At Bay Street Hospitality, term negotiation is data-driven. Using the Bay Score framework, the fund dynamically adjusts its negotiation position—ideal, fallback, and dealbreaker—based on the actual score profile of each deal.

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Why Generic Legal Language Hurts Investors

Traditional Term Sheet vs Bay Street Method

• One-size-fits-all clauses → Terms adjusted based on IRR, AHA, ESG, etc.

• Fixed fallback language → Dynamic 'ideal/fallback/dealbreaker' based on metrics

• Opaque risk-sharing → Transparent tradeoffs based on Bay Score quartiles

• Static reps and covenants → Terms adapt based on Sponsor Score and Region Risk

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Structure of the Dynamic Negotiation Playbook

Bay Street’s negotiation protocol uses a three-tiered approach per clause:

• Ideal Term = Highest protection when Bay Score is <70

• Fallback = Standard when Bay Score is 70–89

• Dealbreaker = Minimum baseline only acceptable for 90+

Each clause is linked to:
• Bay Score (composite strength)
• AHA / IRR (return profile)
• BMRI / LSD (macro + exit risk)
• Sponsor Quality

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Example Clauses with Dynamic Settings

Clause: Waterfall Distribution
Bay Score < 70 → 9% Pref + Full Catch-Up | 70–89 → 8% Pref, 50/50 | 90+ → 6% Pref, No Catch-Up

Clause: Brand Termination Rights
BMRI < 40 → LP veto rights | 40–70 → LP consultation | >70 → Brand locked-in

Clause: Exit Control
LSD > 3.5% → LP Exit Priority | <3.5% → Sponsor Exit Call

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Negotiation Strategy Based on Bay Score Quartile

• Q1 (90–100) → More flexibility; modest alignment tradeoffs

• Q2 (80–89) → Moderate stance; ensure IRR is protected

• Q3 (70–79) → Conservative stance; stronger fallback clauses

• Q4 (<70) → Tight protection; enforce strict pref and controls

In Practice: Negotiating with Precision

• Marriott REIT (Bay Score 87): Accept 7% pref, standard exit, no co-invest clawbacks

• Portugal ground-up (Bay Score 93): Lower pref, sponsor gets flexibility on promote

• Sri Lanka boutique (Bay Score 64, BMRI 71): 10% pref, IRR floor, FX hedge, co-invest escrow

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Benefits for Investors and Sponsors

Institutional LPs

• Avoid overpaying for high-risk deals

• Build term sheets tied to quantitative logic

• Increase trust in underwriting discipline

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Sponsors

• Negotiate faster with logic-based arguments

• Win better terms for stronger assets

• Build repeatable structuring templates

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How the Playbook Is Maintained

The Bay Street Terminal dynamically generates negotiation language based on:

• Bay Score quartile

• Region risk (BMRI)

• Exit delay risk (LSD)

• Sponsor attributes

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Conclusion: A Smarter Way to Negotiate

In hospitality, the line between return and regret is in the details. By applying a quantified negotiation playbook informed by the Bay Score system, Bay Street ensures that every investor clause—exit rights, fees, controls—is grounded in data, not anecdotes.

Dynamic alignment = stronger protections, smarter capital deployment, and long-term trust with institutional partners.

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