Chapter 12
The Second Diligence
The fourth-quarter reports went out on Friday the seventh of January, two days after the last of the managers’ December reports came in.
Since November Andy had asked Beth Ann to send him each fund’s report the way its investors received it, on the day it went, and Fund III’s reached him at twenty to four. He printed it and read it at the round table, a pencil in his hand. Every building had a page of its own. The marks carried the valuation committee’s three signatures, each with its date. On the summary page every return stood in two columns, gross and net, with the label at the head of each, and the paragraph in Beth Ann’s letter about the firm’s agents ran to four sentences and used the words on Anika’s page.
He read it to the end, found nothing to mark and put the pencil back in the cup.
Travis Oyler called Beth Ann at twenty past nine on Monday morning. She came up the floor with her notebook still open in her hand.
“Renata will be here Wednesday at half past eight,” she said. “On site for the day. Travis would like the data room brought current through the end of the year before she gets on the plane.”
“That’s tomorrow night.”
“Tomorrow, then.”
Andy went along the landing to Maggie’s office. She was on the phone with the auditors about their dates for the year-end fieldwork, and she held up a finger until she had finished.
“Renata’s on site Wednesday morning,” he said. “Forty-eight hours.”
“Fine,” Maggie said, and picked up the phone again.
Beth Ann and Tom took the long table downstairs at ten and kept it through Tuesday, and Andy stayed upstairs and let them. Most of what went into the room already sat somewhere the firm could put its hand on it: the reports that had gone out on Friday, Tom’s December books, the minutes of the valuation committee’s December meeting, and the appraiser’s signed terms for the first quarter’s work, addressed to the committee. Anika added the page of seats and the succession plan Andy had signed on the third. Owen’s record went into the compliance file two agents longer than the copy Anika had sent Munich in November, each new one with Anika’s signed page dated the day it began, and How we use software agents went in beside it, dated the later of those two days.
At four on Tuesday Beth Ann sent Travis’s office the link. It had taken a day and a half from Travis’s call.
Renata’s email came in at ten past six, to Beth Ann, with Andy and Maggie copied. She had been in the room since a little after four. She would like to begin on Wednesday with Nadia and the firm’s investment criteria, then Scott on the committee and the loans. After lunch, Esther on how a new investor was brought in, then Owen, Tom and Beth Ann one at a time, and ten minutes each at the end of the day with Anika and Maggie. I would be grateful to spend the afternoon with your team without Mr. Daryani.
Andy wrote back to all three of them himself. Yes. I’ll be out of the building from noon. Then he opened his calendar and blocked the afternoon from twelve to five, the way he would have blocked a closing, and left the description empty.
Renata had flown in the night before. Beth Ann met her at the back door at twenty past eight and brought her through to the conference room, where Maggie, Anika and Andy were already at the long table. She shook hands round the table, set her bag on the chair beside her and took out a notebook Andy had not seen before, bound in dark cloth, its spine still stiff. Each page had its number in the top corner in her own hand, and beside most of her notes from the room was the number of a folder.
Next to the notebook she laid the pages she had printed overnight. The top one was the track record with the footnotes, already marked in pencil.
“Thank you for the afternoon,” she said to Andy. Then she turned to Maggie. “Ms. Holt, if I find something today that nobody owns, whom should I give it to?”
“That does not happen anymore,” Maggie said.
Renata looked at her for a moment. Then she wrote a line in the notebook.
“Then I’ll look for one,” she said.
Nadia came down at half past eight with her laptop. Wyatt was in Nashville for the day, walking a property. Renata asked Nadia to take something that had come in overnight, something nobody at the firm had looked at yet, and run it against the firm’s criteria.
Nadia brought up the morning’s pages from the deal inbox, a page for each offering the brokers had sent since the evening before, and opened the first: a garden property from the early eighties in Arlington, between Dallas and Fort Worth, with the broker’s guidance at the foot of the first page. Then she put Wyatt’s box on the screen beside it. It ran to two pages, with a number beside every line down the left margin. The last two numbered lines, under Submarket and Returns, each carried a date in July and Wyatt’s initials.
She went down it out loud. One, the market: Dallas-Fort Worth, yes. Two, the product: yes. Three, the size: inside the range. Four, the basis: under Wyatt’s line, yes. At the Submarket line she stopped, opened the map of the firm’s own buildings beside the offering and measured from the property to the nearest one. Then she read out the dated line under it and set the broker’s guidance against what that line asked for. She checked the guidance against the broker’s own page a second time, opened the tracker and typed the row herself: Pass, 5, and one sentence. Nothing of ours close enough to tell us the rents, and the guidance leaves no room in the basis to find out.
Andy listened from the far end of the table. He had a legal pad in front of him and did not write on it.
Renata asked to see the year. Nadia filtered the tracker to every pass since the summer, and the reason column ran down the screen in numbers, with a sentence beside most of them. Renata chose a row from October with the end of her pencil. Nadia opened the deal’s page and showed her the line it had failed. Then Renata asked where the box itself had changed, and Nadia scrolled to the two dated lines, and below them to the last section, under its heading: Things that changed your mind between Tuesday and Thursday. Renata read the section through and wrote for a while.
“Thank you, Ms. Farooq.”
Scott came in at ten with a red pen in his shirt pocket and took the chair at the end by the window.
“I’d like to start with a loan, Mr. Engel,” Renata said. “Fund II’s property in Charlotte, and the refinance in 2024. One of Fund II’s distributions came from loan proceeds the lender held back at closing. I’d like to see what released them.”
Scott opened the room on the screen, went to the folder for Fund II’s loans and opened Charlotte. The documents sat in the order things had happened. The loan agreement came first, tabbed at its earnout section. Behind it was a single cover page in Scott’s own words: what the lender had held back, the occupancy test the property had to meet to release it, the name of the officer at the lender who had agreed the test with him and her direct line. Behind that was the rent roll for the months the test measured, with the trailing occupancy at the foot of each month and the last one over the line. Then came the lender’s notice funding the held-back proceeds, the bank statement with the cash coming in, and Tom’s distribution notice to Fund II’s investors for the quarter that carried it.
Renata read the earnout section through. Then she went to the bank statement and the distribution notice and added in her margin, and set the pencil down beside the total.
“Is the officer still there?”
“She moved to their Raleigh office last spring,” Scott said. “Her successor’s name is under hers, with the date I spoke to him.”
At the foot of the cover page, in Scott’s hand, it said Filed 2 October 2026. S.E.
Andy read the date. He looked along the table at Scott, who was watching Renata turn to the next page.
When she had finished with the loans, Scott opened the committee’s minute book, which Anika kept, from the first of July. Every deal the committee had seen since then was in it, each with its page on how the firm could lose money and, under the page, what each member had added, initialed. Renata read three of them all the way through, the Raleigh pass from the week after Christmas among them. On every page the votes were set down in the order Scott had called them, and Andy’s name came last. She ran her pencil to the foot of each page before she turned it. Scott uncapped the red pen once, to point to a line she had asked about, and capped it again.
At five to twelve Renata closed the notebook on her pencil. “Thank you, Mr. Daryani,” she said.
He took his coat from the back of his chair, went out past the kitchen and the files room and let himself out the back door.
He ate lunch on 71 at a table by the window, alone, and nobody called. At three he was in the line of cars outside Diya’s school. She got in, looked at him and asked why he wasn’t at work.
“I was asked to stay out of the office this afternoon.”
“Can they do that?”
“They can ask. I said yes.”
She found the station she liked and turned it up. At home he set his phone face down on the kitchen table while she did her homework, and it stayed there until a quarter past five, when he looked in on Maya, who was still asleep, and drove back to Bee Cave.
Renata was in the lot when he pulled in, putting her bag into the trunk of a rental car under the light by the back door. She lifted a hand to him, and he lifted one back. Then she got in, and the car left the lot.
Upstairs the lights were still on in the back corner. Esther was at her desk with the step sheet for a Fund III family’s trust on her screen, the one she had run in the first week of January, four days from the transfer papers to the call. Beside her keyboard lay a printed page of the family’s Fund III subscription papers, with the telephone number underlined in pencil.
“She checked the number?” Andy said.
“Against the papers in the room. I’d called them on that one, the number we already had.” Esther looked at the page. “I’ve done it since the third. Beth Ann wrote the steps and gave them to me. She asked whether anyone had ever asked me to change wire instructions by email. I told her once, and it was really them. They’d changed banks.” She looked back at the screen. “I called them anyway.”
Owen was still at his desk beside Tom’s, with the log open on his left screen.
“How did she start?”
“With every time one of them was wrong.” Owen scrolled to the top of the record: a date and a line for each mistake, the newest initialed E.R. “Then Anika’s pages for the two that started in November, before she’d read a line of their logs. Then one night in October, every note before every action. Then the night of the email in June, and the review that turned off Beth Ann’s tool.”
“And then?”
“She asked for Maggie’s page two.” He typed the first item from Maggie’s list into the search box and ran it against every agent’s log, then the next, down to the last one on the page. Each search came back empty. “Twice, each one.”
“That’s all?”
“It’s a short search,” Owen said.
Tom had gone home at five. On his desk lay a single page: the Fund II waterfall for the December distribution in three columns, the administrator’s figures, Tom’s figures and the section of the partnership agreement each line came from. The first two columns matched to the dollar, now that the administrator’s system ran the agreement’s tiers as written. At the foot were two sets of initials, Tom’s and, under them, Maggie’s. In the top corner Tom had written in pencil, R.S., 2:40, tied.
Beth Ann still had a family’s page open on her screen. “What did she want from you?” Andy said.
“Three families off my pages. She asked me what each of them would expect from us next quarter. Then she went back into the conference room and called them herself to check.” She turned her chair a little toward him. “Two of them have called me since to say she called. The last thing she asked me was what happens to all of this if I go.” “If I left tomorrow, every preference would transfer intact.”
Her phone rang. She looked at the name on it, picked it up and said the family’s name warmly into it, and Andy left her to it.
Renata’s list came in at ten to eight on Thursday morning, from an airport, and Andy read it on his phone in the lot before he went in. It was short. Its heading said Open items, and there were three of them, each with an owner and a date.
The firm’s annual compliance review for 2027, in draft with the outside compliance lead. A. Reeves. 28 February.
Outside appraisals of the first quarter’s buildings under the valuation policy; the appraiser’s letters follow the close of the quarter. M. Holt. 30 April.
A second for the Head of Capital Raising. B. Sorensen. 31 March.
Under the three lines she had written one more. Owners and dates as stated to me by each owner.
Each of the owners had been copied. He climbed the stairs. Maggie’s door off the landing stood open, and she was on the phone with her back to it, and he went on past it to his desk.
On the last Thursday in January, Anika brought the redemption agreement to the round table with Greg’s counsel’s changes in the margins and Maggie’s price page clipped to the front.
Andy had called Greg in November and offered to buy his fifteen percent at the firm’s year-end mark, whatever Maggie’s page turned out to say. Greg had run the buildings for the firm’s first six years and had drawn no salary from it for most of the years since. He had asked for a week, taken two, said yes and hired a lawyer. For years Andy had left Greg’s share unpriced, and now Maggie had priced it the way a stranger would.
Her page put the firm at about twenty million at the end of December. A buyer would now pay ten times its recurring fee earnings of about one point one million and take thirty percent off for Andy, with the deal fees on a line of their own. Greg’s fifteen percent came to about three million. He kept his carry in the first three funds, which the page had never counted.
The firm would pay about one and a half million in cash at signing and give him a note for about one and a half million, over three years at six percent. Greg’s counsel had read all of that and asked only about the dates. His one change ran to a paragraph in the margin, in a lawyer’s blue ink. If any interest in the management company were sold within twelve months of signing, at a value higher than Maggie’s page, Greg would be paid the difference on his fifteen percent. The window would close in February 2029.
“I’d accept it,” Anika said.
“Why?”
“Because his lawyer is right to ask for it. And you’d pay it anyway.”
Andy read the paragraph through again. Then he picked up his pen and initialed the margin beside it.
The agreement was signed on Friday the fourth of February. Tom wired the cash at eleven and sent Greg the note. Greg called a little after two.
“Andy, it’s Greg. It came in, and Tom’s note with it, with every payment date typed on the front.”
“That’s Tom.”
“That’s Tom.” Greg was quiet for a moment, and Andy could hear wind on the line. “My lawyer says I was hard on you with that look-back.”
“Anika told me to take it.”
“I figured she would.” Another pause. “I hope you have to pay it.”
“So do I,” Andy said.
“Is my name still on that door?”
“It is.”
“Take it down and send it to me, would you? I’d like it on my desk.”
After the call Andy got the screwdriver from the drawer in the kitchen and went along the landing to Greg’s old office. He backed the two screws out, and the plate came away in his hand. Under it the paint was a shade brighter than the rest of the door, a clean rectangle the size of the plate. He wrapped the plate in a sheet from the legal pad, found a padded envelope in the cabinet by the printer, and wrote Greg’s address on it himself, from memory.
The separate account’s first building, a garden property outside Nashville that Wyatt had walked in January, went to the pension’s head of real estate for her consent in the first week of February, and it came back the following Thursday. It closed on Wednesday the twenty-third, with about twenty-one million of the pension’s money in the first deal, and that afternoon Beth Ann typed the figure into the pension’s page, under Separate account.
On the last Monday in February Russ Whitlow called, a little after ten. “Walt signed this morning,” he said. “Beth Ann has the side letter back from our counsel. Fifty million, one and a quarter percent, and twenty-five million of co-invest, two deals. Travis’s report is in our file.”
“Thank you, Russ.”
“I’ve sat through a lot of second looks,” Russ said. “Usually the founder flies out to see me first, with a new deck and a story about everything that’s changed.” He let that sit. “You never came. Renata says your people ran her whole afternoon without you, and nobody left the room to look for you.”
“She asked for that.”
“I know she did.” The line went quiet for a second. “This is a different firm. I’d expected a better pitch.”
Andy laughed, which he had not expected to do on this call, and Russ laughed with him.
Anika closed Fund IV on Tuesday the seventh of March, three weeks inside the deadline the investors had extended the spring before. The Ostrander office’s wire reached the fund’s account at twenty past eleven, and at noon Tom brought the closing schedule up the stairs and stood in Andy’s doorway with it.
Every investor in the fund had a line on it, by the date they had come in. The Ostrander office’s line was at the bottom, the last one added.
“Commits fifty,” Tom said. “Wires about thirty-three.”
“How does fifty come to thirty-three?”
“Their share of everything we’ve called since the first close, so they come in level with everybody else. About a million in catch-up fees, which come to us. And about one point four million of interest, which goes to the fund, to everybody who put their money in before them.” He turned the page toward Andy. “Just under twenty million, callable later, the same share as everybody else’s.”
“And the fund?”
“Four sixty, anchor included.”
Maggie had already put the catch-up in her book as one-time, on a line of its own beside the one from the second close, and the interest nowhere among the firm’s fees.
At ten past one Lorraine’s text lit up his phone on the legal pad.
Closed. And you never called him. Good.
He carried the phone along the floor to Beth Ann. She had a call going with Russ’s assistant, settling where the Ostrander office’s first report should go, and when she saw the phone in his hand she put her pen down and finished the call first. Then she read the text, gave him back the phone and turned her screen toward him. The Ostrander office had a page of its own now. Under Firm contacts she had typed two names, her own and Esther’s.