Commercial Real Estate Investors Are Close to Capitulation, Which is a Bullish Sign
I work as the Controller of Blackburne & Sons Realty Capital Corporation, one of the oldest private money (hard money) commercial lenders in the country.
Daily, trust deed investors call our office to inquire about the status of one of their particular investments, to question the amount of a disbursement, or to simply check-in on their overall portfolio. A couple years ago, the substance of the calls consisted of simple accounting questions or a request for a brief update.
For the past three years, given the deteriorated condition of the commercial real estate market, unfortunately many of the calls received today entail a scared or panicked investor, wondering how their investment(s) will survive. While each investor’s concern is voiced differently, the underlying emotions associated with those concerns tend be to be similar relevant to market conditions. I’ve facilitated investor calls five days a week, eight hours a day for the past 4 ½ years; but only after a seminar with Tony Woods, author of “The Commercial Real Estate Tsunami”, was I able to identify the investor emotions exposed in those conversations.
A chart provided in Woods’ book, courtesy of Westcore Funds of Denver, Colorado entitled “The Cycle of Market Emotions,” is a fabulous tool to understand the underlying emotional cycle. Examples of emotions are euphoria (the best feeling possible), down to fear, panic, capitulation and finally despondency.
Present day, I believe the majority of investors’ emotions seem to be in the area of panic or capitulation, based on the substance of calls and reactions to updates. However, just recently more and more investors are becoming submissive (i.e. despondency). These particular investors still call for updates, but the information provided is no longer a shock or disappointment; rather considered par for the current market conditions.
It’s always darkest before dawn… so I remain optimistic for our loyal trust deed investors that again (hopefully sooner than later) the feeling of hope and relief in trust deed investing will be restored.
Angela Gimenez is the Vice President and Controller of Blackburne & Sons Realty Capital Corporation. The opinions expressed are her own. She can be reached at 916-338-3232.