Page 234 - 2

H OLDING S TRA TEGIES AND E XIT S TRA TEGIES

reap the rewards. Since the market for apartment buildings that are
ripe for conversion to co-ops is hot, I will sell them at a premium to
people who want to convert them and I’ll take the money to buy land
in a good location that has a long-term ground lease.”
Kandell made a conscious decision to give up the income that he
had from apartment rentals, sell the buildings at high prices because of
the particular demand that existed at that time, and turn the money
into a safe, gilt edge, and passive investment in ground leases. Taking
advantage of favorable tax treatment, he swapped a building that could
go co-op for a ground lease that was owned by my old client, Sol Gold-
man. The land Goldman swapped was under a major office structure,
known as the Newsweek building on Madison Avenue. The rate of re-
turn was lower than Kandell earned from the apartment building but
it was a rock-solid investment that would ultimately appreciate in
value. By repeating this investment technique, Kandell amassed a con-
siderable fortune that he left for his heirs without the headaches con-
nected with active ownership and operation of apartment buildings. I
learned later that some of the co-op conversions of Kandell buildings
never got off the ground primarily because of fights with tenants that
ended up in the courts. Kandell took advantage of an opportunity to
cash in when the time was ripe and changed his investment strategy to
a more conservative one. Whenever the market is hot for the type of
property you own, you should consider selling and reaping large prof-
its, then putting the money into another type of real estate for which
the demand, and the price, is not so high.

HOLDING STRATEGIES

The following are examples of several strategies that successful re-
alty investors utilize. Some of the strategies are short term and some
are long term.

213