Presentation by George Donohue of International Properties Group, presented August 2014. Commercial Real Estate - Maintaining Brokerage Excellence.

1. MMAAIINNTTAAIINNIINNGG…… ……
EEXXCCEELLLLEENNCCEE !!
GEORGE F. DONOHUE

2. SSEELLFF RREEFFLLEECCTTIIOONN
What do you think truly makes an
excellent real estate professional?

3. Most # of deals in a year?
The highest commission paid on a deal?
Most aggressive?
Fastest deal-maker?

4. TThhee CClliieenntt’’ss OOppiinniioonn??
Clients, prospects, co workers in
your office….in the other offices…
What do other people think makes an
excellent real estate professional?

5. Deep, true knowledge of the industry
Integrity – “First Class” Negotiator
Transacts “quality”
Refined, strategic professional
Assertive not aggressive
Has been very successful in all
cycles

6. How do you maintain…
Deal Quality with the right Deal
Quantity
Quality of YOUR reputation
Quality of the COMPANY

7. Today’s discussion is on
Maintaining Excellence
….to increase your income and
….to elevate yourself to the highest
level in the industry

8. There are many ways to achieve a
“greater excellence”…
Experience itself will propel you
Let’s discuss: ….
– Negotiating
– Commercial Leasing Tactics

9. RReeaall EEssttaattee DDeeaallmmaakkiinngg
 Some of the material today is extracted from:
– Real Estate Dealmaking
– Considered 1 of the top 10 real estate books in the
country according to The Los Angeles Times, Miami
Herald, Boston Globe , Chicago Tribune….
– ….and 50 other major publications throughout the USA.

10. LLIIFFEE……..
…IS A NEGOTIATION!

11. WWHHYY IIMMPPRROOVVEE YYOOUURR
NNEEGGOOTTIIAATTIINNGG SSKKIILLLLSS??
OBTAIN BETTER DEAL RESULTS
ADVANCE YOUR CAREER
A BETTER LIFESTYLE
BETTER LIFE FOR YOUR
FAMILY

12. TTHHEE PPRROOFFEESSSSIIOONNAALL OOFF
TTOODDAAYY AANNDD TTOOMMOORRRROOWW
…IS MORE THAN SOMEONE WHO FINDS,
SELLS OR LEASES A PROPERTY..
THEY ARE TRUSTED ADVISORS!
EXCELLENT NEGOTIATING SKILLS GIVE
YOU AN EDGE!

13. TTHHEE AARRTT AANNDD SSCCIIEENNCCEE OOFF
NNEEGGOOTTIIAATTIIOONNSS
WHAT IS A NEGOTIATION?
COOPERATIVE BARGAINING
AN EXCHANGE OF IDEAS AND INFO
TRYING TO SATISFY ALL PARTIES……
NOT JUST MAXIMIZING YOU

14. AA NNeeggoottiiaattiioonn vvss.. AA SSuucccceessssffuull
NNeeggoottiiaattiioonn
The Trained Negotiator vs.
The Inexperienced Negotiator
Many people are reactive to a
negotiation not proactive.

15. HHiigghh SSttaakkeess NNeeggoottiiaattiioonn
 Hostage Negotiations
 Probe Causes Related to the Situation
 Establish Credibility
 Identify and Assess Problems
 Validate Facts
 Use Active Listening
 Clarify Meanings
 Facilitate Prediction of Outcome and Consequences
 Facilitate the Planning of Different Solutions

16. SSoommee KKeeyy TTrraaiittss ooff BBeesstt NNeeggoottiiaattoorrss
High Reasonable Aspirations
(not outrageous)
Judicious concessions – give when they
gain
Can maintain momentum
New proposals when there are material
changes
Greater accuracy when judging the other
side’s interests. (novice: trial and error)

17. HHOOWW CCAANN YYOOUU GGAAIINN AANN AADDVVAANNTTAAGGEE
IINN RREEAALL EESSTTAATTEE NNEEGGOOTTIIAATTIINNGG??
USE FINANCIAL CALCULATIONS
PREPARATION-DUE DILIGENCE
DETERMINE STRENGTHS
DETERMINE WEAKNESSES
OBTAIN THE FACTS

18. CCAALLCCUULLAATTIINNGG TTHHEE VVAALLUUEE
INCOME APPROACH
MARKET APPROACH
REPLACEMENT APPROACH
BE SURE TO OBTAIN
PROOF OF FUNDS (POF)

19. IITT IISS NNOOTT TTHHEE PPRRIICCEE
SPEED VS. PRICE
THE “MOST IMPORTANT
QUESTION”

20. IIMMPPOORRTTAANNCCEE OOFF
PPRREEPPAARRAATTIIOONN
REACTIVE VS. PROACTIVE
10 HOURS PREPARATION TO 1
HOUR OF NEGOTIATION

21. TTHHEE PPSSYYCCHHOOLLOOGGYY OOFF
NNEEGGOOTTIIAATTIIOONNSS
VALUES, PRINCIPLES, BELIEFS
THE NEGOTIATION IS ABOUT THE
PEOPLE NOT THE PROPERTY
MOTIVATION
LOOK CLOSELY AT THE PROPERTY
...LOOK MORE CLOSELY AT THE
PEOPLE

22. WWHHOO AARREE YYOOUU TTRRYYIINNGG TTOO
SSAATTIISSFFYY??
THE HIGHER AUTHORITY TACTIC
HOW DO YOU AVOID IT

23. NNEEGGOOTTIIAATTIIOONN EEDDUUCCAATTIIOONN
SHOULD YOU TRULY LEARN TO
BECOME A BETTER NEGOTIATOR…
OR “LEARN” BY COSTLY
MISTAKES.

24. WWHHAATT IISS TTHHEE VVAALLUUEE OOFF BBEEIINNGG AA
BBEETTTTEERR NNEEGGOOTTIIAATTOORR??
IF YOU CAN IMPROVE A DEAL BY
JUST 10%
 $200,000 DEAL = $20,000
 $500,000 DEAL = $50,000
$1,000,000 DEAL = $100,000
$10,000,000 DEAL = $1,000,000

25. BBEENNEEFFIITT
BY BEING BETTER INFORMED
ABOUT NEGOTIATING….YOU WILL
NEVER DO WORSE…
…YOU WILL ONLY MAKE BETTER
DEALS.

26. YYOOUURR PPLLAANN
TYPE OUT YOUR PLAN
ESTABLISH “THE WAY”

27. PPHHYYSSIICCAALL EENNVVIIRROONNMMEENNTT
YOUR PLACE
A NEUTRAL PLACE
THEIR PLACE
ROUND TABLE VS. RECTANGULAR
CHAIR SET UP, AIR CONDITIONING

28. TTHHEE TTYYPPEE WWRRIITTTTEENN AAGGEENNDDAA
REPAIRS TO THE PROPERTY
DELIVERED VACANT
FURNITURE
PRICE
CLOSING DATE
BROKERAGE FEES
DOWN PAYMENT
ENVIRONMENTAL ISSUES

29. PARTNERSHIP NNEEGGOOTTIIAATTIIOONNSS
 Initial Investment
 Common Goals
 Budget Setting
 Additional Capital
 Distribution of Responsibilities
 Exit Strategy ******
 Tax Structure
 Ownership Structure

30. TTHHEE IIMMPPOORRTTAANNCCEE OOFF
TTIIMMEE
FORCING TIME LIMITS
“THIS OFFER IS GOOD UNTIL ____”
NEVER REVEAL YOUR TIME LIMITS
THE REWARD OF BEING PATIENT

31. UUSSIINNGG PPRROOFFEESSSSIIOONNAALLSS
IT DOES NOT HAVE TO BE A
SOLITARY EFFORT
REAL ESTATE PRO
GENERAL CONTRACTOR
ENGINEER/INSPECTOR
PROPERTY MANAGER
ACCOUNTING EXPERT

32. NNEEGGOOTTIIAATTIINNGG AAGGAAIINNSSTT BBAANNKKSS
Completely Different
You are negotiating against policies
and procedures
You need high level of preparation
about their competitors
Salary vs. Commissions

33. SSeelllleerr FFiinnaanncciinngg
What is it
– Finance the purchase
– Finance the construction
When to use it
Debt plus an Equity Kicker

34. BBrrookkeerr’’ss DDiilleemmmmaa
People try to compress your fee
Defend your commission with math
example
Defend your need for exclusivity with
“2 paper piles on the desk”

35. IImmppoorrttaannccee ooff IInnddiissppuuttaabblleess
Everything……..
…You say
…You do
…You give
…Must be indisputable

36. AAVVOOIIDD UUSSIINNGG AACCRROONNYYMMSS
NOI
GRM
DIFFERENT WAYS TO CALCULATE
CAN RESULT IN MAJOR
MISUNDERSTANDINGS

37. NNeeggoottiiaattiinngg AAggaaiinnsstt LLaawwyyeerrss
 They are completely different
 Key points
– Legal Fee
– Capping the total fee
– Out of pocket expenses
– Retainer
– Payment Schedule
– Responsibilities
– Time Line/Deal Schedule

38. BBUUYYEERRSS AANNDD SSEELLLLEERRSS::
YYOOUU MMUUSSTT PPUUTT IITT IINN WWRRIITTIINNGG
PEOPLE HEAR WHAT THEY WANT
TO HEAR
IF IT IS NOT IN WRITING IT
DIDN’T HAPPEN!

39. IITT’’SS NNOOTT JJUUSSTT AA NNUUMMBBEERR
WHAT ARE THE MARKET
CONDITIONS FOR THE BUYER?
(A LANDLORD)
WHAT ARE THE CONDITIONS FOR
THE SELLER? (OR A TENANT)

40. PPrrooppoossaallss
Who has the advantage…..
The person giving the first offer or
…the person reading the offer and
sending in the counter offer

41. TTHHEE PPRROOPPOOSSAALL
IT FORCES YOU TO COVER ALL THE
ISSUES
IT CLARIFYS
IT AVOIDS COSTLY
MISUNDERSTANDINGS
ESCAPE CLAUSE - CONTINGENCIES
BEST AND FINAL OFFER

42. DDEECCLLAARRIINNGG TTHHEE MMAARRKKEETT
IS IT A BUYER’S (or Landlord) MARKET
IS IT A SELLER’S (or Tenant) MARKET
IS IT A “NORMAL” MARKET

43. MMeeeettiinngg HHeennrryy KKiissssiinnggeerr
The very first words in a negotiation
should….
…explain very clearly the reason you
are at the negotiation.

44. GGeettttiinngg BBuurrnneedd bbyy CCoonnttrraaccttoorrss//VVeennddoorrss
Poor negotiations lead to…
Job not completed on time
Job went over budget
Job never finished
Quality fell below expectations

45. NNeeggoottiiaattiinngg wwiitthh CCoonnttrraaccttoorrss
They are very different
Key points
– Hire an inspector first (cost/benefit)
– Penalty Clause
– Reward Clause
– Pay small up front fee
– Payment Schedule

46. NNeeggoottiiaattiioonnss RReeggaarrddiinngg TTeennaannttss
It’s All in the Clauses
– Base Rent
– Term of the Lease
– Lease Start Date
– Rent Start date
– Operating Escalations
– Real Estate Tax (base year)
– Security Deposit
– Construction work
– Subleasing
– Etc…Etc…Etc…

47. CCoommmmeerrcciiaall LLeeaassiinngg TTaaccttiiccss
A lease may have 40 to 100 components
(basically clauses that express
agreements about particular things)
 A lease is a “good lease” depending on
the market at the moment. (It may have
been initially a bad lease for the tenant
and then evolved into a great lease).

48. TThhee DDeetteerrmmiinnaanntt
What is a primary determining or
influential factor that dictates the
terms of a lease……
Supply and Demand causes tenants
and landlords to behave and
negotiate in a certain manner…

49. UUssee CCllaauussee
Use Clause
– General vs. Specific (any danger?)
– For a tenant which is better and why?

50. SSeeccuurriittyy DDeeppoossiitt
Based on creditworthiness
Tenant may or may not gain interest on the
money
Check or Irrevocable Letter of Credit
“Burn down”….good tenant….deposit gets
burned down

51. RReeccaappttuurree CCllaauussee
Why do they exist?
More rent to Landlord
Landlord wants to accommodate a
bigger tenant
Sell the building vacant

52. MMaaiinntteennaannccee
Overhaul?
Replacement?
Maintenance?
Routine Maintenance?

53. RRiigghhtt ooff FFiirrsstt OOffffeerr
Landlord makes an offer of a vacant
space to a Tenant
What vacant space?
Anywhere in the building
Just on that floor
Only adjacent space
In the elevator bank

54. IImmppoorrttaanntt CCllaauussee ffoorr IInnvveessttoorrss
How does an investor know what the rent
is:
Rent Roll?
Income Tax Statement
What is written in the lease?
The best way to know the “true income”
is found in what lease clause?

55. EEssttooppppeell CCllaauussee
What is it?
Why is it so very important?

56. RReessttoorraattiioonn CCllaauussee
 Extremely Dangerous for Tenant
 Sometimes hidden in another clause
 Tenant must return the space back to the Landlord
in the original condition it was given.
 A method to hold onto the security deposit or clean
up arrearage. “Pay what you owe or restore”

57. CCaappss
Caps can be helpful to a Tenant
Anything can be capped:
Rent
Electricity
Op Ex

58. CCoo--TTeennaannccyy CCllaauussee
If a retail tenant moves into a mall or
shopping strip because a National Chain
or a specific type of store is already
there……
….and that specific store leaves……
...the tenant can either:
– Pay lower rent
– Terminate the lease

59. ““Kick Out” CCllaauussee ((RReettaaiill TTeennaannttss))
Tenant’s Option (Please kick me out)
Landlord’s Option
Mutual Option

60. OOppttiioonn ttoo EExxppaanndd
Anywhere in the building
Just on that floor
Only adjacent space
In the elevator bank
At the “then going rent in the lease”
FMV or FMR (is there a difference?)
…or 90% of FMV or FMR

61. TTEEAAMM NNEEGGOOTTIIAATTIIOONNSS
3 PEOPLE ON A TEAM PLAYING
CHESS AGAINST 3 PEOPLE
WHO IS THE LEAD NEGOTIATOR?
MAKE SURE EVERYONE KNOWS
THE PLAN

62. PPrreepp uupp QQuueessttiioonnss
Review the questions your team
needs to ask BEFORE the
negotiation

63. RROOLLEE--PPLLAAYYIINNGG
THE DRESS REHEARSAL
ROLE PLAY BOTH SIDES
TRY IT WITH DIFFERENT TYPES OF
PROFESSIONALS

64. UUNNDDEERRSSTTAANNDD CCUULLTTUURRAALL
TTRRAAIITTSS
THE “ASKING PRICE TO TAKING
PRICE” SWING
THE UNITED STATES
CHINESE/SOUTH AMERICAN
JAPANESE

65. EETTHHIICCSS
BUILD TRUST AND RESPECT
ENLIGHTENED TRUST
REPUTATION IS CRITICAL

66. EENNDDIINNGG TTHHEE NNEEGGOOTTIIAATTIIOONN
PREPARE TO COMPROMISE
SOMETIMES THE BEST DEAL IS NO
DEAL
IF IT IS A GOOD DEAL
CLOSE IT!

67. CCoonncclluussiioonn
Thought provoking
Maintaining Excellence starts now
It is critical to build a reputation to be
the Stream professional that is very
successful in every cycle
The Best Negotiators are well trained
Explore and learn new “creative”
lease solutions ….

68. Maintain Excellence for you, your
family and your company!
Thank you for your attention.
Wish you and Stream Realty all the
best in the many years ahead of you!