Best Practices: Getting Out Of An Investment When The Getting Is Good
Our Managing Director of Investments, Featured in Biznow on Exit Strategies in Multi-Family Investments:
August 1, 2019 Dees Stribling, Bisnow National
The Best Practices series asks CRE leaders around the country about how to best execute a single aspect of their business. See the first and second in the series.
Nothing lasts forever, including commercial real estate assets' most productive years. Determining exactly when the best time is to sell a CRE asset is, however, as much art as science.
What are the most important considerations in how long to hold a property, and how do you determine the best exit strategy?
We put that question to executives at six CRE investment companies, of various sizes and holding various property types.
Continental Realty Group, Managing Director of Investments, Robert Ireland:
Part of what makes multifamily real estate so interesting is that there's no one-size-fits-all approach. Still, a given property’s holding period and exit strategy are core components of a sound acquisition strategy. First, what is the right strategy for a specific property? Sometimes you’re looking at a property where the best play is a long-term hold, while other opportunities are much shorter in nature. Second, what are the goals of the stakeholders? Are they looking for high current yield, or is the appetite for capital appreciation? These aren’t always mutually exclusive, but are key considerations. It’s important that stakeholder goals are aligned from the start. Third, based on the answers to the first two questions, what type of available financing is best used for the property? For a shorter-term hold, there might be a heavy emphasis on financing with flexible prepayment options. If the plan is to renovate and refinance, the emphasis may be on loan earn-outs or availability and terms of supplemental financing. For properties with a value-add component where you also want to maximize cash flow, you can look at interest-only options. Fourth, where do you believe you are in the cycle? We recognize, despite the volumes written on the subject, there's no crystal ball that will tell us exactly where we are in the cycle and when the next downturn may occur. But that doesn’t mean you can’t make educated estimates and plan our business strategy, financing and ownership goals around it. Continental Realty Group (formerly Continental Realty Advisors), based in Denver, is a multifamily sponsor, participating in $1.6B in acquisitions, renovations and dispositions.
About Continental Realty Group
Continental Realty Group, Ltd. is a real estate investment firm dedicated to the creation of value in multi-family real estate investments. It manages the full investment cycle from initial research to disposition, allowing the opportunity to add value at each stage based on its decades of experience. Its name changed to Continental Realty Group, Ltd. in 2019 to reflect its growing diversity as a multi-family sponsor and developer. For more information on Continental Realty Group, please visit www.ContinentalRealtyGroup.com.