How could such a thing happen?
(Reading time aprox. 13 minutes)
1939 was toward the end of the terrible depression years — high unemployment and critically austere financial times. The country was trying to recover. Real estate sales were very poor, especially business properties.
Bruno Giordano was the owner of a portable hot dog and pretzel stand space, on one of the busiest corners in the city. It was right at the exit of the Market Street subway, in downtown Philadelphia. This year Bruno was doing better than almost any other vendor in downtown Philly. It didn’t take a rocket scientist to see that the bandage around his seemingly broken leg, sitting in a wheel chair, and holding a sign with the word “PLEASE”, helped his business. The sign read:
BUY A DELICIOUS
HOT DOG, ONLY 10 CENTS.
CLEAN GIANT SOFT PRETZELS 2 CENTS.
(TAKE ONE HOME FOR THE FAMILY)
Bruno’s sidekick, 14-year-old Joey, dispensed the pretzels and hot dogs sold at his stand. Joey handled them with surgical gloves, from a container covered with glass, onto butcher’s paper sheets to wrap for the customers. A thousand times a day, Joey would call out, “Buy a hot dog mister, please? Buy a pretzel lady, please? Take one home for the kiddies pretty lady, please?” Any wonder they sold more than any other vendor, and even more than Bruno ever sold, before Joey joined him. Joey was the charmer and said, “PLEASE.” Joey handled all food with tongs and forks, which no other pretzel or hot dog vender did.
This would be a good time to suggest that you read my other story entitled: “Bruno and Joey,” It will give a good background and better understanding of how such a near impossible thing like this story could actually happen.
On a hot day in August 1939, a sale sign was placed on the front of an office building, in downtown Philadelphia. It was on the corner where Bruno sold his pretzels and hot dogs for 10 years. He was on this corner ever since the financial markets crashed in 1929. He started with pretzels only, and made his living pennies at a time. A pretzel vendor doesn’t carry prestige, but does reward a jobless man with pride. Then he met Joey. Things changed big time in both lives. It was before WW 2 when an accident became a blessing for Bruno and Joey. A sign was affixed to the office building where they had the hot dog and pretzel stand. It read:
Commercial office building
MArket 4 9999
This “FOR SALE” sign on the building upset Bruno greatly. He reasoned that he would have to vacate his site if a new buyer bought the building. The former owner, Abe Fenstermacher liked Bruno, and with his influence and gratuities, Abe did whatever was necessary to keep the police, any city officials or other vendor from bothering Bruno. This is what they mean when they say, “He’s connected.” Bruno was deeply concerned that he would loose his site, and didn’t know what to do. He only went to 8th grade in school, and then dropped out when his father ran away with a young girl and his mother died. He was completely alone and depended mostly on the unsavory characters in his neighborhood to get along.
Things changed. Abe Fenstermacher died. His only heirs were two sisters, both poor in their own right and estranged from any good family relationships, even with brother Abe. They were his only sisters and now his only heirs, but there was no love lost between them. Now this highly mortgaged building had to be sold or was destined for foreclosure. In this depression time, there was no market. A sale was unlikely, especially since the rents from the partially vacant suites barely covered the existing mortgage payment. It was literally “under financial water”.
That night, 15 year old Joey said to Bruno, “Why don’t you call that lawyer guy dat fixes da parkin’ tickets, what’s his name?” “Youse mean Izzy Epstein, the Esquire”, said Bruno. “Yeah, dat’s da’ guy. Ain’t he connected”, Joey asked? “Yeah, good idea, kid. He’ll know what to do.” Bruno just didn’t know how ridiculous the whole idea was, and didn’t care. He just knew Izzy, was known by his friends as the lawyer to make magic legal things happen. “Izzy the Esquire”, called endearingly by connected friends, was working late. His office was in his home, on S. Broad Street. Izzy answered the phone. Bruno said, “I gotta see ya’ It’s important.” They made a date to be at Izzy’s office the next night. Bruno and Joey went together to meet with Izzy. They explained the situation, plus their personal relationship. Bruno said, “I don’t know nuttin’ about buying and selling no buildings, but I want youse to fix it so’s I can own dat building.” “How much is it”, asked Izzy? “I don’t know”, said Bruno. “I’ll call and find out”, Izzy replied. He called the phone number on the sign. Here is what Izzy found:
The price, $500,000. This was a center city office building but might as well have been five million. Bruno had no money and didn’t understand such big numbers. All he knew was he wanted “Izzy should fix it.” He didn’t understand, that it just couldn’t happen. Bruno kept saying, “Youse can fix anything. Just do it. It’s for me and da’ kid here. PulI one of them strings of yours. I want youse to fix it. Do watcha’ gotta do.” “Let me make a few calls”, Izzy said, “and I’ll get back to you.”
1. The present mortgage was delinquent and foreclosure was imminent. However, the bank was allowing forbearance because of the economy, and they really didn’t want to own a financial looser. If they had to take title at foreclosure, it would just be another liability on their hands and financial statement, the same as all of the other foreclosures. On the bank’s books, it looked now like an asset, delinquent. Foreclosed, unless someone bought it, the building would be a great big liability. Not good for the bank.
2. The two sisters who were on the deed as joint tenants, were now the owners. They had no money at all to maintain the building nor pay any arrearages. A foreclosure against them would not look good.
3. Any deal to purchase and take it off the sisters’ hands would be acceptable to them. Their attitude was get if off our back anyway it can happen, but get rid of it.
4. The bank was willing to lower the interest rate on the mortgage from 6% to 4% if they didn’t have to foreclose. They were promised there would be some payments from rent collected, after a four-month forbearance of payments. The bank’s option was to foreclose but there would be no bidders in that economy. It was not a viable option. Anything was better than nothing, and Bruno was the only person on earth who would take the chance. It probably could never happen again except to a guy like Bruno the pretzel vendor, whom the bank knew was connected. Connected people make crazy deals, and many times just names of people used to make deals. They were not the actual principals; they were “STRAW BUYERS”. As an aside, there were very few foreclosures of properties in Bruno’s neighborhood. In South Philadelphia, many properties were owned by “connected persons” during the depression and prohibition in the 30s. Lots of “peculiar” deals happening with the “connected people”, and “Izzy the Esquire” was handling many of them.
“THE IMPOSSIBLE DEAL”
When Abe Fenstermacher knew that he was dying, he gave every red cent of his cash and financial holdings to charities, just before his death. He knew that the heirs could not carry the expenses for the building, which had a serious negative cash flow. It was a financial albatross. The sisters would surely lose it to a foreclosure or a tax sale. Abe hated his sisters and this was how he would get even for some family problems in their past. There was no cash for down payment or any of the costs to make the deal. Bruno was not qualified for a mortgage and had no cash. It just couldn’t happen, but it did, and here is how:
1. Bruno would assume the existing mortgage and commence making payments three months after settlement. He would need at least three months rent before he could start making the payments and take over the mortgage. The bank agreed.
2. In the three months after settlement, he would make offers that could not be refused, to the connected guys who were friends. He knew they were connected in the rackets, particularly liquor. They could use the space as their offices. The guys liked the idea. A “fancy schmancy” downtown office, centrally located for legitimate fronts, gold leaf letters on the doors, and cheap rent. Even “Izzy the Esquire” would use one, with confidential cheap rent, just to get the building full and a cash flow. It would be enough to pay the bills and mortgage payments. “Izzy the Esquire” would handle everything. He was the attorney and agent of record.
3. The family would have to make the mortgage payments and pay all settlement costs from the rent, to be accumulated for the next three months. This was possible by the forbearance agreement with the bank, until the closing date. Both the family and the bank were boxed into a financial corner and had to agree or no deal. Then, everyone looses.
4. The lawyer, Izzy, agreed to take his fees from the future rents until paid in full, if ever. He would then be managing the building for a usual 5% management commission from Bruno, thereafter as collected. A good deal for everyone! If it failed, the only looser was “Izzy the Esquire” for his time involved. Now it started to look like a real winner.
There were many things that could go wrong with this transaction, but they just didn’t happen. It was as smooth as any other real estate deal, and everyone was happy. No money passed hands; Bruno Giordano was the new owner and no cash.
Bruno and Izzy influenced their connected friends to become tenants in the newly named “Giordano Building”. It worked well for the first two years, then came Pearl Harbor. Every office building in town became filled to capacity. Rents went up and the Giordano Building was 100% filled and now very profitable. Everything was wonderful, except one thing: In the middle of 1942, when Bruno was 60 years old, He died.
Fortunately, “Izzy the Esquire” had Bruno make a will which left everything to Josephine (Josey) formerly Joey. She was still too young to own real estate, but Izzy was the executor, trustee and guardian. He played everything straight and made everything work. Josey was now an heiress. She inherited Bruno’s Trinity house in South Philly, which would be her permanent residence; the hot dog stand, where she would still work every day like Bruno did; she also inherited the 20 story Giordano office building in downtown Philadelphia, now worth a couple million or more; plus a couple thousand bucks cash that Bruno kept in a shoe box under his bed. It was under the bed because there were no closets in most Trinity houses. In the home, there were hooks on the walls for hanging clothes. Storage was either in bureaus, chiffoniers, hanging on the wall hooks or clothes boxes under the beds. He also kept a potty under the bed. It was a long walk up and down the narrow steps to the outside cold potty room in the winter, on the back of the house, with no plumbing. That’s the way many Trinity houses were.
Josey, the runaway, with her seventh grade education, counted on “Izzy the Esquire” for complete guidance in all business things from then on, with one exception; she made all the decisions about the pretzel and hot dog stand. There, she was her own boss! She continued with the business in front of her own Giordano Building. Who knows, she may still be there. The new sign now read, Bruno and Josey’s soft pretzels and hot dogs. Josey bought a new truck and towed the hot dog stand to and from a new garage, which she also bought, near her Trinity house in South Philadelphia.
This deal was the impossible deal, but “Izzy the Esquire” made it all happen. He really was the legal magician from South Philadelphia, and Josey is a millionaire selling pretzels. I wouldn’t be surprised if she now owned the whole pretzel factory.