How does the typical investment horizon of a development differ from an acquisition?

How does the typical investment horizon of a development differ from an acquisition?

• A. Shorter
• B. Longer
• C. Similar
• D. Unrelated

Answer: (A)

Development projects have shorter investment horizons because the main value is created through the process of building, entitling, and leasing up, with the exit coming soon after stabilization. The time from start of construction to sale is typically a few years, after which the investor can realize returns from a near-term liquidity event. In contrast, acquisitions rely on long-run cash flows and potential appreciation, requiring a longer holding period to capture rent growth, debt service optimization, and favorable exit conditions. This is why, on balance, the typical horizon for development is shorter than that for acquisitions. So the best answer is that the horizon is shorter.

Development projects have shorter investment horizons because the main value is created through the process of building, entitling, and leasing up, with the exit coming soon after stabilization. The time from start of construction to sale is typically a few years, after which the investor can realize returns from a near-term liquidity event.

In contrast, acquisitions rely on long-run cash flows and potential appreciation, requiring a longer holding period to capture rent growth, debt service optimization, and favorable exit conditions. This is why, on balance, the typical horizon for development is shorter than that for acquisitions.

So the best answer is that the horizon is shorter.