One of the headline examples of Washington's real estate bust is back in the market, acquiring new properties and shrinking its relationship to longtime partner Lehman Brothers.

After its founding in 1998, Monument Realty emerged as a star of Washington's blazing real estate market, only to become a symbol of the bubble bursting when Lehman went bankrupt in 2008 and creditors came knocking. In a year, Monument went from being a $50 billion company to nearly being dissolved.

Still, co-founder Michael Darby kept the company together, despite painful foreclosures, losses and a split with his partner. Monument is making major acquisitions again, with two purchases in December. Its rebound is an illustration of the cyclical nature of commercial real estate, in which fortunes can be made, lost and made again.

After leaving another development company to found Monument, Darby and co-founder Jeff Neal raised money, inked deals and sometimes turned in staggering profits, such as when they flipped vacant land on New York Avenue for a $25 million gain in 2000.

Monument lined up 2.7 million square feet of development in its first three years, driving office construction into emerging markets such as the Dulles Corridor and later Southeast Washington. Before construction on the Nationals ballpark began, Monument had acquired 50 properties around it. It also acquired the Watergate Hotel with the idea of turning hotel rooms into condos.

"It seemed like everything we touched turned to gold," Darby said.

Darby and Neal weren't shy about their success, bringing a party of 50 or more - including their investors, lenders, contractors, consultants and brokers - on an annual trip to South Beach, Fla., and celebrating the closing of deals with trips to beach or ski resorts.

Extravagence was the norm, Darby said: "The whole real estate industry in Washington was making money and everyone was spending it, personally and corporately," he said.From 2002 on, nearly all of Monument's acquisitions were made in partnership with Lehman, which offered the developer a $7 million line of credit in 2003, and increased it to $32 million less than a year later and to $80 million in 2005.

Then, in August 2007, Lehman officials called and, citing financial trouble, told Monument to immediately put the brakes on spending - to engineers, architects, everyone. In the next year, Monument laid off 50 of its 80 employees, Neal left the company and Darby faced $500 million in loans on the 26-property portfolio it owned with Lehman, the value of which was dropping dramatically.

The low point came during Monument's 2008 holiday party, a thrifty affair at a local bar, when Carby stepped out to take a call; Lehman, in bankruptcy, wanted to force Monument out of all of the deals. "There I was, standing outside in the snow, trying to save my company as my employees drank and laughed inside the bar, oblivious to what was happening," Darby said.

An Australia native who moved to the United States with dreams of becoming a professional skier, Darby said he thought of folding up and becoming a ski bum.

Instead, Monument crawled back to viability by refinancing loans on many properties and selling others at losses. Last year, Monument sold offices in Gaithersburg and Shirlington and land in Springfield. It has not escaped catastrophe, losing the Watergate and the Palatine housing complex in Arlington County to foreclosure.

But for the first time in almost four years, Monument is back in the market, and in July it raised a new fund with Atlas Capital Group. It has purchased, with Atlas or other partners, a loan on a Gallery Place property, an Arlington site where it plans an office building for Boeing Co. and a West End office building.

And it is back to looking for the next big thing. This time, it's a Base Realignment and Closure project in Springfield, where Monument has assembled enough land for four office buildings.OConnellJ@washpost.com

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