- Continuation vehicles allow sponsors to extend asset hold periods and provide liquidity for investors amid a tighter lending environment.
- Real estate secondaries surged to $14.6B in 2024, with GP-led continuation deals accounting for $9.3B.
- These structures work best for niche sectors like life sciences, logistics, and senior housing, not for office or retail assets.
- Complex valuations and alignment with LPs can slow execution, but more sponsors are adopting the model as fund terms expire.
A Familiar Tool for Unfamiliar Times
Continuation vehicles, once known as rollover or recap funds, have returned to prominence as real estate managers face rising interest rates, tighter underwriting, and fewer exit opportunities. Originally used after the 2008 crisis, they’re now helping sponsors hold onto assets without selling at a loss or struggling to refinance, per Commercial Observer.
These vehicles allow existing LPs to cash out or roll into a new structure, while giving GPs more time to execute business plans.
A Growing Market
The real estate secondaries market grew 49% in 2024 from the prior year, fueled by a surge in GP-led continuation deals, according to Ares Management. A key turning point came in 2020 when Blackstone recapitalized BioMed Realty for $14.6B, paving the way for broader CRE adoption.
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Not for Every Asset
Continuation vehicles are best suited for stronger sectors like life sciences, logistics, and senior housing. These assets are easier to value and align on. But the strategy hasn’t worked as well for office, hotel, or retail. Market uncertainty makes valuation and investor agreement harder in those sectors.
“You can’t just take 15 office buildings and throw them into a continuation vehicle,” said Miles Treaster of Cushman & Wakefield.
Timing and Complexity
Deals often take more than six months to close. Many start up to two years before a fund’s expiration. The process involves appraisals, fairness opinions, and investor discussions.
Firms like Evercore, Lazard, and StepStone are increasingly advising on these deals. Their involvement is helping to speed up execution.
Legal expert Jennifer Morgan says sponsors favor continuation vehicles when asset values fall short of expectations. Lower values reduce incentive compensation and make sales harder.
What’s Next
Funds launched in 2015–2016 are now reaching the end of their life cycles, but many still hold assets without clear exit paths. Continuation vehicles are expected to see more use through 2026, especially with interest rates expected to remain high.
“Many GPs may be forced to use continuation vehicles to hold assets longer,” said finance professor Zhijun Yang. “The market conditions today look very different than they did eight to ten years ago.”
