Commercial Investment Real Estate March/April 2013 - Page 20

BRIEFS by Steven Heller, Esq. Your mother always told you to be a good person, but was her concern your values or your business prospects? Decency during business negotiations may be the right thing to do, but it can also further personal relationships that create real business value for your bottom line. Many tough negotiators exploit their lever- age to the fullest extent to cut super-clever deals without considering the unhappy vic- tims of their hard approach. Af er congratu- lating themselves for the sharp deal, these negotiators discover that resentful parties don’t perform their obligations (and won’t forgive the other side for failing to perform theirs), create costly problems carelessly, and are unlikely prospects for repeat business. Businesspeople who compromise and follow good-faith negotiating practices will create trust and build business reputations, which are forms of goodwill that are mea- surable over the long term in real dollars. T is principle is part of demonstrated eco- nomic theory and works the same way in everyday deals. Commodifying Trust T e close-knit nature of real estate com- munities makes maintaining positive relations a requirement for healthy busi- 18 March | April | 2013 ness. For example, if a landlord claims he can’t give a tenant free rent for the f rst few months while it ramps up its business, then he should explain that his cash f ow won’t allow for it, given the large tenant improve- ment allowance and commission obliga- tions. As an alternative, he should consider giving something else back to the other side if possible. Negotiation victories can backf re when built primarily on trickery or hard lever- age; on the other hand, when you allow for compromises and clarify what you truly need and why, you will secure both dollars and the other party’s trust. T is trust is a bankable commodity worth maintaining, because satisf ed partners are more likely to work constructively to solve problems with you and are open to doing more business in the future. This approach may seem obvious, but in the trenches of deal making the same destructive dynamics repeatedly surface. Relationships Over Law Sometimes legal documents don’t matter. While contracts and legal instruments can be critical to protecting yourself and your rights and opportunities, in some cases, enduring relationships simply matter more. For example, an of ce building landlord stopped making loan payments and went into default, but the lender didn’t foreclose, even af er two years. Although the poor economy limited the lender’s options, the lender banked on the ability of the landlord, a well-connected and reputable developer, to work out a con- structive resolution. Even if the deed of trust document dictated only foreclosure, the developer’s reputation and credibility bought him several extensions and the retention of this property. The Big Win In some deals, it pays to leave a few dollars on the table to get a deal done. For example, in the letter of intent, the seller f nally succeeds in dragging his prospect to that huge number he wanted, but then halfway through nego- tiating the f nal contract, the prospect kills the deal and disappears. T e big price wasn’t sustainable, and the seller pushed so hard to get it that the prospective buyer didn’t trust the seller to restructure a dif erent deal. Commercial Investment Real Estate y Playing nice can have a big pay-off.