BUSI 455 Week 7 Negotiation 2: Negotiating Example

Negotiation 2 Negotiating Record: Juniper Table and Riverbend Commons Reach a Ten-Year Lease

Session 1: Agenda and Opening Packages

*Our message:* "Thank you for meeting with us. Juniper Table has been glad to be part of Riverbend Commons for seven years, and we would like to stay much longer. We suggest keeping all six issues open until the end, so that we can find a package that works for both of us, and summarizing what we agree on at the end of each session. To start, we have two proposals that are equally acceptable to us. The first sets rent at $25 a foot rising two and a half percent a year, runs seven years with the right to renew for five more, provides a $20-a-foot improvement allowance, limits growth in shared maintenance charges to 4 percent a year and adds the patio at $3 a foot. The second sets rent at $26.50 rising only 2 percent a year, runs ten years, provides $30 a foot for improvements, limits maintenance growth to 5 percent and includes the patio at no charge. We also want to be open about timing: we need to decide within 60 days whether to invest in our kitchen here or plan a move."

*Their response:* The landlord's pair agreed to the agenda, said Package A's rent was too low, and said Package B "is closer to something we could work with," while calling its allowance far too high.

*Our reasoning:* The choice told us what the plan predicted we might learn. Leonardelli et al. (2019) note that a choice among equivalent offers reveals the other side's priorities, and the landlord's preference for the ten-year package suggested that term mattered more to them than the allowance or starting rent.

Session 2: Finding the Trade

*Our message:* "We are glad Package B is a starting point. Could you help us understand why the longer term appeals to you? If we know what matters most, we may be able to give you more of it in exchange for help on the kitchen."

*Their response:* The landlord's pair explained that the center would refinance its mortgage next year, and that its lender valued anchor tenants with at least seven years remaining on their leases. A ten-year restaurant lease would help the center's refinancing terms. That fact changed the value of the term issue: a long lease was worth more to the landlord than its rent alone, and it was the issue we most wanted too.

*Our reasoning:* Lewicki et al. (2015) describe integrative negotiation as identifying interests and building options that satisfy both sides. Here the long term served both sides, so we did not need to concede it; we could ask for value in return. We proposed a ten-year term with a $24 allowance and 2 percent increases, and offered to move on base rent if the allowance held. The landlord's pair countered with a $20 allowance and 2.5 percent increases.

Between sessions, we checked the counter against the plan. A $20 allowance already beat our $15 target, and 2.5 percent increases sat at our target, so we could have accepted. But the lender's requirement meant the landlord gained more from the ten-year term than our plan had assumed, which suggested room to ask for more. We agreed to make one more conditional offer and to accept the counter if it was refused, so that pressing for a better deal would not put the lease itself at risk.

Session 3: Settling the Remaining Issues

*Our message:* "If you can meet us at a $22 allowance and 2.25 percent increases, we can accept $26 base rent, a 5 percent cap on maintenance charges and patio use at $2 per square foot for 600 square feet, which also brings you new income from space that is empty today."

*Their response:* The landlord's pair accepted, after asking for the patio fee to begin in the lease's second year, when our patio furniture and permits would be in place, a change that cost them nothing and suited us.

*Our reasoning:* Every concession in this session was conditional, the lesson carried forward from Negotiation 1. Brett and Thompson (2016) summarize research showing that negotiators who exchange information about priorities and make multi-issue offers reach better joint outcomes than those who negotiate one issue at a time, and the session moved quickly because all six issues were settled in one exchange. We considered pushing rent down further, since the landlord had shown how much it valued the term. We decided against it: the agreement was already better than our targets on most issues, and a final squeeze might have cost goodwill we would need over ten years of repairs, renewals and shared parking.

Tentative Agreement

Both pairs confirmed the terms in writing at the end of Session 3. Rent landed between our target and our limit, but the term, increases, allowance and patio all beat our targets, because the trade around the lender's needs created value instead of dividing it.

Closing the Negotiation

*Our message:* "Thank you both. We are pleased to stay at Riverbend Commons for another ten years, and we appreciate your openness about the refinancing, which made this agreement possible."

Curhan et al. (2010) found that the subjective value negotiators felt after a first negotiation, their feelings about the outcome, the process, themselves and the relationship, predicted their economic results in later negotiations with the same partner. A ten-year lease means many future conversations with this landlord, so ending with mutual respect was part of the result. Matthew 5:37 asks that our yes be yes (English Standard Version Bible, 2001/2016); we kept every statement in the negotiation true, including our deadline, and the other pair's candor about the lender was met in kind.

References

Brett, J., & Thompson, L. (2016). Negotiation. Organizational Behavior and Human Decision Processes, 136, 68-79. https://doi.org/10.1016/j.obhdp.2016.06.003

Curhan, J. R., Elfenbein, H. A., & Eisenkraft, N. (2010). The objective value of subjective value: A multi-round negotiation study. Journal of Applied Social Psychology, 40(3), 690-709. https://doi.org/10.1111/j.1559-1816.2010.00593.x

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Leonardelli, G. J., Gu, J., McRuer, G., Medvec, V. H., & Galinsky, A. D. (2019). Multiple equivalent simultaneous offers (MESOs) reduce the negotiator dilemma: How a choice of first offers increases economic and relational outcomes. Organizational Behavior and Human Decision Processes, 152, 64-83. https://doi.org/10.1016/j.obhdp.2019.01.007

Lewicki, R. J., Barry, B., & Saunders, D. M. (2015). Negotiation: Readings, exercises, and cases (7th ed.). McGraw-Hill Education.