Negotiating is an art and science
A retail lease can be over 100 pages, and often requires a real estate attorney to negotiate. It’s a legal back and forth to refine the high level business terms agreed upon in the LOI, and to discuss “legal issues” like what happens when someone trips and falls in the space, and who is responsible for which facilities issues.
But throughout the negotiations – whether the LOI or lease – it’s also a time for both parties to determine how difficult the other one will be when resolving issues and seeking compromise.
For better or worse, how you manage the deal negotiations – especially the non-economic terms – can make or break a deal, if not an entire relationship.
I’ve almost lost – if not actually lost – a couple deals for a variety of reasons. Some which are absolutely silly, and some which are fair (in retrospect).
One of the aspects of real estate that a lot of newbies don’t know or appreciate is that it’s not a perfect market: unlike Facebook, you can’t just dump money in and let algorithms do their thing. You have to grind through every bit of a deal, and it only moves as fast as you can push it — and every situation (landlord, lease form, market, timeline) is different. And, for better or worse, the optics of how you approach each deal matters…a lot.
Here are 10 ways to lose a deal, in no particular order
When someone on the exec team (usually the CEO or CFO) wants to “add value” by conditionally accepting a deal in real estate committee IF you can get the rent down / the TA up by some nominal amount that doesn’t actually move the returns analysis. (ie if $5k is going to make or break your deal, you probably have bigger problems / more risk in the pro forma than you should…)
Taking more than 2 weeks to turn lease comments (press your attorneys)
Taking more than a week to turn LOI comments (really shouldn’t take you that long)
Waiting more than 2 weeks to send an LOI after touring a site (you should have a standard template ready to go)
Redlining an LOI or lease such that there’s more red text than black (optics matter)
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