Tuesday, August 27, 2013

Living The Big Sky Life: Closing The One Percent

When I was busy living the big sky life, no one with buku-bucks purposefully came to Montana to propagate those bucks. They only came to hunt them. Like I’ve said before, the aphorism I heard repeatedly tossed around my closing room was, “If you want to make a $1Million in Montana, you’ve got to bring $10Million with you.”

And when it came to the arrival of those who could easily afford to lose $10Million in an attempt to make $1Million – a/k/a the one percent - there were usually two types of transplants: those who preferred to keep a low profile because they were looking for a hideaway (“lone wolf pack”,) and those who had a rich vision of controlling proportions (“leaders of the pack”.)

Bill Pennington of Circus-Circus fame was, from what I could see, a top dog member of the “lone wolf pack.” He knew what he wanted, and in direct contrast to the bargaining control tactics used by his neighbor, Burt Sugarman, it appeared that he preferred to go about getting it by paying a fair price for it. After buying Kiefer Sutherland’s secluded lakefront log mansion not long after my own arrival in Whitefish in 1992, he became intent upon quietly securing a privacy buffer around his new hideaway house by systematically buying up as much of the surrounding acreage as possible.

I handled one of his escrow closings for the purchase of a large neighboring parcel with a house for the uncomplicated cash price of $1Million. It was probably one of the easiest closings I’d ever done. Of course, Pennington’s people in Las Vegas handled everything except his signature. I even had the full purchase price wired into my trust account more than a week in advance of the closing date.

In preparation for the closing, Bill’s representative requested that I fax all of the closing documents to him for review. After several phone conversations, we were good to go and the funds were wired. The only problem was that no one knew when Bill would be signing the paperwork, let alone which state he’d be in when he did sign. So I sat on the funds and waited.

One afternoon in the middle of the week, right before his expected closing date, the waiting unexpectedly ended.

I happened to be manning the office alone that particular afternoon because Joan had left to do our banking and run other office errands. I wasn’t alone, however. I was with a couple of local sellers and their real estate agent, Vince Walton, in my closing room facilitating their modest $75,000 home sale when I noticed an older gentleman walk through the front door of my office and look around helplessly at the two empty desks.

I excused myself from the closing and went out to assist my surprise visitor who promptly introduced himself as Bill Pennington. He was there to sign his paperwork.

Standing before me was a 70-year old man with a full shock of white hair. He was short and somewhat stocky in stature and dressed to the nines in full cowboy regalia which included tailored and pressed jeans with a crisp center crease, cowboy plaid shirt with pearl snap buttons, and snake skin boots. The ensemble was impressively adorned with accessories made from little more than gleaming gold nuggets that shimmered in the reflective light. My eyes were blinded first by the designer belt buckle … and then by the bolo-bling chains around his neck … and then by the massive Rolex watch … and lastly by the chunky man rings that encircled his stubby well-manicured fingers.
I motioned toward the window of my closing room and told Mr. Pennington that I was with clients at the moment but would be happy to assist him when I became available. Since I expected to be finished with the closing in progress within the half hour, I told him he could either wait or return in thirty minutes when he could have my undivided attention, or he could make an appointment for another time.

He began to fidget and look around nervously as if he couldn’t decide what to do now that his schedule was going to be upended. He eventually came back with, “Is there any way I can do it now because I have to be at the shooting range in 45 minutes?” Wow, and impeccably dressed to impress he was, even if it was only for target practice.   

I thought for a second and offered him a seat at my desk as I pulled out his file. I put the documents before him, quickly highlighted where he needed to sign, and reminded him that I needed to return to my closing.

When I walked back into the closing room, I could see that Vince Walton had perked right up as he excitedly asked me, “Isn’t that Bill Pennington?” I merely looked at him and continued with his sellers where I’d left off. At this point, Vince had noticeably lost interest in his little $75,000 sale and seemed to want only to stare at Pennington sitting at my desk.   

My desk sat right outside of the closing room, and through the closing room window I could see Bill shuffle around those papers with the expression of a lost child, but sign nothing. After five minutes of that, Joan finally walked in and reacted with surprise when she saw him sitting at my desk. She exclaimed in her usual high-pitched happy voice, “Oh Hi! And who are you?” I overheard Bill explaining to Joan how I’d given him the paperwork to sign, but I had gone through everything so fast that he wasn’t sure if it was right, that maybe I’d missed something. Internally I was howling as I watched Joan stand next to him and kindly guide him through his signing as she would a novice first-time homebuyer, not a seasoned investor who’d just paid $1Million in cash for a little privacy buffer. It was one of the funniest oxymoronic scenes I can remember ever having during my days in that office.

I learned after leaving the Flathead Valley that the Big Mountain Ski Resort had a persuasive infusion of capital around 2007, and with the cash came an official name change to Whitefish Mountain Resort. The community and Big Mountain owner/operator, Winter Sports, Inc., had “leader of the pack” and one-percenter, Bill Foley of Fidelity National Financial fame, and his very rich vision to thank for that. Apparently even the local MOWBs could be convinced for the right price that change was inevitable.

Around the same time, Foley additionally acquired a 30,000 acre trophy ranch near Deer Lodge called the Rock Creek Cattle Company. Because he did a Burt Sugarman and secured the surrounding 50,000 acres for cattle grazing via lease from the state of Montana - thereby increasing his controlling proportion to 80,000 acres in total, he’s been able to market the exclusive development as a working ranch to other city slickers of his financial caliber. I wouldn’t go so far as to call that sharing the wealth, but more like like attracts like.

So how have these infusions by the one percent changed the quality of life for the regional residents in a state that has no sales tax? Apparently it’s gone a long way toward pricing many of the locals out of home ownership, especially when the property taxes for homes around Whitefish Lake alone have increased about 2000% in the last twenty years. And everyone knows that no cost of living increase of that magnitude has managed to trickle its way down into the average worker's paycheck.

Living The Big Sky LifeTM
© by DK King

Tuesday, August 13, 2013

Living The Big Sky Life: Famous Files

Although U.S. Highway 93 (a/k/a “Pray for me, I drive 93”) was considered during my residency to be the most direct route north into Whitefish from Kalispell, there were several other north/south options into town as well. Farm-To-Market Road was an old west-of-town option. Highway 2/LaSalle Road was an east-of-town option, and where Kalispell’s Glacier Park International Airport is located. And then there was Whitefish Stage Road which ran parallel between Highways 93 and 2.

It was west of Whitefish Stage Road just south of Highway 40 that you would’ve found Wagon Wheel Road – home to the house once owned by Emilio Estevez. When it came time to exchange his humble hideaway house in the Wagon Wheel neighborhood south of town for something more desirable like waterfront property on Whitefish Lake, he listed his property for sale with local agent, Ben Singer.

Ben Singer was, and I’m assuming still is, a longtime local real estate broker who – I was told - had Hollywood connections. He was known to handle his fair share of the valley’s higher profile celebrity transactions so I had little reason to question what I was told with regard to the family connections he had. The transactional truth in dealing with Ben was hard to deny however. He was obviously getting the business somehow and it wasn’t because of his business acumen or acute attention to detail. It seemed that’s what his wife, Candace, was for, and frankly, it was a good thing he had her.

I never knew Ben before the accident, and therefore have nothing to compare things to, but I was told that after he dangerously slammed into a tree while skiing and suffered a serious head injury, he was never quite the same. No surprise there. He was lucky to be alive they said. One had to admire his spirit and perseverance in spite of it all, and far be it from me to take that away from him.

The low key sale of Emilio’s low profile Wagon Wheel Road house sometime in 1993 was hardly noteworthy … until I got an urgent phone call one morning from Ben asking me to come to his office in person to do the closing that afternoon. Not a biggie unto itself, but it was something that simply never happened in Whitefish. My office was barely three blocks away from Ben’s office and was by far the most efficient closing option. But he insisted, so I complied without really understanding what all the fuss was about.

I showed up at Ben’s office as agreed, briefcase in hand, and was ushered into a poorly lit windowless conference room where Emilio and then wife, Paula Abdul, were seated around the closing table. Emilio was seated at the head of the table with his back to the door. Paula was seated near the middle of the table to the right of Emilio backed up against the wall, and Ben sat in a chair in the corner between Emilio and Paula, also backed up against the wall. I chose to sit at the table to the left of Emilio and across from Paula where I could see everyone in the room.

After the introductions were made, I pulled the closing paperwork out of my briefcase and began the signing. The house was bought by Emilio prior to his marriage to Paula so she was not an owner/seller of the Wagon Wheel house, and was in attendance as merely an observer. My dealings were solely with Emilio at this point.

His intentions were to sell the Wagon Wheel house utilizing a 1031 tax deferred exchange which required legal agreements/paperwork be prepared by the MOWB (and in my opinion, inept) Kalispell attorney Ben had referred him to, and the exchange accommodator chosen by said attorney whose sole function was to act as a neutral third party to the transaction for the purpose of holding the sales proceeds from this closing in a trust account only he controlled for later use in the exchange purchase of a new lakefront property yet to be named.

1031 exchanges are done all of the time in the investment real estate business. The tax code is complicated and the requirements for a successful tax deferred exchange are very specific so the details are extremely important. One of the most important requirements for a successful exchange stipulates that the seller should never have control over the funds received from the sale of the exchange property, or the “down leg.” Another requirement is that ownership to the newly purchased property, or the “up leg,” must match the vested ownership of the down leg property at the time of sale.

The exchange accommodator for Emilio’s transaction was a Kalispell accountant whom I’d never met (other than over the phone) but had transacted other uneventful 1031 closings with. I had no real reason for concern this day, but I would be lying if I didn’t say the entire 1031 accommodator thing has always disturbed me, for a variety of reasons - the primary being that the accommodator can theoretically be anybody. No insurance or bonding required, no protection for the seller and its funds being held in trust by some unknown the seller is supposed to trust - a person who could essentially abscond with enormous sums in cash proceeds if so inclined. And believe you me, it’s happened.

Let me add too that the IRS typically does not care if the seller’s down leg proceeds have been embezzled by an unscrupulous accommodator. It will require the seller to pay any capital gains tax owed on the proceeds realized from the sale of the down leg should the up leg purchase not be consummated as required by the tax code. No matter the reason.

As I began moving paperwork by Emilio for signature, we chatted casually about the house being sold and the ping pong table being left behind, but when we got to the exchange part of the closing, there was nothing casual about his examination of the attorney prepared paperwork. His sales proceeds were relatively substantial and quite unexpectedly, he focused his piercing blue eyes upon me and asked the million dollar question no seller had ever asked me before: “What’s to keep this accommodator from taking off with my money?”

I could see Ben’s face in the corner go apoplectic red as his eyes bulged in their sockets, but Emilio was oblivious to everything except my answer, which was, “Well, you’d better hope he has a wife and a family that he loves.” What else was there to say? He was a smart man or he wouldn’t have asked the question. His response (and I was the only one who saw it) saw his sharp blue eyes widen to double their size, and then he quietly turned to re-review the attorney's paperwork as he slowly exhaled. And that was it. He signed everything while we informally conversed about what he was looking to replace the Wagon Wheel house with.

The up leg purchase was going to involve Paula and that’s where her paranoia of paparazzi got involved. She was adamant that everything be top secret. She wanted absolutely no one to know anything about anything. Having been a part of the Flathead Valley for as long as he had, Emilio was far more laid back about the whole thing, but strived to pacify Paula all the same. The ownership vesting on the up leg did ultimately prove to be an issue, but the attorney believed he knew better so I shut my mouth and proceeded as instructed. 

Less than a month later, Penny Brooks , the listing agent on the Whitefish Lake house Emilio had identified as his up leg delivered the signed contract to my office so we could open escrow. It was indeed top secret and she wanted to make sure Joan and I understood the confidentiality clause in the contract. Yes, of course - every transaction that took place in our office was treated with the level of confidentiality now required by law simply because I believed that good business was nobody’s business.

It wasn’t long before word got out around town all the same. Penny came storming into our office one afternoon in a fit of rage accusing us of violating the contract’s confidentiality clause by divulging sensitive details about the super-secret sale on Whitefish Lake. I told her flat out that if word got out, it didn’t come from my office. Hell, Carla didn’t even know who Emilio Estevez or Paula Abdul were. Penny was unconvinced and left in a dramatic huff.

It wasn’t long after those false accusations that we learned the source of the leak was Penny’s very own seller who’d gotten drunk on the golf course and bragged over the course of an afternoon to anyone who would listen about who was buying his house. So much for confidences and small town secrets.

And now for my favorite part! On his new lakefront purchase contract, I noticed immediately that Emilio had set the earnest money deposit for the exact amount of the sales proceeds I’d deposited with his 1031 accommodator on the down leg sale barely a month earlier. All of that money he was justifiably concerned about was now going to be legitimately moved from the unknown to the known until close of escrow - from the accommodator’s trust account to Ben’s broker trust account where Emil clearly believed it more secure. 

I chuckled with smug delight for days, and have been air high-fiving Emil ever since. Nice job, Mr. Estevez. I suspect your brother would righteously call this "Winning!" 

Living The Big Sky LifeTM 
© by DK King

Saturday, August 10, 2013

The Journey

A special thanks to Artist KAd Collins for allowing me to use as my avatar the magical surrealistic portrait she created in silverpoint called "The Journey." She has beautifully captured a part of my life's journey in a highly personalized story-telling work of art bursting with expressive and meaningful symbology. For me, it transcends all words.

The Journey © Copyright by Artist, KAd Collins
To find out more about the artist or to commission your own surrealistic story-telling portrait, contact the artist directly at ArtistKAdCollins or KAd's Etsy Studio.
© by DK King