An exit strategy is the plan for how and when a sponsor intends to conclude a real estate investment and return capital to its investors, whether through a sale, refinance, or another liquidity event. Every real estate offering should articulate a projected exit strategy up front, since it shapes the expected holding period and the assumptions underlying projected returns.
Common exit strategies include selling the stabilized property to another investor once the business plan is complete, refinancing to pay down or replace existing debt and potentially return capital while retaining the asset, or, for development projects, selling immediately upon completion or lease-up. The chosen strategy depends heavily on the property type, the strategy pursued, whether value-add or core, and prevailing market conditions at the time of exit. Because market timing can shift a projected exit strategy, investors should understand what happens after the exit on a real estate investment, including how proceeds are distributed and what alternatives a sponsor might pursue if the original plan needs to change.
Further reading: The Lightstone DIRECT Story
ACCESS
