By: Paulina Ruta
Although not a new strategy to commercial real estate, partial sales have become increasingly popular for “large property deals,” billion dollar buildings for example. This is largely due to the mutual appeal to both the buyer and seller of the property. For the buyer, it has become increasing hard to finance such large purchases, and therefore buying in smaller chunks makes it feasible. In addition, foreign buyers get to have their investment tied to a local expert, decreasing their risk of entering an unfamiliar market. On the seller end, partial-interest sales allow them to hold onto a part of the property to continue benefitting from appreciation while moving onto other deals. As stated by Doug Harmon, chairman of Cushman’s capital markets group, these deal are a “marriage” between investor and owner and are the current trend.
Statistics Summarized:
2017: 83% of all deals on Manhattan office buildings were partial-interest sales Comparable to 2015, where 42% of such sales were minority-interest sales
2016-2017: minority-interest deals made up 17% of total sales dollars Comparable to 7.1% recorded during the previous 10-year period.
Article reference: https://www.wsj.com/articles/why-sell-a-billion-dollar-building-when-you-can-unload-a-piece-of-it-instead-1520776800