Hold-Sell Analysis

Hold-Sell Analysis

Evaluate strategic options for an asset -- hold, sell, refinance, or recapitalize -- by comparing forward returns under each scenario.

Skills Invoked

• hold-sell-framework -- decision framework, scenario comparison methodology
• underwriting-standards (core) -- pro forma projection for hold scenario
• valuation-methods (core) -- current value estimate for sell scenario

Required Inputs

• Property name and basic details
• Current operating results (rent roll and T-12 or YTD actuals)
• Original acquisition basis (price, date, equity invested)

Optional Inputs

• Current debt terms (balance, rate, maturity)
• Estimated disposition value or broker opinion of value
• Redeployment opportunity yield (for sell proceeds)
• Tax basis and depreciation schedule
• Fund lifecycle constraints (term, extension options)

Reads from Manifest

• underwriting/proforma.xlsx -- original UW pro forma
• underwriting/assumptions.json -- original UW assumptions
• valuation/valuation-summary.md -- prior valuation if available

Writes to Manifest

• Directory: strategy/
• Files: hold-sell.xlsx, hold-sell.md
• Key metrics: hold_forward_irr, sell_forward_irr, refi_forward_irr, recommendation, current_value_estimate

Workflow

Step 1: Establish Current Value

Invoke valuation-methods to estimate current market value using direct cap and DCF approaches. If user provides a BOV or recent appraisal, use that as primary input.

Step 2: Build Hold Scenario

Invoke underwriting-standards to project forward cash flows for remaining hold period. Calculate forward IRR from current equity basis (current value - debt = implied equity).

Step 3: Build Sell Scenario

Estimate net sale proceeds: disposition value - transaction costs (brokerage, legal, transfer tax) - loan payoff. Factor in tax implications (depreciation recapture, capital gains) if tax basis provided. Calculate reinvestment yield on net proceeds.

Step 4: Build Refinance / Recap Scenarios (if applicable)

Model refinance: new loan terms, cash-out proceeds, revised CFAD. Model recapitalization: partner buyout, JV restructuring, preferred equity. Calculate forward returns under each structure.

Step 5: Compare Scenarios

Invoke hold-sell-framework to compare all scenarios on:

• Forward IRR
• Equity multiple on remaining capital
• Risk profile (lease rollover, capex needs, market exposure)
• Fund lifecycle fit (time to exit, distribution needs)
• Replacement risk (can proceeds be redeployed at equal or better return?)

CRITICAL: All IRR and return calculations MUST use scripts/returns.py. Do NOT compute forward returns by reasoning through the math.

Step 6: Output

Generate hold-sell.xlsx with scenario comparison tabs:

1. Hold Scenario (forward cash flows, IRR)
2. Sell Scenario (net proceeds, redeployment return)
3. Refinance Scenario (revised cash flows, IRR)
4. Scenario Comparison (side-by-side summary)
5. Sensitivity (cap rate, exit timing, redeployment yield)

Generate hold-sell.md with narrative recommendation.

Write to strategy directory and update manifest.

QA Checklist

• Current value supported by market evidence or stated as assumption
• Transaction costs realistic for property type and market (typically 2-4%)
• Tax implications included if tax basis provided
• Forward IRR calculated from current equity position, not original basis
• Redeployment yield assumption stated and justified
• Replacement risk addressed in recommendation
• All return calculations performed by validated code

Escalation Notes

• If current value is uncertain, present analysis at multiple value assumptions
• If debt information is unavailable, analyze hold vs. sell on unlevered basis and note the gap
• If tax basis is unavailable, exclude tax analysis and flag as material omission
• This analysis supports a decision but does NOT constitute investment advice