When Barnes Morris Pardoe, a D.C. real estate brokerage, started working on assembling a site at 18th and I streets NW, the brokers had little idea it would take them six years to get all the landowners to agree to sell.
By the time it was all over, however, they had taken countless trips to Ocean City to negotiate with an elderly landowner, paid a coffee shop owner to give up a 15-year lease, made settlements with both an apartment building owner and the tenants in the building and convinced another company to give up its mid-town parking lot.
"That was a tough one," said Richard L. Cohen, president of Barnes Morris Pardoe. "It just kept getting more and more complex."
Cohen and his staff of sales agents claim that they have done about 75 percent of the large site assemblies in Washington over the past few years, and that the business -- which entails getting landowners to agree to sell their property -- has given them more than a few gray hairs.
"It's like punching a pillow," said Thomas J. Rossi, vice president for the company. "Just when you think you have one corner down, two or three problems pop up somewhere else."
In the process of doing their work, Cohen and his agents have been forced to eat countless corned beef sandwiches (in an attempt to get the owners of a carry-out to sell), have called all over the country to price new coffee roasters (as part of an offer to move a coffee shop business) and gotten to know every square inch of downtown Washington.
"I don't even like corned beef," growled Richard F. Siegel, one of Cohen's sales agents. "And after all those sandwiches we didn't even get the deal."
Assembling land for a building is a process that has existed as long as development, but in the Washington area site assembly has gotten increasingly difficult over the past 10 years, real estate brokers say, as land values have escalated and local laws protecting tenant and historic interests have become more complex.
"Site assemblies tend to be soap operas," said Christopher Gladstone, vice president of Quadrangle Development Corp. "We've never had one that wasn't fraught with problems."
Landowners here also tend to be knowledgeable about what their property could be worth and savvy enough to know how to play the game, Gladstone said. "In our experience, we've always seen a great deal of sophistication on the owners' side of the table," he said.
Vernon Knarr, a principal of Vector Realty, said that sometimes landowners will vie with each other to be the last holdout, in an attempt to get the best payoff. In other cases, Knarr said, tenants claim their leases are worth more than the land, thereby bidding up the total cost of the property.
"In a lot of cases we've paid a lot more, maybe twice, what it would have cost if there hadn't been a tenant on the property," Knarr said. "In other cases the tenant doesn't want to give up his lease, even for all the money in the world. He's happy operating his little market, and if he won't sell out you can't buy the property."
In most cases, developers say, it isn't even an easy case of convincing one person to sell but instead whole families must be convinced, or a group of investors, such as doctors or lawyers, or a group of trustees who have inherited property.
"Sometimes you can't even locate all the owners," Siegel said. "If you are dealing with an elderly person, you also realize it will be easier to work with him than all his heirs."
At the same time, the developer or brokerage company must try to keep other developers from getting control of key pieces of the site it is working on to keep from getting stuck in a bidding war for properties.
"Look at a Monopoly board and that's what this business is all about," said Rossi. "You need to own both Park Place and Boardwalk before you can build a hotel."
Developers usually start by purchasing one of the key pieces, Rossi said, such as the largest piece or a piece that sits in a strategic position on the block, either on an alley or in the middle of a row of buildings.
"You need to position yourself so that you are still in a good position even if you don't get the whole site," Rossi said. "You buy the better pieces or the strategic pieces so you have something worth selling if that's what you have to do."
Richard Hollander, senior vice president for the D.C. office of Cushman and Wakefield, said there are some investors who look for key pieces and will buy them before the rest of the market gets interested in an area.
Hollander said that such an investor purchased the site of the Popeye's fast-food store on the corner of 14th and I streets NW in 1981 and then several years later sold it at "quite a profit" to another investor who later sold the site to the Trammell Crow Co. of Dallas, which is developing a major office building on the corner.
"The original investor could see that the Popeye's site was the most strategic on that block," Hollander said. "He knew that if someone was going to develop that corner they would need the Popeye's."
Sometimes investors try to "spike" an assemblage, Hollander said, a term that means investors buy a property in the middle of an assembly so that the developer assembling the site will be forced to negotiate with them.
"It's a chess game," said Gladstone. "Positioning yourself is crucial to getting an assembly together."
In the "old days," before downtown land values began the rapid escalation of the late 1970s, Rossi said, a developer assembling a site would make all the contracts contingent on being able to settle all the other contracts in the parcel.
"No one wanted to risk any money on small pieces," he said. "Once land values went up, however, landowners could refuse to allow such contingencies. Today people say, 'If you want it you better buy it and not let this drag on.' "
At the same time, developers have to negotiate with tenants who hold leases, a process that sometimes can result in costly settlements.
As development in Washington moves east of 15th Street NW, some of the leases that have proven most difficult to site assemblers are those for the pornography shops that dot the downtown. Because of changes in the zoning laws, many of these businesses have nowhere to go if forced to give up their locations, and the owners have successfully argued with developers for big payoffs.
In one case, said Cohen, a developer had to pay a porno shop lease-holder $500,000 to give up a lease that had would have run out in 13 months.
"The developer was ready to build," Cohen said. "We couldn't wait around for the lease to expire."
In the case of the assembly at 18th and I streets, which Barnes Morris Pardoe did for the Oliver T. Carr Co., one of the major stumbling blocks was an elderly gentleman from Ocean City who "just wanted to finish out his life doing what he had been doing," Cohen said.
Max Munk, who was 93 years old when Cohen first contacted him about selling his small building on I Street, "wasn't interested in the money," Cohen said. "He had no way of spending what we were offering him and he just didn't want to complicate his life."
Munk had leased his building to the Madison Coffee Shop, a Washington landmark popular with the office crowd for its pancake breakfasts. Cohen met with him again and again over five years, trying to convince him to sell the property to Carr. But when the lease on the coffee shop came up for renewal, Munk signed a new one for 15 years, even though Carr had offered a substantial increase in the price if Munk wouldn't sign a new lease.
"We couldn't believe it," Cohen said. "At one point we even offered to move the coffee shop into the building at one end of the site, to recreate the shop exactly as it was, but that wouldn't do. In the end we had to buy out the lease for about $1 million."
With Munk holding back, Carr began having problems with the other properties in the deal. David Goodman, a Washington doctor, already had agreed to sell his building -- which housed the Dart Drug store on the corner -- but as the negotiations with Munk dragged on, Goodman began talking to other buyers.
At the same time, the tenants in the Greystone Apartment building, which was also one of the target properties, began to push for a share of the deal being made with the Greystone's owner. During the time that Munk held out the city's laws had changed, giving tenants the right to purchase their building. Even the owners of the parking lot next door to the Greystone were unwilling to sell.
In the end, Barnes Morris Pardoe wired $1.5 million to Munk's bank account.
"When he saw the money in his account, he gave in," Cohen said. Carr worked out a joint partnership with the owner of the Greystone and the owner of the parking lot, and paid off the tenants of the Greystone to give up their purchase rights.
"It was a nightmare," said Siegel. "I think Munk finally sold just to get rid of us."