The Deal (9 page)

“Why wouldn’t you have mentioned this to us?”

“Because to tell you the truth it wasn’t such a big deal when James told me, and, more importantly, it hadn’t yet been locked up.”

“And now? Is Auerbach’s position locked up now?” asked Tommy.

“It is. I spoke with James yesterday afternoon and he confirmed his involvement with Cantrol. He has signed an exclusive agreement for his team to handle all of their Manhattan real estate affairs.”

“Did the two of you discuss Cantrol’s position as of today?” I asked.

“We did and it’s no secret to them that the sales market is hot. The board would absolutely be willing to look at a possible sale of their world headquarters on Sixth Avenue.”

“Refresh our memories regarding the specifics of the property.”

“One million fifty thousand square feet. Built in 1974, the building is forty-five stories tall, each floor a touch more than twenty-three and a half thousand rentable square feet.”

“Loss factor?” I asked.

“James says about thirty-two percent on a full floor. All building heating and cooling systems have been replaced within the last four years. The lobby and elevator cabs were all part of a thirty-five million dollar renovation completed last summer.”

“How many elevators in the building?” continued Tommy.

“Twenty passenger and four freight.”

“I haven’t been in there for a while,” Jake commented. “How much space does Cantrol actually occupy?”

“Around two hundred thousand square feet. The bottom nine floors, of which at least three basically sit empty.”

“And the rest of the tenant roster?” Jake continued.

“Aside from what’s vacant, fantastic. A couple of international banks and four law firms, all with decent-sized blocks. No one’s lease comes up for at least four and a half years and this is one of the law firms that happens to be the smallest tenant in the property. They specialize in class-action litigation, not a bad niche in 2004. Needless to say, their practice is thriving.”

Perry stood up and handed us each a package containing all of the information she had just revealed. Included were further specifics regarding the property as well as floor plans.

“All in, we’re looking at a transaction in the half a billion dollar range, give or take in either direction. At my request, James has made it clear he will provide any documentation we request as required by our due diligence.”

As always, Perry had set the bar quite high. She was perfectly prepared and had come up with a fantastic scenario. One property, which from a due diligence point of view would undoubtedly help logistically with regard to our time constraints.

“Any questions?”

“Fantastic, Perry. Just great,” commented Tommy. “Sounds potentially nice and neat and it’s a phenomenal property.”

“A trophy building. High-profile, imposing, perfect for the Zhamovsky mindset.” I added.

“Why thank you both very much,” Perry said.

A sweet, confident yet appreciative smile slowly made its way across Perry’s face, the same satisfied look she gets when she knows she has put forth a job well done.

“All right, Jake. Let’s keep going,” Tommy said.

Perry locked her eyes with mine, forcing me to give her even further approval. I felt sad, yet flattered at the same time. Sad that Perry was so focused on my attention toward her, but flattered for the very same reason. I gently nodded and mouthed “not bad,” broadening her smile.

“What have you got?” Tommy continued.

Jake was pumped. He was even wearing a tie bar that morning, something he only puts on if it is time to sequester every single ounce of his most professional self. Something that reminds him of the power broker he had worked so hard to become.

“Slevin portfolio.”

The Slevin clan. Two brothers in their sixties, Ray and Lawrence, each with a son, Jagger and Leo respectively. Don’t ask. The word is that Ray Slevin is a diehard Stones fan. Anyway, the Slevin family owns seven properties along the Park Avenue South corridor, between 14th and 30th streets, right on the avenue.
During the Internet boom running from the late nineties through the millennium, this was possibly the hottest submarket of New York City. Internet firms, advertising agencies both high-tech and standard, you name it; if it was a creative company and had to do with the evolving e-world we were living in, they only wanted to be headquartered on Park South. Rents went through the roof and occupancy rates skyrocketed accordingly. Today, different story. This is possibly the submarket that suffered the most in the wake of someone sticking a pin in the bloated stomach of our economy. Post 9/11 there was more sublease space available than direct space, meaning there was more space being offered by firms locked into leases who no longer needed it than there was being offered by landlords directly. That is how many firms along this corridor collapsed, which means I don’t even need to tell you what happened to the rents. On the positive side, the Park South submarket has been recovering at a decent pace like the rest of the city.

Jagger and Leo Slevin are pricks. Period. Two loaded little brats born on third base who live with the attitude and arrogance of guys who hit a triple. They act as agents on the family’s seven properties, meaning they are the brokers who negotiate all incoming deals on behalf of ownership. Talk about a nice setup. I have inside knowledge that their fathers pay them full commissions for these deals on top of huge salaries, even though they will one day own the buildings. Too bad they’re such fucking morons.

Their fathers are actually decent guys, which makes it even sadder. This family has put a lot of cash in our pockets over the years and we’ve put a number of fantastic tenants in their properties. The Slevins have great respect for our team and, having just come through some tough years, things were again looking up for their holdings. I knew someone would bring them up, and perhaps I would have too if it wasn’t for one thing.

“Sexy enough?” I asked.

“Correct me if I’m wrong here, but according to Jonah, flash and excitement is as important to this guy as the potential to prosper,” added Tommy.

“I hear you guys, but just bear with me. Jonah, you said your Russky friend is a bit of an ego maniac. But I also heard you say that he’s a smart businessman looking to expand into a realm completely new to him, leading the charge for one of the world’s largest company’s board of directors. I imagine the number one issue for them will be financial sensibility here, not just flash on its own. After all, there are going to be a number of people to answer to on their end.”

So far neither Tommy nor I could discount Jake’s comments. We continued to listen quietly.

“This isn’t to say that I haven’t taken the sexiness your guy craves into account. As I looked over the Slevin portfolio, comparing it to other potential transactions out there, it was the one that made the most sense to me for a couple of reasons. You mentioned that your boy controls the popular vote of his board. Therefore, I knew we needed an angle that would appeal to him on a personal level on top of the financial sensibility.”

Jake paused, heightening our anticipation.

“And—” Perry finally said.

“And, what’s the one aspect of Park South/Union Square that not only continues to thrive, but did so in the shit market we all just trudged through?”

I saw where Jake was going. I loved it.

“The nightlife,” I said.

“You got it, killer. The nightlife. Out of the seven Slevin-owned properties, four have happening, high-end, glitzy restaurants as the retail tenants. One more has Stark, the hottest bar and lounge to open in months, written up in New York Magazine just last week. If Zhamovsky wants sexy, few things are sexier than being the number one VIP in some of the hottest restaurants and clubs in Manhattan.”

“Great angle, Jake. I like it,” Tommy said. “Very smart.”

“Is there really such a thing as a ‘sexy value’ in real estate?” asked Perry, forcing us all to think a bit deeper.

“Look at this market we’re in,” I responded. “The winning property in any market will always have some type of allure. In a market mirroring a recovering economy, it is all about tremendous value, tremendous ‘bang for your buck’ for all buyers, even high-end.”

“You really see ‘sexy’ and ‘value’ coexisting?” she further challenged me.

“Today, interests are seeking property with real value, coupled with that extra something that separates a certain property from all others in its class. To get people to buy in markets like this, there must be that added dimension. Perhaps something that caters to a certain unique use for the property, maybe a potentially niche, future location—something. Just look at what’s happened over the last couple years in the Meatpacking District. Conversely, a market like the one we left behind pre-millennium change, the type of market we’re trying to get to once again, has a different type of high-end buyer. The one willing to pay a premium for what he wants. You’re just used to focusing on sexy in a topped-out market, Perry, but sexy is alive and well in each type of market. It’s all about where you look for it.”

“Amen,” Tommy intervened. “Let’s keep going. Numbers—”

Perry dropped her head back to the notes she was keeping. She hated coming up short in an intellectual confrontation.

“Park South’s vacancy rate hovers around eleven percent. Deals are being done in the mid-twenties per square foot,” Jake started. “In an up market, Park South always performs. It simply always has. In a market on the upswing with money to spend, Park South is the perfect place to get situated for the, eventually, profitable future. How long that future lasts is an entirely different story.”

“And not our worry.” I shamelessly threw in.

“Total square footage for the seven properties?” Continued Tommy.

“One million five hundred seventy-five thousand ten rentable square feet. An average of two hundred twenty-five thousand square feet per property. I’m thinking we pay in the neighborhood of two hundred ninety-five dollars per square foot. Agreed?”

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.