The Ego Makers

by Donald Everett Axinn

  “Well, gentlemen, shall we start?” Malenti began. “The loan comes due very shortly. Fm sending you the official notice today. All the stipulations described in the note and mortgage will be invoked. Penalties, recourse, that sort of thing. I understand you advised Mr. MacDougall you would not be in a position to pay off the loan?” He stopped and glanced at us one by one. “My position is that if you do not we will file an action for foreclosure, and go after you personally for every penny you owe us.”

  The sonofabitch was grinning. I wanted to vault from my seat and slug the bastard. But I clenched my fist, holding it beneath the table as I glanced over at Cal.

  “Okay,” Cal began, “you could do that, I suppose.” He hesitated, then said, “Of course, Mr. Malenti, we would serve you with discovery demands, immediately put in a defense that would slow you down, file a Chapter Eleven right before the gavel goes down, submit a plan of reorganization, and let the court determine whether or not we as the debtor-in-possession can continue to operate the property. That’ll take a year, probably more. And who knows what we would find in discovery proceedings, examining bank personnel.

  “I don’t have to tell you, Mr. Malenti,” Cal went on, “that the loan’s interest rate is no longer commensurate with market conditions, which is a major factor. And before you respond to what I've said, let me remind you that a lender must show that the reasonable value of a property is lower than the mortgage in order for that lender to be granted a deficiency judgment. That’ll be quite difficult to prove. Fm sure you’re aware of that.” I had always liked Cal, but he had just gone up another notch in my esteem.

  “I've heard of you, Ostreicher. Obviously you’re quite knowledgeable in these matters. But so am I. We’ve both been down this road before.” Malenti’s face became more chiseled, his jaw muscles hardening. Easy to tell this guy was paid to be tough.

  He waited for Cal to say something, but when he didn’t Malenti continued: “Yes, you can hold things up for a time, but you know well eventually get the building and a good chunk of your clients’ liquid assets as well. They did personally guarantee,’ No response from our side. “Now,’ Malenti added, “there might be other things we would consider. And what I’m going to say next is not an offer, just thinking out loud. As it now stands, the loan aggregates about $60 million. Interest is plus or minus $500,000. Each and every month. We might be willing to accept a paydown of the balance due by at least $15 million, which they could take from their other assets. Stocks and bonds. Plus additional collateral security,’

  “And what might that be?” Cal asked.

  “Second mortgages on all your income properties, enough to cover our loan by 125 percent of the outstanding balance.”

  I stood up, but Cal waved me down. “And their personal guarantees?”

  “They stay on, of course. You’re not trying to be cute with me, are you, Mr. Ostreicher?”

  Cal let a good half-minute go by before he responded. “There is not one chance in ten thousand we would be willing to even consider what you suggest,” he said, his words carefully measured. He picked up a pencil and placed it between his two index fingers and said, almost in a whisper, “I don’t want my clients to have to go through a protracted fight, but if we have to we will. You’re not offering them much. If anything. You realize, of course, that while that would be going on they could probably rent the building. Wouldn’t it be far better to cooperate and work with them? Reduce the interest and give them time to get it rented? They’d also try to sell the building.” Cal raised his hand. “The Martins have been at this leasing business for a long time. Even if the bank were to get the building, whoever handles it would never do as good a job. Motivation’s not the same.”

  “And how, Mr. Ostreicher, will they pay for the tenant improvement funds?” Malenti asked. “We’re certainly not releasing the reserves for that. As long as you brought that up, we’ve concluded they’ve done a bad job. I will do considerably better.” He got to his feet, probably to display the muscles rippling ominously beneath his impeccably starched shirt, and stood behind his chair, his hands on the back. “There’s something else. Fm not accusing these gentlemen of being playboys, but too many hotshot developers got fat during

  the go-go years. Bought expensive playthings, became too arrogant to recognize that the market had drastically changed.”

  Now both my fists were clenched. I glared at Malenti. “We’ve been through recessions before, Mr. Malenti. Maybe you haven’t. We wouldn’t be where we are — and the bank wouldn’t have knocked themselves out as much as they did to get our business — unless The Martin Companies were the best.”

  ‘Were,’ Malenti emphasized. “The problem is not ours but yours. We demand what we are entitled to — repayment of the loan when it’s due. Nothing less. It’s your performance — or lack of it! That’s why we’re here today, Mr. Martin.”

  “Mr. Malenti,” Cal interjected, “wouldn’t it be more accurate to say that both sides have a problem? Perhaps there may be something that can be done, like some monies to reduce the loan in return for an extension or a moratorium on interest payments.”

  “Not on your life,” Malenti shot back. “The bank’s in no mood to do that kind of compromising. Especially since certain liberties were taken with the financial statements.” He finished with a certain cynicism in his voice.

  What the hell was he referring to?

  “You’d better explain that,” Cal said. “We don’t know what you’re talking about.”

  Now it was MacDougall who spoke. And with obvious bitterness. “It appears that some documents did not contain the proper signatures. And the numbers for income and expenses for a number of the buildings were grossly inaccurate. We also have a suspicion that specific assets that should have been listed on your financial statements may not have been. If they were omitted, that would not be a legal breach, but we would take a very dim view of it. Destroys whatever credibility your clients had with us.” He switched his gaze from Cal to me.

  I stood, incredulous and furious. “I simply don’t know what in hell you’re talking about.”

  “Don’t you, Henry?” MacDougall said. “We have it on good authority,’

  “You’re nuts!” I clenched and unclenched my hands. Cal put his hand on my arm and tugged me down.

  MacDougall stared at me. “And how do we know you haven’t transferred company funds into your own account? Or Switzerland? No, we can’t prove it, but we have our suspicions.”

  “I’d like to know why you think so, Mr. MacDougall!” I knew my face was probably as red as the proverbial beet. “Where’d you get that crazy idea?”

  “That information is, as they say, privileged,” MacDougall responded in a steady voice.

  Then Cal came to the rescue. “Gentlemen, I think we’ve gone as far as we can today. My clients and I will study carefully everything you’ve said. We’ll get back to you.”

  “When?” was the curt question from Malenti.

  “Very quickly. A few days. I'll call your attorney, Mr. Malenti.”

  “Here’s my card,” Cunningham said. “No more than three business days. Have a nice day, gentlemen.”

  “Let’s talk this over at lunch at my club, Glen Pointe,” I said when we were outside. “That ridiculous statement about Swiss bank accounts — where the hell did that come from?” Cal and Steve both shrugged.

  Over lunch, we dissected the meeting. Cal emphasized the seriousness of defaulting. “What makes it more difficult is their accusation of falsified reports and illegal signatures. Normally they’d end up doing some compromising, but they’re not going to budge on anything. Not with their current attitude.”

  I shook my head. “It’s completely crazy, that nonsense about our having money stashed overseas! I can prove our reports weren’t exaggerated.”

  “Very difficult when they want to believe the worst.” He hesitated, then added, “you don’t have any Swiss bank accounts, do you? I hear people bragging about t
hem at cocktail parties.”

  “Jesus Christ, Cal, no!”

  As we were finishing our meal, Cal said, “Look, I’ve got to run. What I want you two to do is to search through all your assets and compile a list of how much you can convert into cash. We give them that, and it may delay legal action.” He sighed, as if stymied. “I can’t tell how much will be enough. And if we need to, well file for Chapter Eleven. But there are problems with that I won’t go into right now.”

  “Okay,” I said. “But we have a whole bunch of other real estate that requires infusions of cash. And renewals like the office buildings in Montvale and several here on Long Island. Cal, tell Charles to drop you at the Westbury station and then come back for us. The Long Island Railroad runs to Penn Station about every half hour or so.” He nodded. “But if it’s imperative you get in faster, I can have Craig run you back in the helicopter.”

  “No, thanks. Those little whirlybirds make me nervous. I've got things to read on the train.” We shook hands and he departed.

  I turned to Steve, who was pouring himself some tea. ‘Who the hell would be trying to give us the business? That crap about phony reports. Oh, maybe once or twice I signed your name.”

  He shrugged. “You usually have answers,” he said matter-of-factly. “You figure it out.”

  “I don’t know. I really don’t know,” I said, shaking my head. Then, changing the subject, “Let’s jump on the cash flows with Ari. Delay some of the accounts payable; also negotiate lower numbers for new tenant work. Pay down some of those land mortgages at a discount, except that’d mean using cash now. That won’t solve it. Let’s hold on to our reserves.”

  As we were walking out of the dining room, Norman Schefer, a golf friend, rose from a table. “Hi, Henry. We’re a threesome. Tee-off time is in about half an hour. Want to join us? Chance to bring your handicap down.”

  “I’d love to, Norm. Of course you’d lose money, but sorry, I can’t. Meetings back at the office. You fellows enjoy your game.”

  Charles hadn’t returned yet from the station so I said to Steve, “Let’s walk a little. The weather’s nice. I need some fresh air.”

  “Me too,” he said. “Joyce is into walking and wants me to keep in shape. She’s really changed. I guess you should know. She’s pregnant.”

  “I knew I had better register surprise. “Oh, ah, congratulations! Changed how? Maternity clothes, layettes, that kind of thing?” I asked.

  “No, deeper than that. It’s like she’s sort of preparing a nest. Talks a lot about family. Everything else comes second.”

  A deep sense of sadness suddenly overwhelmed me. Steve kept blabbering as we walked, but I was thinking how nice it would have been if that baby were mine.

  Back home, alone with my thoughts, it was difficult not to acknowledge the depth of my desperation. In a flying fantasy, I was on instruments. I didn’t have the knowledge I needed to survive. I was rolling over, out of control, fighting panic. Had to get down safely, and yet for almost the first time in my life I was helpless, incapable of putting together what I had to do.

  I sunk down on my couch, feeling empty. I reached for the telephone to call Karen. No. I couldn’t bear her to see me this way. Beaten and bewildered. Was that a refrain from some song? If not, it should have been.

  Nowhere to hide. Nowhere to get out of the way. Maybe run away. Chuck the whole mess. Big brother, you run the business. Okay, Stevo, you can have it all. Ill check out, maybe Alaska or Canada. Become a bush pilot. Find a wife. Keep it simple. Maybe fly myself into some nice ice storm. Very romantic. Totally unrealistic. Still, better than what’s going on down here. And sure as hell it’s only going to get worse.

  19

  AFEW weeks later, on my way to the office, my car phone rang. “Good morning, Mr. Martin. Sorry to catch you in your car, but it seemed important.” It was Dianne. “Mr. Ostreicher said to contact him. Immediately.” Nothing good to report from Cal, I thought.

  “I’ll call Cal and be there in ten minutes.” I noticed that Charles’s head seemed slightly cocked, as if trying to overhear my conversation. Yeah, he’s really been too nosy lately. Have to talk to him about that. Oh, for God’s sake, Henry, you’re turning paranoid.

  “They’re going for the jugular, Henry,” Cal said, his usually controlled voice a notch too excited. “I don’t understand it. They have nothing to lose by continuing to negotiate. I talked to their attorney, and he said they weren’t serious about Swiss bank accounts. Mostly the reports and signatures.” Frustration and anger seeped through his words.

  ‘What the hell’s the matter with those clowns?” I asked.

  “They’ll cover themselves legally.” He continued. “Nothing we offered in the meeting was agreed to by them. So we can’t contest their actions.”

  “You make it sound like Three-Fifty-Five is gone already,” I said. Now I was getting really angry. “Cal Ostreicher didn’t get his reputation by succumbing to a bunch of stiffs.”

  “Who’s talking about succumbing?” he said. “There’s something called lender liability.’ And other defenses. I’m starting to get pissed, but I can’t afford to lose my perspective. Have to take another call. Talk to you later.”

  In the office, I had just begun to read some faxes when Ari Miller called me on the intercom. Needed to see me pronto, he said. “Problems, Henry, big ones. Now First Republic wants all new cash flows and updated balance sheets. Bank examiners coming down on them. Apparently they too have loaned more to us than they should have.” He let out a deep sigh. “They insist on major reductions.”

  “Better check with some other lenders,” I said. “European American and Citibank. Maybe State Bank of Long Island or Dime Savings Bank.” I could feel my jaw muscles tightening. “Just a minute. Don’t our loan agreements give us a full year?”

  Ari slumped down in his chair. “Commercial bank agreements always contain the right to call a loan. Remember? I'll make those calls.”

  “Comb our accounts. I know your rainy-day excess balances routine.” I smiled. “C’mon, we've dealt with bankers before. Always want somebody else to take the responsibility.”

  “New mood, Henry. The ‘80s are finished. Time to get real conservative.”

  My eyes locked on his. “You’re beginning to sound like Steve. If I listened to him, we’d still be putzing around with little industrial buildings, like my father did. Look, Fm no fucking genius, but The Martin Companies succeeded because we took calculated risks.”

  “I'm fully aware how you've elevated TMC to where it is today,” he said. “But, I repeat, it’s time for circumspection. Steve’s conservatism does have its place.” He was almost pleading.

  “That’s not you, Ari. Steve’s been whispering bearish nothings in your ear, right?”

  “No,” he replied, a trifle annoyed. “But I've read those lectures you gave at Stanford. You traced the cycles of real estate investment, how some owners and developers lost their properties during severe declines.”

  “Fm flattered, but you didn’t read on. I also said that fortunes are made during recessions. Even in the depths of the Depression. Bernard Baruch said something like, When everyone else is dumping, that’s the time to buy/ TMC is powerful, has good depth. Our holdings are diversified, not like most developers.”

  “True,” he said, “but we simply can’t stand a concerted assault by our lenders. They’re all revising their loan formulas.”

  I knew what he meant: coverages based on loan-to-value ratios. They liked shorter leases if rents were rising. Now they want ten-year leases. Amortizations cut way down, maxed at twenty years. No hangovers — loans longer than the length of leases.

  “What I’m trying to tell you, Henry, is that we don’t want to be stuck out there on some goddamn limb. I mean, how much can we carry?

  I hadn’t heard him this forceful in a long time. I leaned back in my chair. “I hear you, Ari. We’ll be all right. As long as we keep renewing leases and keep our vacancy rates low. L
and, well, that’s always harder to move, but Fll get cracking.”

  He stood up to leave. “The big question mark, of course, is Three-Fifty-Five. If we don’t work out something with Federated—”

  “Don’t be so pessimistic,” I broke in. “Steve’s pessimism is enough for this company. Keep your cool, Ari. We have to carry a sense of history —- remember to stay calm. Only a very few can become leaders; all the others want to follow. Just like in the animal kingdom.”

  After Ari left I made a call. “Karen? Henry. You free this weekend? How about blasting off for a few days? It’s a perfect time for Martha’s Vineyard.”

  “Can’t,” she said. “Mom’s sixty-fifth birthday is Sunday. I’d invite you up to the Vineyard, except I know she wants only family.”

  Her tone did not indicate an absolute no. Or maybe I was fantasizing. “Hey, Karen, what about this? We’ll fly to Nantucket or Block Island this Friday as early as possible after work. I'll get you to the Vineyard early Sunday.” I hoped that masterful plan might do it.

  “Let me see what I can work out, Henry. If I have to be there by late Saturday afternoon, would you still want to give it a shot?”

  “Absolutely! Maybe I'll talk you into forgetting your obligations.”

  “You’re the most persistent man in all Manhattan.” Karen laughed. “No, I take that back; in the entire metropolitan area. Try to keep it in your pants until the weekend, all right?”

  “I promise,’ I said.

  ‘I’ll call you tomorrow,’ she said. “As soon as I work out logistics.”

  I received a fax from MacDougall, and it contained precisely what Cal had predicted. In addition to disclaimers, their attorney demanded full payment within ten days or else they would commence foreclosure proceedings. The tone was what I guess is called “from your friendly banker.” I faxed a copy to Cal.