- September 2009: Vol. 21 No. 8

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How Do You Price a Secondary?

by Ronald Dickerman

Ronald Dickerman, president of Madison International Realty, answers this month’s reader’s question: “How do buyers price illiquid joint venture interests held by institutions in the changing economic environment?”

The current economic crisis and distortions in the capital markets have created unique underwriting challenges for pricing interests in the secondary market, resulting in a bid-ask spread that continues to stifle transaction volume. Those requiring liquidity seek certain transaction execution, while active investors cannot ignore a generally bleak outlook for commercial real estate and practice conservatism in their approach. With the necessary attention and accommodations during the underwriting process, however, high-quality assets and sponsors can find a common bid-ask price, and the result will be increased transaction volume.

Pricing is particularly challenging because joint venture and limited partnership interests are inherently illiq

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