Where We Are Now: July 8, 2020
July 8, 2020 | Source: Compass California Real Estate Blog
Work From Home — Day 110 – Let’s Get to the Close
Reflecting back on the surprise I articulated on WFH Day 80, I was now facing a closing delay that was entirely my fault and responsibility. Morgan Lane Marin’s “bookkeeper on a beeper” was not going to cut it to run Pacific Union. We had no accounting systems and no way to operate the fiscal business.
Here comes yet another call to Dave Lacey at Brookfield. Remember he had thrown me a lifeline in late May 2009, 34 days from closing.
In summer 2009, as you can imagine, Brookfield was motivated to get Pacific Union off its “books.” While a closing extension of 30 days is not forever, realize that we were in the darkest of economic times and market dynamics had the business in a rough spot.
Lacey’s response to my call for lifeline #2 was “Sure, we can provide a 30-day extension on the close, but you have to take the downside risk for the financial performance of the business.” On the surface a simple request.
A few things to keep in mind:
- This was late June 2009. Dow was at 8,500 up from March 2009 lows of 6,600.
- The business was cash flow negative of $3.5 million YTD.
- We were buying the business “blind.” We were talking to no one on the management team, only Brookfield / GMAC. We did not visit offices. All due diligence was paper based.
We came a long way to get to closing – no backing out now.
We negotiated a transition agreement with Brookfield / GMAC where closing was delayed to August 4, 2009. As buyers we had 100 percent of the downside risk for the losses in the month of July and none of the possible upside benefit. Essentially, if the business lost money we would increase our purchase price accordingly. If the business made money, Brookfield benefitted – this was a fair arrangement and our second lifeline.
In July 2009, approaching closing, we decided to gather the Pacific Union management team to share the news. Approximately ten days before closing, we gathered at the St. Francis Yacht Club for a morning meeting hosted by Avram Goldman, then CEO of Pacific Union. This was likely the most important job interview of my life. I needed the Pacific Union leadership team so much more than they needed me.
In the ensuing days, and years including now, Avram Goldman was the greatest stand up executive I could imagine. He was transparent, honest, helpful, and encouraging. Today, Avram is enjoying the good life with his family and selling real estate in Sonoma, CA. Thank you, Avram!
Dave Lacey’s balance and patience were critical in this journey. Same for my new partners, the executives at Fidelity National Financial.
Clearly, we got the deal closed. As I remember, Pacific Union effectively broke even in July 2009, so no additional money, over the original purchase price, changed hands at closing.
The experience was exhilarating to say the least. Every other day I woke up thinking this is an amazing opportunity vs. this is the craziest idea imaginable. Both thoughts proved to be true.
The lessons learned are:
- Follow your instincts and trust your gut.
- Relationships, like Dave Lacey, the executives at Fidelity National Financial, and Avram Goldman, are so very important in life – treat everyone with great respect and admire how they contribute to your own success.
- Compete and excel. Be one of the good that become great!
August 4, 2020 will be eleven years – hundreds of people have contributed along the way! Too many to name but enough to remember – I have a few gestures and favors left to return to others!
This is Where We Are Now.
Mark A McLaughlin