A State of Denial
It’s been a little while since my last post, since that time have had a number of meetings with developers and colleagues who work directly with sponsors.
Wish I had a great story to tell.
What we have found is that across the board there is still a huge number of developers and sponsors who are in denial when it comes to their projects.
And for those reading who like Sarah Palin think “de nile” is in Africa then let me refresh your memory via way of Wikipedia.
“Denial is a defense mechanism postulated by Sigmund Freud, in which a person is faced with a fact that is too uncomfortable to accept and rejects it instead, insisting that it is not true despite what may be overwhelming evidence.”
What has this got to do with Real Estate?
Let me share one story that sums it up for me.
Recently I took a well qualified buyer to see a development that still has a third of its inventory unsold.
This project hasn’t sold almost anything in months but when it came to their pricing still wanted $2000+ a square foot!
Sure it was nice project, high floor great finishes but there is no ways in God’s green earth are they going to achieve anywhere remotely near that number.
(My guy was thinking "south of $1000 a foot)
Maybe they “can negotiate” you say…..well my experience is that any time opening positions are so far apart to begin with then the negotiation is destined to fail.
That is reality and research in the area of negotiation bears that point out.
If this was a one off story we all could just have a laugh but it isn’t.
All too often we hear “my project is different” “my project’s location set’s it apart” or “this is much higher quality than the competition”.
No one is immune to market forces those who don’t get a head of the curve when it comes to pricing i.e. cheaper than their competition and who can’t stand out and get qualified traffic in to see their inventory/product are going to get 100% of nothing rather than a percentage of something.
We are in the worst downturn in at least 15 years some say even longer that is our economic reality.
Cut your losses, reconsolidate, get some cash in, work with your lenders and prepare for the next round.
No point in continue to “fight” a battle you cannot win with a price point that was where the market use to be.
Those days are gone.
