Washington developer Theodore N. Lerner won a court-ordered auction yesterday, besting Boston builder Mortimer B. Zuckerman with a $35 million bid for Tysons II, one of the most conveted parcels of real estate in the Washington area.
The two-man contest, held in a hot, stuffy Fairfax County courtroom with bidding in minimum steps of $100,000, left Lerner the victor in perhaps the most costly land deal in suburban Washington history -- a 17-acre tract directly across the road from the Tysons Corner Shopping center.
The strategically locatd site -- which went for a full $22.5 million higher than its appraised value in 1979 and $10 million more than Lerner once offered for it -- could be developed as a regional shopping center or up to 5 million square feet of office space under existing zoning provisions.
Lerner, a part owner of the Tysons Corner mall and several other shopping centers in the area, declined yesterday to disclose his plans for the property.
As befits development tycoons, yesterday's tense, high-stakes bidding war settled in one hour a prolonged three-sided wrangle among Lerner, Lerner's two former partners in the Tysons II deal, and Zuckerman.
The court ordered the auction to determine who -- Lerner or Zuckerman -- would be allowed to buy out Lerner's former partners after Lerner and his two business associates had failed to agree on sale of the land.
"The ball is in Mr. Zuckerman's court," Circuit Judge Richard J. Jamborsky, said when yesterday's auction began promptly at 9 a.m. in the cramped courtroom, without benefit of air conditioning.
Zuckerman, through his attorney, Fred Drasner, immediately offered $25.8 million, $100,000 more than the minimum bid imposed by Jamborsky.
"$25.9 million, your honor," said Grayson P. Hanes, one four attorneys clustered around their client, Lerner, at the end of a long table.
After Drasner bid $26.1 million on behalf of his client, Lerner himself took over the bidding. Looking straight ahead toward the judge, Lerner kept on outbidding Zuckerman.
After Lerner reached $2.29 million, he looked at one of his lawyers, John T. (Till) Hazel Jr., whose eyes rolled as if in amazement.
At the $32.2 million mark, again set by Lerner, Zuckerman's attorney asked for a five-minute recess. Lerner was clearly on the offensive.
When bidding resumed, it took only 10 more minutes for Lerner to reach the $35 million mark. Jamborsky then glanced at Zuckerman's end of the table. There was silence, and the judge pronounced the auction at an end.
The terms were cash. Although the purchase price was $35 million, Lerner, who already owned a 25 percent interest in the Tysons II property, will have to pay only $26.5 million to buy out his former partners, who held the remaining 75 percent.
While Lerner accepted congratulations from friends and associates after Zuckerman failed to stop his offer, Hazel, a formidable developer in his own right, said a Jamborsky, "Judge, you did a pretty good job as a real estate salesman."
Zuckerman, who before the auction had joked with reporters ("I have one maximum price, my attorney has a figure and my cardiologist has another"), slumped against a corridor wall after he lost. His open-faced smile was gone. He looked stunned.
"Mr. Lerner deserves to win it," he said. "I hope he has a lot of success. He won it fair and square."
The dispute broke out last year when Lerner's partners, Baltimore developer Homer Gudelsky and Washington attorney H. Max Ammerman, decided over Lerner's objections to sell Tysons II to Zuckerman, who, at 43, has already left his developer's imprint on Boston, Philadelphia, Washington, San Francisco and Los Angeles.
Lerner, a part owner of Wheaton Plaza, White Flint, Tysons Corner and other retail outlets that changed the shopping habits of millions of suburbanites, wanted Tysons II for himself.
Zuckerman thought he had acquired the site when his $25 million offer was accepted by Gudelsky and Ammerman. But the partners' dispute with Lerner threw the transaction into the courtroom. Last week, Lerner topped Zuckerman's price, offering $25.1 million, or $25.6 million if the land could be developed with a regional shopping center. It was at that point in Jamborsky a one-against-one auction.
Although yesterday's sale price was almost 50 percent more than what Zuckerman paid last year in the court-voided deal, some real estate experts said the sale was only the latest indication of the booming market for commercially zoned land in both the suburbs and the city.
"I'm not surprised," said James D. O'Brien, vice president of Coldwell Banker, a major real estate broker in the suburbs. "If you told me $50 million, I wouldn't be surprised. Seven dollars a square foot [the price of the 117-acre Tysons II tract] is cheap."
O'Brien contrasted the price with the $40 million -- or $615 a square foot -- paid by the Vancouver-based Daon Corp. earlier this year for a one-acre lot on the southwest corner of 13th Street and New York Avenue NW.
But Edgar A. Prichard, a veteran zoning attorney who is Gudelsky's and Ammerman's lawyer, shook his head in disbelief at the level of the bidding. "The land's not worth that much," he said. "I like some knowns and constants. We've departed from conventional wisdom."
Another valuable Fairfax County site on the Capital Beltway -- the Chiles tract at Rte. 50 -- was rezoned for commercial development by the county's Board of Supervisors last week in an action that gave the 334-acre parcel an estimated value of more than $14 million.
Ammerman, who kept track of yesterday's auction with a pencil, legal pad and electronic calculator, noted with relish that in 1979, when Lerner was trying to buy out his partners, his appraisers said the land was worth only $12.5 million.