In real estate negotiation is everything.Getty
A forthcoming book, Real Estate Titans: 7 Key Lessons from the World’s Top Real Estate Investors by Erez Cohen, has eleven in-depth interviews with some of the most successful real estate investors across the entire spectrum of the market. I spoke with Cohen by phone to learn some of the negotiation secrets that he gleaned from his interviews.
When it comes to their negotiation approach is there a tactic that stands out for you?
Here is one eye opening negotiating experience I had with a real estate titan. I show up to this meeting thinking the real estate titan, with whom I am supposed to negotiate, is going to be there. They’re not. They come up with some excuse and they send their lawyers, right. So there is a lawyer there. The lawyer turns in a verbal offer, he is very careful, and gives me something forty percent below what he knows should be market. I’m not even talking about asking price, but market. Say the market is 100, he offers 60. He is clearly seeking very favorable terms. In any negotiation whenever you’re selling or buying anything it’s not only the numbers, it’s about the credibility, it’s about the time required to close. He wants more time, he wants exclusivity. He wants me to remove whatever I am selling so nobody else has access to it. He wants to sign a legal document where I state I will do this. And then, when you I am ready to spit on the lawyers face, after a day or two they [the titan] get back to me and say, “I don’t know why they offered that, but I didn’t even know.” So that way I am like what the heck is going on here. And this person is playing mind games with me.
They’ve anchored me in a way that is like, “Oh my god. this prominent investor is offering me much less than what I thought.” They instill self doubt in my mind. While this is just one experience, I have learned that when I am negotiating with a titan (whether it be in real estate or any other industry) I need to be prepared to negotiate a deal that is very beneficial to them. There are really nice, romantic stories out there where in a negotiation you should share all the information. You should always make sure to give and take in equal proportion. That might be for a perfect world, that’s not what I have seen throughout most of my career. It’s very tough to have a negotiation where everybody is happy.
That’s a drastic anchoring technique. They aren’t going to make many friends that way.
The people that I’ve interviewed are all very charismatic. They’re likable. Dale Carnegie talks about this. I even talk in the book about How to Win Friends and Influence People because I think this is a must read for anybody in the world. So Carnegie talks very prudently, if you want to be successful in business you have to get people to trust you, like you and respect you. When you sit down with these titans, that happens. Sitting with them, I can tell you, I have been enamored with them. They’re very charming, they’re very good at storytelling. Most of them smile. They call you by your first name. There’s nothing more beautiful than hearing your name.
What were some of the common themes in their approach?
As I interviewed these real estate titans, one theme that became very prevalent throughout is that they know when to negotiate. They do so when times are not very good. They are very active when most people are not. They tell you that this is how they made most of their money. The down turns. The recessions. The market softenings. As any savvy investor should, they’re trying to buy it at a huge discount. They try as much as possible to remove emotion out of the picture when they’re making their decisions. They are going to ask themselves is this the best thing for my investors and my company. That’s it. That’s the focus. They don’t ask is it good for the person sitting across from me.
Also, the famous cliche, tell me who you surround yourself with and I’ll tell you who you are. There’s a lot of truth to that. I know some of their circles. They’re people that are high up the food chain in every part of their life. They do not waste their time with people who pull them down, people who are takers. They’re going to surround themselves with people who are smart givers. People that add value to them and people that understand there’s a quid pro quo. It’s almost like a mastermind when you’re part of this group.
They exercise. That’s something. When you exercise, you start your day with more discipline. You’ve started your day with a hardship. You’ve overcome an arduous task already and are ready for more. I was surprised to hear that many of them meditate. You start your day off stronger mentally. Many of them said, if you’re not healthy you can’t work.
Are there any things they don’t do?
The average person is watching cable news. These people are not really listening to cable news. Because cable news is a lot noise. They can pick up the phone to anyone in their circle and say ‘hey what do you think about the economy now, where are we?” and they’re going to get much smarter answers than the average person is going to get. Answers where emotion has been cast aside and where logic prevails. Many times we lose because our emotions take over us or because we start listening to other people or because we start trying to justify our conclusions without logic and without numbers.
Many of them moved into markets before anyone else did. Did they share any secrets about how they predicted it would be a good move?
One of the interesting things that I heard is that you’ve got to study history. You have to study political history, economic history, of your state and your country and understand how it evolved. So if you understand that, you have a better understanding of where potentially the market could go, where political policies could go. I spoke with Rohit Ravi and in India it was the case that there was a lot of horizontal development and slowly he was one of the pioneers in vertical development. He verticalized Chennai and other parts of Southern India. He started noticing patterns of what people would want going forward. He shared that many times in business, your customers don’t know what they don’t know and therefore it is your job to try to provide that new product for them. On the hotel side he shared with me that in the Maldives they developed the St. Regis and it’s one of the top hotels in the world in terms of highest average daily rate. They average over $2,000 per night daily rate. They wanted to attend to the ultra, ultra luxury segment. They found that there was unmet demand – with little offering – in the Maldives to do that.
Most or all of them spend time reading things that have nothing to do with real estate. So they can get ideas from other industries and from other people who are not in real estate and many of them get their ideas from there. For example, I interviewed Bob Faith, from Greystar one of the largest operators in the world of multifamily buildings. He said he read a book from a healthcare consultant and that’s where he got an idea that revolutionized his operating business for operating these multifamily buildings. They do digital detox. They go out and they read. They spend time reading and thinking. That’s how they get all of their breakthroughs. Whether it’s for a negotiation or a new business. Two of them said they go out to the countryside and think.
But then they have to convince other people to get on board with an entirely new idea. How do they manage that?
Definitely charisma and charm. I think many of them find out what the most important things are for the opposite party and they try to see if that is something they can meet. They are prepared and they understand who the person across the room from them is. We sometimes have this assumption that most people are just focused on money. But today there’s so many other things that that go in to it. For example, I spoke to Joseph Sitt [founder of global real estate company Thor Equities and retail chain Ashley Stewart] and asked he share with me one surprising anecdote. He tells with me that he was able to buy a property, without disclosing which one, that I think it was $152 million instead of $154 million. There was a credible investor, an institutional firm, offering $154 million and he offered $152 million and he ended up buying that property. He said it was because either himself or somebody from his team emailed or called this seller everyday for seven years. Talk about perseverance. It was hard work. He saw something that other people didn’t see. To him he was buying it at a significant discount. We all think it is about the price but there’s more to it than the price. We’re emotional people dealing with emotional people.
Real Estate Titans: 7 Key Lessons from the World’s Top Real Estate Investors publishes on April 2nd, 2019.
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