Can You Help Tiger Get His Lease?
By Shawn Jackson
Tiger Woods, a little-known sports professional, now a bit more uncomfortable with outside sports, has decided to open an indoor sports facility in Northern California. The new business will be called Escape Enterprises. One of thereasons he now likes “inside sports” is that he can escape the paparazzi with their cameras and annoying questions. In the spirit of other sports personalities, he would also like to be anonymous and still play a game/sport.
So, he’s thinking about something like indoor skiing or soccer, along with bocce ball for his mother-in-law. To accommodate a big indoor sports center, maybe even a family fun center (wanting to reestablish his “family” persona), he knows he’ll need about 50,000 square feet of indoor space along with adequate parking. He also knows that he will need as much marketing exposure as he can get, so one of the things he wants is for the new sports facility to be right by the freeway.
He spots two locations that seem to fit. The first location is 50,000 square feet, right by the freeway and the landlord is requesting $1 per-square-foot. Common area maintenance (CAM) expenses are $0.25 psf. The second location, also 50,000 square feet, is in an industrial complex, about a mile away from the freeway, but costs only $0.50 psf; CAM expenses are $0.12 psf.
Each landlord knows that to get a tenant, they’ll need to allocate two months of rent for tenant improvements. The first landlord will need to spend $100,000 and the second landlord will need to spend $50,000 to do that.
In Tiger’s letter of intent (LOI), since he knows it’s a tenant’s market, he’s thinking about offering both landlords only 50 percent of their asking rent. Tiger, as an incentive to the landlord, will take care of the tenant improvements himself, since some of his football buddies are now looking for work. Tiger also wants three months of free rent to finish the tenant improvements and get the marketing in place. The first landlord has agreed to a three-year lease with two five-year options to renew. The second landlord wants a straight five-year lease with no options to renew.
Time to dig deeper
Now, Tiger’s wife (along with a few girlfriends) think that adding a high-velocity paint ball field on the inside of the building would be a good idea … along with a new game called “Paint the Tiger”… with the paint balls, of course. Tiger, albeit a bit anxious about the idea, thinks it could be a way to cash in on his recent publicity. However, as you know with any lease within city limits,there may be an issue of parking requirements and road access, especially with what the city assumes will be a popular Paint the Tiger game.
The first location has easy access, but perhaps a parking problem; the second location has no problems with either parking or access…although it will require a map to find.
Business development principles: negotiation
First, we have to understand and reconcile the “negotiation paradox,” in that any agreement is based upon disagreement of concept and perception. For example, when a store sells a pen for $1 and a customer agrees to buy that pen for $1, they have a perceptual and conceptual disagreement in that the store owner believes the $1 is worth more than the pen, whereas the customer believes the pen is worth more than $1. Obviously, the earning power of the customer to create that $1 and the ability of that customer to replace that $1 figure heavily in the perceived value of the pen.
The first system/strategy (of five sequential systems) in a successful negotiation is call the “PREP IT” stage, which stands for: Preparation: History, issues, documents, anticipated solutions; interests, not positions; separate the people from the problem; Response: Research and objective criteria; External conditions: Market conditions and feasibility; Power points: Best alternative to a negotiated agreement and strengths, weaknesses, opportunities and threats; Internal conditions: Financial and motivational factors of both parties; and Tactics: The specific statements and documents presented to show how the proposed solution is truly a “win-win” for both sides.