In Contract? Big Whoop: Negotiations Linger as Sellers Play Nervous Field

The investment side of the commercial real estate industry is rife with tales about buildings sitting pretty, and pretty, and pretty, while brokers and landlords and buyers finagle, and time passes.

There’s the Forbes Building, the American Stock Exchange Building, the four remaining Equity Office Portfolio towers on the market since early this year.

Aside from the oft-repeated truisms that the market is in the dumps, financing is scarce and buyers and sellers are engaged in a pricing stalemate in which both refuse to budge, there might well be another factor.

Back in July 2007, when a buyer had a contract out on a building, that meant there were two players involved—the buyer and the seller. Money was exchanged. A deal was imminent.

But, then, as so many stories go these days, the credit crisis hit.

“Some lenders froze or pulled financing, and buyers got caught with their proverbial pants down,” said Peter DeCheser, managing director at Jones Lang LaSalle Capital Markets.

So, deals that had been scheduled to close at the end of ’07 didn’t do so until early this year (thereby artificially inflating all those first-quarter transactional numbers). In response, the protocol has changed: Instead of a seller having just one contract out with a would-be buyer, now the seller might have multiple contracts out with buyers for just one building. With the bigger universe of players comes more complicated and lengthy negotiations.

“An owner or seller typically never had to send out more than one contract,” Mr. DeCheser said, “and could be pretty sure it was going to get signed. That’s not the case today.”