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Pre-Negotiation Plan for The Bullard Houses (Role of Buyer)

Justine Mensik
October 15, 2014

1
Summary of Negotiation
In this negotiation, we have the seller of the Bullard Houses, Downtown, Inc. It is
a corporation that was formed eight years ago by seven of James Bullards descendants,
for the purpose of saving the houses from destruction. We also have a buyer, Absentia
Ltd., being represented by a senior partner in Jones & Jones, a leading real estate firm in
Gotham City. In this negotiation, the Bullard Houses are up for sale, and the buyer and
seller will be negotiating terms of a potential sale.
Issues
As the buyer, there are a few issues that will arise in this negotiation. An example
of one would be the price that my client, Absentia Ltd., would be willing to pay. Absentia
Ltd. is controlled by the Conrad Milton Hotel Group via a Bahamian blind trust, so the
purchase of these Bullard Houses would ultimately lead to the development and
construction of a Milton hotel. The existing houses will serve as a hotel lobby and public
room, but the actual hotel tower will be built in the current garden area. Therefore, it is
important to get this property for a good deal, since a copious amount of money will have
to be poured into the building of the tower. I recognized this issue in determining my
goals for this negotiation, which is the first step in developing and executing a
negotiation strategy. With one of my goals being to develop a new hotel, part of
achieving this goal would be to get the property for a good price. An additional issue for
me (as the buyer) would be to maintain confidentiality in regards to these hotel plans. It is
important that I do not give any indication that the buyers intention is to convert the
houses into a hotel. One reason for the confidentiality is that the price of this site will rise
dramatically, as well as the price of my alternative site, if the hotel plans become public
Pre-Negotiation Plan for The Bullard Houses (Role of Buyer)
Justine Mensik
October 15, 2014

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knowledge. Additionally, if other competing developers discovered Miltons plans early,
it would give these groups more time to develop a more attractive plan to pitch to the
seller. I determined this was an issue in the process of setting goals for the
negotiation, and maintaining confidentiality would help me achieve the goal of
maintaining control of the negotiation. This differs from my first goal, since it is
more of a procedural goal. There are a number of potential issues for the other party.
For one, Downtown, Inc. could be incredibly concerned with preserving these houses,
and could see their conversion to a hotel as the opposite of preservation. Additionally, the
seller may want to sell these houses with the promise that they will remain residential
properties. Also, the seller could be concerned with their reputation during this sale. They
may be concerned with selling the property to a well-known, reputable buyer, so as to
avoid negative press. In addition to all of this, money could be a large issue for the seller.
As mentioned in the instructions, it is costing Downtown a lot of money to simply hold
onto the property, and its shareholders have no interest in developing the property
themselves. Therefore, it is likely that Downtown is looking to make a solid profit, in
order to offset their high costs of holding the property. Based on all of these factors, I
will take a moderate stance in this negotiation. This property represents prime real
estate, and owning a hotel in Gotham City would be incredibly lucrative for my client (it
was mentioned that there is a shortage of hotel rooms in the city). Therefore, it will be
important for me to come in with a moderate opening offer, aggressive enough to show
that I will not be manipulated, but mild enough to show that I am willing to make
concessions to get the deal done. I have to keep the real intentions and plans for this
property a secret, so I will avoid any hostility or belligerence. Displaying either of these
Pre-Negotiation Plan for The Bullard Houses (Role of Buyer)
Justine Mensik
October 15, 2014

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behaviors may indicate that I am indeed hiding something, and will make the seller
suspicious.
Bargaining Range
In this negotiation, my BATNA is an alternative site that is available for $20
million. While The Bullard Houses represent prime real estate, there are only so many
concessions that my client can make. As previously mentioned, my client is inevitably
going to be spending a lot of money to develop a hotel, and will not pay an absurdly high
amount for the property on which to build. I believe this is a relatively strong BATNA,
and will give my client an advantage in the negotiation. In the general information
given, it was mentioned that there is a shortage of hotels in Gotham City. While it is best
to develop a hotel at the Bullard Houses site, any site for a hotel will likely be profitable
in this city. For this negotiation, my target point will be $19 million, and my reservation
price will be $24 million. I will make my initial offer marginally below my target point.
In doing this, I am attempting to create a larger bargaining zone for the negotiation
to take place in. This will create more distance between my target point and resistance
point, and the desired result will be a settlement point that lies closer to my target. In
addition to this, the target point of $19 million would be cheaper and more desirable than
the cost of my alternative site, which is $20 million.
Problems & Planning
One very obvious potential problem would be that Downtown Inc. and other
bidders discover my clients plans to turn this property from residential to commercial. I
believe that preservation of the houses is very important to the seller, so it would be a
huge setback if the plans for a hotel were made public. Another problem would be if the
Pre-Negotiation Plan for The Bullard Houses (Role of Buyer)
Justine Mensik
October 15, 2014

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seller is incredibly persistent in asking questions and discovering my clients intentions
for the property during the negotiation. I do want to be ethical and as honest as possible,
but a persistent and inquisitive seller will make that very difficult for me as the buyer. An
additional roadblock for this negotiation is the Zoning Board, which will have to rezone
the site from mixed residential and commercial to high-rise commercial. In order to
counteract these roadblocks, I will fan and emphasize existing controversy in Gotham
City. There is considerable anger with mentioned plans to restore the Houses for high-
income families. I can take some attention away from my client and magnify any
resentment or protest against these plans. Not only will this distract attention from my
client, it could influence the Zoning Board to approve plans for a hotel. As opposed to
private housing for wealthy individuals, a hotel will boost the citys economy by bringing
in some tourist revenue. Moreover, my client would make the hotel lobby and bars open
to the public, unlike the private residences. Overall, I will pitch this sale as a politically
and economically viable alternative to a luxury housing sale. During the negotiation, I
will ask the seller: 1) how do you validate the price for which youre selling these
Houses? 2) Aside from the optimal price, what else are you trying to obtain from this
sale? 3) In order to complete the sale, would you be willing to make any specific, smaller
deals?
Conflict Strategies
Per the Dual Concerns Model, I will adopt a competitive strategy in this
negotiation. While I do want to be cooperative during the negotiation, my ultimate goal
is to serve my client and achieve goals set by the client. The substantive outcome
(getting the hotel for a good price, and maintaining anonymity) is more important
Pre-Negotiation Plan for The Bullard Houses (Role of Buyer)
Justine Mensik
October 15, 2014

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than the relational outcome. Once the sale is done, it isnt necessary for my client to
maintain a relationship with Downtown, Inc, which is the nature of most real estate
transactions. I believe that Downtown, Inc. will be approaching this negotiation with a
competitive strategy as well. It is not important for them to foster a relationship with my
client. They will be more concerned with furthering their own substantive interests in this
negotiation. There have been and likely will be other bids and negotiations for this
property, so it is probably unimportant for Downtown to foster a meaningful relationship
with my client, who is in the same pool of bidders.