When to go principal to principal

One of the primary responsibilities of a commercial real estate practitioner is to serve as the “go-between” for two parties. In many respects, our job is to keep our clients separated from one another until the appropriate time. That statement may sound unusual to someone outside the business, but experienced brokers understand exactly what I mean.
 
Certainly, there are many reasons for this.
 
Commercial real estate transactions are emotional. Owners become attached to their properties. Buyers become excited about opportunities. Tenants become frustrated with rising occupancy costs. Landlords sometimes take resistance personally. Human nature has a way of entering negotiations, and when emotions become involved too early in the process, the transaction can quickly move away from facts, economics, and problem solving.
 
Part of our responsibility as brokers is to absorb some of that emotion and interpret information in a way that keeps negotiations productive. Often, we are translating more than negotiating. We take a strongly worded position from one side and communicate it constructively to the other. We soften rough edges, clarify intent, eliminate misunderstandings, and preserve momentum.
 
That role is far more important than many people realize.
 
I have seen transactions collapse over comments that had nothing to do with price, timing, or terms. A poorly timed meeting between principals can create tension where none previously existed. Personalities sometimes clash. Casual remarks become perceived commitments. Negotiating positions harden. Egos become involved. Before long, the focus shifts from solving a problem to winning an argument.
 
Ironically, some of the best meetings between principals occur after the difficult issues have already been addressed.
 
Once the major business points have been substantially negotiated, the nature of the conversation changes. The parties are no longer sitting across the table as opponents trying to extract concessions from one another. Instead, they begin discussing how to make the transaction successful. Conversations become collaborative rather than adversarial. At that point, a face-to-face meeting can strengthen trust, create alignment, and reinforce the relationship moving forward.
 
So when is the best time to get principals together?
 
In my experience, the timing is right when expectations have been properly framed, emotions have settled, the parties have demonstrated seriousness, and there is more to gain from collaboration than from posturing. Experienced brokers understand this instinctively. They recognize that controlling a transaction often means controlling the process, and part of controlling the process involves understanding when direct communication between principals helps the transaction and when it hurts it.
 
This is why seasoned practitioners are often reluctant to arrange a meeting or conference call too early. It is not because they are trying to keep parties apart unnecessarily. It is because they understand that premature interaction can sometimes create obstacles that did not previously exist.
 
The right meeting at the wrong time can easily become the wrong meeting.
 
And one of the subtle skills developed over years in this business is knowing exactly when the timing is right.

Allen C. Buchanan, SIOR, is a principal with Lee & Associates Commercial Real Estate Services in Orange. He can be reached at abuchanan@lee-associates.com or 714.564.7104. His website is allencbuchanan.blogspot.com.