No matter the business there is one constant, at some point human interaction will be required. As a corollary, if one deals with other people with any frequency, it is inevitable that conflicts will arise. In commercial real estate, and particularly in real estate finance, confrontations of varying intensity happen on a regular basis. Buyers/ borrowers want the best terms possible; sellers/lenders want the best terms possible, and once a transaction goes from concept to reality negotiations surrounding potential financing commence. Unfortunately, it is not uncommon for the parties involved to lose sight of their ultimate goals and instead focus on “winning”. Often “winning” does not produce the best solution. Optimal or nearly optimal solutions usually involve some reconciliation of differences where one party does not prevail over the other. When people collaborate with the intent of learning from one another they, more often than not, will come up with a solution that is better than either party would have come up with alone.

Probably the most widely known coining of the phrase “winning” was when Charlie Sheen got into a verbal battle with the creators of Two and a Half Men. At the time he was earning nearly $2 million per episode and was the highest paid actor on television. He decided to “win” and got fired from the show. Several years later this is what he had to say.

“All I had to do was take a step back and say, ‘OK, let’s make a list. Let’s list, like, everything that’s cool in my life that’s going on right now. Let’s make a list of what’s not cool.’ And the cool list was really full. The not cool list was, like, two things that could’ve been easily dismissed.

In the time since his departure from that show he has not had one significant television or movie project. His career may not be over, but it has certainly been impacted. By nearly any rational measure Mr. Sheen did not “win”.

The first step in any negotiation is to fully understand the final goal of the interaction. Does “winning” the interaction bring you any closer to your goal? The second step is to understand how the other party perceives the same issue. It is important to clearly understand their views, not an interpretation filtered through your desires and feelings. You need to understand the other position and its nuances. This avoids situations where one side believes they understand the other position but, in fact, does not. In the quantum world as well as the world of philosophy, studying an occurrence changes the state of the object being observed. Or put another way, changing the way one looks at something may change the object being observed.

A win should be about getting as close to achieving your goals as possible, not depriving the other side from achieving theirs. Approaching these situations with grace, temperance, and a sincere desire to provide as close to an optimal situation for all parties as possible often will result in reciprocal behavior. It is human nature to want to prevail and “win” in a negotiation. Often however what feels good is not good at all. As real estate transactions tend to be “deals” where the parties transact and move on, versus say an industrial transaction where the buyer likely will have a sizeable transition period with the seller and maintaining a cooperative attitude is important, often CRE parties are not concerned about their interactions.

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