholiton, vice president for development for the Sears, Roebuck & Co. subsidiary Homart Development Co. Homart had been engaged in secret negotiations for two years with Washington developer Theodore Lerner, who owned 25 percent of the site, to buy the land and develop it as a joint venture.
At stake was 117 acres in one of the nation's hottest real estate markets, a massive tract on the north side of Rte. 123, across from Tysons Corner shopping center, that had gone undeveloped during a bitter feud between Lerner and partners Homer Gudelsky and Max Ammerman.
The story of the negotiations that led to a surprising courtroom denouement of the famous and long-running real property battle is a story of years of real estate intrigue, of deals that came together and fell apart and of the sudden appearance of the "boys from Minnesota"--showing up, almost as if on cue, as a complication in the final act.
It ended in a courtroom full of startled observers on March 24 when lawyers for Lerner and his estranged partners walked in, 30 minutes before the property was to be auctioned off, and announced a settlement in which Lerner and Homart agreed to pay $21 million in cash to buy the remaining interest in the site.
"Real estate is a business of strange happenings," said broker Stephen Spencer, one of four Coldwell Banker real estate employes involved in putting the deal together.
A week before the auction was to be held, the Minnesota group had contacted John P. McEvilly, the principal broker in the Coldwell Banker group who had been working with Homart for two years on acquiring the Tysons II site. "They came in looking for a hotel site, and the call came to me," he said.
After McEvilly showed the group several sites, they asked about Tysons II. McEvilly mentioned the auction and said that he expected they would be able to acquire a hotel site from the successful bidder. The next day, over breakfast, "They said they were going to bid on it," he recounted.
Sworn to secrecy about the negotiations between Homart and Lerner, McEvilly responded only that he was working with someone else who planned to bid on the site, he said.
The following Tuesday, both Sholiton and Eugene M. Rerat II, a Minnesota broker and general partner in the investment group, visited McEvilly in his offices overlooking the wooded, sprawling Tysons II site.
"The guy from Minnesota said, 'You don't have to tell me who your person is, but go to him and tell him I can deliver the property for $32 million,' " McEvilly said.
McEvilly said that Rerat asked for a 10 percent irrevocable letter of credit by the next day in return for the commitment to deliver the land.
The terms of the auction required the successful bidder to post 10 percent of the purchase price, with 120 days to deliver the balance. "They were going to try to flip it sell it at a profit in 120 days," speculated McEvilly, in a version that Rerat disputes in part.
"I'm not going to say that I offered anybody the property at any price. I obviously can't offer somebody something I don't have," said Rerat, contacted in Minneapolis. "As far as my intent to flip the property, it's not true. We would have possibly sold a piece of it." Rerat, who declined to identify the other investors, said that the group still plans to build a hotel in Virginia.
When Rerat left, McEvilly met again with Sholiton.
About 4 p.m. the following day, auction eve, intensive negotiations began on the site. At 10 a.m. the day of the auction, McEvilly spoke to Sholiton and Lerner. "They didn't have a deal," he said.
By then the brokers were out of negotiations, which were in the hands of the parties and their attorneys. McEvilly, Spencer and colleagues William F. Kamp and Dennis S. Turner arrived at the courthouse along with the other brokers, lawyers and county officials.
The deal that paved the way for a $500 million office park development at the Tysons site had begun two years before, when Homart contacted McEvilly, asking for a suburban site. After looking at nearly 80 other locations, Homart chose Tysons.
In April 1981, McEvilly called Lerner, knowing him only by reputation and not knowing what to expect. Lerner said the site was not for sale but that he would consider a joint venture, warning of complications, McEvilly said. In May 1981, at the first auction of the site, Lerner's bid of $35 million was accepted. In July 1981, Lerner and Sholiton met for the first time to discuss the venture. Before it could occur, however, two major developments intervened.
First, Sears moved to acquire both Coldwell Banker and Dean Witter Reynolds. While Sears was busy consummating its acquisitions, all other deals--including this one--were off. And Lerner, having been told that the Virginia highway department wanted costly road improvements before development could occur, refused to pay the $35 million, and the partners went to court over a $1.5 million deposit Lerner had made. Eventually, things got back on track. Homart received the approval it needed either to buy out the other partners or bid for the land with Lerner in February.
Construction of the office park is expected to begin in about a year with the first building completed in late 1985.
"We died a thousand deaths on this thing," McEvilly said.