Land Development Deal Gone Bad

A businessman invested into a land development firm that sought to build a strip of land into a burgeoning marketplace. There was a clause that provided the mechanism for which the investors could get their money back with an interest rate of 12%. "We invested this money for diversification; we timed it poorly, and ended up really needing it. Now, we've been having meetings for six years; they're just avoiding settlement." A breakdown in trust occurred despite the regular meetings, and the investor was frustrated with the time span. "I'm spending way too much time on this," he said, "when I should be taking care of my customers. I just want visibility of when this will end."

The land developers, unable to pay the requested amount immediately, offered joint development of the land. They explained that the situation in the area had changed; new opportunities had opened up in the neighborhood, and there was more demand for commercial space. This renewed the investor's confidence, but he was still unwilling to agree for joint development. He offered a payment plan with additional interest at a rate of 15% annually, and his confidence grew further as the mediator mentioned the enforceability of a contract formed through mediation. The land developers argued that they couldn't afford the higher interest rate, and offered land to the investor.

''I'm not a real estate manager, I don't know what the land is worth, and I don't know how to sell it. If the land is really that valuable, sell it, and give us the cash," responded the investor. The developers looked surprised and encouraged at this response. It was the "aha" moment that the negotiations required: while the intent of the investor had simply been to get his money back, this statement had a profound effect on the land developers. The developers viewed the comment as the investor sharing his vulnerability, and crediting their abilities in land management. There was a burst of confidence in the room - the implication was that the land developers' experience in purchasing and selling land was valuable to the investor. The developers' self confidence in their ability to manage the land had decreased in the past several years due to the time it was taking for their business to get off the ground. However, a well-respected investor trusted their ability to sell the land at a fair price and give him his fair share. The situation was a win-win; they became confident in their ability to sell the land at a premium, more than what the investor needed. The parties agreed, and for the first time in 6 years, were able to reach settlement. Both left the mediation center with something valuable; the investor with a settlement and time for his customers, and the developers with a newfound sense of confidence in their business model.