Is there any syndication focusing on long-term buy and hold?

[Chan Le]

For some reason I only see 5 or 7-year target sell, perhaps there is a reason no syndication want to buy & hold forever?

[Brian Burke]

There are a few reasons.

1. The first thing many syndication investors ask is "when will I get my money back."  Most investors don't want to part with their money indefinitely.

2. As hold times increase, IRRs decrease. Since many investors in syndications are IRR driven, higher IRRs are more attractive to them.

3. Most syndication business plans involve a value-add strategy of some sort.  Most of the added property value happens in the early years of the investment.  It makes sense to harvest that gain, then repeat the process on the next investment.  You make 80% of you profit in 20% of the time.  Move on and do it again.

4. As properties increase in value, return on equity decreases.  Selling monetizes that equity and allows it to be invested and earn a higher return.

5. The sponsor's largest source of revenue is in the promote, which in most cases isn't realized until the sale.  Most sponsors don't want to wait their entire life to get paid for their efforts.

6. Probably a dozen more reasons than the 5 most common/important above.

"Buy and hold forever" is a legacy-investor's strategy.  If you own real estate in your own account and are just building wealth to pass on to your heirs, it works great.  If you are a centimillionaire, legacy holding parks cash that has few other places to sit.  Maximizing return is a lot less important than preserving capital.

But most syndication investors aren't centimillionaires.  Rather than parking money, they are looking to maximize their returns and build wealth.  Shorter-term holds provide a better vehicle for accomplishing those objectives.