by Adam Gittlin
We all agreed.
“Four hundred sixty-four million six hundred twenty-seven thousand nine hundred fifty dollars. We get them a unique, niche type of portfolio that overnight makes them the premier landlord in one of Manhattan’s most interesting submarkets. In doing so, we look like heroes coming in well under the half a billion they came here willing to spend. We need to inch up, we’ll still most likely end up below our client’s ceiling.”
“How are the buildings physically?”
Jake stood up and handed us each a package.
“In this package you will find the specifics for each property. Square footage, structural history of the property including all renovations and the years they took place, building system specifics, building system upgrades, if any, etcetera.”
Jake’s prospect was definitely a solid one, but one nonetheless with an inherent, real obstacle we were all unfortunately aware of.
“Given the time constraints, who do we deal with?”
The Slevin family was in two different camps of thought. The older generation, who had held onto these properties so long they were basically mortgage free, were all for selling out one day. Ray and Lawrence were both at peace with the fact that their grandchildren’s grandchildren would live like kings from the property value they had amassed. As for Jagger and Leo, a bit of a different story. Like I said, these two are complete pricks. And they have never had a problem letting everyone know that all family business decisions are to come through them, not their fathers. Nonetheless, it is hard not to see their side of the coin. As for their feelings toward the portfolio, simple. Ride out the market until an even more prosperous day, a day when the economic environment enables them to cash out much higher. After all, why should they have to throw in their chips when they are only in their thirties, sitting on a
mortgage-free portfolio that still has the ability to turn a profit even in a down market?
“We deal with Jagger and Leo.”
“I agree,” Tommy said. “You tell me why.”
Tommy Wingate. Always the teacher.
“Because the key to having your way with the Slevin boys is a simple one. Give them respect. At the end of the day, that’s all these two poor schmucks are looking for. You cross them, you go to Ray and Lawrence first, they’ll never trust you and they’ll do everything possible to make life difficult even if it doesn’t have to be. Today, all four love us. We go through the proper channels, even though the two jerkoffs are the harder sell, we stand a much better chance of pulling this off.”
“Good thought. Now, how do we sell them?”
No brainer.
“No brainer,” Jake continued, “we convince them on as long a recovery period for the economy as possible. We refer to things like the awful national employment reports that keep coming out each month. Fuck, we make them think we see oncoming plateaus or even regression. We make them think the years of reality from over extension and uncertainty that most likely lie ahead couldn’t possibly be worth the chance of a few extra bucks.”
Bingo. Convince them that getting out now may in the long run prove to be the wise, yet unobvious choice.
“Any thoughts?” asked Tommy.
“Definitely worth looking into,” Perry said.
“I think it works,” I added. “It can’t hurt to have a number of different possibilities to work off of and discreetly play off one another.”
“Yeah, we’re not really dealing with much time here. The more worthy, viable deals we can work, the better,” Tommy said. “All right, Curtis, you’re up.”
I could literally feel my facial skin surrender as my game face took over.
“I’ve had a couple of interesting conversations with Sam Archmont during the last few weeks.”
Sam Archmont is one of my favorite clients. He’s a top dog at one of the largest banks in the United States, Gallo Booth West, headquartered on the West Coast.
“How is he doing?” asked Tommy.
“He’s the same fucked up lunatic he’s always been. He’s great. He sends his best to all three of you.”
I met Sam Archmont through my father about five years ago. The two had been long-time friends. The guy was in his mid-sixties at the time but believe it or not, once we knew who the other one was, we kept running into each other at the gym where we both belonged. He’s one of those Jack LaLanne types, old and leathery but fit as a fiddle. Turns out when he was young he did some time and became obsessed with working out while he was behind bars. So now, to prove his physical prowess, each year he does a different stunt at his birthday party. I know, like Jack LaLanne. That’s why I used the analogy. Last year Sam ran across hot coals. Good thing the paramedics were standing by because the poor old bastard’s bunions couldn’t even thwart that kind of heat. I don’t think the old fool took more than three steps before his inner child, who by the way sounded like a little girl, was screaming for dear mercy.
Anyway, about the third or fourth time I ran into him we got to talking. It turned out they were looking to upgrade their East Coast headquarters, and I scheduled a meeting between him, one of the integral players internally for handling their real estate affairs, and Tommy. To make a long story short, ten months later we moved them into 120,000 square feet of space averaging $52.00 per square foot over the course of a twelve-year lease. Just last year they exercised an option on their lease for another 30,000 square feet of space in the same property, which meant another commission for us. Sam Archmont has made me a lot of cash over the years. But this alone isn’t the reason he’s one of my favorite clients. Sam Archmont handles lending for the bank, as it relates to commercial real estate property. He’s an amazing source of information for me. He’s got his finger on the pulse of anything and everything when it comes to the landlords of New York City’s office buildings. This is why he’s always been my favorite client. Along with the fact he’s probably the craziest guy in the world to go out on the town with.
“Anyway,” I continued, “during one of our chats, Sam mentioned something to me about Lloyd Murdoch. And I found what he had to say interesting solely because of its market relevance.”
Lloyd Murdoch is a fifty-something, second generation landlord in Manhattan. His family owns ten properties throughout the city, some that carry heavy financing. They are a definite player in the New York City commercial real estate market, and Lloyd is their leader.
“Once I spoke with Andreu Zhamovsky, I saw a whole new relevance to what I had been told.”
“Which was?” Perry asked.
“That Four Ninety and Four Ninety-five Madison Avenue were about to become R.E.O. properties.”
R.E.O properties. Otherwise known as “Real Estate Owned properties” or properties that have been taken back by a bank because the borrower has defaulted on his mortgage and the foreclosure auction didn’t attract any bids. In this case, most likely because the properties were so heavily leveraged the debt service is worth more than the property.
All three perked up, as if a snake had bitten them in the ass.
“Four Ninety and Four Ninety-five!” exclaimed Jake. “Come on!”
Four Ninety and Four Ninety-five are two huge, gorgeous, mirror-image properties facing each other on Madison Avenue in the high Forties.
“I’m telling you,” I went on, “I shit you not.”
“I assume you checked back with Sam,” Tommy said.
I handed them each yet another precisely organized package.
“Sam didn’t just have peripheral knowledge here. Gallo was the actual lender. The buildings were officially taken back by the bank last Thursday.”
“I’ve always heard Murdoch likes to toe the line,” Tommy added.
The truth is that the element of the unknown is one of the things that made this so interesting. Lloyd Murdoch is someone none of us have really ever dealt with. Tommy knew him in passing from his early days in the business, but that was it.
“Wh
y hasn’t there been any press yet?” asked Jake, looking around. “Did any of you hear about any type of foreclosure auction?”
“That I’m not sure of yet. Sam wouldn’t discuss anything more with me over the phone. But a car’s picking me up here around three and I’m heading out east to his place.”
His place is a 7,000-square-foot dream house on Ocean Drive in East Hampton, sitting right on the beach.
“He’s getting married tonight on the beach behind his house. I told him it was urgent that I had this information, and he told me we could sit down beforehand.”
“Another marriage?” said Perry, half-jokingly. “Does this guy get married once a month?”
“The package I just handed you is all of the specifics about the buildings. But I imagine, or should I say hope, none of it is anything new for you.”
I said that because not only are 490 and 495 Madison Avenue legendary buildings, but the four of us closed a one-hundred-thousand-square-foot deal in 490 just last year. A deal no one in the market ever thought we’d get done. Beautiful lobbies, high-speed elevators, top-tier tenants, these two buildings are the cream of the class A building crop. Each has 700,000 rentable square feet or twenty-six floors at just a shade under 27,000 rentable square feet each. They run along the avenue, taking up the full city block, prominently staring one another down, seemingly keeping the other in line. Each of us felt close to these two buildings. The 490 transaction was one of the most difficult we ever closed as a team.
Normally in that type of a deal situation we’d form a working-business relationship with ownership. Not the case with Murdoch. He’s the definition of the secretive type. He left all areas of negotiating and finalizing the deal in the hands of his brokerage team. We never once dealt with him, something that made what I had proposed all the more intriguing.
“Did Sam give you any indication about what happened at all?” probed Perry.
“He didn’t. But I think I know what may be going on. Larry Peterson—”
I handed them each yet another package, this one filled with articles.
“— I remember my father telling me about this guy, and a little game he played to save his ass in the early nineties.”
“Watch the games, Jonah. None of us, especially you, can afford another Murray-Gate.” Tommy warned.
Tommy took a look at the pile of reading material I just handed him.
“Do you ever sleep, Jonah?”
I turned to Perry and Jake.
“I assume there is no need to refresh your memories with regard to the commercial real estate collapse of the early nineties. Larry Peterson, a heavy Garmento landlord—”
Garmento being the lingo used to term anyone who works in the Garment District.
“— was simply drowning in his investments. Before he knew it, the market had dried up so severely that his buildings were all sitting half empty. Anyway, because of this he found all of his lenders breathing down his neck. So what did he do? He tactfully defaulted on his mortgage terms intentionally so the buildings would end up back in the banks’ hands. But as we all know, banks hate being put in this situation for one simple reason. They are not in the business of buildings. So what did Larry Peterson do?”
Perry jumped in.
“He bought his property back all over again, this time at lower prices dictated by the ‘at the time’ current market conditions.”
“That’s exactly right,” I replied. “And how did he do that? How was he able to get the buildings past foreclosure and back into the hands of his desired bank? Relationships. He had the bank help him keep it all quiet with the promise of buying the buildings back at current market values, numbers much lower than what he originally paid. He aligned himself with new partners, helped the institutions clear up existing tax liens, got the lenders whole again, swallowed his losses, and jumped right back in.”
“So assuming that’s the case,” added Jake, “we’d be entering the arena looking to buy these two buildings right out from under Murdoch? Who’s looking to simply, very under the radar, restructure and buy his own buildings back?”
“And why not?” I said.
“Devil’s advocate—”
Perry looked at me with those smart, diligent eyes.
“— what’s to say the bank would want to deal with us just coming in with some buyer they had never done business with before? I mean, here they are in a position to nicely and neatly hand the property back to its past owner, someone they as an institution have done business with; have a history with.”
“I’ll tell you what’s to say, Perry. The fact that here we are coming in with cash and willing to respectfully engage in a bidding war, something we all know our competition most likely will not be able to take part in. Now I know that banks don’t like dealing in buildings because it’s not their business, but what banks are in the
business of is making money. Not only are we, cash in hand, an appropriate, willing buyer, we come with the added bonus of not having just defaulted on a mortgage.”
I paused, giving them all a chance to respond. No one did.
“Am I wrong?”
As the three of us spoke further, it occurred to me that even though we had each taken this situation as a chance to outdo one another, none of us had. Which in this case was a good thing. We had all won. Each potential deal was a solid, viable prospect.
The more we talked, the more obvious the plan became. We were going to pursue all three deals, each team member taking the point, or lead position, for the deal they had brought forward. The key to this approach working was a simple one. Under no circumstances at all, ever, was any prospect to find out about either of the others. People tend to be more giving and forthcoming when they think they are negotiating against themselves as opposed to multiple interests. For a moment, in deference to Perry, we mulled the idea of intentionally leaking all three deals to the media, hence lighting a small fire under each potential seller’s ass. But we decided against it. We all agreed that in the end, hostility fostered from such a situation could have a potential seller holding things up at crunch time for any one of a million reasons. And we decided it made more sense to use our strong relationships and records, creating a comfortable environment that would have people doing what they could to help a potential deal come to fruition.
We left Tommy’s office that morning running. We never looked back.
Chapter 10
I walked into Jake’s office, or the room in PCBL Headquarters better known as the shrine to the New York Jets. Signed jerseys by the likes of Johnny “Lam” Jones and Joe Klecko were hanging on the wall, while shiny green and white helmets tagged with black squiggly lines were on display in glass cases. In the corner farthest away from Jake’s desk were Joe Namath’s shoulder pads and cleats from a playoff game along with a signed photograph by number twelve himself, a picture taken of he and Jake when they met in Atlanta at the 2000 Super Bowl. These three items were placed together in one larger glass case forming the room’s feature piece. Not only was it on a pedestal, it had its own direct spotlight shooting down from above.
He was sitting behind his desk, leaning back in his chair with his Bruno Maglis up on his desk. He was talking on the phone by way of a wireless headset, throwing a mini Jets’ football up in the air repeatedly. As I entered, with one motion Jake threw me the ball and leaned forward, placing his feet back on the floor and grabbing a pen. Without breaking stride in his conversation he quickly wrote something on a piece of paper and handed it to me. It read “Jagger Slevin.” He motioned for me to shut the door, which I did before sitting down.
“I’m telling you, man, we’re talking about a very interested party,” Jake continued into the tiny microphone in front of his mouth. “Someone who has done their research, and has decided they would like to, if nothing else, get a dialogue going. Maybe simply for informational purposes, possibly for reasons a bit more interesting should the opportunity present itself.”
Jake is fun to watch in action. He’s a real smooth character, but one armed with knowledge to the hilt. A dangerous combination. Especially for a moron like Jagger Slevin.
“Nope, nope, that’s all I feel comfortable with telling you for now. Just meet me for lunch, I promise to let you in on a lot more.”
One of the first things my father taught me in life, and one of the first things Tommy reminded me of in real estate, get them in person. For reasons too endless to count. For example, to see if their expressions actually match their words, to show them they’re worth more than a phone call, to make sure your words are only falling on intended ears, etc.
“I can’t do it on Tuesday,” Jake went on. “I’ve got a closing that morning that may run through lunch. I would change a lunch date tomorrow, but the potential client is coming in from Boston. Just meet me. Cancel whatever the fuck it is you have and meet me. Trust me.”
After a little more verbal wrestling, Jake finally landed his lunch meeting. He took off his headset and carelessly threw it on the desk.
“Done. One o’clock. Oak Room.”
“Not bad. Only one problem now.”
“What’s that?”
“You have to actually sit there and have a meal with him.”
“That I do. You think it’s wrong if I start doing shots to deal with the pain?”
He turned to his computer screen to look at his e-mail.
“Shouldn’t you be off trying to close some half-a-billion-dollar deal or something?”
“I should, smart ass,” I began. “but I thought of something you should probably know, and I didn’t want to forget to tell you.”
“And what’s that?”
“The garage deal Jagger and Leo have been trying to develop by Union Square.”
“What about it?”
“It fell apart. I saw Goldman when I was out last night.”
Brad Goldman is a broker from a rival firm.
