Bullard Houses - Negotiation

Case: The Bullard Houses

I would like to discuss The Bullard Houses case. Bullard Houses are old townhouses in the center city. They are owned by Downton Inc., a corporation formed by decedents of the Bullard family. Downtown would like to sell the property as soon as possible as their cashflow is dwindling and its expensive to maintain the existing structure. I represented Absentia Ltd., which is back by the Conrad Milton Hotel chain. Milton wants to buy these buildings, put a high-rise hotel on the property, and use the houses as a lobby for the hotel. As an agent for Absentia I have instructions not to reveal to the Bullards the true purpose of buying this property is to build a hotel.

The maximum amount I can offer is upto $24 million. This is my Reservation Price. Milton knows that if Bullard’s come to find out that this is supposed to be a hotel the site would cost $32-$40 million. Milton would also like to keep the Bullard name as the address of the location as it comes with a cache.

There is an alternate site down the street is available for $20 million that can be used to develop as a hotel. This is our BATNA. This obviously is not equivalent to the Bullard site, as the Bullard site is a better location and comes with a brand name.

There are some rumors of other competing offers for the site for a Quincy market type development, in the tune of as much as $20 million. But this information is not substantiated, and the financial terms are not clear.

As I started to negotiate an offer with the representative for Downton, one of the prime requirement that the Bullard’s they don’t want the future development to be garish and commercialized. They would like to have them refurbished as a luxury townhouse development, but don’t have the money to do that themselves.

During the discussion a specific question came up: What does our client Absentia want to do with the property. I was in a dilemma here as one response could be that we are not allowed to say what it will be used for which in a way is avoiding or not answering the question. The other response could be to deny that there would be no commercial development. This would be a lie and would have been illegal.

I responded by saying that the future plans are not clear, and we cannot commit to future use. This raised suspicion with the seller’s agent. This was also a lie! I think for that specific question a better answer could have been “I have an obligation from Absentia to not tell them how we are going to use the property”. This would have raised suspicion as well, but it wouldn't have been a lie as I was under contract not to reveal the true intended use of the property.

At this point I tried to move the discussion to the formalizing how the final contract which included:

1. Price and payment terms

2. Property be clean of any tenants

3. Property be clear of any clauses of future use

I went ahead and quoted a first anchor price of $12 million, which was based on what another real estate developer would