Chapter 533: Eden’s Development Plan

September 27, 1991, Friday, morning.

New York, Waldorf Astoria, 21st floor.

It was rare for Satsuki to sleep until eight o’clock today.

Matters on Salomon’s side finally came to an end, and the external messaging had already been finalized with Frank last night, finally clearing a large chunk on today’s schedule.

According to Chizuru’s original arrangement, the morning was supposed to be for rest.

Just past nine o’clock, the doorbell rang.

"Miss, Mr. Hale from Carlyle has arrived."

Chizuru glanced at the schedule in her hand with a somewhat helpless expression.

"He said it was arranged in advance, and he also brought a guest."

Satsuki was spreading butter on a piece of toast at the dining table, and her movements paused at these words.

It was indeed arranged.

Sitting at Carlyle for an entire afternoon the day before yesterday, Robert Hale had indeed mentioned before leaving that he wanted to take up a little more of her time after Salomon’s business was settled.

Only she thought what the other party meant by "a little time" would at least be until next week.

"Please show them to the reception room, I’ll go over after changing my clothes."

She glanced down at the toast, hesitated for two seconds, and still shoved the whole piece into her mouth.

...

In the reception room, Hale had already stood up.

This Carlyle partner was in his early fifties, wearing a gray suit with a meticulous tie, the kind of appearance that could be found in a dozen versions at any cocktail party in Washington.

The person standing next to him, however, was somewhat different.

Around forty years old, tall and thin, somewhat tanned, wearing a suit that was obviously newly bought, with the shoulders still looking a little ill-fitting.

Tucked in his hand was a blueprint tube larger than a briefcase, and standing in the Waldorf Astoria reception room, he looked like a contractor who had just been hauled over from a construction site.

"Miss Saionji," Hale walked up first, "Congratulations."

"I watched the live broadcast of yesterday’s shareholders’ meeting in my office. To be honest, I originally thought it would argue for at least another week."

"I thought so too."

Satsuki shook hands with him and sat down on the sofa.

"But Mr. Buffett wanted to argue even less than I did, so it ended early."

Hale chuckled.

"If The Wall Street Journal heard that sentence, it would probably make tomorrow’s front page."

"Then I’ll have to trouble Mr. Hale to keep it a secret for me."

After exchanging a few pleasantries regarding Salomon’s follow-up arrangements, Hale quickly changed the subject. He clearly also knew that the time of this Japanese Eldest Miss before him was not cheap.

"Actually, coming here presumptuously today, besides offering congratulations, there is also a project we have been studying recently that we’d like you to consider."

He turned sideways, gesturing to the tall, thin man beside him.

"This is Mr. Thomas Eden, a developer from California."

"Over the past half year, Carlyle has been paying attention to how land and facilities can be reused after U.S. military bases are closed."

"Thomas’s project is one we encountered during this process."

Saying this, Hale looked back at Satsuki.

"I thought you might be interested in it, so I specifically invited him over today."

"Miss Saionji."

Eden reached out his hand, giving a very firm handshake.

"It’s an honor to meet you. I’ve watched you on TV for three days, and today I finally get to see you in person."

"Am I quite fierce on TV?"

"... No, you’re younger than you appear on TV."

Eden paused for a moment before answering, obviously not expecting the other party to make such a joke first.

Satsuki blinked.

Well, this answer is barely passing.

"Alright, Thomas."

Hale timely took over the conversation.

"It’s already not easy for Miss Saionji to take time out to see us today. Don’t you have a lot of things you want to show her?"

"Oh, right!"

Eden looked as if he finally remembered what he was here to do today, and quickly picked up the blueprint tube that had been resting at his feet.

"Miss Saionji, I brought a layout plan today. If you don’t mind, I’d like to start by talking about the place where this project is located."

"Of course, please go ahead."

With permission granted, Eden placed the blueprint tube on the coffee table, unscrewed the cap, pulled out a roll of blueprints, and spread them out on the tabletop.

Then he took a few metal weights from his briefcase and pressed down the four corners of the blueprint one by one.

On the blueprint was a coastline.

On one side was a blue bay, and on the other side were overlapping contour lines, sandwiched in the middle by an area circled in red, with various annotations written in pencil all around.

"You see, this is San Luis Obispo Bay."

Eden’s finger landed on the bay location on the blueprint.

"Right on the central coast of California, between San Francisco and Los Angeles. Heading north is a little over three hours’ drive to Silicon Valley, and heading south to Los Angeles is also about four hours."

He gestured along the coastline, then moved his finger further inland, stopping at the area circled in red.

"This is an army base, there since World War II. Training grounds, barracks, warehouses, repair shops, plus a dedicated pier and railway spur."

"This July, Congress passed the second round of base closure lists, and it’s on it."

Satsuki gave a soft "Oh."

The Base Closure Commission.

She knew about this matter.

With the easing of U.S.-Soviet relations, the massive military system maintained during the Cold War had begun to scale down.

The U.S. defense budget was tightening constantly, and the Pentagon also began setting about closing military bases that were no longer needed.

However, closing bases was no easy task.

Behind every base were local employment, tax revenues, and members of Congress who were unwilling to lose these things.

So the Americans simply came up with a system of the Base Closure Commission, where the commission lists the items and hands them over to the president and Congress to handle, avoiding every single congressman jumping out to protect the one in their own constituency.

A round in ’88, and another round this year.

There will be more in the future.

"According to the current schedule, the troops will withdraw successively between 1993 and 1994," Eden said, "by then, more than ten thousand soldiers and their families will leave."

"Plus the civilian employees hired at the base, and those businesses that rely on the base to make a living."

He tapped at the location of the small town on the edge of the blueprint.

"Roughly half of the population here is related to the base."

"After the base is evacuated, this town will have no reason to exist."

He pulled out a few more photos and placed them one by one next to the layout plan.

About half of the storefronts on the main street had their rolling shutters pulled down, with "For Rent" signs posted on the doors.

A motel sign was missing two letters, and the storefront window of another barbershop still had a poster from the year before last, with a layer of dust accumulated on the glass.

"Actually, we don’t have to wait until the base closes," Eden said. "Over the past two years, the local economy has already started going downhill."

"Defense orders have shrunk, those aerospace companies in the south have been laying off workers, and many engineers and technicians ran back to their hometowns after losing their jobs, only to find no jobs back home either."

"Plus the real estate crash, savings and loan institutions going bankrupt one after another..."

He paused and smiled self-deprecatingly.

"I myself am one of those unlucky fellows."

"Oh?"

"In the eighties, I did a few projects in Orange County and Sacramento, office buildings, industrial parks, and two residential communities."

Eden didn’t hide it.

"They did pretty well, or at least I thought so at the time."

"But starting in 1990, the savings and loan institution that loaned to me was taken over by regulators. The second phase of that industrial park afterward is still a piece of cleared land with foundations laid to this day."

Satsuki glanced at him.

This man probably knew those closed-door storefronts in the photos better than anyone.

"So you want to build an industrial park here again?"

"Not just an industrial park."

Eden’s hand fell back onto the layout plan, and his speech speed clearly accelerated.

Saying this, this slightly cramped man completely changed, as if he had finally returned to a place he was familiar with.

"I call it a technology and industrial development zone, divided into three to four phases in total."

"The first phase does not touch the military’s land."

His finger traced along the outside of the red line, outlining an area close to the highway.

"There is a large amount of private land, abandoned warehouses, and closed factories all around the perimeter of the base. The prices are very low right now, and the owners are desperate to offload them."

"I have spent several months contacting local owners one by one and negotiated the right of first refusal for a portion of them. We are still talking with the rest, and as long as the funds are in place, the acquisition for the first phase can begin."

"This area is close to the highway and the port, making it suitable for starting with light industrial plants, warehousing, and electronic assembly."

"There are already thousands of locally-based engineers and technicians who were laid off from aerospace companies. They don’t lack craftsmanship; they just need a place to work."

"Then the second phase is the R&D park."

His finger moved northward, stopping on a gentle slope near the coast.

"The terrain here is high and the scenery is good, making it suitable for low-density R&D buildings and experimental facilities. There are also several state universities and community colleges nearby, and Stanford and Berkeley are not too far away by car."

"The third phase is living amenities: housing, schools, hospitals, and commercial streets."

"To make engineers willing to move here, offices alone are not enough. We must make their wives willing to come and their children have schools to attend."

"As for the fourth phase—"

He finally placed his finger on the base circled in red.

"Right here."

"After the base is closed, a portion of the land will be released. The barracks can be converted into dormitories, the maintenance shops and warehouses into factory buildings, and the docks and railway spurs can all be used."

"If we can get this piece, the area of the entire development zone will expand several times over."

Satsuki didn’t speak; she lowered her head and looked at the map for a moment.

The blueprints were drawn in great detail.

Roads, pipelines, drainage, phasing boundaries, and even the greening ratio for each phase were marked out.

The pencil handwriting had both old and new parts, some places had been erased and rewritten several times, and the edges of the paper were frayed.

Unlike those pretty rendering drawings used to fool investors.

Satsuki could tell that Eden had put a lot of thought into this plan.

"What is the attitude of the local authorities?" she asked.

"Very supportive."

Eden pulled a few letters out of the folder and pushed them in front of her.

"These are letters of support issued by the county and city councils. The local area has also established a base reuse committee, and I am one of the advisors."

"Over the past few months, I have had quite a few meetings with them. How to plan the land, how to resettle unemployed personnel after the base closure, and what facilities can be retained have all been discussed."

He took out another document from the folder and placed it next to those letters.

"And this is the preferential package we are currently discussing."

Satsuki picked it up and flipped through it.

"Tax exemptions?"

"Yes, as well as support in land planning, infrastructure, and approvals."

Eden explained:

"What the local area is most worried about right now is that after the base withdraws, a large number of soldiers and their families will leave, and the remaining people will also move away one after another because they can’t find jobs."

"Therefore, they hope to introduce a batch of enterprises that are truly willing to operate long-term as soon as possible, bringing back the lost employment and tax revenue."

He pointed to several clauses in the material.

"If the development zone can be successfully launched, the city and county levels are willing to study local property tax reduction plans, assist in land consolidation, and undertake part of the construction of roads, water supply, and drainage facilities."

"In addition, the development zone can also establish a dedicated approval coordination window."

"Enterprises building factories, applying for land-use adjustments, or handling other procedures can all be processed centrally through this window, without having to run around to various departments themselves."

Satsuki turned to the next page.

"Have these conditions been finalized?"

"Not yet."

Eden shook his head.

"To what extent can be granted depends on how much investment there is in the end, how many jobs can be brought, and which enterprises are willing to truly settle in."

"However, the local government has made it clear that if they can find an enterprise with sufficient strength as the main investor, they are willing to rediscuss the planning and preferential conditions of the entire development zone based on the actual needs of this enterprise."

Saying this, he paused slightly.

"To be honest, what they lack most right now is such an enterprise."

"As for the state government, we have also contacted them. However, it is currently just a preliminary statement, and what specific support can be provided still needs further discussion."

Satsuki nodded, roughly flipped through those letters, and put them back.

"Then, regarding this project, I have a few more questions I’d like to confirm."

She looked back at Eden.

The questions that followed were asked by Satsuki in great detail.

The property rights structure of the land: how much of the first phase has actually signed the right of first refusal, and how much is still just verbal intention.

Capital requirements: approximately how much needs to be invested in each phase, how much Eden himself can pull out, and which banks have been talked to.

Enterprise settlement: are there any tenants confirmed to come currently, roughly what industries they are in, and what their scale is.

Development cycle: how long each phase lasts, and when cash flow will start.

Preferential plans of the local government: which ones belong to clearly defined support, which ones still need council approval, and specifically how they will be tied to the amount of investment and jobs.

Returns: according to his calculations, what the final rate of return is roughly, and what premises this figure is built upon.

Eden answered them one by one.

The first phase requires about 120 million US dollars, mainly for land and infrastructure.

If the entire project is completed, estimated at today’s prices, the total investment will be between 1.5 billion and 2 billion US dollars, with a cycle of over 15 years.

What he himself can cough up isn’t even enough for pocket change.

"What about the banks?"

"Banks in California right now," Eden gave a wry smile, "will hang up the phone directly upon hearing the four words ’real estate development.’"

"As for tenants..."

He fell silent for a moment.

"Quite a few are interested, mainly a few small suppliers doing defense electronics, and a few local software companies."

"But they are all small and medium-sized enterprises. They are willing to come on the premise that someone else comes first."

"The hardest part of a development zone is the first batch; no one is willing to be the first person to move into an empty lot."

Satsuki nodded gently.

That was indeed the truth.

"What about the military’s land?" she asked, "You just said that a portion will be released."

"How much is a portion, when will it be released, and at what price?"

Eden did not answer immediately this time.

Hale beside him did not interrupt either, just picked up his teacup and took a sip.

"This is the most uncertain part of the entire project," Eden finally said, "I don’t want to lie to you."

"According to the current procedures, after the base closes, the land must first go through the interior of the federal government."

"Other federal departments have priority, followed by state and local governments, as well as some public welfare uses stipulated by law. What remains will then enter transfer or sale."

"This process can take three to five years if fast, or ten years if slow."

"In addition, for a military base that has been used for fifty years, no one can say for sure what is underground."

"Fuel, solvents, discarded ammunition... Environmental cleanup is the Army’s responsibility, but no one can give an answer right now as to when the Army will finish cleaning and to what extent."

"Therefore, the fourth phase you see," he pointed to the red line, "is currently just a possibility."

"The first to third phases can be independently established even if we completely fail to get the military’s land. It’s just that the scale will be much smaller and the return will be lower."

Satsuki looked at him.

To be able to proactively lay out the weakest points and talk about them, rather than waiting for investors to unearth them themselves.

This guy was actually more honest than she had anticipated.

Or maybe he was just smart enough to know that facing a level of due diligence team like Saionji, he couldn’t hide anything anyway.

But whichever it was, it wasn’t a bad thing.

She now had a general understanding of Eden’s plan.

Next, what she wanted to know more was why Carlyle had brought this project in front of her.