This involves the purchase of a controlling interest in an asset. It allows for a significant economic upside and gives legal right to control the management team of our choosing. Usually these are a start up business or a new ground up development of a hard asset, such as Real Estate. However, we also seek to acquire underperforming assets due to the specific asset, asset category, or external economic conditions. The asset is repositioned by enhancing the asset itself, changing or modifying the financial structure, or providing necessary liquidity to weather an economic cycle.
The acquisition of first lien or mezzanine debt permits the indirect acquisition of commercial real estate. The debt can either be held to maturity, refinanced or sold, or the security interest is materialized through foreclosure on the real estate. The Company pursues the acquisition of debt related to an opportunity-driven real estate investment, as well as the asset itself. The availability of debt is determined by the term of the existing debt, the liquidity in the marketplace associated with the existing debt, the strength of the owner to refinance the debt, and the general economic conditions affecting the holder of the debt. The holding period is generally three to five years depending on debt terms and underlying asset strength. However, the value of the debt can be achieved through paid-as-agreed performance of the debt, a sale of the debt prior to maturity, as well as enforcement of the debt covenants to cause a transfer of title and sale of the underlying asset.
Often times, we will joint venture with another firm to target a larger transaction or multiple transactions. The joint venture allows a more competitive acquisition platform due to our ability to tailor-make the team, with each Partner specializing in one area of the transaction. The holding period is generally three to seven years for the life of the joint venture, with a target of three to four years for each asset in a multi part transaction.
The financial partners associated with the Company seek above-market returns on a risk-adjusted basis. The financial partners are aligned with the co-investment strategy of the Company, which provides a unique opportunity for a financial partner to participate in the financial return and our expertise. The financial partners vary from private Family Offices to Institutional Funds, insurance and credit companies, and public corporations.
The Company is proud of its tenured relationship with operating partners that look to utilize their market position and operating expertise to create value in underperforming or uniquely positioned assets. The operating partners typically make a small contribution to the ownership vehicle, and receive a management fee and performance fee. We pride ourselves on developing long lasting relationships with Operators with whom we have decades of success.