How’s your shop evaluating hold/sell today?
We have a couple assets at the end of the hold period and most is coming in as high as 15% below BOV. Even some of our MF is not getting the traction we expected. It’s forcing us to think whether it makes sense to just hold and revaluate in say 3 years, however, the flip side is, do things even get any better? It seems buyers have more conservative UW than ever.
Buyers conservatism today can change quickly when the herd is back. That said, hold/sell are very often more determined by higher level dynamics rather than if it's the best time to sell or not. Small shop and your deal will make a promote and the principal wants a new house? Losing or mediocre deal but your firm is raising a fund and doesn't want to show a bad deal on their track record when they can just use fairy dust underwriting to show higher returns if they don't sell it now? Last deal in your fund that did well so just get it out of the way so you can close out? Investor in the deal is a HNW that hates Trump and thinks the economy will crash and just wants out? Loan maturity that you'll need cash in to refi? So many different scenarios go into these things. When I was younger I used to ask myself why we are buying a deal that another smart group determined is a good deal to sell instead of hold onto when they know more than us. Learned later how political it all is and that's what makes it exciting too.
Also can be determined by your inventive structure. Is it IRR based and you're already 5+ years into the deal that you were supposed to sell two years ago but market got soft? Even if the market improves it has to improve A LOT for you to make a nice promote on it in 3 years since time kills IRR
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