Shlomi sat across from me, frustrated. Two years earlier he had bought a plot designated for construction near the seafront promenade in a European tourist city. As the planning of the project advanced, Shlomi learned of requirements from the local authority that his planning team had not anticipated. The authority asked to change the “building line” (meaning the distance at which the building will be set back from the neighboring plot), and because of the nature of the project (an apartment hotel) it required a number of parking spaces that could not be provided without digging an underground parking garage (which would make the project's costs much higher).
Shlomi tried to negotiate with the owners of the adjacent plot to obtain their consent to reducing the required “building line,” and to find a joint parking solution, in order to save the costs of digging an underground garage that would have to be too deep to meet the local authority's parking requirement. The neighbors, an elderly couple, stood firm in their refusal.
“Let's offer to buy their plot,” I suggested.
“You think I didn't offer them? I offered them a combination deal [a land-for-units arrangement], which at first they didn't understand, and after I sat with them and their grandson for about three hours and went through the deal and its advantages for them, they sent me away with a negative answer,” he said. “They want me to buy the plot. They said they're already elderly and want to see money now, not wait for apartments in a building I'll build. I don't have the money to buy their plot, and they are asking an unreasonable price. More than 3 times what I paid for my plot.”
The meeting ended without our finding a real solution to the tangle Shlomi had landed in, but as it ended an idea for a thread to help Shlomi popped into my head. I called the local partner and asked him to check on plots sold in the area over the past year. I added a request that he also try to obtain the data on the transactions, especially the price.
About a week later I received from the local partner the data on 3 plots of different sizes sold in the past year, and another plot in the process of being sold. The partner also managed to obtain (he has his ways...) copies of the sale agreements. I immediately summoned Shlomi to a meeting and presented him with the data.
“It's true that we're in a seller's market,” I said, “and from the data I obtained, prices per sq.m. in the area have gone up. They have not quite doubled in the last two years, but they are not far from it.” I showed him the data and sent him, together with the data, to negotiate with the neighbors again.
The negotiation with the elderly neighboring couple was not easy. But after several meetings, again with the grandson, and after he confronted them with the data on the recent transactions in the area, the parties managed to reach agreement on a price that was much higher than the price Shlomi paid for the plot he owns, but significantly lower than the initial price the neighbors had asked for.
You can surely imagine how much thanks we received from Shlomi for the information we brought him, which helped him reach agreements with the neighbors and buy the plot.
“A survey of 500 international real estate investors found that 90% of them believe that quality intelligence is a key factor in the success of these deals” - “International Real Estate Investor Survey 2024” by the website <a href="https://www.linkedin.com/redir/redirect?url=http%3A%2F%2Fnar%2Erealtor&urlhash=gPHR&trk=article-ssr-frontend-pulse_little-text-block">nar.realtor</a>.
The real estate market has become sophisticated in recent years, and knowledge and intelligence are no less important than skills and past experience. The information is available in open databases to anyone.
As a lawyer accompanying international real estate developers, I am well aware of the importance of knowledge and quality intelligence when carrying out real estate transactions overseas. These transactions, which involve multiple parties, complex regulations and many potential risks, require comprehensive knowledge and deep strategic thinking in order to ensure success.
Every country offers unique investment options. In-depth knowledge of the laws and regulations is a non-negotiable requirement of the local team, including and especially the architectural and planning team.
In addition to knowledge, quality intelligence is essential and constitutes a significant asset and advantage. Intelligence not only about specific properties but also about the sellers, lawsuits, valuation and so on.
“A study by the consulting firm KPMG found that international real estate investors who do not invest time and effort in gathering quality intelligence tend to lose money” - “The Impact of Intelligence on the Performance of International Real Estate Investments 2023,” KPMG.
As a real estate developer, where do you get your intelligence before a deal?
Stories are based on real situations, with identifying details changed. Not legal advice.
Translated from the Hebrew original. עברית