In the absence of data, all decisions are emotional. - Unknown

Human behavior specialist Dr. Brené Brown famously wrote, “In the absence of data, we will always make up stories. In fact, the need to make up a story … is part of our most primitive survival wiring.”¹ While there is not a complete absence of data in private markets, they are marked by limited transparency against the backdrop of a very complicated and increasingly uncertain environment. 

Investors are in the business of figuring out whether there’s a story worth putting capital behind. Making sense of it all is really about perceiving the true story, which is just as much an art as it is a science, a gut feeling as an analytical thought. Managers like me herein, lean on oversimplified data and intuition to form stories about tariffs, stories about AI, and stories about real estate markets … and the best investors get them occasionally right. 

When it comes to real estate, I’ve found the best investors are the ones with an intuition and instinct formed from thousands of hours of operator-level experience. It reminds me of a platoon leader I served with named 1LT Ray McPadden, who had been patrolling the infamous Korengal Valley of Afghanistan for 14 months. He described the predictive powers he and his men developed over the course of nearly a hundred enemy engagements. After a while, they began to form a sixth sense that would alert them to when, where, and how they would be attacked, right before an attack began. I’d like to think our investment team, having underwritten thousands of deals, and invested with hundreds of sponsors, know a little about this. 

There’s likely a mental framework that little-understood parts of the brain are using, but it manifests as a feeling more than a thought. If it were not, quants would have replaced our jobs long ago, and we would already be talking about a future where there would be no need for human real estate sponsors. But, the foreseeable future rewards those with a honed gut who can finish the story where the data is missing. RRA’s founding partners cut our teeth on the operator side and have since spent almost two decades in transitional real estate debt, which helps us better evaluate brokers’ and borrowers’ narratives on certain deals. Likewise, it allows us to see the through-line in the market cycle and better attempt to make sense, and cents, of it all. 

‍_{[1] - Brené Brown, article The Swim of Awakening, published on July 23rd, 2017 in Spirituality & Health Magazine}