“Tax credits are important, Steve. We need to use them, especially because the building is up, and we don’t have any tenants. Ill check with Ari later. And Grubin.”
Steve pushed his chair back. “All right, construction.”
I quickly pulled another folder out of my briefcase and continued before he could think of more things to criticize. “Lucien Cattai’s contracted to build the shell for twenty-four million. Eighty bucks a square foot. Right? Add thirty a square foot Standard negotiated to finish their interior space. That makes a hundred-ten, okay?” I looked up.
“I know where you’re going, but we can’t be sure,’ Steve said. “Remember Montvale III? After that we decided not to get a general contractor to build the tenant finishes. Also, this job is too big for our crews. It’d be a mistake.”
“No, it wouldn’t. Think about it. Lucien has to put in a four to five percent profit that we don’t need to include. That’s one savings right there. Maybe we can get Michael Gordon out of retirement for this job. He buys aggressively, even though he sometimes squeezes the subs too much.” Steve shook his head, but I went on. “Even if we don’t do it ourselves, we’re sure to save ten to fifteen percent. Lucien always comes in high, and when he’s finished, it’s always less.”
“Too big a chance, little brother. There’s no assurance that prices won’t go up. Just one more way to get hurt.”
“For Chrissake, stop calling me little brother,’ “ I snarled, no longer trying to hide my growing irritation. “This is a risk-reward business. If we’re going to save this deal, we have to take some risks. Calculated risks.” I stood up. “Even if I make assumptions you don’t like, using them is a lot better than continuing to carry the building vacant. Who’s going to rent three hundred thousand feet in one shot? Most of the current requirements are in the fifty to hundred thousand square foot range — max — and that means it’ll take a lot more time.”
“Very convincing,” Steve said, sarcasm oozing. “Save it for your women.”
“Am I right, or not? I am,” I said, not waiting for an answer. “Look, it’s obvious. We stay vacant and the overhead skyrockets. Money never recovered. All right, next,” I said, putting the “CONSTRUCTION” folder aside. I pulled out “OVERHEAD.”
The first sheet was a printout, containing all the components. Steve began with the first item, R. E. Brokerage. “Hollick gets five percent a year for ten years, that’s fifty percent of the first year’s rent. What did we agree to?”
“When the deal was at fifty dollars a foot, we agreed on that commission for the full ten-year rental, no credit for the concession,’ I said. “If we can get them to cut their number from $7.5 million — Jesus, that’s outrageous! We have to get it lower. In my next life, I’m coming back as a broker. Or one of those $300- to $400-an-hour attorneys who keeps the clock running. Bastards!” I was tempted to interject my old joke that I really wanted to return as a brassiere, but Steve had heard it too often.
“Maybe we could have reduced the commission before, but not the way things stand now,” I said, reconsidering. “Can’t touch it. We need Hollick to help us, and he certainly won’t if we try to play around with his fee.”
Interest was the next item, broken up into two parts: Construction Mortgage and Site and Other Loans. Steve handled this category. “Obviously with the building up, bank interest on construction is fixed except for changes in the prime rate,” he said. “No way of knowing the duration. With this building, we have to assume twelve to eighteen months from the time the shell is finished until a tenant or tenants are in and paying. It’s eight months already. We’d better not touch that.” I could tell he liked his analysis.
“Maybe we can,” I suggested. “If we sign Standard General, we can give them occupancy, say, in six to seven months. That means a savings of three to four months, which translates into big bucks, like …” I began to punch numbers into my calculator.
“No, Henry. You didn’t allow enough time for the lease execution. And seven months to finish the tenant work is too fucking tight for a job this big. Computer rooms, elaborate cafeteria, gym, and so forth. Their attorneys are going to drag it out. Those guys can’t justify their fees unless they pull apart every clause.”
“They’ve already reviewed it,” I said.
“Sure, but the game only begins when their client agrees to go ahead. You know that. Cal is not the problem, never has been. It’s the Standard bunch. And Yedid will do everything he can to get them to drag their asses, hoping it will kill the negotiations with us.”
“True, Steve. I’m assuming we can get Phelan to move the lease along. But on second thought, they’re in no hurry. Their present lease expires in January.”
“Yeah said Steve, “and I found out Yedid has no tenants to replace them. He’s going to keep them as long as he can. And another thing. Standard’s a public company. No one’s going to do anything that might result in criticism. Did you know one of Yedid’s attorneys from Ellison and Pearce sits on the board?”
Yes, of course I knew, but didn’t acknowledge it, “We have to take the risk,’ I said, “If we adjust the vacancy period, even three months, not five, we save.” I looked down at my calculator,
“Henry, why do you keep playing these goddamn games? You want me to agree just so you can get the result you want. Forget it!” He slammed his folder shut,
I shook my head. “Stop for one bloody fucking minute!” I stood and leaned across the table. “Even if the rent is lower, we’ll have to take it!” I stopped for dramatic effect, “Partner,’ I said, “we don’t close this lease, our asses are out there twisting in the wind. You said so yourself. Everything’s tightening up — credit, leasing, everything. You know the saying, In a recession, take any rents you can get because tomorrow they’ll be lower.’ “
Steve seemed ready to capitulate. I was going to do what I had to regardless of what he thought. I was the only one who could save the deal. That’s the way it had always been. Nothing was going to change the pattern,
“All right, Henry, you win. It’s in your great, big capable hands. Close it with Phelan. We’ve got enough of an investment in that relationship.”
I have, I thought. ‘I’m the one who’s spent endless hours creating that relationship. “Okay, I'll try,” I said, “But something’s not ringing right. What’s changed and why.” Let him know I wasn’t taking anything for granted. And he shouldn’t, either,
I shoved the folders into the briefcase and locked it shut. Steve followed me out of the room. When we got to the end of the long carpeted hall at the bank of elevators, he pressed “Down.” The executive offices were one flight up, reached by an elegant, curved stairway.
4
EVERYBODY knew the story of John Calbraith Phelan, Jr. He was a legend in his own time. Chairman and CEO of the Standard General Corporation, he was one of the highest paid, most respected and envied corporate leaders in America. You knew his story even if you weren’t a colleague or peer.
Born in the Bronx, Phelan was the oldest of eleven children. His father, when he wasn’t drinking, was a steamfitter. Which meant that he didn’t fit a whole lot of steam. His mother, an iron-willed woman, was increasingly bedridden with pleurisy. It became apparent that young Jack, at fifteen, would have to substitute for the father as the family’s breadwinner. His brothers and sisters helped with part-time jobs.
“Johnny, I know you to be the Lord’s answer to all that has befallen us,” his mother would say whenever she sensed the burden of their survival to be almost more than her son could manage. Then she would say, “Now, here, John Calbraith, rest yourself. You’re only a boy. Tonight I’ve made your favorite meal. A good piece of meat, you know, some fine potatoes, and a nice sweet pie to top it all off.”
Two jobs, sometimes three. But Phelan did manage to finish high school as well as organize a number of local service businesses. He convinced a few schoolmates and his two younger brothers to join him. The brothers had no choice. J.C.P.
Enterprises, he called himself. The services ran from delivering drugstore prescriptions, and food, both Chinese and Irish, to driving those who would pay the cost, which was no more than going themselves by taxi. He began modestly and afforded great attention to details. He made phone calls, wrote thank-you letters to customers, canvassed extensively for business. After six months, he was known to most of the community, particularly the Irish. He borrowed as much as he could in order to pay the bills promptly and keep up the pressure to generate the lowest possible costs. It was apparent that he possessed excellent business sense, which quickly translated into growing profits.
Three years after graduating from high school, on a hot Monday morning the last week of August, Phelan walked into the office of the dean of the Columbia School of Business, Dr. Frank L. Sullivan, Jr. He was met by the dean’s assistant, Dede Houghton, who had served Sullivan for the past fourteen years. An older woman whose children had graduated from Columbia College, she was reputed to be particularly effective in helping the dean with his relationships with the provost and president.
“I know I don’t have an appointment with him, ma’am, but I’ll be pleased to wait until he can see me,” Phelan said, with just enough of an accent and winsomeness to break down anyone’s resistance.
Young man,” Mrs. Houghton said politely but firmly, “you don’t seem to understand. You want the dean of admissions. That’s …”
“Beggin’ your pardon, ma’am, I really need to see this man. I can wait. It’ll be all right.” His smile was infectious.
“That’s just not possible. The school year has just begun, and Dean Sullivan has more appointments and meetings than he can handle. I’d like to fit you in, but at best I don’t think it could be for several days.” She was trying.
“If I’m not botherin’ you, ma’am, I'll just sit quietly here and wait. It’s real important I talk to him. He is the only one. He is,” he concluded.
She was charmed, but she couldn’t help wondering if he had finished his sentence. “He is … what? God?”
Dr. Sullivan’s office door opened and closed twenty-eight times that morning. John counted them. The dean, who at first didn’t notice the young man, could hardly ignore him when he rose each time and said politely, “Good morning, sir,” whenever the dean came out to greet or say good-bye to his visitors. By late that morning, Sullivan called in his assistant.
Frank Sullivan was starting to thicken around the middle. At fifty, standing six foot three, he was slightly hunched over and limped a little, the result of football injuries playing end for Cornell. His nose was ski-jump thin and his eyes a trifle watery. He had never married and worked long, hard hours, which was plainly written on his face. He complained about academe but wouldn’t have changed his life one bit. He suffered fools badly, tried to act tough but was in reality a pussycat. “All right, Mrs. Houghton, now who is he?” She told him as much as there was to tell, and with that handed him a note that said, “Begging your pardon in advance, sir, it is most critical that I have a moment to speak with you. My name is John Calbraith Phelan, Jr., and I am convinced I should be enrolled immediately. Respectfully yours, J.C.P., Jr.” It was typed carefully on his business stationery.
“You see, sir,” Phelan said when he was finally ushered into the dean’s office, “it seems so very clear that my talents for doing business are evident in my already considerable experience,’ He smiled and looked fixedly at the dean, whose face betrayed no expression. “It stands to reason then, don’t you think, sir, that were this lad to get the magnificent education offered by your great school, that he could do even better? And of course, later on, hell be in a position to contribute monies to worthwhile charities, universities like this one, and to people who can’t make do for themselves for one reason or another, the way it was with my own family. As an example. And I was thinking that — “
Dean Sullivan finally cut him off. “Hold on, young man. You’re not trying to bribe me, are you? You talk very rapidly. Slow down. Let’s get a few things straight, shall we?” Sullivan walked to his window and closed the blind to temper the heat, for it was sweltering, the temperature hovering near 100. “First, the academic year has already begun. Second, only the very top college graduates can matriculate here. And last but surely not least, for the most part, I stay out of decisions regarding admissions.” He got to his feet, to indicate the interview was over. “Young man, I admire your determination, but you’ll have to apply like everyone else.” He smiled. “By the way, what was your undergraduate college?”
Phelan, who was sitting on the edge of his seat, shook his head. “That’s just it, Dean Sullivan. What I had in mind was combining the undergraduate and graduate schools. Together. I know that’s not the way it’s regularly done, but I’m sure you’ll agree it’s important I get through rapidly.”
The dean’s expression was shocked. “You mean you haven’t finished college? I’m sorry, Mr. Phelan, but I’m afraid I can’t help you. You must be a college graduate, or at the least a gifted senior. What have you been doing? Oh, yes, your businesses.” He started toward the door.
“There wasn’t the chance, sir,” said Phelan, his voice rising. “John Calbraith Phelan, Jr., didn’t get the opportunity. You see, when you’re responsible for putting food on the table for ten younger ones, when your father doesn’t work and your mother can only work a little because she’s sick, you don’t have much time, sir.”
Dean Sullivan, who had retreated to his high-backed leather chair, sat down slowly. “There wouldn’t be any chance you’d be making this up, would there, John Phelan? We Irish do have the gift of gab.” He twirled a pencil nervously between his fingers. “And pretty vivid imaginations, too.”
“We do that,” Phelan said. “But every bit of this is true. Every word. And in a way, sir, my business experience has been an education.”
Phelan slumped in his chair, his head drooping. He sighed audibly, but said nothing. Sullivan peered at him. “Still, what you’re requesting is inconceivable,” he grumbled. “I have never heard anything quite like it.”
“Yes, sir. You’re absolutely right,” Phelan agreed.
“The university has certain rules and regulations that exist for very good reasons,” Sullivan continued. Phelan remained frozen, his face intent, eyes on the dean’s.
“I haven’t even seen your high school transcript. It had better be excellent.”
Phelan nodded. “It is, sir.”
“You’d better write me a couple of pages about your business activities. We’ll see if you can write decent sentences. I certainly know you can express yourself.”
There was a moment of silence. Then, “All right, John Phelan, I may give you a chance to prove yourself. Subject to the approval of the provost and other deans, I will get you started.” Phelan jumped up from his chair. “Now, hold on, young man, you’d better understand what that means — what it is that is expected of you. There’ll be five subjects the first year: four in Columbia College and the last one here. Now listen carefully. If you do not maintain at least a 3.0 average, you’re out. No ifs, ands, or buts. No excuses. Is that understood?”
Phelan rose and started pumping the dean’s hand. “You’ll not regret it, Dean Sullivan. You surely won’t.”
“And what about the cost of this education, Mr. Phelan? How do you expect to pay for it?” The expression on the young man’s face gave him the answer. He sighed. “All right, well try to get you financial aid. How will your family manage without you?”
“I’ve got that all figured out, sir. I’ve been training me two brothers and me other chums. I’ve got everything organized, so all I need to do is read their daily reports, meet with them for a half hour or so, then make adjustments. It’ll work good, sir.”
“Mr. Phelan,” Dean Sullivan said with an unrestrained smile, “if you’re going to become someone in the business world — and I rather suspect you will—you’d better straighten out that language of yours. It’s not ‘me’ ta
sks. It’s ‘my’ tasks. Not ‘work good,’ ‘work well.’ “
Phelan nodded, then broke into a broad grin himself. “I’ll work on it, sir. I’ll make you this solemn promise” — he took a deep breath — “I will do you proud, sir. Indeed. You and this magnificent school.” He reached for the dean’s hand and pumped it again. “There’s not a bloody thing that’ll prevent that, sir. My entire future and those around me is the thing at stake.”
Phelan proved as good as his promise. His academic advisor planned liberal arts courses that included American literature, history, philosophy, Spanish, and fine arts. Phelan enjoyed them and did well, telling his professors on occasion that he never imagined learning could be so stimulating. He was a good student, although he did engage in numerous arguments with his business school professors, especially disagreements about the practical applications in the case studies. But he handled himself with restraint, and never alienated his teachers, who were not unaware of his background and the double load he was carrying. Five years after his meeting with Dean Sullivan, John Phelan graduated third in the class of 1950 at Columbia.
The balance of his storied career can be surmised. After graduation, his businesses now in the hands of his brothers, Phelan was hired by IBM in 1950 to train first in marketing and then in sales. He began to set records for sales of mainframe computers, but felt the tug of the Korean War. “You know, Mom, I didn’t do any service in the big war. I believe Fm to do some now.” She reminded him that not only was he just eighteen when the Second World War ended, but he was supporting the family. ‘Well, yes, but the boys can take over. It’s going to be the Navy. Fm to report to officer candidate school in Newport, Rhode Island, next week. Oh, Mom, don’t look that way. This country has done wonderful things for the Phelans. We can give a little back.”
When he was discharged in 1953, United Computer Corporation made Phelan a very attractive offer. A few days after his twenty-ninth birthday, John Phelan was promoted to vice president, in charge of North American sales. His next job was as sales manager for Europe and the Near East. IBM then enticed him to return, put him in charge of marketing, and made him a senior vice president. When he was not elected to the board eight years later, Phelan left IBM. He took a presidency of a middle-size corporation. Several years later, he was offered the presidencies of several major companies and settled on the hot, rising Standard General Corporation. Now, decades later, Phelan was at the pinnacle of his powers.
The Ego Makers Page 5
