We hear it all the time from clubs: “We are already in talks with a developer and don’t want to rock the boat by opening up to more competition and risk losing what we already have.”

It is important that you as a club manager understand that this position is based on two myths.

 

Myth 1: you will lose your current offer if you delay signing to instead follow a prudent process

The developer that you’re negotiating with will tell you that they have other projects to pursue and that if you don’t sign now that they will take their money elsewhere and the offer will evaporate.

This is not true.

In competitive processes that we have managed, the developer that was previously in the driver’s seat has submitted a proposal and it is at least as high as their previous offer, usually higher.

 

Myth 2: if the current offer is justified by the feasibility, then the price cannot go higher

A developer can manipulate a feasibility to show what they want it to show. With clubs this is often used to justify a lower price than they are actually prepared to pay. Our competitive process is structured to push all developers to offer their maximum possible amount. That maximum is a question of not only the real project feasibility but also each developer’s circumstances, such as:

  • Workforce capacity – another project is coming to an end
  • New capital from investors or access to more debt
  • Previous approval success with the council.

This means that some developers will pay more than the feasibility indicates. A lot more. This is no different to a standard residential auction, where some people seem to pay a lot more than the expected price. It’s likely they had a reason that was specific to them for doing so.

A development partnership is more complex than a sale and cannot simply go to auction, but there is no reason why the Club cannot enjoy all of the benefits from competition that you would if you were auctioning your house rather than selling it to the first person to make an offer.

This is best illustrated by the chart below, which shows actual data from our various competitive processes, where the offer on the table before the process is typically beaten by up to 50%.

 

To learn more about how we will maximise the benefit to your club from your property please contact us on (02) 9966 8898 or email wsmith@augustaadvisors.com.au