Investor sentiment hasn't changed—at least not in a significant way—as a result of the new presidential administration, according to Shlomi Ronen, managing principal and founder of Dekel Capital. Following the election, there was a lot of excitement about the pro-business attitude of the new administration and the potential policy changes, like loosening Dodd Frank regulations. As of now, Ronen says that there hasn't been a shift in sentiment because investors are still waiting to see what is going to happen.
“It really hasn't come into play yet. If and when Dodd Frank gets scaled back, it will provide additional liquidity in the market. At that point, we will see what will happen with that liquidity,” Ronen tells GlobeSt.com. “We are primarily talking about the banks and the CMBS lenders. On the CMBS leg, we will see if the bond buyers are going to allow CMBS lenders to no longer risk retain a portion of the securitization, which they have to do now. On the bank side, you still have Basel III regulatory framework that banks have to adhere to, so it may not free up liquidity on the bank side in the long run.”
The real estate industry would love for these regulations to be pulled back, but for now, the market is still healthy. In fact, Ronen recently made a case for the extended cycle and why he expects a long runway. “I haven't seen anyone make a case for why this cycle will end in the next year or two,” he says. “No one has a strong reason or can point to a cause for why it will end.”
While there isn't a cause for an impending recession and no change in sentiment, investors are still questioning when the end of the cycle will come. Ronen, however, says that this has more to do with the length of the cycle rather than the new administration. “We are late in the cycle, and that means that investors have made investments, gotten returns and are now looking to get the same returns on similar investments,” he explains. “That doesn't exist, and it doesn't exist because we are in a very liquid market.”
While investor sentiment remains positive, it isn't reckless and investors aren't making bets on potential policy changes. Rather, Ronen sees responsible caution from investors. “To the extent that there is steep competition in every facet of the equity market, we are seeing a good amount of liquidity, but with that liquidity, we are seeing constraint,” he explains. “I haven't seen increased speculation or unconstrained investing.”
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Kelsi Maree Borland
