Shelby didn’t respect him enough to be able to work up more than a mild anger. She stood up to leave. “All right, Reese, have it your way. But here’s the deal. If that settlement offer is rejected without Charese’s approval, she’ll be filing this immediately.” She dropped a copy of the Board of Bar Overseers complaint on Reese’s desk, making sure he could read the caption on the legal document.
His cheeks and ears turned red, but he fought to keep his voice under control. “It’s not even signed.”
“Not yet. But it will be, if necessary.”
“I wouldn’t advise threatening me, Shelby. I have some powerful friends in this city.”
“Well, you’re going to need them. Because I also know how to use the press. And don’t think Wesley Krygier wouldn’t like to put the screws to you. Heck, he might even take out a full-page ad himself—I can picture it now, nothing but a copy of the Bar Overseers complaint, maybe page 3 of the Sunday Globe. I wonder how many friends you’d have then. They’d throw you away like the garbage you are.”
Shelby turned and opened the door, then turned halfway back to address Reese. “Oh, and I’m sure Mrs. Jeffries, poor soul, will enjoy reading about your sexual romps with Charese.” Reese’s lower lip dropped, a stream of drool threatening to escape onto his chin. “It’s right there, in paragraph 7 of the complaint.”
He jumped to his feet. “You know that’s not true!”
Shelby smiled. “For Charese’s sake, I sure hope not. She’s suffered enough. But it’s what she remembers, and I did you leave you two alone for an hour the day she came into the office, so who was I to tell her not to put it in the complaint?”
CHAPTER 37
[May 24, 1990]
It was bid day. Howie had taken a week off from work, and he and Pierre spent the last four days pouring through the Fenway Place books and touring the property with a building inspector. Felloff had been true to his word—he gave Pierre and Howie complete access to the property and to all the relevant financial information. More importantly, he produced the promised “wart removers” necessary to redress the rent control and oil contamination “problems” described to Pierre by Felloff’s lawyer. It was time for Pierre and Howie to nail down the final bid figure and fax it to the RTC offices by 5:00.
They were alone in Pierre’s office, each in a rolling office chair. “Look, Howie, there are three ways to analyze this. One way is to decide what we would pay if we had unlimited money. The second way is to make the decision based on what we can afford. And the third way is to try to predict how little we can spend and still win the bid.”
Howie titled back in his chair. His hair and clothes were disheveled, and whatever tan he brought with him from California had disappeared under the gray skies of a New England spring. ”All right, Pierre, let’s go through each and see where the numbers fall. First, unlimited money—what would you pay?”
Pierre pulled out his notes. “Well, if we figure we can sell twenty units a year at a price of—”
Howie interrupted. “Wait, I don’t want to make that assumption. I know the market isn’t falling as fast as it did last fall and winter, but I’m not going to invest my money based on speculation that we’ll be able to sell twenty units a year. Let’s look at the worst case scenario—that we can’t sell any units and have to just rent the units out for a few years until the market comes back.”
Pierre sighed. This “sell now” versus “sell later” conflict was a recurring one between him and Howie, but at least Howie hadn’t said he wouldn’t sell the units now. “All right, let’s look at the rental stream then. The gross potential rental income is about $1.9 million. Take off vacancy and expenses and you get a net of about half that—call it $900,000. What would you pay for that kind of income stream?”
“Last year, about ten million. And I would have done a deal like that if you hadn’t stopped me, remember?”
Pierre nodded and smiled. He was glad Howie remembered, and it was generous of him to bring it up again. “By the way, did I tell you that somebody just bought that property for $1.4 million?”
“Wow, it was just about this time last year that I signed the P&S to pay $1.8 million. It must have been a hellish year up here for you guys.”
“Yeah, I’d say prices are down twenty percent across the board in the last year, and condos maybe thirty percent. But it seems now to have flattened out, finally.”
“Well, thank God for you and Bruce Arrujo, or I’d be down four hundred grand.”
“And we wouldn’t be talking about bidding on this property. So back to my question: What would you pay for a $900,000 income stream?”
“Well, I’ve been spoiled a little the last few months with the properties you’ve been finding at auction. But I’d probably pay around $6.5 million. That’s almost a fourteen percent annual return, not counting the tax benefits.”
“But don’t forget, they’re giving you 90 percent financing here, so you might pay a little more.”
“You’re right. But we have to pay $400,000 to Felloff. Hold on.” Pierre watched Howie punch numbers into a calculator. “So call it $6.7 million. If I had unlimited money.”
Pierre nodded. “Good. Second scenario. What can we afford? Or more accurately, what can you afford?”
“I’ve got about $480,000 in my investment account. Plus I could come up with another eighty or ninety.”
“And we need 10 percent down, plus we have to pay closing costs. Other expenses we can just fund out of the cash flow. So we can afford to pay up to $5.4 million, the way I figure it.”
Howie nodded. “Sounds about right. Now the tough one. How much will it take to win the bid?”
Pierre stood and began pacing. “Good question. Felloff says he’s seen about a dozen people seriously looking at the deal. But remember, most of them are going to build in reserves for the oil contamination and the rent control problems. So let’s work backwards. A really aggressive bidder would pay maybe $7.2 million—that’s a ten percent discount off of the appraised value and he gets some good financing, plus he believes he can sell the units off as condos in a few years for a big score. But, he has to take off a million for the oil clean-up, and who knows how much for the rent control.”
“Well, if he really thinks it’s rent controlled, he wouldn’t pay much of anything for the project.”
“You and I wouldn’t, but some people think rent control might end soon. One of the big developers in town—a guy named Wesley Krygier—is trying to get it repealed. He’s connected politically and I’ve heard he’s got a decent chance now that rents are falling and there’s really no housing shortage. So somebody might take a shot.”
“OK, take off maybe another million then?”
Pierre nodded. “At least. If the project really was rent controlled, it would be almost worthless.”
“So now our competition’s down to $5.2 million. So we win with a $5.4 million bid, so long as nobody does anything stupid.”
Pierre was silent for a moment, then nodded his head a few times. “I’ll tell you, Howie, this would be a great deal at anything less than six million. Really solid. That’s still less than $25,000 per unit, and I bet these things are worth at least $50,000 in a few years. Remember, units like this were selling for almost a hundred two years ago. And even if we can’t sell them, it’s still a good deal as an apartment building.”
Howie clapped his hands together. “Done. I agree. Five point four million it is. Oh, maybe we should add five thousand just in case there’s a tie, right?”
“Hey, it’s your five thousand.” Pierre tried to sound cavalier about it, but he was desperate for five grand right now, and Howie was tossing it around like it was loose change. But Howie had already lent him $20,000, and Pierre had promised himself he wouldn’t ask for more. Plus, he didn’t want Howie to be concerned about his partner’s financial condition—surely at least one of Howie’s sacred investment books warned of the dangers of entering into business deals with insolvent
partners.
Pierre pulled the bidder’s form out of a folder and filled in the bid figure—$5,405,000.00. He signed the bid and walked over to the fax machine. He faxed it twice, just to be sure.
* * *
Pierre was at his office by eight o’clock the next morning. He couldn’t remember the last time he had left the house before Valerie was awake—normally mornings were their special time together. He would put Valerie in a jogging stroller and push her while he rollerbladed, or he would take her to the park to look at the dogs and ride the swings, or they would go out and stomp in the snow. The routine allowed Carla to shower and have some personal time before Pierre went into the office. It was Pierre’s favorite time of the day.
But today he wanted to make sure he didn’t miss a call from the RTC. They said they would try to make a decision before noon, but in any event not later than five o’clock. And Carla had promised she would bring Valerie over for a picnic lunch on the floor of Pierre’s office.
At ten past nine the phone rang. Pierre grabbed it on the first ring. It was Howie. He sounded almost as nervous as Pierre. “Heard anything yet?”
“Not a word. What time’s your flight?”
“Eleven. Trying to beat the holiday traffic. I was planning to bring you the deposit check on my way to the airport. Fifty grand, right?”
“Right.”
“And I couldn’t sleep last night, so I typed out the terms of our deal, just so there’s no confusion.”
“Good idea. Why don’t you fax it to me so I can see it in writing. Then we can sign it when you get here. Hopefully it will mean something.”
“I’ve got my fingers crossed. I’m faxing now, and I’ll be there in half hour.”
The deal Pierre and Howie had struck was simple, though a bit unorthodox. Whatever income the property generated was to be distributed in the following order: First, to pay the mortgage and other expenses. Second, to pay Felloff his consultant’s fee. Third, to pay Howie back his $580,000 investment, plus twenty percent yearly interest. Above that, Pierre and Howie would split 60-40, with Pierre getting the lion’s share. Pierre had wanted to take money earlier in the deal, but Howie had been insistent on making Pierre wait until the end. “Look, Pierre, you talked me into this deal because you said you could sell these things as condos and we wouldn’t be stuck with an apartment building. If you’re right, you make a huge profit—maybe two or three million. And that’s fair because you’ll be doing all the work and it’s your deal. But if you’re wrong, I’m protected because my money is safe and I’ll get at least 20 percent interest. I’m sorry, but it’s the only way I’ll agree to do the deal.” Pierre knew Howie had structured the deal based on a formula in some investment book, and though he would have liked a different structure, he couldn’t really blame him for assuming a worst-case scenario and trying to protect his investment.
* * *
Howie had come and gone, and Carla and Valerie had come and gone, and still Pierre had heard nothing from the RTC. It was three o’clock, the city was emptying for the Memorial Day weekend, and every hour that passed lessened the likelihood that theirs had been the high bid. Should they have bid a little higher? Had Felloff hedged his bet and made a similar deal with other bidders? Had the RTC decided to reject all bids?
It had been a rare opportunity—a chance to purchase a multi-million dollar property at a steep discount. You only got a couple of chances like that over a lifetime. Blow it and the financial repercussions would likely be felt all the way into the next generation. If only that damn phone would ring.
At three fifteen, Pierre could hold it no longer and walked down the hall to the bathroom. With his bladder full, it would take him almost a full minute to finish. It was the type of thing men kept track of when there was no sports page taped to the wall—in Pierre’s case, he liked to count by naming a Boston sports hero whose number corresponded with the number of seconds elapsed. He had counted to 26—Wade Boggs—and was about to recite the name “Carlton Fisk” when the phone rang. Pants still around his ankles, he waddled back to his office. He reached the phone on the fourth ring.
“Hello, hello.”
“Mr. Prefontaine?”
“Yes, please hold on. Just one second.” He puled up his pants—the office was technically open for business so he really couldn’t stand there naked—then picked up the phone again. “Sorry about that. This is Pierre Prefontaine.”
“Hi. This is Andrea Cameron calling from the RTC. Congratulations. Your bid is the high bid.”
Pierre closed his eyes and pumped his fist into the air. Then his knees weakened, and he dropped into his chair. The last time he felt this way was when Carla said she’d marry him. He opened his mouth, fought for words. “Thank you. Thank you very much.” He swallowed. “What happens next?” It was a stupid question, but he needed time to think. Most of all he didn’t want to seem overly excited—the easiest way for a buyer to kill a deal was to let the seller think the buyer would have paid more.
“Well, unfortunately, I need to ask you to bring your deposit check in this afternoon. Or you can wire it to me.”
Wire it? I can’t even maintain the minimum balance in my checking account. “No, I can bring you a check.”
“I wish we could have given you more time, but we had to wait for approval from Washington. I’m in Lowell. Can you be here by five o’clock? They’re pretty strict about locking the doors right at five. Government, you know.”
Pierre looked at his watch. Lowell was due north, the same direction as thousands of Memorial Day travelers were heading. It would be tight in the traffic. “I’ll give it a try. Please don’t leave until I get there.” He took the address, grabbed the check and his file, and ran to his car.
* * *
At seven minutes before five o’clock, Pierre pulled his two-year old Grand Am into a parking space in front of an old brick mill building in downtown Lowell. He ran into the building; the receptionist was gathering her things to leave.
“Andrea Cameron, please. I’m Pierre Prefontaine.”
“Yes, sir, she’s waiting for you. Second door on your right.”
Pierre walked down the hall, took a deep breath, ran his hand through what was left of his hair, and knocked lightly against the half-open door.
“Come in.” An attractive woman of about thirty greeted Pierre. “You must be Mr. Prefontaine. I appreciate your coming in on such short notice. Please have a seat. I’m Andrea Cameron.”
Pierre shook her extended hand. “Thanks for waiting for me.”
Andrea smiled and shrugged. “No big deal. I used to be a paralegal in a big law firm, so five o’clock seems early to me. But the stereotype is true—five o’clock comes, and this place clears out in a hurry. Including my boss, who’s in charge of liquidating this asset.” She paused, cocked her head. “Did we meet before?”
“I think so. I was in last week to review the files and sign some forms.”
“Right. Actually, that’s one of the things I wanted to talk to you about. Before we can accept your bid, I need to have you sign those forms again. Basically, they alert you to the fact that it’s a federal crime to buy property from the RTC if you or any of the people in your ownership group are in default on any mortgages held by the RTC. You have to sign the forms under the penalties of perjury.”
“Not a problem.” The RTC was one of the few entities Pierre didn’t owe money to. And he knew Howie was current on all his loans. Pierre took the documents and signed them. “And I suppose you want a check, too.”
Andrea smiled. “Yeah. Make it out to Andrea Cameron.”
He smiled. “Too late. It’s already made out to the RTC. But you could change your name.”
“No thanks,” she laughed. “I’m sort of attached to Andrea. But speaking of names, what’s the name of the new owner of the property going to be?”
“Good question. Can I let you know? I want to talk to my lawyer first to figure this all out. We only have twenty days to clo
se, right?”
“Right. And I’m afraid it’ll be tough to get an extension. So June 15 is the closing deadline.”
“And how does the financing work?”
“I assume you want the maximum?” Pierre nodded in response. “All right. It’s pretty standard documentation—I can send the forms to your lawyer if you want.”
“Great. We’ll be using Bruce Arrujo, at Stoak, Puck & Beal.”
CHAPTER 38
[May 29, 1990]
Pierre had been in many downtown office buildings, but never as a client. He couldn’t help feeling a little pride at the thought of hiring the largest firm in the state to help him consummate a multi-million-dollar real estate transaction. But he didn’t get too carried away with himself—if push came to shove, he would have to ask Bruce to spot him five bucks for lunch.
Bruce personally came to the reception area to greet him, the firm bustling after the long holiday weekend. “Pierre, great to see you again. And congratulations on your bid. The woman at the RTC already faxed me over the loan documents this morning. Come on in—I’ve reserved a conference room for us.”
Bruce escorted Pierre into a plush conference room with views overlooking Boston Harbor. Everything in the room was either leather or cherry or oriental. The room had no smell, yet reeked of scotch and cigars and money. And it made Pierre feel important, as it was designed to do.
“Pretty nice view, huh?” Bruce asked.
“I can’t imagine a better one.”
“Actually, Mr. Puck’s office is a corner office and he has these views, plus views to the north of the Charles River. But I guess this’ll do.”
They sat down, and Bruce took out a notepad. “Before we get into this new deal of yours, let me take care of some preliminaries. First of all, who’s my client? You? Howie? Both?” Bruce smiled again. “And whoever it is, thanks for thinking of me. I really appreciate it.”
[Boston Law 01.0] Unlawful Deeds Page 22
