talk, listen to their tone, observe their body language, and determine whether they really want to make a deal or just show you how smart they are.
• Most negotiations should proceed calmly, rather than in a hostile manner. However, sometimes a negotiation works best after a few screams and some table pounding.
• The best negotiators are chameleons. Their attitude, demeanor, approach, and posture in a negotiation will depend on the person on the other side of the table.
• If the other party to the transaction wants to acquire something you own, let them convince you that you really don’t want it or need it. In doing so, they’ll convince you of just how badly they want it.
• Money is not always the only consideration for exchange in the sale of an asset. Think beyond the traditional boundaries.
• Learn the value of saying no. View any conflict as an opportunity.
• Most important, know the party on the other side of the table before sitting down with them. Research who you’re dealing with, how they negotiate, and what they want from you.
Now you’re ready to deal. The following stories illustrate these basic rules.
Consider What the Other Side Wants
One of the best deals I ever made was the acquisition of the tallest building in lower Manhattan, a 1.3- million-square-foot landmark known as 40 Wall Street.
I got it for $1 million, and the negotiation was all about timing and intuition.
In the 1960s and 1970s, 40 Wall Street was truly a hot property—a fully occupied building. Then in the 1980s, it was bought by Ferdinand Marcos, who was busy dealing with a revolution in the Philippines. The skyscraper at 40 Wall Street fell into decline, proving once again that a business should never be run by a dictator, especially a real one about to be booted from power.
Then the Resnicks, a prominent real estate family, descended on 40 Wall Street, but after a long period of negotiation, it became clear that the Resnicks and Citibank weren’t going to make a deal and that 40 Wall Street would be back on the block. I wanted very much at this time to make my move, but this was in the early 1990s and I was in no position to do so. The real estate market was terrible, and my own financial straits were woeful.
The next buyer was the Kinson Company, a group from Hong Kong. They made a great deal, and after the purchase was complete, I requested a meeting with them to discuss a possible partnership. They weren’t interested in a partnership, but they did want to make 40 Wall Street the downtown equivalent of Trump Tower, including a public atrium. It sounded like a beautiful idea. However, what they would do with the steel columns that supported a seventy-two-story building never seemed to enter their minds. I was dumbfounded.
As you can probably guess, the Kinson group proved to be relatively clueless about renovating, running, and leasing out a New York City skyscraper. They weren’t in the real estate business to begin with—they were mostly in apparel—and they were in way over their heads. They poured tens of millions of dollars into the building but were getting nowhere. They had problems with tenants, contractors, suppliers, architects, even the owners of the land, a prominent family from Germany, the Hinnebergs. Eventually, Kinson wanted out, and they called me.
It was now 1995 and the market still wasn’t so good. Kinson had every reason to want to get out, and they wanted to do it quickly and quietly. So the negotiations began, with me offering them $1 million in addition to assuming and negotiating their liens. I also made the deal subject to a restructured ground lease with the Hinneberg family.
They accepted my terms without question.
Why? Because they wanted out—and fast. They knew it and I knew it, and because I knew it, the negotiation was easy.
There was another crucial aspect to this deal, which proves the importance of knowing what the other side wants: All of the prior leaseholders had dealt with the agent of the Hinneberg family. The agent insisted on increasing the rent and raised other financial obstacles that he said the owner insisted upon. I had to see for myself what the Hinnebergs wanted—was it money, or something else? If you want the truth, go to the source and skip the translation by the intermediary.
I flew to Germany with Bernie Diamond, my general counsel, for a face-to-face meeting with the owner, who seemed impressed by the fact that I would travel across the Atlantic to see him. I learned that what he really wanted was peace of mind in connection with his ownership of the land, but all he was getting was aggravation and litigation. I told him I would agree to turn the present disaster into a first-class office building if he would forgo all rent during the renovation period and revise the lease to permit rental to quality subtenants and bank financing for part of the building improvements. He agreed—and it was the first of many instances that confirmed my belief that Walter, Christian, and Walter Hinneberg Jr. are among the finest people with whom I’ve ever done business.
Very soon after acquiring 40 Wall Street, the markets turned for the better, and the downtown area experienced a renaissance in terms of both commercial and residential properties and developments.
I make a great deal of money from 40 Wall Street. Aside from owning the most beautiful building in lower Manhattan, I have the added attraction of owning a particularly lucrative one, all because I watched the property carefully for decades, waiting for my moment, and knew what the other side was thinking.
Be Reasonable and Flexible
A good negotiator must be flexible to be successful.
When I bought 40 Wall Street, it was virtually vacant. I told the existing leasing broker, a friend of mine, that I was going to renovate the building and get tenants. I offered him the chance to be my exclusive rental agent. The broker had been the agent for the previous owners of the building, who had been having big problems getting tenants. He was so sure I would fail that he said he would take the job only if I would pay him a retainer of $60,000 per month, starting immediately. He said he would deduct his future commission from that guaranteed fee.
His offer was impossible for me to accept. I owned a vacant building with existing losses, and the broker, who had been unable to produce in the past, was asking me to pay cash up front. I told the broker that his offer showed a total lack of faith in my ability to be successful—a broker getting paid without producing a tenant was unheard of.
The broker remained inflexible in his position. We parted company.
I hired another high-quality broker, who willingly accepted the opportunity on the usual terms—no lease, no commission. I renovated the building. The broker made millions in commissions in the next two years. The original broker’s inflexibility cost him a small fortune, plus he lost any future business from me.
Trust Your Instincts
When I took over 40 Wall Street, my associate Abe Wallach, who orchestrated the purchase, was certain that the only viable solution was to convert the building to a residential cooperative apartment house. His reasoning made sense, given the depressed market for office tenants and the incentives the city was giving for residential development downtown. All of the real estate brokers shared his view that leasing to office tenants wasn’t feasible. They said the floor sizes were either too small or too large for renting. They complained that the lobby, elevators, and building systems required extensive renovations with questionable results.
I was leery of their recommendation because the cost of residential conversion was high, plus the five floors occupied by a law firm would have to be bought out for megabucks and that would screw up any construction
