Embracing Fear, Leveraging Uncertainty

Humans developed fear as a protection mechanism so we wouldn’t get eaten by lions. In today’s world, fear can protect us from real dangers like not walking across a highway into oncoming traffic but when fear starts to creep into our investment decisions it can have a real and negative impact. It’s something we see manifest most clearly in uncertain times like the present and something that’s been top of mind for me the last few months. Sam Zell used to say that people want the returns he generated but couldn’t stomach the fear it took to get those returns and that rings true in times like these.

Last fall, our family closed on two acquisitions, a self storage facility in Bakersfield (CA) and a small multifamily property in coastal Oceanside (CA). Reflecting back on the last few years, I think that investor fear peaked in the third quarter of last year when both of these deals were tied up. If either deal traded today, I think they would trade at a premium to what we closed for a mere few months ago.

We are still seeing a lot of risk aversion in the market which creates acquisition opportunities for us while others “wait and see.” For example, we are using data analytics to identify mismanaged properties and reaching out directly to these owners to manufacture creative acquisition opportunities in sub-institutionally sized multifamily. The herd is still tepid and largely sitting on the sideline with unrealistic expectations looking for a unicorn opportunity that may or may not exist.

We are thinking very intentionally about long term wealth generation and opportunities to multiply current assets under management during this time period and encourage all our family and friends to do the same to take advantage of this window of opportunity. Happy to share more about how we are thinking about the various asset classes within real estate and our real estate allocation for 2024.