Extend and Pretend: The Psychology Behind Why Syndicators Won’t Sell
Everyone was waiting for the distressed deal flood. It never came. And Brian Sutton knows exactly why.
In Episode 5 of Lessons the Hard Way, Brian sits down with co-host Sam Chillingworth to break down the psychology behind why syndicators are holding on instead of selling — why extend and pretend took over the market — and what it actually feels like to be the operator sitting on a deal that isn't coming back.
Brian also makes a confession most operators in his position would never say out loud: MUST WATCH. He still believes in the model. And he explains exactly why.
In this episode:
• Why the expected flood of distressed deals became a slow drip instead
• The psychology of extend and pretend: denial, responsibility, and not wanting to post a loss
• Two choices in a bad syndication: sell for a loss or rescue capital.
• Why lenders were enabling the can-kicking just as much as operators
• Brian's confession: in 20 LP deals, a lot have gone south
• Why he still believes real estate generates more millionaires than any other asset class
• The fund model advantage: more flexibility, more options, better capital protection
• Contrarian capital: why the investors who make the most money buy when others won't
• A U-shaped recovery: what that means for timing and where Two Waters is positioning now
• Why this current downturn will produce the next great run in real estate
• What Brian would tell any investor sitting scared on the sidelines right now
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🔗 Two Waters Capital: 2waterscapital.com
0:00 Cold open
0:36 Show intro
0:58 Welcome back: the buzzword right now is distress
1:27 Why distressed deals are trickling out instead of flooding the market
1:53 Brian was there: why he did not want to let go of his own bad deal
2:12 Nobody wants to post a loss
2:30 Single syndication in its infancy: why the market is especially fragile
2:59 The birth of coaching groups and new syndicators entering the market
3:29 Kicking the can: hoping the market comes back before investors find out
3:51 Two choices for a bad syndication: sell at a loss or rescue capital
4:34 The intention was never to lose money: giving operators credit where it is due
4:40 Survive until 25, extend and pretend: the mantras that kept deals alive
5:24 Bridge loans, capital calls, and convincing lenders to work with you
6:14 It will be a drip, not a fire hose: how the distress will slowly leak out
6:37 The psychology: what does it actually feel like to be that operator
7:05 Denial and responsibility: protecting capital vs. kicking the can
7:26 Your first loss is your least loss: when holding on stops protecting capital
7:49 Trapped in two ways: the vehicle and the psychology
8:09 Two Waters' response: learning from mistakes, moving to the fund model
8:38 Why funds give operators and LPs more options when deals go sideways
9:30 Still waiting for the next shoe to drop: operators and LPs in limbo
10:07 "The market is not coming back to save you"
10:24 Why people are not selling: denial on both the operator and LP side
10:58 LPs who signed up for passive income and stopped paying attention
11:18 Brian's confession
11:50 Why he still believes: real estate creates more millionaires than anything else
12:26 Investing direct vs. through a financial advisor: where the return actually goes
13:51 The next renaissance: real estate will come out of this downturn
14:19 Still optimistic and moving forward: Two Waters' current position
14:48 U-shaped recovery: what that looks like and why it matters for timing
15:08 Two Waters' first fund: two distressed assets bought at significant discount
15:48 Why these deals are hard to find and require deep local networks
16:12 Prices will not crater and will not rebound quickly: a slow leak for years
16:30 Investors got in for the right reasons, just potentially the wrong time
16:55 What to say to the investor sitting scared with capital on the sidelines
17:30 Contrarian capital: the investors who make the most money invest when others won't
17:59 The herd mentality of institutional capital and why it creates opportunity
18:30 Buy right in a down market and you will be rewarded for your courage
19:06 Closing thoughts: life is a journey and relationships are the point
20:07 Getting out of your own way: the hero syndrome that cost Brian the $10M deal
20:34 How that loss is shaping how Two Waters thinks about every future deal
21:14 Closing
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