Donald Bouchard, CRE

In advising clients who are involved with so-called public/private partnerships, it is critical to develop an understanding of the fundamental differences between private firms and governmental agencies. Each sector operates by a different set of rules. State and local entities are subject to a rigorous structure of budgets, and legal requirements that are often foreign to individuals used to doing business in the private sector. Real estate entities are used to identifying opportunities and striking fast to tie up property, gain entitlements, secure financing and complete projects in as fast a timeframe as possible. Private entities can benefit from enormous flexibility when compared to the public sector.

The nature of the public organization is also key to consider. While there is a built-in bureaucracy in the public sector that seems ponderous and inefficient to those in business, it is important for the real estate advisor to develop an appropriate set of expectations for the other party. Municipalities that operate with a manager and city council or a mayor and alderman structure are sometimes able to move more quickly when contemplating a public-private partnership arrangement due to their very nature. On the other hand, town governments can be sometimes difficult to deal with due to the fact that they are commonly governed by a part-time board of selectmen. Add to this the tendency of New England communities to adhere to town meeting forums to pass complex warrants, zoning initiatives and budgets, and you have a process that naturally moves at a slower pace.

Negotiations involving the financial aspects of public-private partnerships are often the focus of much of the friction between these differing types of entities. Public sector decision making requires a reasonable degree of certainty that sometimes focuses on seemingly mundane aspects of a joint venture enterprise. Nevertheless, due to local political and voter sentiment, these can frequently become deal killers. Communities must by their nature seek to mitigate risk.

Advising private clients engaged in discussions with municipalities often boils down to addressing three key issues: First, it is critical to understand the nature of your partner. Considerable effort should be expended in order to dissuade the client from adopting expectations that a public-private partnership can be completed in a timeframe typically reserved for private business dealings. To the degree possible, the process should be clearly laid out, identifying the various steps and approvals required to get to an agreement. Note that often approvals or even legislation is required that is beyond the power of the community to deliver and the client should be aware of such eventualities.

Secondly the old cliché that time is money, is an operative standard in the private sector. It is important to prepare the client for the expectation that any such process could ultimately take much longer to accomplish than one would think. The private sector client should be encouraged to adopt a timeframe for progress that is realistic and tailored to the more limited flexibility and resources that are often available to the public entity.

Finally, perception can be reality for municipalities. Developers are sometimes already stereotyped as evil profit mongers seeking to make a buck regardless of the short or long term implications for the community. As a result, the development of a solid and honest working relationship is fundamental to accomplishing the result. Communication, respect and responsiveness will ease the process but will also open up the dialogue. The private sector elements of any deal should be clearly spelled out in detail so that a city or town can carefully assess and understand any complex proposal.

Likewise, when counseling a public sector client, it is important to help them achieve an understanding of the developer’s business, market issues, issues of feasibility, cost and finance and expectations of what reasonable profits should be. Negotiations are much more fruitful when a clear understanding of the agenda and how and where compromises can be reached to achieve a deal that benefits both the community and the developer. Public sector entities and private sector firms operate in distinct and fundamentally different orbits. Achieving a positive result is the result of managing the process so that it is open, fair and allows each party to gain an understanding of the “view” of the prospective deal from the other viewpoint.

Perhaps someone should tell Congress that compromise is really not such a bad word...but I digress. 

Donald Bouchard, CRE is a senior vice president at Lincoln Property Company, Boston and is the 2016 chair of the New England Chapter of the Counselors of Real Estate.