Chapter 13
What Kind of Firm
The hotel room in Mumbai had a writing desk under the window with one shallow drawer, and on the first night Andy put his phone in it.
Maya watched him from the end of the bed, where she had sat down to take off her shoes and then had not taken them off. They had left Austin on Saturday morning and come in on Sunday evening, after two flights and a long wait between them, and Diya was already asleep in the room next door with the connecting door open a hand’s width.
“Who has the number here?” Maya said.
“Maggie. The front desk’s.”
“And if she calls?”
“Then something needs me.”
He pushed the drawer shut. It stuck in the damp, and he had to lift it a little on its runners before it would close.
He had put the two weeks on the firm’s calendar in January. The first was Diya’s spring break, and the three of them would spend it here. The second he would spend here on his own. He had told Maggie first, and then the senior people one at a time, and none of them had asked what should happen if something came up. Anika’s page already said who sat in his seat while he was out of it. Since the middle of February a firm in Chicago, the kind of buyer Lorraine had once described to him at the top of her ladder, one that bought minority stakes in real estate managers, had been sending the firm questions about itself, a few each day, and Maggie had said only that she would send him nothing about them unless he asked.
Maya bent and took off her shoes at last, one and then the other.
“Two weeks,” she said.
“Two weeks.”
She lay back across the bed in her traveling clothes and was asleep before he had found the switch for the lamp.
On Monday morning a driver took them up to Lamington Road. The traffic stopped and started the whole way, black-and-yellow taxis cut in and out of it, and the red buses leaned at the corners with men standing in the open doorways. Diya sat by the window and watched every one of them go by. It was hot before nine, and the air through the vents smelled of diesel and the sea.
“Has it changed?” Maya said.
Andy looked out at a flyover he did not remember and a row of towers beyond it that had not been there when he left for Texas.
“The traffic hasn’t,” he said.
The shop had been on Lamington Road, where half the street had sold radios and watches and anything else that came in from Japan, in a row of four-story buildings with shops behind roller shutters at street level and flats above, washing hung out on the balconies. Andy found the building before he found the number. It had been painted since he last stood on this pavement, a pale green that the sun had faded unevenly, darker under the balconies where the light never reached. The left side of the ground floor, as far as the pillar, sold phones now. Cases in every color hung in rows on a pegboard behind the glass, and a young man behind the counter looked up at the three of them and went back to his customer.
Andy stood across the street and looked at it. A row of black plastic water tanks sat along the roof, and rust ran down the render below each one in a long brown stain where it had leaked for years. The steel of the columns stood up out of the roof in bundles, left there for another floor that nobody had built. At the head of each ground-floor column the render had cracked in fine diagonal lines, the kind that let the water in behind it. An air conditioner hung out over the pavement from the flat above the next shop, dripping steadily onto the stone, and the wall below it had gone black in a stain the size of a door.
“Which part was Dada’s?” Diya said.
“The left side. Up to that pillar.”
She looked at the pillar and then at the pegboard of phone cases. Maya had her phone up, taking a picture of the whole front, and then one of Diya with the shop behind her.
“He opened that shutter at seven every morning except Sundays,” Andy said.
Diya crossed with her mother at a gap in the traffic and walked the front of the shop from the corner to the pillar, slowly, with her lips moving. Then she walked it back the other way. When she came across again she stood beside him on the curb and followed his eyes up the wall to the tanks.
“What are you looking at?”
“The roof. Those tanks have been leaking down the wall for a long time.”
She studied the rust for a while.
“Is that your job?” she said.
“I invest in apartment buildings.”
“But you’re always looking at spreadsheets. When do you look at the buildings?”
Andy watched the air conditioner drip onto the pavement.
“When something’s wrong,” he said.
Diya took that in without comment. Then Maya called them both to the gap in the traffic, and the three of them crossed back to where the driver was waiting with the engine running.
Maya and Diya flew home on Saturday. He rode with them to the airport and came back over the sea link after dark, with the water black on both sides and the lights of Marine Drive strung along the far shore in the long curve the whole city called the Queen’s Necklace.
On Sunday he slept until nine. From Monday he was on the street at seven. The first morning he took a car. After that he walked most of the way, early, before the heat came up, and stood across from the building with a coffee in a paper cup and watched the row open. The shutters went up one after another along the street, each with the same long rattle, and the young man at the phone shop raised his at ten past seven and hooked it open with a pole. On the third morning he nodded across the street at Andy, and Andy nodded at him.
When the street was full he walked. He went down to the sea and along Marine Drive, past the lettered roads running back from it, A Road to D Road, and the building on C Road where he had grown up. He went past the Sindhi college by the cricket club, the one the teachers from Sind had started after Partition, where he had done his last two years of school, and past the stadium on D Road, where the boys from his building had stood outside the wall listening to Test matches they could not get tickets for. Then he went out to the new towers going up along the shore in Worli, their concrete frames wrapped in green netting, bamboo props standing close under every slab. He looked at roofs. He looked at where the gutters ran and where they had been meant to run, and at the joints where the concrete met the block, and at the low corners of courtyards where the rain would sit after a storm.
On the Wednesday he went looking for the Bombay office of one of the Sindhi trading families his father had worked for in the years before the shop, when his father kept other men’s stock and books in Durban, in Jakarta and in Kobe, and came home once a year. He found the street in the Fort, and the building. The family’s name had gone from the door, and a firm of lawyers had the ground floor. He knew no one on the street now, and no one there knew him. He stood on the step for a minute anyway, in the shade of the entrance, and then walked on toward the water.
The phone stayed in the drawer. Twice that week the front desk rang the room, once about his laundry and once to ask whether he would be staying another night. Late each evening, when it was after school in Austin, he called the house from the phone by the bed, and Diya told him about her day, and he did not tell her much about his.
On Friday he stayed on the street until noon. Then he crossed over and went into the phone shop and bought a charger he did not need, and paid for it in cash, and the young man counted the change into his hand.
On Saturday night he opened the drawer and put the phone in his bag without turning it on. He turned it on at the gate. There were photographs from Maya and two from Diya, the two pages Maggie had sent the senior people on the Mondays he was gone, and one text from Maggie, sent on the seventeenth.
Pricing done. March estimated. Monday the twenty-seventh at four, your table.
He put the phone in his pocket and watched them board the first rows.
He was in the back lot before six on Monday, awake since three, and he had the building to himself until Tom’s car came in at seven.
He read Maggie’s two pages first. Arturo had approved the roof inspections after a hailstorm at the Fund III properties in Dallas, with the claims filed the next day. Beth Ann’s line named her second, Esther, ahead of the date she had set herself. The Chicago firm’s last questions had gone back answered on the Thursday, with Maggie’s initials. Then he read the minutes of the investment committee’s meeting on Wednesday the twenty-second, which Anika had left on his round table with a paper clip on the second page.
The deal was a garden property in south Austin, built in the seventies, that the same family had owned since it went up. Andy knew it. He had made the family an offer on it in the syndication years, and they had never called back. He had wanted it for the firm since before there was a fund: a quiet street, the same family since it went up, their name still painted on the sign by the road.
Nadia had brought it. Her page on how the firm could lose money began with the drains. On the Friday before the meeting she had asked the broker for a plumber and sent a camera down the lines in the ground-floor units, and the drain lines under the slabs were the original cast iron, scaled and cracked along the bottom in most of the runs the camera could reach. Replacing them meant cutting open the slab in every ground-floor unit. Her page carried the cost of it, and with the cost in, the family’s price came out above line four of Wyatt’s box. Under her page Maggie had added the cost of moving each ground-floor household out while its floor was open, which Andy would have left out, because he always had. Scott had added one line. Seller’s inspection scoped a sample of units. Ask which, and why those.
Anika had recorded the votes in the order Scott called them. Wyatt had voted no, then Maggie, then Scott himself. At the foot of the list, where Andy’s name usually came last, Anika had written A. Daryani: away.
He could see how he would have argued it. Replace the lines as the units turned, carry the cost across the hold, let the rents pay for it. He had argued deals that way for years, and won most of the arguments, and some of those deals had been good ones. He stayed with the page a while. Then he slid the paper clip back onto it and set the minutes on the corner of the table.
Nadia came up the stairs at twenty to eight. He gave her time to light her screens, and then he walked down the floor to her desk.
“Good page,” he said.
She looked up. “Thank you.”
“Whose idea was the camera?”
“The plumber’s. I asked him what he’d want to see if he were buying it himself.”
Andy nodded and went back up the floor to his office.
At four Maggie came up the floor carrying Tom’s fee schedules and one typed page, and took the chair at the round table where she had sat thirteen months before.
The schedules had the same pencil column down the side. Every line had its word, recurs or deal, and here and there an asterisk stood alone. The typed page had two numbered lines on it, one under the other. The first read 1. Priced on reported earnings, before one-time items, and the space at its end was empty. The second read 2. Priced on the equation, with a figure at its end. At the foot, in small type, it said Run-rate at 31 March. March estimated. Under the second line was a space for a signature and a date. Andy left his desk and took the chair across from her.
“The number everybody likes first,” Maggie said. “About twenty and a half million in fees over the last twelve months. Twenty-three of us. About nine hundred thousand a head.”
“Somebody will put that on a slide.”
“Somebody will.” She put her finger on the first line of the typed page. “This line prices us on what the firm earned in those twelve months. A little over nine million, before the one-time items come out.”
“Which items?”
“The anchor’s catch-up, mostly. We bill that once.” She moved her finger along the line. “And the rest of it counts ten closings, as if every year had ten. A banker selling us would open with this line and put a big multiple on it. I left the end of it blank. I don’t want that number in the room.”
“And the second line.”
“Is the one I’d sign. The same question I asked every fee last time.” She opened the schedules and ran her pen down the column. “Take the fees that recur, take off what it costs to run the firm with your seat at market, and you have about one point four million of recurring earnings. A margin of about eleven percent.”
“It was one point six,” Andy said, with his eyes on the figure.
“It went down. On purpose.” She turned to the budget pages clipped to the back of the schedules. “The compliance lead, the reporting system and the appraisers, all of it running now, for an account that owns one building. And Owen’s line, about eight hundred thousand a year, all in. We built the next rung before it paid us.”
“What did Owen’s line buy?”
“Nineteen percent of our hours go to assembly now, and the committee takes about three in four of the packages as they come.” She tapped the deals column. “About what it cost, on our own count. The cash shows up in more closes.”
“You told me the margin would come down to about fourteen percent.”
“For the whole of this year, and it will. This is one day’s run-rate, with every cost in and most of the account’s fees still to come.” Her eyes stayed on the column. “And about four-fifths of what we earn still comes from closing deals. The promote and our own money are out again. The company and nothing else.”
Andy went to the door, where his jacket hung, and came back with Lorraine’s page from the inside pocket, where it had stayed since Maggie wrote on it. He opened it out on the table between them. The creases had gone soft and white along the folds. Lorraine’s black line still ran across the top, with his arrows and her two marks beneath it, and Maggie’s 1.6 under the first term, written in February of last year.
Maggie uncapped her pen. Under her 1.6 she wrote 1.4. Under the six and a half she wrote 12, and under the half she wrote 10%. She capped the pen.
“Twelve times,” Andy said.
“Her six and a half was for a firm a buyer could not see past the next fund. Now he can read the account’s contract, and the committee’s pages, and the valuation file. Once the account is fully invested, it pays us about two point one million a year. Today only the first building is in, and its fees are all I put in the one point four.” She set the pen down on the schedules. “He pays for being able to see it coming, and he counts the rest as earnings when it arrives. That’s the twelve.”
“And ten percent.”
“For you. Lorraine took off half.” She looked at him. “You were gone two weeks. The Chicago firm’s people asked us something every day you were away, and none of the answers came from you. Scott ran the committee, and it passed on a deal you’d have bought.”
“I read it.”
“I thought you would.” She turned back to the page. “It stays at ten because Fund IV’s key-person clause still has one name in it. Yours. Until a fund’s documents say something else, a buyer keeps a little back for that.”
“Walk me through the rest.”
“Twelve times the one point four, less ten percent. About fifteen million.” She pointed at the deals column. “The deals come to about six point one million a year. He still can’t count on them, so they get three times, less the same ten percent. About sixteen and a half million.”
She put both hands flat on the schedules. “The low thirties. Thirty-two, and treat the last digit as soft. The joint venture still hasn’t given me its split, and when it does the number can only move up.”
Beside the figure on the second line of her typed page she had penciled an asterisk.
“The investor gets this page on Wednesday,” she said, “and the stake is priced from whichever line has your name under it.” She turned the page to face him. “Sign the second line.”
She held out her pen. Andy read the second line once more, and the date at the foot. Then he took the pen and signed in the space under it, and dated it.
“A little over two times,” he said. “From fourteen.”
“All of it from the multiple and the discount.” She took the page back and looked at his signature on it. “For a firm that does this well, I’d expect three to four times by the time the work is done. We’re below that so far.”
Andy looked down at Lorraine’s page. He left it open, turned it around on the table and slid it across to her, and after a moment Maggie opened her weekly log at the back cover and laid the page inside it, flat, and closed the log on it.
The stake was signed downstairs at ten on Wednesday, at the long table. One of the Chicago firm’s partners sat across from Andy, and the other watched from the screen at the end of the room. Anika had the signature pages in order in front of her and passed each one along with a yellow tab where the names went.
Service Capital would issue new units to the Chicago investors, twenty percent of the company at the value on Maggie’s page, for about six point four million paid in. They bought the company’s fees and nothing else; the carry stayed where it was. Anika’s page of rights gave them an observer’s seat and a consent over anything that changed who ran the firm. Andy would own the other eighty percent. Part of the money would go to Greg. Tom had a schedule for that, with the note’s payment dates on it and a line for a payment Tom had marked to be confirmed.
The partner across the table signed last and capped his pen. Anika gathered the pages and took one more page from the folder under them and laid it in front of Andy by itself, with the arithmetic typed under the clause and a line for his name.
“Greg’s clause,” she said. “The stake puts his fifteen percent about one point seven million over the December page.”
Andy read the page, and Anika waited until he had reached the foot of it.
“His lawyer wrote sold,” Anika said. “This morning we issued new units. A new issue is arguably outside the clause’s words.”
Andy signed the page and handed it to Tom.
“Wire it today,” he said.
The partner from Chicago stood and buttoned his jacket. He took a card from his wallet, wrote a number on the back of it and handed it across the table to Maggie. Then, as he turned to go, he gave Andy one too.
Upstairs the legal pad still stood against the glass beside his round table, where it had stood for most of a year, its five lines turned toward the floor and 250 beside the circled third. He looked at the top line and went back to his desk.
The committee met downstairs at nine on Thursday, Scott at the end by the window and Andy in his place along the side.
The second item was a single page from Anika. In the second week of March the Chicago firm’s analyst had asked about Fund II’s interest in the San Antonio property, the one investment in Fund II where another sponsor made the decisions. She had wanted to know whether the firm meant to do more of them, and she had put it plainly: was Service Capital a manager, or a feeder for other people’s deals?
“We’re a manager,” Scott said. “A manager puts money where it makes the decisions. We don’t write a check into a deal somebody else runs.”
“And Fund II’s interest?” Maggie said.
“Stays until the building sells. Nothing more goes in beside it unless the agreement makes us.”
Wyatt had his box open on his laptop. He typed a new numbered line at the foot of it, the seventh, and put the date and his initials beside it. 7. Control. We invest as general partner with the major decisions ours, or as a lender with default rights through to the building, in a vehicle the firm has not yet raised. No passive interests in deals another sponsor controls.
Scott took the votes. Wyatt and Maggie said yes, and Scott gave his own, and then he turned to Andy.
“Yes,” Andy said.
Anika read the minute back. After the meeting she filed a copy in the policies binder behind the allocation policy of the twelfth of October, a year and a half old now, whose log had long since filled its first page.
On Saturday morning he drove Diya to a Fund IV property in north Austin, a garden community the fund had bought the summer before, where the renovation crews were halfway through the second building. Maya was on a day shift. Diya had asked at breakfast where he was going, and then whether she could come, and had her shoes on before he had answered.
The maintenance supervisor met them at the office with a ring of keys. Andy asked to start at the back.
They went along the rear of the first building, and Andy asked the supervisor what the crews had found behind the walls, and listened to the whole answer. At the second building the crew had the ground-floor doors propped open and were laying new floors, and a radio was playing in one of the kitchens. The supervisor showed him the water heater closets they had opened, with a new pan under every heater and a pipe from each pan running out through the wall.
“What’s that for?” Diya said.
“If the heater leaks, the water goes in the pan and out the pipe,” Andy said. “The floor stays dry.”
He crouched and put his hand on the floor of one closet to feel whether it was. It was.
Diya crouched beside him and put her hand flat on the floor too.
“Is something wrong with this one?” she said.
“No,” Andy said.
She looked at him sideways and stood up and dusted off her hand on her jeans.
A woman came out of a ground-floor door with a laundry basket on her hip and stopped to tell the supervisor that her kitchen sink drained slow. Andy asked her which unit, and how long it had been draining slow, and the supervisor wrote it down. Diya listened to all of it.
The last door on the second floor was a finished unit, empty, the new floor down and the smell of paint still in it. The supervisor found the key on the ring and handed it to Andy. Andy turned the key and pushed the door open, and stood back, and Diya went in ahead of him.