My friends tease me and claim I am a flight attendant. I barely return from one business trip and I'm already on my way to the next... But the truth is that I see my work as a kind of mission. That said, what I like most is, at the end of another working day abroad, to sit at the hotel bar, order a Negroni and sum up the day for myself.
I was sitting at the bar of our regular hotel in the European capital, and when I saw her coming out of the elevator I immediately asked the bartender to make her a Negroni too. She sat down beside me and slowly sipped the drink.
“I want to move as fast as possible,” the developer told me. “Prepare the text of the purchase agreements in accordance with our understandings so that I can go out to marketing.”
“I understand, I'll also speak with the local partner, we'll prepare the necessary documents, but to the best of my understanding we are not yet on the track of selling to customers,” I replied.
“It'll be fine. Don't worry. You'll see that in the end everything will work out for the best,” she replied.
Indeed, a letter of intent was signed to buy a building in a European capital that she intends to convert from offices into a residential building, with a very attractive deal price that would bring the client a handsome profit, and an agreement was signed with an architect who would accompany the project before the local authorities, but at the same time there were several more obstacles on the way. The building has several owners, some of whom have passed away and some of whose heirs are outside the country, which makes it harder to conduct the negotiation. In addition, the building has several more tenants with long-term agreements.
The main difficulty that we, the local partner and I, foresaw was removing the tenants. From their lease agreements it could be understood that they would not hurry to leave the premises, since they paid rent that was relatively low compared with market prices, these being old agreements. Two of the tenants were not a problem in my view, since their leases were due to end at the end of the calendar year and until then, even if all the parties acted quickly, we would not get to construction. The main problem was with a tenant on one of the floors whose lease had been renewed only a few months earlier for two years. We did not manage to find a loophole in the agreement that would allow us to evict him earlier. I suggested that we make completion of the purchase deal conditional on the tenant's consent to vacate the premises within 30 days from the day we receive a building permit.
The sellers' lawyers began negotiating with the tenant. In parallel our client continued to advance the project and spend money on engineering tests, architectural planning and more. To no avail we recommended to her, more than once or twice, to slow the pace a bit and wait for the results of the negotiation with the problematic tenant. She kept going full force.
The date for signing the agreement arrived, and the sellers asked to postpone by a week. Our attempts to get an explanation were unsuccessful. At the end of the week an extension of another month was requested, since they had not yet reached understandings with the problematic tenant. The client, for her part, showed signs of irritation, but continued on her way and with the planning procedures.
After two months of postponements the sellers' lawyers announced that they could not commit to the condition precedent, since it did not look as though they would succeed in persuading the tenant to shorten the lease period. The client and I boarded a plane for 24 hours of brainstorming and an attempt to save the deal. Together with the local partner we met with the sellers' lawyers. All kinds of ideas came up, and we tried to find a way that would allow the deal to take place, but in the end we reached a dead end. At a meeting we held with the manager of the tenant company, the client tried to offer some financial compensation, but the demands he set in order to vacate the property early were excessive. In the evening, at the hotel bar, she told me she was giving up on the project and asked me to act to recover the earnest money she had deposited in trust with the sellers' lawyers.
How much do you believe in the project, and how much are you willing to invest even before the purchase agreement is signed? The answer to this often surprises me, and mainly testifies to the passion and belief of the developer. After all, nobody likes to lose money, or to spend money that later turns out to have been spent in vain, but there are also those who know that 1 out of 14 startups manages to make an exit, and that not every real estate deal or opportunity comes to fruition, but to understand and find that out you have to invest and sometimes also lose money.
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית