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see soapbox diatribe below...

-the increased use of the word "capital allocator"

-the amount of get rich quick/deal syndication linkedin posts I see on a daily basis

-the increasing need to raise capital globally if you want to participate in a meaningful way

-sponsors not having an original thought and outsourcing deal analysis to their LP's

-New mezz/preferred equity funds gloating about capital subordination not realizing they're creating adverse selection bias with their structure

-People that get hung up on personal skin in the game as the ultimate insurance policy

-Lack of skin in the game. Seems hypocritical to above point, but let me explain. Distinction above is that above people justify taking shortcuts in analysis/due diligence because of skin in the game. Later group is a signal for undercapitalized sponsors getting deals done, the amount of capital flowing in our space, and/or a savvy sponsor accumulating portfolios of options that may walk if option value goes OTM)

-Lenders that think a 70% loan is always safer than an 85% loan

-Multifamily groups that say development is risky at this stage in the cycle and then go buy a 25 year old asset at the same cost basis and justify it by saying Class B does better in a downturn.

-A whole cohort of participants that don't realize making money in real estate is actually hard

-Lastly, that I've been wrong long enough to question whether I'm actually any good at this. Ignorance may be bliss on a long enough timeline...

 

Good stuff man. +1

Can you elaborate on adverse selection bias caused by the mezz / pref equity guys?

 

On the development side, the exit numbers you have to underwrite in order to get something to work are getting absurd. Having trouble understanding the cap rate spread between asset types. Infill hotel projects in Tier 1.5-2.0 cities with exits +/- $500,000 per key on non-luxury product. Just the general number of full-service product proposed or under construction is scary.

 

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