The Recluse

I needed time to think this through before committing myself. "What do you think the deal is with the Regent Property? We've sat on that hunk of land for what? Four or five years?"

"More, we bought the first parcel in early '09 when prices were still in the crapper and we've added to it twice since. We now have just about one hundred acres, of which about twenty is prime frontage and if the extension off 286 gets approved who knows where the line gets cut?"

"So why do you think my dear brother wants to unload it?"

"He wants to close on a piece of land he and Andrew have been horny about for a while, and I think this company in Richmond is trying to offer him a trade. The land Karl wants to develop is south of Richmond near Colonial Heights. It's not a bad spot, but it's certainly not Regent! It doesn't make sense to unload prime land in our back yard for a more speculative property way down south of Richmond. The whole deal smells to me, but frankly I need time to get underneath the layers of this deal Karl is spearheading. Anyway, back to Louise?"

"Well, her family is in the hotel business, of course, and we are in the middle of building their new centrepiece property. She knows real estate and knows it very well, that's why we picked her, plus the fact it gives us another female board member. Louise is no figurehead at RHG, she is serious about commerce. Louise has big time political connections in this town, and her husband Henry and she used to socialize with my folks."

"Not so much now. They were divorced two years ago and she kicked him out on his butt. Threw him off their board and cleaned house. I haven't talked to her much outside of board meetings lately, but she must still see your Mom, I think."

"Of course I wouldn't know about that, but, if true it might not be helpful, because Mom and Karl are pretty tight." I tilted my head indicating my reservations.

"That's why I called you, Brad. Would you mind giving her a call? Maybe offer to have dinner with her tonight?"

"I can try, but Louise and I aren't exactly close, I mean, I know her well enough, I suppose, to ask her for dinner, but if it comes down to personal loyalty, she'll probably stick to mother. If I can convince her that the deal is not in the interest of the corporation and that we have serious misgivings, maybe we just appeal to her sense of ethical responsibility as a board member. My guess, though, Uncle George is that it is a dicey proposition at best. I suppose I could kidnap her, and if neither of us show up, if Andrew doesn't give anyone his proxy, and if you got delayed, there wouldn't be a quorum and everything gets tabled for a month."

"It's an appealing thought, as it would give me some time to find out what is really going on here, but it's not worth risking putting you in jail!"

"Ok, give me a second here." I said as I reached for my phone.

"Richmond Hotel Group, this is Jenna. How may I help you?" The melodic voice in my earpiece reminded me of the golden corn syrup my mother used to serve on scones after school.

"Hello Jenna, It is Brad Willis calling for Louise Andres. Is she available?"

"One moment please, Mr. Willis, while I check with Ms Andres." The line went dead for a moment before the elevator music kicked in. Within a minute there was another slight klick and the very recognizable sound of Louise's voice came on the line.

"Brad Willis, to what do I owe the honour of this call? Are you planning to make me the template for the hero of your next novel?"

"Interesting concept, but I'd need much more background. Would you be willing to provide it?"

"That depends, am I the hero or the villain?"

"Which would you like better? The villains get all the really good parts, but of course the hero walks off into the sunset..."

"With the girl? I don't swing that way! But seriously, as much fun as this is, what can I do for you?"

"I know this is rather cavalier, but I am in town tonight, staying over for the board meeting tomorrow, and I wondered if you might be free to have dinner with me? I know it is all very last minute, but some things have come up that called me into town and Uncle George and Andrew are both previously committed."

"I think there is much more to this story than meets the eye, and there is more you aren't telling me than your sudden interest in taking an old lady out to dinner, just because she happens to be a fellow board member. To find out what the agenda is, I am going to have to arrange my schedule to see you, aren't I?"

"Always appreciated that you were a gifted board member, Louise! You have a knack of seeing the words that perhaps are not on the wall! Give me a time that would work for you?"

"Where are you staying, Brad?"

"I'm at the Willard, Louise, but I can meet you anywhere."

"Get a table for eight o'clock and I will come to you. I'm going to be at the office late anyways, so I might as well drop by on my way home to Georgetown. Besides they have a very good chef and it will cost you a mint!" The line went dead before I could confirm or thank her for the kindness. Turning to Uncle George I raised my eyebrows in resignation.

"Can you get me a table here for eight pm?"

Uncle George reached across to the guest phone and punched a button. "Café du Parc? Yes, thank you. Bradley F Willis, suite 1102, I'm calling to request a table for two in the dining room for 8PM tonight. Yes, that would be very fine, thank you again." George put down the receiver. "Done. Now, tell me Brad, if you were your brother, which I understand would be about the last person you might want to exchange identities with, why would you want to make this deal, at the risk of alienating members of the family, and giving up the potentially biggest revenue producing piece of real estate that we own?"

"Has to be something in it for him, doesn't there? I mean, Karl is about the most mercenary individual I've ever met. Not saying wanting to make money is necessarily a fault, I mean it beats starvation, doesn't it? Nevertheless, if this deal does not make sense for W&F then there has to be something else in it for Karl. What about Andrew? You said they were both hot for this parcel of land, do you think they might be in this together? Is that why Andrew is sitting down in Virginia Beach? Why hasn't he given you his vote on the board for tomorrow? Wouldn't that be the norm?"

"I don't know for sure. Yes he wants the land south of Richmond, but he told me this morning that he had no knowledge of any deal to sell off the Regent property. He seemed to discount the idea, but he and I haven't been seeing things in the same light for the past few months. I think Andrew and Karl would like to see me retire so they can take control of W&F. By the way, the compensation committee voted to give each of them an extra $400K bonus in June, along with some stock options. I don't mind the money, but I'm not ready to be turned out to pasture yet. I did hint to Andrew that I would like to have his vote for tomorrow's meeting but he sort of waltzed around the issue, not wanting to offend Karl."

"Do you think that he might have given Karl his vote?"

"No, I doubt that, at least I hope not. Andrew knows that as of now I am still holding too many cards, at least I am if you are with me, Brad. If it comes down to a shareholders vote they could loose their seats on the board. I know Pete Hoffman has by far the most shares of the independent board members, about 4% of the company. I'm not sure how many shares Louise holds, some certainly and I could check on that easily enough. It is a board disclosure requirement. Senior management outside of the board hold another 2% Individual investors hold the rest of the stock, about 20% but it is rarely voted. I still control a large portion of our family shares, about 30%, plus I have exclusive rights to vote the shares in the company pension fund, which is another 5%. Karl and you and your mother have equal shares with just about 12% each. Andrew only holds about 4% outright, of course he will be getting more when I either retire or die, but for the present you and I, with Peter's help, can force a shareholder's meeting to unseat the board and potentially replace management. That, however, could take time and if they get board approval for changes in the meantime, it would get ugly trying to stop a deal from being done."

"It would also tear this family apart. There's enough bad blood between Karl and me already. Have you talked with Karl about this deal?"

"He says there is no deal, period, but he couldn't look me in the eye doing it. Something is happening, and the fact that Richard Perkins is leaving in a rush tells me that whatever is happening is likely to be a pretty big negative involving our bankers. We have too many irons in the fire right now for any major disruption."

"Let's assume that Richard leaving our board could affect our relationship with the bank. How vulnerable are we?" I asked, trying to buy time to process all these variables. One thing was clear, and that was Uncle George was rattled.

"They head our loan consortium, of course. If they pulled out it might create a domino effect. Corporate lending is at about $95 million in total, but that is not all in one tranch. We have about $25 million tied up in the Greenfields Development, secured by a first mortgage on the land and infrastructure. That is more than covered by the loan covenants. We could be out of that financing in six to ten months. Then there is about $10 million secured by Regent. That property, even in a fire sale is worth three times that amount and to the right buyer maybe five times. The hotel development we are doing with Louise is tying up about another $20 million in mortgages. A couple of smaller mortgages make up about $10 million more. Those are separately financed and secured and are non-recourse. We are using about $30 million on our corporate revolver, which is approved to $90 million. We are well within all our covenants on every cent, but there are pending deals out there worth maybe another $40 - $50 million right now. None of them are going to be closing before the Greenfields project is turned over and we are generating about $4 million a month in positive cash flow from our other properties, even after factoring in Cap Ex. The problem is that the hotel deal is also an operating term loan through Citizen's Bank, and they could call that."

"So, if we assume, perhaps dangerously, that Citizen's Bank has no reason to become belligerent, then this resignation is something personal for Richard. Can he call about $50 million in loans just because he wants to?"

"Sure, with his board's approval and 90 days notice, if the bank terminates our revolver, we are obligated to clear the loan. We'd have to come up with $30 million for that and another $20 on the Hyatt for Richmond Hotels. That means finding an alternative financial institution who'd be ready to jump in that quickly, or we'd have to liquidate property."

"Looks to me like the easiest property to give us that kind of capitalization has to be Regent. It has a great asset to liability ratio, even as a fire sale. So, who wants our property so badly and why, and is one or more of our partners working to make this happen?" I asked, more to myself than my uncle.

"That's what we have to find out, but it could take some time, and that's why you're here and why you are taking Louise Andres out to dinner. Call me in the morning."

I made sure I was at the restaurant fifteen minutes early and stood as the maitre'd escorted Ms Andres to our table. For a woman nearly my mother's age Louise carried herself well. She was clearly trim and fit, and having relieved herself of husband number two seemed to have agreed with her. When Louise smiled I was always reminded of a particular painting my father used to have in his den. It was a shadowy picture of a grey wolf. It looked for all the world like the wolf was smiling, until you concentrated on the eyes. Those eyes were piercing, and all predator. Louise was like that.

"Well, Brad, good to see you. I must say you have piqued my interest! The reluctant partner and famous author just happens to be in town and calls up an old woman to dine with him?" Louise raised her eyebrows suggestively, "now, you've got me here, I expect to be wined and dined, but more critically, I expect you to come clean with me, my boy."

"Louise, you might just hurt my feelings! Why would you doubt that? I don't recall ever lying to you before." I smiled my best disarming attempt at levity. "But before we get into anything tedious, tell me what you'd like to drink, our waiter is on his way over."

I ordered a bottle of Silver Oak Cabernet and we made inconsequential small talk until it arrived. Placing our dinner orders, she had the sole almandine while I opted for the duck with an onion and plum reduction, Louise gave me that look again that I knew was not going to brook any prevarications.

"Ok, Louise, what would you like to know?"

"Is there a problem with the Hyatt Hotel property, Brad?"

"No, at least none that I know of. I believe we are on schedule and as far as I know there are no significant cost overruns. But again, I am not involved in the day to day management of the company, as you are well aware."

"Yes, I am, and I would have expected to hear from your brother or Andrew if there was. So if it isn't our joint project that has you sitting here, way outside of your comfort zone, then I am on tenterhooks to discover your agenda, Bradley, for you certainly have one, and I have accommodated you thus far, so tell me what this old lady's vote on the board is worth. Are you planning a coup d'etat?"

"No, Louise, nothing so exciting, I'm afraid, but there is a matter I do want to appraise you of and I'd like very much to have your opinion." I spent the next ten minutes until our dinners arrived bringing Louise up to date with everything Uncle George had shared with me. Not surprisingly, Louise never interrupted or asked a single question until my monologue was concluded. Over dinner we discussed mutual acquaintances, the latest political nonsense, and why the performing arts in DC were going to the dogs.

Settling for coffee and cognac rather than dessert, Louise leaned forward slightly. "George suspects there is going to be a surprise declaration tomorrow, and you've been sent to assess whose side Louise is going to come down on. Why-ever didn't George call me himself?"

"Maybe because he felt that if he confided in me first he'd have me on side. He'd need my votes if it came down to a shareholders revolt against the board. I also think that perhaps my uncle is keen to have me once again more involved in the company."

"Is that likely to happen?"

"No, unless it was an emergency and for a very short period of time. I have made my feelings about that clear for quite some time. However, it is still almost entirely a family held company, and I think that George is very unsettled about where both my dear brother and Andrew are heading."

"So, you and I are the wild cards? That's why we belong together at this table? Brad, you are a nice guy, and I suspect quite loyal to your uncle, but I'm an independent board member. I sit on this board at the express will of the shareholders, to provide independent oversight, and to give my best judgements to management."

"Yes, and that is as it should be, Louise, but we both know it was my father who selected you for the board, and you and mother are, or have been good friends."

"Stop right there, Brad! Don't go there. If you, or your uncle, think that I am in anyone's pocket on this board, just put it in writing and you'll have my resignation."

"No, Louise, please, that wasn't where I was going. I respect your integrity and I have learned on the board to respect your opinions and your insights. My purpose tonight was primarily to give you some advance warning of what we may face tomorrow, including Richard Perkins resignation, and the possibility of a motion to dump the Regent property at a discounted valuation."

Louise sat silently for several minutes sipping her cognac while appraising my last statement.

"I appreciate your candour, Bradley. I will give this some careful consideration, I promise. Now, a girl my age needs her rest, so if you'll excuse me, I'll see you tomorrow at the board meeting." Louise stood and, before I could rise to escort her, walked regally from the room. Well, I certainly hadn't handled that very well. I really ought to stick to writing novels, at least then I could control what my characters did or said!

. . .

The board meeting began in its usual relaxed manor, belying the undercurrents swirling through the room. Uncle George took his customary seat at the head of the table, with my dear brother Kurt, playing his role as president of the company, sitting opposite him. The rest of us were seated on the long sides of the table, with mother to Kurt's right, then Louise with Richard Perkins at Uncle George's left hand because Andrew was absent. To George's right sat Pete Hoffman, then myself, with Don Ferguson to Kurt's left.

The meeting was opened by the Chairman, but George barely got a few remarks out before Kurt interrupted to go on to an update on project status. Mark Hurd, our CFO then came in briefly for questions on the financial reports, but we'd all had them for days and there were no big issues to hash through. After Mark left, traditionally the floor would have reverted back to the Chairman, but Kurt asked for the floor to present an urgent proposal. As we expected, the proposal centred on the land swap between our Regent property and the land Kurt and Andrew were hot over down south of Richmond.

According to my brother, the deal was an urgent matter because we had been given a very advantageous offer that would expire in ten days. Due to the size of the transaction it required board approval and we needed to approve it today, there being no possibility of delaying the exchange of properties until the next board meeting. A handout was circulated to all board members, including Richard, who had yet to announce his resignation.

I took one look at the valuations and almost lost it. The agreement listed our Regent property at a value of just $22.5 million. It would barely cover what we had originally invested in the land. The property we were to be taking in exchange was listed for $ 18 million. It was a colossal joke. The land in Colonial Heights was just over sixty acres and it wasn't anywhere near the value of real estate that Fairfax County garnered.

"Excuse me," I said, "this can't be right. Are you seriously telling the board that our land in the heart of Fairfax County is worth about $220,000 per acre, while this plot south of Richmond is valued over $300,000? What is missing in this equation, Kurt?"

"Brad, please, we have done our due diligence and we believe this land parcel has excellent potential. We've sat on the Regent property for years and tied up money with no return. It's time to unload it."

"Unload it, just before the pending announcement of the route for the new highway expansion? Kurt, the Regent property is worth twice what you have listed it for. My quick guess is that this deal is undervalued to us by twenty million or more! I move this proposal be tabled for further examination, pending an independent appraisal of both properties by at least two recognized and independent appraisal firms."

"Brad, you are not on the executive committee, and you have no current experience in these matters," my mother retorted, "Perhaps its time you stick to writing your novels and let us run this company. Your brother has given his life to W&F while you dither around."

Uncle George rapped his gavel. "I have a motion on the floor and I'm looking for a second."