The developer of the Tysons Corner shopping mall, who last spring won a dramatic courtroom auction by offering $35 million for 117 acres of Fairfax County's most valuable land, has given notice that he wants to back out of the deal.
Developer Theodore N. Lerner filed a motion in Fairfax County Circuit Court late Monday asking that he not be required to buy the so-called Tysons II property and that its current owners return the $1.5 million deposit he made on the land last May. Lerner contended that new demands by the Virginia highway department have reduced the value of the site, across Rte. 123 from his Tysons mall, and nullified his purchase agreement.
One of the current owners, Washington lawyer H. Max Ammerman, and the owners' attorney disagreed strongly and said they will contest Lerner's claim.
"He settles or he forfeits," Ammerman said. "What's a deposit for?"
Lerner's gambit was the latest in one of the most unusual and high-stakes land deals in the history of the Washington suburbs. The long-running dispute over who should develop Tysons II, the last undeveloped tract at the heart of what has been called Fairfax County's downtown, has pitted the county's two preeminent zoning attorneys -- John T. (Til) Hazel and Edgar A. Prichard -- against each other.
The feud stems from the bitter unraveling of a long-running and successful development partnership, still active at Tysons and Wheaton Plaza. And it has clouded once again the future of the land, which has been envisioned variously as shopping mall, office park and hotel-office complex. "As a result of this, I think it's all going up in the air," said Hazel, Lerner's attorney.
Other development experts speculated that Lerner may be playing for time to wait until the economy improves or to pressure the highway department into offering to provide better access to the site. The department is insisting that Lerner pay more than he considers fair to widen roads and build a new bridge to handle the increased traffic any development at Tysons II would cause.
Lerner and his wife already have a 25 percent interest in the land and -- with their partners Ammerman, who owns 10 percent, and Baltimore developer Homer Gudelsky, who controls 65 percent -- they once planned a second regional mall across from the Tysons mall. But the partners quarreled and last year Lerner's partners agreed to sell Tysons II for office construction to Mortimer B. Zuckerman, a prominent Boston developer and the owner of Atlantic Monthly magazine.
Lerner objected to the sale and offered $25.6 million to buy out his partners last May. A Fairfax judge ordered their dispute settled in a courtroom auction. Lerner and Zuckerman faced off in a hot, stuffy room in the county courthouse, raising each other's bids by increments of $100,000 and $200,000 as more than a dozen lawyers watched in awe.
Lerner finally discouraged the Boston developer with a bid of $35 million.
"Judge, you do a pretty good job as a real estate salesman," Hazel, a successful developer in his own right, said at the close of the auction.
Some real estate agents said yesterday that the judge may have done too good a job -- that Lerner may have decided $35 million was too much to pay. "I think he couldn't put together his financing," said one developer. "The generally weaker economy makes all land look overpriced."
Lerner, a reclusive businessman who developed White Flint and Landover malls and is now active in downtown Washington, could not be reached for comment yesterday. His attorney Hazel denied that Lerner was attempting to back out of a potentially unprofitable deal.
Hazel acknowledged that Lerner would lose nothing by delaying development. At current interest rates, Hazel said Lerner would have to pay about $4 million a year to finance the Tysons II purchase under the existing contract.
"There's no doubt that Lerner is not jumping up and down to do anything on this site . . . The worst that Lerner's going to lose is $1.5 million, so why should he lose $4 million a year?" Hazel said. "But I don't think he's going to lose the $1.5 million."
Prichard, who represents Ammerman and Gudelsky, disagreed. He said Lerner will lose his deposit and be in default on the contract if he fails to settle by Jan. 28. Prichard said the sales contract clearly makes Lerner liable for any contributions required by the highway department.
Hazel said the department had promised to build an interchange at International Drive and Route 123 if Lerner contributed $1 million and some land. That promise came from then-Northern Virginia highway commissioner William B. Wrench, who overruled the department's staff to urge both the Fairfax Board of Supervisors and the highway department to approve Lerner's plans.
Wrench resigned last summer, however, and department engineers have once again said that offices or stores at Tysons II would further clog the already congested roads at Tysons. They have said Lerner cannot tie his new development to existing roads unless he pays to widen Rte. 123 and promises to contribute to the cost of an interchange, whenever the department chooses to build it.
"It was like a kid in a toy store with a free pass," Hazel said of the department's demands. "They've finally realized that Tysons Corner is a disaster, and instead of going out and trying to solve it, they're in a panic. They don't have the money and they don't know what to do about it."
Prichard said, however, that the department's demands are Lerner's problem and Lerner's alone. He said the Tysons II sales contract states: "Purchaser has been advised that the Virginia Department of Highways . . . may require from the owner of the land substantial contributions toward the cost of roads . . . ."