Commonwealth

"On June 16, 1940, France collapsed. Britain stood alone, under constant air attack and threat of invasion, while Germany controlled all of Europe. “Let us therefore brace ourselves to our duties,” Churchill exhorted, “and so bear ourselves that if the British Empire and its Commonwealth last for a thousand years, men will still say, ‘This was their finest hour.’"

"When he was done, Ted Ashley and I made the presentation of the Kinney offer. At first, our discussion was a litany of numbers, the dollars and cents we would pay for the stock, and the promising financial potential we saw in the studio’s future. This was a typical investment banker’s strategy: stick with us; we’ll make you rich, and then even richer. But, rather untypically, after I had waved the golden carrot, I proceeded to brandish a very sharp stick. I announced that we had taken it upon ourselves to alert the SEC to Commonwealth’s financial shenanigans. And, in another uncommonly aggressive tactic, we had also shared our analysis of the Commonwealth balance sheet with its large institutional shareholders. This was not the way we generally conducted business at Lazard, but the deal was not our usual sort of deal, nor were we up against the usual sort of principals. On behalf of our clients, we could, when it grew necessary, become fiercely pragmatic. Rozet was furious. As he stormed out of the meeting, he paused to shove his face directly up against mine and shout that he would sue me. But it was too late. I knew that Charles Allen and Bernie Cornfeld were too sophisticated and too practical to tie their futures—and capital!—up in a teetering corporation. They would have no choice but to negotiate the best deal they could with Kinney. Which, in short order, they did."

"The fund chairman opened negotiations by saying he wanted to buy the shopping centres at a discount. He and his fellow directors were determined that their first venture look good. The custodians of the superannuation of tens of thousands of Commonwealth employees could not be seen to do anything risky or that didn’t pay well. Stokes’s view of what happened next is that he and Bendat worked out a way to keep both sides happy. Not everyone would agree with this later. Stokes and Bendat outlined a deal that saw them get paid less upfront than the going market price, a figure based on a multiple of rent returns. Stokes explains: ‘The shopping centres were selling at a yield of about 8 per cent — roughly the value of the rent roll multiplied by twelve, so if you got $10 million rent a year then to buy the building is $120 million. But the super fund wanted to give a better immediate return to its members, so it needed a 10 per cent return, not 8 per cent. We said we’d share the future in return for giving away a bigger share of the present.’ Bendat and Stokes agreed to sell the shopping centres for ten times the annual rent value instead of twelve times — a big discount that came with some long and lucrative strings attached. Lucrative for the sellers, that was. ‘We finally did a transaction where we shared in the rental income and some of the capital growth, so that after five years we shared 50–50 in any rental increases and at the end of ten years we’d take a share of any increase in capital value.’ This arrangement would be ‘locked in’ for thirty years."