Chapter 20

The meetings I had with the two banks were real eye openers. According to what they were telling me, I'd need to pledge just about everything the company owned in the way of assets, including my six partially completed houses and the remaining six lots in the tract. In addition to this, they wanted my home and all my coin collection.

One of the bankers told me I could borrow one hundred thousand, using the forty two paper lots alone as collateral. He assured me that, after I'd signed the contracts to take the paper lots to a final map status, I could then qualify for a new loan for a total of $250,000.00.

I had enough extra cash to be able to swing the purchase price for the new lots, and then pay for the engineering with the loan of $250,000.00, but it would stretch me far beyond where I could see my way clear to going. To me, borrowing from either of the banks, under the terms they were offering, just wasn't an acceptable option.

I ended up calling the engineering firm and delaying, for two weeks, the contract signing. When I explained to one of the engineering partners the problem I was encountering with securing financing, he just laughed and told me that what I was finding was the norm, not the exception.

He told me all bankers were leery when it came to lending to home builders. He said it was because too many builders had stuck banks with failed projects that had ended up with their collateral sitting in limbo in some bankruptcy court for several years. When this happened, the unfinished houses were either heavily vandalized, or else the bank ended up expending vast sums, paying for on site security.

In spite of how my day had gone, I was still determined to go ahead with the purchase. To me, it was simply a question of value. Those lots, when taken to final map, would be worth about twice what they were going to cost me. If they would be worth that to me, I had no doubt at all that they would also be worth that to other builders and architects in the area.

It was too bad that I didn't have my father working with me yet. I sure could have used him to free me up, time wise, so I could go to work on securing whatever financing I would need.

I was pretty sure my home would appraise for no more than forty five thousand. I could probably get a $36,000.00 mortgage on it. My best bet would be the coins. The biggest problem would be in getting someone to make me a loan, since I had no intention of selling them outright. To get a loan, I'd first need to get a professional appraisal. I found a company in Newport Beach that had a very good reputation as certified coin appraisers. I got an appointment with them for the following Monday morning.

I was nervous as I rang the buzzer to be admitted into the storefront of the coin appraiser. In my briefcase I was carrying my entire coin collection. I was paranoid about someone sticking a gun in my face and making off with my most precious possession. Over the years, these coins had served as my security blanket. I'd always counted on them to rescue me in case some calamity struck in business, and I needed them to bail me out.

Having them had given me confidence, and a feeling of security much stronger than what an insurance policy would have provided. I had faith in those coins, had counted on them as an emergency reserve for all of my adult life. The thought of using them for collateral now, to fund part of this new project, was unsettling to me.

After the door buzzed, I opened it and stepped inside, watching as the door closed and audibly clicked shut again. All the way at the back of the store stood an older gentleman. He appeared to be old, probably in his late seventies, or even eighties. I could tell he wasn't very tall, was mostly bald on top, with snow white hair on the sides. He wore glasses and had an abnormally large sized head.

"Hello, I'm Jim Flanagan. I have an appointment to see Mr. Kaplan." I had started speaking to the man as I approached the counter he was standing behind. He extended his hand, which I shook.

"I'm Bernard Kaplan. When we spoke on the telephone, you said you have a collection of Carson City silver dollars you'd like me to look at?" He had a very deep voice, which for some reason surprised me. Deeper than the deepest baritone, well into the bass range.

I placed my briefcase on the counter and started pulling out the coins. I placed the thirty five hand sewn pouches on one side of the briefcase, and the small carved wooden box on the other. I took the empty case and set it down on the floor by my feet.

Mr. Kaplan put on another pair of glasses, like a watchmaker would wear, with other lenses that moved on the frame near the regular lenses. I watched as he lifted each pouch and carefully exposed about half of the coin. He'd manipulate the coin inside the pouch as he examined both sides. At times, he'd set the pouch down and adjust the moveable lenses before continuing his exam.

When he was done with each coin, he'd secure it back into the pouch and set it down. He'd pick up his pencil and make between five and ten lines of notes for each coin. At the bottom of each of the coin notes he'd write in a dollar sum. The sum for the first coin was $8,000.00. Some of the later sums were as low as $600.00, but the vast majority were in the thousands. One coin he wrote $23,000.00, then crossed that out and wrote $26,000.00.

It took him over three hours to examine the thirty five coins and make all his notes. He had over ten pages of notes when he finished. I saw him looking over at the wooden box when he was done with the loose coins. I pushed the box over to the cleared space in front of him. When he had the lid raised I saw the amazed look on his face.

"This was a reward given by the mint in Carson City to a security guard who thwarted a robbery of a mint wagon. These are, according to what the seller told me, twenty five of only one hundred proof coins the mint made that year. The seller also told me that the security guard was his late wife's father. He gave the loose coins to his children as birthday and Christmas presents over the years. The wife bought out her sibling's coins because they were going to spend them for other treats. She made all the pouches to keep the coins in."

"I see a lot of value here, Mr. Flanagan. Tell me what it is you wish to do with these coins?"

"I want to take out a loan against them. I've owned them since I was sixteen. I want to keep them in my family for as long as possible. They've become a sort of talisman for me."

"I see. How much are you looking to borrow with the coins as collateral?"

"This is why I came to see you, Mr. Kaplan. I was told that these coins were the best examples of the mint's output over the years. The guard had friends who worked inside the mint who saved particularly well struck coins for him to give out to his children."

"These are the finest examples of this genre that I've ever come across. To the right collector, or at auction, this collection of yours would command an enormous sum. How long would you need the proceeds? What interest rate and terms were you thinking of?"

"I'd like three hundred thousand dollars, interest only, for a period of three years. I have other assets, besides the coins, that I'm willing to encumber to raise the rest that I'd need."

"What is the loan's purpose?"

"I'm a home builder. I'm buying forty two home sites and will be building all the homes with my construction company. The project will last about two and a half years. Each home will be selling for between fifty and seventy thousand dollars."

"And the terms for this loan?"

"Eight per cent interest, payable quarterly on the outstanding balance, with a lot release and pay down clause as each home is sold and the mortgage funded."

"Would you tell me the nature of the other collateral you plan to use, and the amount you wish to borrow against it?"

"I have another twelve lots, with six homes partially built, and the other six lots already prepped with all utilities in place. I also will put up the property that I'm acquiring. I will need to retain some of the money from each home sale to pay for materials and labor for the next homes I'd build. I'll be building these homes six at a time. I also own my own home, free and clear. I'd be willing to use it for this loan as well."

"May I ask you how long you've been a home builder, Mr. Flanagan?"

"I started learning the trade right out of high school. I went out on my own about four years later. I've been building about six to ten homes a year ever since. I've never failed to make a decent profit on any home I've built and sold, with the exception of the home I now live in. If I were to sell it now, I'd probably make at least a fifteen to twenty thousand profit. The real estate market is very robust, and I see nothing to indicate any slow down occurring in the foreseeable future."

"I have a son who makes short and long term business investments, Mr. Flanagan. Would it be all right with you if I called him so that the three of us could have lunch together and discuss your proposal in more detail? For my part, I would guarantee to purchase your coin collection from him, for the three hundred thousand dollars you are requesting, should something happen that sent you into foreclosure on the note. As collateral, the coins wouldn't justify him lending you the three hundred thousand unless he had a guaranteed buyer. Your problem will be convincing him that the rest of your collateral justifies the additional two hundred thousand you'd be requiring."

Mr. Kaplan made the phone call to his son and the two of us left soon after, in my pick up, with my briefcase left behind, locked up in Mr. Kaplan's large safe.

Daniel Kaplan looked a lot like his father. He was dressed in a nice suit, and appeared to be in his late fifties or early sixties. His hair was white like his father's, only on the sides though, as he too was bald on top. There were dark hairs in his fringe, which gave him more of a salt and pepper look. When he smiled, he reminded me of a modern day Ben Franklin, as he wore his fringe hair rather long, and had those same small glasses old Ben wore.

The restaurant we went to was nothing special to look at, but they served the best sandwiches I'd ever tasted. It was a deli, and there were quite a few customers, both eating lunch, and just there to buy the meats and cheeses. I had a hot pastrami sandwich with a big dill pickle, sliced in quarters lengthwise, and a huge bowl of coleslaw.

We all talked business while we were eating. I sensed that Daniel Kaplan was a very busy man, and that he'd only agreed to this luncheon because his father had asked him to come. His father laid out all the pertinent facts, from memory, including all the terms and collateral. When he got done with his recitation he said something which shocked me.