Over the past 10 years, institutional investors have experienced the best of times and the worst of times. Rebounding returns in the early to mid-2000s produced a rush of liquidity the likes of which the American commercial real estate markets had never experienced. Unfortunately, this rush of capital led, in part, to the meltdown of 2008 and 2009. The concept of “this time it’s different” turned into “real estate is still cyclical, and it will always have peaks and valleys.”

Real estate underwriting remains critical to achieving returns consistent with the risk assumed, and a major contributing factor in the recent downturn was the failure of some firms to complete the full range of diligent underwriting. This failure was a product of a number of factors that in hindsight appear readily apparent, but will require a sea change of thought and approach on the part of many investors to reverse.

MORE SPEED, MORE RISK In the 2002–2007 era,