Chapter 9: Big Moves

September 4, 1983, Chicago, Illinois

"How are you feeling today?" I asked Keiko when she woke up on Sunday morning.

"I feel so-so, but that's probably good, all things considered. I was obviously tired from the exertion yesterday, but eleven hours of sleep helped. You didn't have to stay in bed with me after you woke up."

"You're right, I didn't. I chose to! Shall we dress and have breakfast?"

"Yes."

"Are you going to Violet's for dinner after the game?" Keiko asked when we sat down to eat.

"No. I see her twice a week as it is, and because we're going to the game together, we'll eat there. I plan to simply drop her off at her house after the game, then come home."

"Have you decided what to do about the buildings? I know you spent several hours analyzing them yesterday morning."

"I was surprised you didn't ask!"

"Usually, you volunteer that kind of information!"

"True. I was still mulling my options. The best long-term strategy would be to buy the two buildings in Rogers Park that need rehab, as I could likely acquire them at a price significantly below market. The downside of that is that it's riskier, as I'd have to spend money upfront, and neither building has a history of long-term rentals.

"The best short-term strategy would be the buildings in Wrigleyville and Lincolnwood, both of which appear to be in excellent shape, and both of which have a history of long-term rentals over the past fifteen years — an average of three years for the one in Lincolnwood and four years for the one in Wrigleyville. I'd have to pay more for those, but the income stream would be more reliable.

"Finally, I could mix and match and do one of each. If I did that, I'd most likely go with the one in Lincolnwood and a brick building in Rogers Park. That would, in effect, split the difference."

"Two buildings?" Keiko asked. "Can you really afford that?"

"We. Can we afford that."

Keiko smiled, "Sorry. Can we afford that?"

I had been sworn to secrecy by Mr. Matheson, but in my mind, that could not include Keiko because she was my wife. And I was positive she wouldn't say a word to anyone.

"Yes," I said quietly. "You need to keep this completely private between us, but some changes are coming at Spurgeon, which will lead to my salary doubling and being sponsored for the Series 30 Branch Manager's license."

"No way!" Keiko exclaimed, then lowered her voice. "$90,000 a year?"

"Yes. I'll have a new role as Head of Research, complete with staff reporting to me. I'll continue reporting to Murray Matheson, and he'll sponsor me for the license I need to eventually run my own team of traders and brokers."

"Or start your own firm!"

"One step at a time! So far, I have seen no reason at all to leave Spurgeon, and given I'm basically being promoted for the third time in just over two years, I can't imagine leaving even if I did have sufficient assets under management. I'm curious if you have any input on the strategic options."

"You seem to have the Midas touch, so I think that would lean towards the more aggressive, long-term strategy. That said, this is your first foray into real estate, which suggests a more cautious approach. Did you speak to your uncle?"

"Not yet. That's why I'm having breakfast with him tomorrow."

"Are you leaning one way or the other?"

"Towards the conservative approach. The cash flow from the rents would cover the mortgage and property taxes, even allowing for the fees Kasia would charge to manage the properties. I'd have to spend money on maintenance, but that's recouped in appreciation of the properties, not to mention that as the mortgage is paid down, the cash flow situation will improve significantly.

"Going the other route, I'd have to borrow more than the buildings were worth or liquidate some holdings to pay for the rehab. That doesn't make a lot of sense to me. The middle route is a real option, but my inclination is towards a conservative approach, as I can't really sustain losses, so I need to do some risk mitigation. That's why my strategy for my Cincinnatus Fund will, in all likelihood, return about twenty percent less than the Spurgeon Select Fund."

"Is that a problem?"

"Not for a very junior person. So long as I beat the S&P, I'm good, and I should beat it by something like six to ten percentage points, which could be as much as 50% better. So far, I'm on track for around 29% returns. The Spurgeon Select Fund is on track to be another five percentage points higher, or 34%, compared to the S&P prediction of around 20%. Of course, there are still four months to go, and a lot can happen in those months."

"Well, given it's our money," Keiko said with a smile, "and traditional Japanese principles suggest caution and conservatism with regard to finances, I would recommend the approach with the lowest risk, at least until you could sustain the loss without it impacting our finances."

"Wise counsel," I replied.

We finished breakfast, I kissed Keiko, and I left the house to pick up Violet so we could join Dustin and Archie at Soldier Field for the Bears game against the Atlanta Falcons. The Bears were still too heavily dependent on Walter Payton to have a serious chance at making the Playoffs, but they had drafted several players with significant promise — Jimbo Covert, Willie Gault, Dave Duerson, and Richard Dent. If those draft picks panned out, the Bears would be serious contenders to make the playoffs and, in a few years, have a shot at the Super Bowl.

The game was hard fought, with the teams exchanging the lead several times before the Falcons scored a touchdown with less than ten minutes to go. The Bears couldn't answer before time ran out, resulting in a 20–17 loss in the opening game of the season.

"That was fun!" Violet declared as we left Soldier Field to walk back to my car. "Of course, it would have been better if the Bears had won!"

"They're getting better," I replied. "Give them a year or two."

"What are you doing tomorrow?"

"Hanging out at home. We're going to grill, but it's just my housemates, Keiko, and me. You're welcome to join us, though you'd have to take the L."

"What time are you grilling?"

"Around 3:00pm. You could easily get home in the daylight."

"What time should I show up?"

"Any time after around 10:00am. I'm having breakfast with my uncle to discuss real estate."

"The buildings you mentioned that you want to buy?" Violet asked.

"Yes. I have a pretty good idea about what I want to do, but I want a professional opinion."

"That makes perfect sense."

I dropped Violet at her house, then headed home to spend the evening with Keiko.

September 5, 1983, Chicago, Illinois

On Monday morning, I met my Uncle Alec at Lou Mitchell's. Once we ordered, I explained what I was thinking, and just as I finished, our food arrived.

"My first concern is that you're overextending yourself," Uncle Alec said after we began eating. "Your current income won't support that if you had empty units for an extended period."

"My income is going to be significantly higher than the headline base number," I replied.

"You're talking about taking commissions directly instead of as carried interest?"

"No. My commissions on new business will be much higher than I anticipated, and my base salary will also be significantly higher. I intend to guarantee the loans with my carried interest, which means I'll only pay prime plus a quarter on a five-year balloon, with zero down, and the origination fee is only a half-point. Remember, my current mortgage is covered by the rent that the others pay, and they aren't going anywhere anytime soon."

"Including Jack and Kristy?"

"They'll stay at least until he's promoted. Going back to the buildings, the two I am most interested in have a history of long-term leases, are brick construction, and appear to be in excellent shape. I believe, and I'd like you to confirm, that Wrigleyville and Lincolnwood should see above-average property value appreciation over the next ten years."

"I'm confident that's a reasonable assessment, but you know there are no guarantees."

"Obviously. In addition, you don't foresee interest rates coming down significantly in the next five years, do you?"

"Not with the specter of inflation spooking the Fed. The Reagan Administration would love to see lower interest rates to spur the economy, especially before next year's election, but the Fed is independent, and Paul Volcker isn't about to be swayed by the Bully Pulpit."

"That's my analysis as well," I confirmed. "Given that, waiting doesn't make sense because I'd forego the appreciation, and when interest rates come down, property values will increase."

"I'm not sure why I'm here," Uncle Alec said with a smile.

"Call it a sanity check," I replied. "This is your area of expertise, not mine."

"Have you had inspections?"

"No. That's the next step. I didn't want to pay for them until I was sure the finances worked, and circumstances improved significantly on Thursday."

"Something to do with KAL 007?"

"Indirectly, yes. I can't say more right now."

"Understood. Noel always did play things close to the vest. I'd say you have your mind made up, and if the finances work, then I can't see any reason not to proceed."

"Then I'll submit offers about ten percent below asking, contingent on inspections. I suspect at least the Wrigleyville owner won't budge on his asking price; it's not out of line for the neighborhood."

"That makes sense. What about management?"

"My friend Kasia is a property manager and is offering property management services. I included her fees in my financial analysis. She'll handle pretty much everything."

"That is the way to do it. On to more important topics — how is Keiko?"

"Hanging in there," I replied. "She had blood drawn for tests to see how well this recent round of chemo worked. I strongly suspect more of the same — keeping the leukemia in check. It's a matter of whether or not they can keep it in check long enough to find a marrow donor and if Keiko can avoid opportunistic infections."

"You're always a straight shooter; what do you think?"

"The same as always — we're going to fight until we win, or until we can no longer fight. The odds aren't great, but neither of us is going to give up."

"That's the answer I would expect from you. If there's anything I can do to help, please ask."

"Right now, it's about finding someone of Japanese heritage who is a match. Yes, there's an outside chance of Keiko matching with someone who isn't Japanese, but the odds are pretty long. A sibling would have been the most likely match, but Keiko is an only child. Her grandfather put the word out in the Japanese community in California, so hopefully that will bear fruit."

"I hope so, too. As I said, if I can do anything, anything at all, just ask."

"Thank you."

We had a light conversation about investing and real estate while we finished our breakfast, and I picked up the check and paid. My uncle and I shook hands, I thanked him again, and then I headed home to spend the day with Keiko, my housemates, and Violet.

We had a nice afternoon, most of it spent in the backyard, and because it was just our housemates, Keiko could join us outside without her mask. Violet stayed until 6:00pm, and then I walked her to the L.

"Violet is becoming more confident," Bianca observed when I returned to the house. "I know she's taken the L before, but she's no longer skittish or afraid of her own shadow.'

"The new counselor made all the difference," I said. "Violet is only seeing her once a month now, and she's spending time with Lily, Bev, and a girl with whom she went to school."

"That's a huge improvement from when I first met her," Bianca observed.

I nodded, "It is. Next up is teaching her to drive."

I had planned to do that during the Summer, but with Keiko's situation, Violet and I had agreed to put it off.

"What happens when you're no longer taking classes?" Bianca asked.

"We'll cross that bridge when we come to it."

The rest of the evening was quiet, and Keiko and I went to bed around 9:00pm, a bit early for me, but I very much wanted to fall asleep spooned together.

September 6, 1983, Chicago, Illinois

Despite the long weekend, Tuesday was a relatively normal day at Spurgeon, though I was a bit distracted, as I was expecting a call from Keiko about her test results. It finally came just after 10:00am.

"My blast count is 6%," she said. "Doctor Morrison conferred with Doctor Weiss, and they concurred that my leukemia is still controlled."

That was as low as it had ever been and was approaching 5%, a level which indicated remission. Of course, staying below that number was vital, and doing so without regular chemo was the goal. Unfortunately, it didn't appear that was possible, but with a blast count at that level, Keiko's overall health would improve. Her fatigue now mainly was related to the severe effects of chemo on her system rather than cancerous cells crowding out good cells.

"That's good," I said. "Almost down to 5%. Is there any word on a donor?"

"Unfortunately, no. They agreed that I should continue with the next round of chemo as planned. They'll draw blood again on the 20th to check my blast count. The same applies as last time — so long as the increase is less than five percentage points, it's considered controlled."

"OK. Do you need anything from me?"

"Always! But my grandmother is here now, so I can make do without you while you work and go to school! I love you, Jonathan! I'll see you tonight."

"I love you, Keiko-chan! See you tonight."

We said 'goodbye', I hung up and returned to work. At lunch, I informed Bianca about Keiko's blood test results.

"How long can this go on?" Bianca asked.

"Theoretically, indefinitely. Practically, with her weakened immune system, she'll eventually contract something that would mostly be innocuous for you or me, and it will be life-threatening for her. If she survives it, it would likely delay chemo treatments, which creates the potential for her leukemia to become uncontrolled."

"How long?"

I shrugged, "The doctors won't say, and the research I've done is inconclusive. Every day gives us an opportunity to find a marrow donor."

After lunch, I placed a call to Bill Wyatt.

"I'm interested in making an offer on the Wrigleyville and Lincolnwood properties," I said. "My offers would be contingent on passing inspection. I have a mortgage commitment letter sufficient to cover both properties."

"Do you have an inspector you prefer?"

"No. If you recommend one, I'd appreciate it."

"Actually, given I have the listings for both of those properties, I'd prefer not to give that recommendation for what I think are obvious reasons."

"OK. I'll call the management company I intend to use and ask for a name so we don't create a conflict of interest."

"What are you offering?"

I'd considered that question since I'd spoken with my uncle, and I'd made a slight modification, not wanting to seem as if I was lowballing the best of the four properties.

"On the Lincolnwood property, 10% below the listing price; on the Wrigleyville property, 6.5% below the listing price."

"OK. I'll fax you the offer sheets, and you can sign them and fax them back. Once I have them, I'll present the offers and let you know what they say."

"Thanks."

We said 'goodbye', I hung up and dialed Kasia Pucinski. We had a brief conversation to catch up before I explained the reason for my call.

"I use Tom Gellico," she said. "He's a straight shooter, thorough, and includes re-inspection after repairs as part of his fee. He's a bit more expensive than most, but well worth it. Let me give you his number."

She gave me the number, which I wrote down, then repeated it back to her.

"Thanks. Would you fax my attorney a copy of your standard property management agreement?"

"Absolutely. Who?"

"Nelson Boyd at Hart-Lincoln," I replied, then supplied his fax number.

"I'll do that right away! Let's have lunch when you're ready to sign."

"Of course! Thanks."

We ended the call, and I dialed the inspector. He wasn't in his office, so I left a message with his assistant with the addresses of the properties, and asked that he call me. About ten minutes later, Anna brought me the offer sheets for the buildings. I checked the numbers against my spreadsheet, signed them, and asked her to fax them back. The return call from the inspector came just before 4:00pm. We discussed his fee, and I agreed and provided him with Mr. Wyatt's name and number to coördinate the inspections.

After work, I headed to Violet's house for dinner, then went to class, and after our usual pie and coffee, I headed home.

September 8, 1983, Chicago, Illinois

"They both countered," Mr. Wyatt said when he called just before 10:00am on Thursday morning. "Wrigleyville came down 2% from their listing price, and Lincolnwood 5%. Do you want to negotiate further?"

"No," I said after a moment's thought. "I'll accept both counters. Would you draw up the contracts and send them to Nelson Boyd at Hart-Lincoln?"

"Absolutely. What kind of closing are you projecting?"

"Call it October 14th," I replied after consulting my calendar. "The funds can be available two weeks after I send all the paperwork to Will Waterston at Goldman Sachs. That gives us three weeks to complete the inspections and either make repairs or modify the sale price to accommodate."

"Sounds good. I'll get all the paperwork done and sent to your attorney."

"Thanks much!"

We said 'goodbye', and I hung up. About two minutes later, Mia let me know that Mr. Spurgeon wanted to see me in his office. I verified that she had let Mr. Matheson know, which she had, and I headed up to 32.

"Go right in," Julie said.

I walked into Mr. Spurgeon's office.