Real Estate Secondary Transactions: Generating Liquidity, Managing Risks, Optimizing Portfolios

The secondary market is expanding and changing the real estate finance market. A secondary transaction is a transaction where equity is exchanged within the ownership structure of a real estate asset, which includes recapitalizations. 

Real estate secondary transactions are being used as a tool to provide liquidity to current investors and involve the acquisition of existing interests in funds or individual/portfolio investments. There are two types of secondary transactions, limited partner (LP)-led or general partner (GP)-led. Both LP-led and GP-led secondaries can offer investors access to real estate assets with proven track records often at a discount and can be a more flexible way to invest or divest from real estate assets than in the primary market.

A GP-led secondary is a recapitalization where the GP maintains control of the underlying asset but sells one or more platforms in a property, or properties, to a continuation vehicle which is capitalized with fee-paying capital from new LPs. With an LP-led secondary, an existing LP sells its interest in a real estate fund to a new buyer who then takes on the LP's rights and obligations.

While secondary transactions offer many advantages to sponsors and investors, counsel must also understand the challenges and complexities associated with these transactions to mitigate potential risks and ensure it is the appropriate strategy for their client.

Listen as our authoritative panel explores how secondary transactions are transforming the current real estate market and provides guidance for navigating these complex transactions. 

I. Market trends driving the increase in real estate secondary transactions

II. How secondary transactions differ or are complementary to primary real estate investments

III. GP-led secondaries vs. LP-led secondaries

IV. Common secondary transaction structures

V. Advantages of secondary transactions

VI. Challenges and key considerations with secondary transactions

VII. Future evolution of secondary transactions

VIII. Practitioner pointers and key takeaways

The panel will review these and other key issues:

• How have current market conditions impacted the number of real estate secondary transactions?
• What are the key differences and considerations between GP-led and LP-led secondary transactions, and which type is more common?
• What deal structures are typically used for real estate secondary transactions?
• What issues most often derail secondary transactions, and how can counsel for sponsors and outside investors overcome these hurdles?