Of Bankers And Predators: For Profits And Prey

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Written by: Topics: Stories

IMG_0387It was a cold and early December morning in London without the slightest trace of sun visible anywhere. Yet I was in a particularly jovial mood. Briskly walking through Primrose Hill, I was on a mission to attend an early morning session of Fierce Grace Yoga. To top it off, I was listening to a song I’d just downloaded on the back of a recommendation from a friend backpacking across Cambodia: Porto – Worakls.

I arrived at the studio, undressed, put on a pair of shorts and, just as I was about to put my phone on silent and step into class, I received a call. It was Martin, the CEO of a real estate company I advise. Hmm. Shall I answer, I wondered. Class was minutes away from starting and I always liked to step in a little early to get a good spot and take a few minutes to settle in. I’ll make it quick.

“Hi Martin.”

“Hello ibanker. You well?

“Not too bad and you?”

“Fine. I can’t chat long…”

Thank God.

“Can you meet for lunch at 1pm today?”

“One sec,” I responded, before inspecting my calendar. The existing appointment was with a friend and of a personal nature. He won’t mind if I reschedule. “Sure. Where shall we meet?”

“Grosvenor Square. We can walk over to a restaurant nearby.”

“Done.” Wait, what’s this even about? “What are we discussing exactly?”

“Real estate…and birdshit.”

Birdshit? “Birdshit?”

“That’s right. Birdshit. See you later.”

Duke of Westminster’s Square

Grosvenor Square is quite the landmark in Mayfair. Home to the US Embassy (until it moves to its new location in Nine Elms), hedge funds, family offices, stupefying real estate (e.g. 20 Grosvenor Square) and more. Belonging to the Duke of Westminster, there are worse places to meet.

I arrived on the scene to find Martin sitting on a bench, reading a copy of Property Week.

“There’s an Italian on North Audley Street. That okay with you?”

“Perfect,” I said.

We walked over and entered the establishment. No more than three seconds passed before a young Italian man appeared out of thin air with a charming smile. He showed us to our seat and we were handed menus. I’m starved. We took a minute to review the menu and called the Italian over again.

“What will you gentlemen have?”

Martin motioned me to proceed.

“I’ll have the Tagliatelle Alla Catalana,” I said.

“And I’ll have the Risotto Allo Scoglio,” said Martin.

“Antipasti?”

“No thank you, ” Martin and I replied in unison.

“And to drink?” said the waiter.

“Water?” Martin suggested to me.

“Sounds good.”

“A bottle of still and a bottle of sparkling, please.”

“Any wine?” asked the waiter.

I shook my head no.

“No thanks,” responded Martin.

“Fine,” said the waiter. “I’ll have a glass of red then,” he smiled.

Getting to business

It took some time before we managed to move the conversation to what resulted in this very gathering. Martin had just purchased an old British sports car the past weekend and he was so delighted about his new acquisition that he spent nearly 20 minutes describing the engine to me and the remarkable ways the car still handled despite its age. What he was most excited about, however, was that he managed to buy it for about a tenth the market price. When I asked Martin how on earth that came to be he was overjoyed to recount the story.

“I’m in my country home three weekends ago and about to have breakfast when I start flipping through the local gazette. I get to the classifieds and there it is. A photo of the car in black and white. A beauty. And cheap. Rare combination. So I pick up the phone, speak to the owner and it happens he lives fifteen minutes away. I go over to his place that afternoon and that’s when I meet the man. A mad scientist type with the attention span of a fly. A bald, septuagenarian guy with sideburns that practically reach his shoulders. Something out of a movie. So I’m there with the understanding that the car is worth around a hundred thousand pounds. He tells me, ‘You can have it for 10,000.’ My eyes nearly popped out of their socket. I asked him why so cheap. He says it’s because he doesn’t want the car anymore. I say fine. Who am I to complain, right?” he laughed. “But then he tells me there’s one condition. I sit back in my chair. What is it, I ask him. He says, ‘The car is pink.’ Bloody pink.”

“Pink?”

“Yeah,” he laughed out loud. “And the condition is that the next owner can never change the colour.”

“You’re being serious?” I asked, incredulously.

“Dead serious. He made me sign an agreement.”

“You bought a pink car?”

“Look. It was embarrassing driving it around at first. Half the people laugh at you. But the other half absolutely love it. I’m a mini-celebrity in the countryside.”

Before I knew it, we’d finished our main course. We hadn’t discussed any business. Time to get back on track. “So, what are you looking to buy?” I asked Martin. Whenever he reached out and asked to meet right away it was usually because they’d found a property they liked and needed to put in a bid fast. And they’d need a co-investor. That’s where I came in – to bring additional investors to the table.

Real estate is a competitive market in London and with lots of foreign investors, including Chinese, Russians and Gulf Arabs, snapping up assets left, right and centre, and sometimes willing to pay a premium over what UK investors would, speed was of the essence.

He smiled. “An industrial site outside of London.”

“How much?”

“A little over £15m. Not a very large asset. But-”

“There’s an angle,” I interrupted.

“That’s right,” said Martin. “We’re dealing with a distressed seller who wants to find a buyer ASAP. He needs to pay off some obligations and is liquidating some of his assets. We can buy the property at an attractive discount. It’s a good site.”

“Tenanted?”

“Yes. The existing tenant will only stay for another year and a half.” He emphasised, “But it will be easy to let again. We’ve sounded a number of businesses we know and we’re convinced it won’t be a problem filling the space.”

“I assume it’s off-market. How did you get wind of this deal? Did you know the owner?”

“It’s not off-market,” he responded.

“Why isn’t everyone jumping on this…discounted asset then?”

“Investors have looked at it. But only a few considered it.” Martin paused before continuing. “There’s an issue with it.”

Isn’t that always the case. “It needs a makeover?”

“That too. But there’s a bird…issue.”

“Birdshit?”

“Also.”

“I’m listening.”

“There’s practically a colony of birds living on the roof,” said Martin. “Pigeons…or some other related winged rodents.”

Hmmm. “It’s their home?”

“It is.”

So there are birds chilling on the roofHardly a pain. “Sounds innocuous.”

“Far from it. They make a mess. A bloody damn mess. And every time it rains, which isn’t once or twice a year, the gutters get blocked. You get flooding. It affects the building. Very costly to manage.”

“That is a problem.”

“You can say that again. Also complicates making improvements to the building.”

“I don’t suppose the birds can be shoo-ed away?”

“No. They’re nesting. According to the Environment Agency the birds must be protected,” Martin emphasised. “To conserve biodiversity.”

“Makes sense,” I said. “I presume they’re a sort of tenant. They just don’t pay rent.”

“Exactly,” he said. “That’s one reason it’s been tricky for the owner to find a buyer, aside from the fact that it’s an industrial site and not all investors understand that asset class.”

“Yet, it doesn’t seem to deter you, does it? Aren’t you bothered by the bird issue?”

“Of course I am. This deal has been stressful for me,” he said. “On the one hand, here’s an industrial site we can get for cheap and we know how to asset manage it. On the other, those birds will end up eating into the profits. But we’re willing to go for it because the pros outweigh the cons.” Martin took a deep breath and scratched his head. “One moment,” he motioned with his index finger, after which he called the waiter, who ran right over to our table.

“How may I help you?”

“Can I have a cappuccino please?” said Martin.

“Of course,” responded the waiter.

“Would you like a coffee?” Martin asked me.

“Yes.” I looked up at the waiter. “Black coffee please.”

“Perfetto,” said the waiter before running off.

Martin returned to the matter at hand. “We need you to find a co-investor who’ll put in £4 million within the next three weeks. Can you do that?”

“I’ll do better than that,” I said. “But you’ll have to buy lunch.”

For the life of me I couldn’t figure out why it took so long for me to recall a peculiar encounter I had with a Cambridge man nearly three years ago outside of King’s College. One Martin would soon thank me for.

Flashback: Conference of the Birds

It all began with a routine family visit to Washington D.C., two weeks prior, during which time a family friend asked me to deliver an old copy of a famous Persian book, Conference of the Birds, to his cousin Simon.

After I returned to the UK, I touched base with Simon and arranged to deliver the book to him in person, taking advantage of the opportunity to visit the beautiful city of Cambridge.

Simon and I met outside of King’s College and walked over to a local cafe for some tea.

It was a pleasant encounter and by the end of it he invited me over to his place for lunch. Just a few minutes away by foot.

Upon entering his house, two things immediately struck me. Firstly, the sheer number of books present. Everywhere I turned I saw piles and piles of books. Is he an academic, I wondered. Perhaps it had to do with living in a university town. Secondly, falcon and eagle photos populated practically every major wall in his place. How odd. This man, I very soon learned, managed a niche business that specifically dealt with bird problems. Interestingly, the kind that Martin’s company suffered.

When time came to leave, Simon handed me a business card which brought a smile to my face.

“What is it?” Simon asked.

“Oh nothing. This is probably the most unique business card I’ve received,” I said.

“Well I’m glad to hear that. Maybe we’ll do business together some day.”

I’ve got better chances of landing a lead role in a blockbuster Bollywood film than for us to meet in a professional capacity. “Maybe…you never know,” I said, hoping it sounded genuine.

Back in the Italian restaurant

A wide grin came over my face. Never dismiss anyone, I thought to myself. I moved closer to Martin, rested my elbows on the table and uttered the next words slowly. “Nature versus nature, dear Martin.” Did I just sound Sherlockian?

“Huh? he muttered with confused gaze.

“You can’t go up on the roof and evict the feathered tenants as it’s considered anti-environment. Let nature do the battling for you. It so happens I know someone who runs a business that tackles birds with birds.”

“Using birds of prey?” he asked.

“Precisely. They hunt. The rent-free tenants.”

“That’s brutal,” he said.

“Isn’t nature?”

A smile formed on his face. “Let’s order some desert.”

==========

QUESTIONS FOR YOU: Have you witnessed nature play into a deal in unique and interesting ways? 

{ 5 comments… read them below or add one }

CM January 6, 2016 at 2:27 am

Très bien ce post.

Reply

jimmul January 6, 2016 at 7:56 am

Great post TIB.
One time I worked on a deal that was killed because the investor couldn’t make up his mind if he should invest or not, and decided not to because it rained that day!

Reply

Raldan January 8, 2016 at 2:37 am

50 bucks to a kid with a slug gun would take care of the bird issue ;)

Reply

Linh January 9, 2016 at 7:46 am

Brilliant post! The ending was just perfect :)

Reply

Royce January 10, 2016 at 9:42 pm

dope

Reply

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