On saying no.

A short note on why we passed on three of the most-marketed Iberian transactions of the year, and what that says about the price of conviction.

The three transactions are familiar to anyone reading the institutional press in the first quarter. We will not name them. Two cleared at numbers that surprised us. One has not cleared, at the time of writing, and may not clear in its current form.

The common shape

Each of the three was priced to a future the buildings themselves could not deliver — a continuation of the rents and the absorption we have been living through, with no allowance for the slower landing the wider economy is now suggesting. When we walked the buildings, the structure, the location, and the basis we would have to pay did not line up. The hold periods being marketed asked the buildings to perform a use, at a price, that the buildings could not honestly carry.

The price of conviction

Saying no to a marketed transaction is a quiet act. It does not appear in the press release, it does not appear in the league table, and it does not appear in the year-end letter unless the writer chooses to put it there. The discipline of doing it, consistently, is most of what the work actually is.

The asymmetry

The asymmetry of a long-horizon practice is that the cost of saying no is recoverable, and the cost of saying yes to the wrong building is not. We have spent years repairing the consequences of buildings we should not have bought. We have rarely regretted a building we declined.