[The characters, places, organizations, events, and so on appearing in this work have no relation whatsoever to reality and are entirely fictional products of the author’s imagination.]
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The moment Henry received the report on the wretched state of [The Times], he ordered them to devise measures to terminate or delay the contract. But as Gilberto had said, the astronomical penalty of 100 million dollars was a shackle even the head of the family could not ignore. In the end, they were in a position where they had no choice but to push the acquisition through, bitter as it was.
“So, what does the British government say? What about the policy support we requested? If all they offer is some low-interest loan, taking over that rotten heap will only leave us with a negative spread. It’s a loss.”
Sensing that the acquisition was an unavoidable fate, Henry had contacted the British government not long ago to request support. The idea was for the government to set the stage so they could at least file a lawsuit against the union, or at the very least, prepare some legal mechanism to restrict the union. But the answer that came back was lukewarm.
“Prime Minister Margaret Thatcher is pushing forward similar legislation, but given parliamentary procedures, it likely won’t become effective until the latter half of next year at the earliest, or the year after.”
Law and politics never kept pace with the speed of business. Henry pressed his fingers to his temple and let out a deep sigh.
“Whew... Tell Sebastian in Britain to drag this out as long as he possibly can. If there’s really no other way, tell him to pretend to enter the factory and get beaten up by the union members on purpose, even if it lands him in the hospital. I mean it.”
‘British unions in ’79 really are fucking awful. Is this why everyone started looking for the Iron Lady? At this point, all we can do is hold out somehow until public authority gets involved.’
“Understood, boss. We’ll delay it as much as possible. And there’s one more thing I need to report. Negotiations over Manhattan’s Battery Park are proceeding smoothly, mainly around the northern residential district, the North End, as you instructed. The allocation of a large-scale parcel is all but confirmed.”
From New York City Hall’s perspective, that corner of sand flats was a troublesome headache they had no way to deal with. If the Devenger family had not stepped up preemptively in June of ’79, it would still have been abandoned land. Thanks to that, they had secured a larger site than expected, but the problem was, as always, the floor area ratio.
Henry swallowed his regret as he listened to Gilberto’s report, which gave him another headache. The prime central site in Battery Park had already found its owner, and only the north and south remained. According to the master plan from early ’79, the north was designated as a pleasant luxury residential complex, while the south was planned as a relatively dense high-rise residential district.
Only the spaces beside the twin buildings bearing the name World Financial Center had skyrocketing popularity; contractors were shaking their heads at the outlying areas, so securing the entire parcel had not been difficult. But “height,” the core of profitability, was holding them back.
“So, what exactly is the floor area ratio?”
Over the receiver came the sound of Gilberto flipping through documents.
“Under the current City Hall guidelines, the limit is twenty floors, with a height of about seventy meters. It seems difficult to exceed an FAR of 8.0. They’re allowing fifty-story skyscrapers on the southern site, but they’ve tightly restricted the number of floors in our district under the pretext of protecting views along the Hudson River. In effect, they’re telling us to give up on commercial viability.”
‘Views? They’re sitting here chasing romance in New York in ’79. This is practically regulation on the level of land-squatting.’
Henry let out a hollow laugh and tapped his desk.
‘An FAR of 8.0? Even Gangnam apartment reconstruction would be more generous than this. How am I supposed to fill all this land at twenty stories and squeeze out pre-sale profits? This isn’t even doing business by digging up land—it’s practically charity. No wonder nobody wants to participate...’
Gilberto paused briefly, then added an interesting condition.
“Instead, on the condition that our family participates directly, they offered quite an extraordinary carrot. In addition to extensive tax reductions for the buyers, if we directly own and operate the buildings, they’re offering to exempt us from property taxes for a full forty years. It must mean New York City Hall is as desperate as you said, boss.”
“Buyers? Ah, you mean when we sell the units, they’ll give tax benefits to the purchasers? So they’re telling us to use that heavily in the sales advertisements.”
“Yes, exactly. The detailed provisions are still under negotiation, but as you said, they plan to exempt the buyers from acquisition tax or property tax for several years. If rumors spread that you can own a home in the heart of New York and the taxes are ‘FREE,’ the money men of Wall Street will come swarming in like clouds. We expect the period to be three to five years at most, but that alone will send the sale prices through the roof.”
Henry nodded.
“If we’re going to take a gamble by entering completely abandoned land, we deserve at least that much. More importantly, what happened with the architects I mentioned?”
“Norman Foster is practically living in Hong Kong because of the Hongkong and Shanghai Bank project, and Richard Rogers has announced that he will build the Lloyd’s headquarters in the heart of London’s financial district. At present, among the people you mentioned, only Renzo Piano has been contacted to some degree, but he is quite skeptical about joining [Devenger General Construction] as an exclusive architect.”
Gilberto trailed off as if troubled, but Henry accepted it calmly. Renzo Piano was a figure who had already entered the ranks of masters after leaving behind the rare achievement that was the Centre Pompidou. There was no way a man running his own office would enter some unfamiliar construction company as a salaried employee.
“Then instead of recommending he join us, commission him to design the master plan. What is the current state of the site we secured?”
“Boss, the site north of Murray Street that we secured is a massive thirty-two-acre landfill that doesn’t even have a name on the map. On City Hall’s master plan, it’s a wasteland labeled only as a ‘planned public green space.’ Equipment is already moving into the World Financial Center site to the south, but this northern edge is abandoned land where sandstorms rise whenever the wind blows.”
“Good. Then show him that wasteland and formally commission a schematic design. Since we chose the northern site, we’ll create a luxury residential complex according to City Hall’s guidelines. Let’s make it a village integrated with a park—a green town—and add a large luxury yacht marina.”
An ambitious light settled in Henry’s eyes.
“Right now, the Hudson River waterfront has nothing but old piers, but what if we dredge it ourselves and build a marina where large yachts can dock? We’ll see Wall Street magnates commute by yacht and step off into the front yard of our complex. That in itself will be New York’s greatest marketing. ‘Parking your yacht on the way to work’—isn’t it romantic?”
‘This is exactly buying into a twenty-first-century luxury lifestyle ahead of time. Commuting by helicopter is too flashy, but going home by yacht has just the right feel, doesn’t it? Besides, there’s no way yachts will fail in New York. If we milk forty tax-free years out of it and then sell it off, it’ll be perfect.’
Henry gathered his thoughts for a moment, then added.
“In other words, tell him to draw up a master plan for the green town and marina. Ah, and call in Moshe Safdie as well, the man who made Habitat 67 in Canada. There’s no genius quite like him when it comes to three-dimensional residential complex design. Give those two and our in-house architects a chance, commission drawings from each of them, and we’ll choose whichever side brings us the craziest idea. Or we can have them mix all three appropriately.”
“Understood. I’ll give them advance notice and have everything ready so you can select one as soon as negotiations with New York City are concluded.”
Henry was about to hang up with an “All right. Good work, then,” when he realized he had forgotten the truly important matter and hurriedly stopped Gilberto again.
“Ah, don’t hang up. I forgot. How much available cash does the trust have right now? Around thirty-three million dollars?”
“No, boss. [The Time] paid in quarterly dividends of 8.82 million dollars, and after deducting 610,000 dollars in taxes, we currently have about 41 million dollars in live ammunition loaded.”
In 1979, when the top income tax rate was close to 70 percent, paying less than 10 percent in taxes? Henry did not bother asking about that complicated magic of tax avoidance. He merely thought, ‘So this is why it’s basic passive ability for America’s upper class to live with capable tax accountants and lawyers at their side.’
“My game console company, [Enjoy], is now in the final stage of development. We’ll need quite a lot of money for mass production and breaking into distribution networks. So what I’m thinking is, we issue convertible bonds, CBs, to the trust, and later the trust takes an equity stake. Would there be any legal problem with this? Explain it in some detail.”
“Boss, your judgment is excellent. Procuring Enjoy’s funding from the family trust is the best option in terms of capital efficiency. But this structure is a double-edged sword. Since you are simultaneously the appointor of the trust, the investment chairman, and even the protector, legally it makes you an easy target for accusations of self-dealing.”
Gilberto’s voice became quite serious.
“If the business so much as stumbles, regulators or future beneficiaries will try to accuse you of breach of trust, claiming you used trust assets as funds for a personal gamble. But do not worry. This Delaware GST—generation-skipping trust—designed by the family is a massive fortress in itself. I will reinforce it with three ‘legal shields’ and seal the holes.”
Gilberto continued explaining point by point. First was the “business judgment rule.” They would leave reports on the supply contract with Saf and the value of the special steel molds on the level of aircraft engines, and embed in the meeting minutes the rationale that “the trust invested preemptively in a business anyone could see would succeed.” Second was “collateralization.” They would establish the pretext of preserving assets by taking Enjoy’s expensive patents and high-value molds as collateral for the trust. The last was designing an “overwhelming profit structure.”
“We simply set the CB interest rate higher than market value and make it so the trust gains explosive profits upon conversion to equity. If we record that it was ‘the protector’s advanced strategy to enhance the family’s perpetual value,’ that will be enough. The paperwork will just get a bit thicker; legally, it will be clean. However, the press may bite at it later, calling it ‘for avoiding gift tax’ or ‘strengthening the governance structure.’ And if it fails by any chance, there is a risk that your children could attack you for breach of trust.”
After ending the call with Gilberto, Henry walked over to the window of his office. Outside the window, Times Square was packed today as well with crowds of protesters.
‘A bank loan would be cleaner, but putting the equity into the trust is still the right answer. [Enjoy]’s goal is, at minimum, to surpass [Nintendore]’s status, and after that, I intend to integrate the entire gaming ecosystem. It’s advantageous to set up the governance structure in advance.’
As if his mind was made up, Henry murmured softly into the air.
“Good. Let’s leave the troublesome paperwork to Gilberto and issue convertible bonds for the amount [Enjoy] needs.”