At Bill Ackman’s Harbor Investment Conference last week, the hedge funder posed a question to one of his guest speakers, Steven Roth of Vornado Realty, on “What makes a great negotiator?”The famed real estate mogul Roth gave a very simple answer of 3 steps—establish the price of the product carefully, move in very small increments and understand the counterparty from A to Z.
To accompany his answer, Roth used an anecdote from the recent, heavily publicized sale of former Citigroup CEO Sandy Weill’s $88 million penthouse at 15 Central Park West.
“The brilliance in that deal was Sandy setting the price, because he could’ve set it at $50 million or $40 million or $60 million,” Roth said. “He didn’t have any idea whether that was the right price or not.”
Weill sold his penthouse for the asking price of $88 million just three weeks after it went on the market. The sell price set a price-per-square-foot record for New York City. Weill had told Roth about the experience of selling his penthouse at a recent lunch, and admitted that he was unsure how to price the penthouse.
Roth continued by explaining that after setting the right price, one should use the next two steps—moving down in very small increments and use understanding of the counterparty to one’s advantage—to be a successful negotiator.
“The first thing is that if you’re on the sell side of something, and you say ‘I want $22 million worth,’ nobody is going to give you $22 million worth. So the pricing of the product is extremely important,” he said. “I don’t do deals now anymore day-to-day but the one thing I do is I price the product. I price every single space we have in our business.”