Page 38 - Network Magazine Winter 2019
P. 38

            Why are Real Estate Lease Negotiations Often Like Playing Poker?
JIM PAULOSKI, PRESIDENT JAMES S. PAULOSKI INC
There are two main reasons. The first is that there is often a lot of bluffing. Each side will bluff as long as is necessary to get what it wants.
The second reason is that in poker, there’s only one winner of each hand. Each person wants to win, and therefore everyone else must lose. Players watch their opponents for signs of weakness, or for giving away information about what they have. So, it’s "Win/ Lose."
Sometimes this attitude carries over into lease negotia- tions. One side or the other (or both) perceives that the negotiations have to be "win-lose." “I win, and you lose” is an expression frequently used.
The problem is that “win/lose” often doesn’t work when negotiating a lease. If you made a deal (i.e., signed a lease) but didn’t trust the other side, or if the negotia- tions were bitter and you signed a lease anyway, you’re facing a potential disaster. You've signed a lease, and now you have to live with it. You're stuck with the other side, probably for years. If you saw the Academy Award- winning movie “The Sting” and remember the brutal, high stakes poker game between Paul Newman and Robert Shaw, you will understand what I mean. That is NOT the kind of negotiation to have and expect that the relations between the parties (who were enemies) will automati- cally improve.
Early in my real estate career, I was told a story about a large negotiation that occurred in New York in the early 1980s. The landlord desperately needed to lease a large
amount of space, and the prospective tenant knew it. The tenant not only obtained a below-market rent but pressured and then obtained so many significant conces- sions that eventually the deal became very personal to the landlord. The landlord reluctantly signed the lease but exacted his revenge when it was time to negotiate a renewal of the lease. The story may be apocryphal, but the message was clear to me: don't infuriate the other side.
Sophisticated negotiators know better than to infuriate the other side. To them, it's more important first to know their needs and priorities and identify if someone can reasonably meet those needs. It's "win-win" rather than "win-lose." Bluffing is part of the process, but only to a point. If you don't get what you need, you’ve lost.
In the early 1990s, I was the lead negotiator for the lease of over 60,000 sq. ft. of office space for my employer. (This was a large deal at the time.) The landlord’s chief representative was the nicest negotiator I have ever met. She was pleasant in every instance where we disagreed, and our side never felt any hostility. As a result, we simply recognized that there were disagreements, so we resolved them amicably. The needs of both parties were met.
Stephen R. Covey described this very well in his masterpiece book “The Seven Habits of Highly Effective People” when he discussed "Win/Win or No Deal."
There are many, many parts to a commercial lease. What
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