During their latest episode of the VALUE: After Hours Podcast, Taylor, Carlisle, Kagan, and Bennett discussed Real Estate Market Poised for a Return to Rational Underwriting. Here’s an excerpt from the episode:
Tobias: What are you most looking forward to over the next few years? Is it a good environment or is it a rougher macro environment, which is a better investing environment or how are you thinking about it?
Moses: What do you think, Rhett?
Rhett: I’m most looking forward to a return to rational underwriting. Some of what Moses described early in the call with lipstick on a pig, as we call it, renovations. When we capitalize an asset, we’re going to do that very conservatively and oftentimes, all cash. And as people, they became so focused on IRR, and levered IRR that if you are a person that uses a pretty conservative capital structure, you just become not competitive. There’s all kinds of other places in real estate where people in a lot of ways lie to themselves in terms of what the actual cash flow of the asset is going to be.
Now we should return to an environment, I mean, should return to an environment where people are actually underwriting more conservatively, which allows us to be more competitive and hopefully buy great assets.
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