The Poisoned Prize of The Times
Henry ordered an immediate search for ways to break or delay the contract the moment he received the grim report on The Times, but as Gilberto had warned, the astronomical one-hundred-million-dollar penalty was a shackle even the head of the Debenzer family could not ignore. In the end, they had no choice but to swallow their tears and push the acquisition through.
“So what is the British government saying? What about the policy support we requested? A low-interest loan alone will only produce negative margins once we take on that pile of liabilities. It’s a guaranteed loss.”
Having accepted that the acquisition was inevitable, Henry had recently reached out to the British government for assistance. He had asked them to use their authority to file lawsuits against the unions or at least establish legal mechanisms to restrain them. The response had been lukewarm at best.
“Prime Minister Margaret Thatcher is pushing similar legislation, but given parliamentary procedures, it will likely be late next year or the year after before it takes effect.”
Law and politics never kept pace with business. Henry pressed his temples and let out a long sigh.
“Huu… Tell Sebastian in England to stall for as much time as possible. If there’s truly no other way, have him pretend to enter the factory and deliberately get beaten by union members so he ends up in the hospital. I’m serious.”
Damn 1979 British unions. No wonder everyone was desperate for the Iron Lady. Until the government sends in the police, we’ll just have to endure.
“Understood, boss. I’ll delay it as much as I can. There’s one more thing to report. The Battery Park negotiations in Manhattan are proceeding smoothly, focused on the northern residential zone as you instructed. Large-scale land allocation is nearly confirmed.”
From New York City’s perspective, that sandy corner had been nothing but a troublesome eyesore. Had the Debenzer family not stepped forward in June 1979, it would still be abandoned land. Thanks to their initiative, they had secured more area than expected, but the real issue was the floor area ratio.
Henry swallowed his frustration as he listened to Gilberto’s next report. The prime central site of Battery Park already had an owner. Only the north and south remained. According to the early 1979 master plan, the north was designated for pleasant luxury housing, while the south was slated for denser high-rises. Only the area beside the World Financial Center’s twin towers enjoyed soaring popularity; the outer zones had developers shaking their heads. Securing the land itself was not difficult, but the “height” that determined profitability remained the bottleneck.
“So what is the exact floor area ratio?”
The sound of papers rustling came through the receiver.
“Under current city guidelines, the maximum is twenty stories, roughly seventy meters in height. Exceeding a floor area ratio of 8.0 looks impossible. While the southern site is allowed fifty-story skyscrapers, our zone has been capped under the pretext of protecting views along the Hudson River. It’s basically telling us to abandon profitability.”
Views? In 1979 New York, they’re chasing romance. This is nothing but regulatory hostage-taking.
Henry gave a hollow laugh and tapped the desk.
A floor area ratio of 8.0? Even Gangnam apartment reconstructions are more generous. How are we supposed to fill this vast land with twenty-story buildings and still turn a profit on sales? This isn’t business; it’s practically charity. No wonder no one wants in.
Gilberto paused, then added an intriguing condition.
“However, they offered quite generous incentives on the condition that our family participates directly. In addition to substantial tax reductions for buyers, they’re willing to exempt property taxes for a full forty years if we own and operate the buildings ourselves. It shows just how desperate City Hall is, exactly as you predicted.”
“Buyers? So they’re giving tax benefits to whoever purchases units from us? We can advertise that heavily.”
“Yes, precisely. Details are still under discussion, but they’re offering several years of acquisition or property tax exemptions for buyers. If word spreads that you can own a home in the heart of New York with ‘FREE’ taxes, Wall Street’s money men will flock like clouds. The period will probably be three to five years at most, but even that will send sales prices through the roof.”
Henry nodded.
“They’re asking us to gamble on completely abandoned land. We deserve at least that much. More importantly, what about the architects I mentioned?”
“Norman Foster is practically living in Hong Kong for the Hong Kong Shanghai Bank project, and Richard Rogers has declared he will build the Lloyd’s headquarters in the heart of London’s financial district. Among the names you mentioned, only Enzo Piano has been contacted so far, but he remains quite skeptical about joining Debenzer General Construction as an in-house architect.”
Gilberto’s voice trailed off awkwardly, but Henry accepted it calmly. Enzo Piano had already entered the ranks of masters with the Pompidou Center. A man who ran his own office would never become a salaried employee at an obscure construction company.
“Then offer him a master plan design commission instead of employment. What is the current state of the land we’ve secured?”
“Boss, the site north of Murray Street that we’ve acquired is a massive thirty-two-acre landfill that doesn’t even have a name on the map. The city master plan only labels it as ‘planned public green space’—a wasteland. Equipment is already moving into the southern World Financial Center site, but this northern edge is still abandoned land where the wind kicks up sandstorms.”
“Perfect. Show him that wasteland and formally request a conceptual design. Since we’ve chosen the northern site, we’ll build a luxury residential complex according to city guidelines. Let’s create a green town integrated with parks and add a large luxury yacht marina.”
Ambitious light gleamed in Henry’s eyes.
“Right now the Hudson Riverfront only has old docks, but if we dredge it ourselves and create a marina capable of berthing large yachts? Wall Street titans will commute by yacht and step ashore right in front of our complex. That alone will be the best marketing in New York. ‘Yacht parking on the way to work’—romantic, isn’t it?”
This is exactly the kind of twenty-first-century luxury lifestyle we can pre-sell. Helicopter commutes are too flashy; yacht commutes strike just the right note. Besides, yachts will never go out of style in New York. We can milk the forty-year tax exemption and sell later. Perfect.
Henry refined his idea for a moment before continuing.
“So ask them to draw up master plan drawings for the green town and marina. Also, bring in Moshe Safdie, the man behind Habitat 67 in Canada. No one designs three-dimensional housing complexes better than that genius. Commission drawings from the two of them and our in-house architects, then choose the most outrageous idea. Or we can blend all three.”
“Understood. I’ll give them advance notice so we can select immediately once negotiations with New York City are finalized.”
Henry was about to hang up after saying “Understood. Good work,” when he realized he had forgotten the most important matter and quickly called Gilberto back.
“Ah, don’t hang up. I almost forgot. How much cash does the trust currently have available? Around thirty-three million dollars?”
“No, boss. We received an 8.82 million dollar quarterly dividend from The Times, and after subtracting 610,000 dollars in taxes, we have approximately 41 million dollars loaded and ready.”
In 1979, when the top income tax rate approached 70 percent, paying less than 10 percent was remarkable. Henry did not bother probing the complex tax magic.
This is why America’s upper class always keeps competent tax attorneys and lawyers on retainer.
“My game console company Enjoy is nearing the end of development. Mass production and distribution will require quite a bit of money. I’m thinking of issuing convertible bonds to the trust so it can later take an equity stake. Is there any legal issue with that? Explain in detail.”
“Boss, your judgment is excellent. Funding Enjoy through the family trust is optimal from a capital efficiency standpoint. However, this structure is a double-edged sword. Since you serve as both the trust’s appointor, investment chairman, and protector, it is highly vulnerable to accusations of ‘self-dealing.’”
Gilberto’s tone grew serious.
“If the business falters even slightly, regulators or future beneficiaries could accuse you of misappropriation, claiming the trust’s assets were used for personal gambling. But don’t worry. The Delaware generation-skipping trust our Debenzer family designed is itself a massive fortress. If we add just three ‘legal shields,’ we can block even this risk.”
Gilberto continued his methodical explanation. The first was the “business judgment rule”—documenting in meeting minutes that the trust’s preemptive investment was based on the supply contract with SAP and the value of the aircraft-engine-grade special steel molds, making it an obviously successful venture. The second was “collateral setting”—securing the trust’s assets by pledging Enjoy’s high-value patents and expensive molds. The third was designing an “overwhelming profit structure.”
“Set the convertible bond interest rate higher than market rates and ensure the trust receives explosive gains upon conversion. We simply record it as ‘a protector’s sophisticated strategy to enhance the family’s perpetual value.’ The paperwork will be thicker, but it will be legally clean. The only remaining concern is that the media might later accuse us of avoiding gift taxes or strengthening control. In the worst-case scenario of failure, there is also the risk that you could be attacked by your own children for breach of fiduciary duty.”
After finishing the call with Gilberto, Henry walked to the office window. Times Square outside was once again crowded with protesters.
Bank loans would be cleaner, but putting the stake in the trust is still the right answer. Enjoy’s goal is to surpass at least Nintendor’s status, and after that I plan to integrate the entire gaming ecosystem. Setting up the governance structure in advance is advantageous.
Henry spoke quietly to the air, his decision made.
“Good. I’ll leave the tedious paperwork to Gilberto and proceed with issuing convertible bonds for the amount Enjoy needs.”