class 6: stages 4 and 5 Flashcards
the role change of the developer in stages 4 and 5 from stages 1, 2 and 3
In Stages 4 and 5 the developer changes his primary role from creator/promoter to negotiator
importance of Contracts
the usual method of allocating and controlling both responsibility and risk
They set forth the rules for the physical, financial, marketing, and operating activities that occur during construction, formal opening, and operation
The agreements should make the costs and responsibilities explicit and as free of ambiguities as possible.
all parties involved in contract negotiations
developer
Landowner
Architects
Contractors
Users
Lenders
Investors
The four phases of negotiations
- Planning and Preparation
- Opening and Exploration
- Proposing and building
- Bargaining and Settlement
- Planning and Preparation
Be clear about objectives
What is the most I can realistically hope to achieve?
What is the least I absolutely need to have?
Recognize the importance of information
Assess the situation/power
Plan a strategy
common mistakes to avoid in planning and preparation
Inadequate preparation
Being unrealistic when deciding on range of acceptable outcomes
Not prioritizing
Phase 2 – Opening and Exploration
Create the right atmosphere
Establish a rapport
Uncover the real issues and interests
Outline your needs
Establish common ground to build relationships
common mistakes to avoid in opening and exploration
Inadequate preparation
Interrupting
Talking too much /not listening enough
Point scoring/attacking/arguing to “win”
Not summarizing
Impatience/loss of temper
Modifying priorities or plans in reaction to the other side’s impatience/ temper/emotions
Phase 3 – Proposing and Building
Listen carefully to the other party
Present proposals
Leave room in your proposals to manoeuvre
Give tentative signals of movement
Make conditional or hypothetical proposals
Build on the common ground
Use concessions to overcome obstacles
Probe attitudes: “What would you be feelings if…?”
Find the right balance between competition and cooperation
Summarize and confirm provisional agreement
common Mistakes to Avoid in Proposing and Building
Complaining but not proposing
Opening with an unrealistic condition or offer
Behaving inconsistently in moving your position
Interrupting a proposal
Smothering a proposal in verbiage
Phase 4 - Bargaining and Settlement
Decide what you require in exchange for your offer
Keep all the issues linked, and trade off a move on one issue for a new condition or a move on something else
Record what has been agreed upon
Common Mistakes to Avoid in Bargaining and Settlement
Agreeing to issues one at a time, but not linking movement on one issue to movement on another
Not confirming/summarizing what has been agreed
Not ending the bargaining once agreement has been reached
Bluffing with a “final offer”
Making inappropriate threats
what should be included in the purchase agreement with the landowner?
Price
Deposits to be paid
Conditions of closing and responsibilities of both parties (eg. Who pays broker?)
Due diligence rights (e.g. right to go onto the site to take soil samples)
Escape clauses for deal breakers uncovered during due diligence
Negotiations with Lenders
Developers often negotiate both the construction loan and the permanent loan at the fourth stage
when can negotiating a permanent loan may be deferred to a later date
if it is not a condition for the construction loan
risk-taking difference between Construction lenders and long-term lenders
Construction lenders take on execution risk, whereas long-term lenders are more exposed to market risk.
. It is not unusual for several lenders to collectively provide construction or mortgage financing.
why?
A single lender may not want to assume the risk inherent in a large project
