White Flint Property Draws Another Lawsuit as Amazon Decision Looms
Minority owner of the former mall site is alleging a partnership involving majority owners Tower Cos. and Ted Lerner is trying to force it to sell its stake for a fraction of value
The White Flint sign on Rockville Pike next to the former mall property
The owners of the former White Flint Mall are facing another lawsuit over the property, this time from one of the co-owners of the site, more than a year after they lost a legal battle against Lord & Taylor.
The new lawsuit comes shortly after Amazon officials reportedly toured the property as part of its new headquarters search.
Last week, descendants of the late Henry Reich filed a lawsuit in Montgomery County Circuit Court alleging majority owners Tower Cos. and Washington Nationals owner Ted Lerner are trying to squeeze them out of their minority ownership in the mall property.
Henry Reich initially developed the property with Lerner and the Abramson family, which owns Tower Cos., according to the complaint filed by attorney Jeremy Schulman.
The latest dispute over the approximately 44 acres of undeveloped land where the mall formerly stood is playing out as Amazon vets its list of 20 contenders, including Montgomery County, for its new headquarters. The company is expected to choose a location later this year.
Local officials have said the White Flint area in North Bethesda was pitched to the company—possibly with the former mall site featured as a significant piece of land for the headquarters project. Amazon plans to spend $5 billion constructing its new headquarters and intends to house about 50,000 jobs at the location.
Lerner and the Abramson family own 75 percent of the former mall property while Reich’s descendants own the remaining 25 percent. The Reich family says Tower and Lerner are attempting to purchase the family’s stake in the property for about $6.6 million and alleges the partners will use their majority ownership to muscle through a deal if necessary.
Schulman said in an interview Monday with Bethesda Beat the family believes Tower and Lerner are intentionally denying them information about Amazon’s search.
“Ted Lerner doesn’t just gratuitously offer someone $6 million for an interest in real estate unless he knows it’s worth ten times that,” Schulman said. “There are a lot of indicators pointing to the D.C. area being among the top contenders for Amazon.”
Sites in Northern Virginia and D.C. are also being considered by Amazon for its new headquarters.
Representatives for Tower and Lerner did not immediately respond to requests for comment Monday. Washingtonian first reported about the filing of the lawsuit.
The lawsuit could embroil the property in a public legal dispute as county and state officials enter a critical period in trying to attract Amazon. This month, the state legislature is likely to give its initial approval to a tax incentive package for Amazon worth an estimated $3 billion to $5 billion that was proposed by Gov. Larry Hogan to entice the company to choose Montgomery County.
Schulman said he didn’t believe the dispute could affect a potential multibillion dollar Amazon deal that may include the site.
“This is something that could be easily resolved,” Schulman said. “They can stop the transaction.”
The new lawsuit also comes about a year after Tower and Lerner agreed to pay Lord & Taylor about $31 million for violating a contract to maintain the mall as a “first-class” shopping destination until 2042. The mall owners agreed to pay after a jury determined they violated the contract by demolishing the mall that shared a wall with Lord & Taylor’s building.
The long-running Lord & Taylor lawsuit stalled redevelopment plans at the site approved by the county in 2012.
The complaint filed in court Wednesday says Amazon officials toured the property with Abramson and Lerner representatives March 4. The next day the Reich family asserts that it received a letter from Jeffrey Abramson and Edward Cohen on behalf of Tower and Lerner that said the former mall property would be sold by April 30 for $26.5 million to an entity controlled entirely by Tower and Lerner.
The letter noted the property would be sold so it can be redeveloped. The letter alleged the current ownership and lease structure “makes redevelopment problematic,” according to the lawsuit.
“Of course, the redevelopment has been in progress for years, without this so-called ‘problem being raised’,” the complaint says. “The only thing that changed is the potential, perhaps even likely, decision by Amazon to place Amazon HQ2 at this location or a pending deal with another development partner.”
The complaint describes the proposed sale as a takeover bid that would enable Tower and Lerner to exclusively reap the profits of a possible deal with Amazon or another redevelopment project in the future.
The Reich family alleges it has received no information from the other owners about whether Amazon is interested in the property.
“Tower MD and Lerner could have come to the [Reich family] to seek to resolve this issue amicably, shared the information they had, and attempted to negotiate an appropriate price (if they could be convinced to sell),” the complaint says. “Instead, consistent with their actions in the past, Tower MD and Lerner chose to bully, threaten and outright steal” from the Reich family.
The lawsuit estimated the value of the mall property is between $260 million and $540 million based on the approved redevelopment plans. Those estimates would make the family’s 25 percent interest in the property worth far more than the $26.5 million selling price for the entire parcel quoted by the Tower Cos. and Lerner.
State property records note the former mall property was assessed at $114.8 million as of January 2018.
The lawsuit describes the proposed sale as a “sham transaction.” It alleges the letter from the Tower Cos. and Lerner asked the Reich family to agree by March 15 to sell its portion of the property for about $6.6 million or the transaction would go forward on April 30 without the family’s approval. The Reich family did not agree to the transaction.
Schulman said the family isn’t interested in selling its share of the property and instead would like to maintain ownership on to it to pass down as a “generational asset.”
The Reich family is seeking an injunction and temporary restraining order to stop the proposed sale. No hearings are scheduled in the case, according to online court records. However, Schulman said opposing attorneys are likely to file a response to his most recent motion within the next two weeks.