Breaking Down Confirmation Bias in Commercial Real Estate Investing
The Criterion Fund: Expanding Horizons in Commercial Real Estate
Dynamic Investments and Overcoming Confirmation Bias
Welcome back to another insightful episode of "How to Invest in Commercial Real Estate" with The Criterion Fund. This episode was packed with exciting updates, strategic insights, and an in-depth discussion on a crucial cognitive phenomenon: confirmation bias. Let’s dive into the key highlights and explore how Criterion is navigating the vibrant world of commercial real estate.
Recent Acquisitions and Strategic Moves
The Criterion team kicked off the episode by sharing their recent investment activities. Over the past month, they have made significant acquisitions, including a shopping center in Florissant, a petromax gas station in Dawson, and a shopping center in Martindale, Amarillo. These acquisitions highlight Criterion's strategic approach to diversifying their portfolio and capitalizing on high-potential assets.
Florissant Shopping Center: Located in northern St. Louis, this $11 million acquisition is poised to provide third-quarter distributions. Criterion is in the process of splitting off the Panda Express and Chipotle out parcels, aiming for a sale before the year's end.
Petromax Gas Station in Dawson: Acquired for over $5 million, this asset will likely yield fourth-quarter distributions if held until the end of the year.
Martindale Shopping Center in Amarillo: A $4.5 million deal with a strong cap rate and committed tenants, this older property brings a blend of stability and potential growth to Criterion's portfolio.
Embracing New Marketing Channels
The team has been experimenting with new marketing strategies, particularly through Facebook ads. This initiative has brought in numerous new investors, demonstrating the power of digital marketing in reaching and engaging with potential stakeholders. Jackson, the new team member in Fort Worth, has been pivotal in converting these leads, reflecting the team's adaptability and forward-thinking approach.
Upcoming Investments
Criterion is gearing up for another significant acquisition: a grocery-anchored center in Houston, Texas. Slated to close on August 28th, this $14.2 million investment showcases Criterion's ability to secure and manage large-scale deals. The center, anchored by a popular Mexican grocery store, is projected to achieve an 18.5% IRR by year five, with the potential for refinancing and sustained cash flow.
Confirmation Bias: A Double-Edged Sword
A substantial portion of the episode focused on confirmation bias and its implications in commercial real estate. Confirmation bias is the tendency to favor information that aligns with our preconceptions while disregarding opposing data. The team emphasized the importance of recognizing and countering this bias to make informed investment decisions.
How Confirmation Bias Can Hinder Investments:
Ignoring Viable Opportunities: Investors might overlook potential deals if they cling to preconceived notions about what constitutes a good investment. This narrow focus can lead to missed opportunities.
Overvaluing Familiar Data: Relying heavily on familiar data or past experiences can result in skewed evaluations of new opportunities. It's crucial to assess each deal on its own merits.
Leveraging Confirmation Bias to Your Advantage:
Focused Attention: By directing focus towards specific investment types, investors can become more attuned to relevant opportunities. For instance, actively seeking out commercial real estate deals can make such opportunities more visible and actionable.
Data-Driven Decisions: Utilizing objective data, such as visit counts and sales performance metrics, can help mitigate the influence of confirmation bias. Criterion employs tools like Placer to gather reliable data, ensuring a well-rounded analysis of potential investments.
Real-World Applications and Investor Relations
The team shared real-world examples to illustrate how confirmation bias can influence investment decisions and interactions with potential investors. They highlighted the importance of maintaining an open mind and engaging with a diverse range of potential investors, regardless of superficial indicators of wealth.
Engaging Everyday Investors: Criterion's inclusive approach has attracted investments from a wide array of individuals, not just those who outwardly display signs of affluence. This strategy underscores the value of expanding outreach and recognizing the investment potential in everyday interactions.
Podcast Impact: The Criterion Fund's podcast has become a valuable tool for connecting with prospective investors. By demystifying commercial real estate and sharing actionable insights, the podcast has inspired listeners to explore investment opportunities and even enabled some to achieve financial independence.
Conclusion
This episode of "How to Invest in Commercial Real Estate" was a testament to Criterion's dynamic approach and strategic acumen. From significant acquisitions to thoughtful discussions on cognitive biases, the team showcased their commitment to growth and investor education. As Criterion continues to expand its portfolio and refine its strategies, listeners can look forward to more valuable insights and opportunities in the commercial real estate sector.
Stay tuned for future episodes as Criterion navigates the ever-evolving landscape of commercial real estate, providing expert guidance and fostering a community of informed and empowered investors.
