When the Deal You Don't Do is the Best Deal You Do
It can be easy to fall victim to the sunk cost fallacy. In principle, all costs incurred are sunk when making a business or investment decision. But that does not always stop an investment or real estate professional from making a decision based on the hard work expended up to that point.
During the diligence process, TRA’s analysts have uncovered details about a potential tenant that have been are deal breakers for our clients. We have found likely instances of fraud, identified tenants on the cusp of insolvency, and learned details about a tenant’s ownership that exposed our client to reputational harm. As responsible fiduciaries, our clients often choose to “walk away” knowing that the potential cost of remediation does not merit the short-term benefits of executing the lease or closing on the acquisition.
TRA’s diligence efforts are comprehensive and fluid. Our analysts are creative in their approach to each tenant reviewed. Irregularities that arise in the diligence process, be they fin
ancial, operational, legal, or reputational, are incorporated into our reports so that our clients can make the best decision possible with the best information available. While every company we review is unique, most do become viable tenants. The value associated with ongoing tenant diligence far exceeds the costs, allowing our clients to walk from a toxic deal.