When Bruce Springsteen was asked about the meaning behind his hit song “Thunder Road,” he described it as an invitation—an invitation to his audience to join him on a journey. Where that journey would lead was undetermined. We now know it led to 20 Grammy awards, two Golden Globes, and induction into the Rock & Roll Hall of Fame. And from a business perspective, an iconic brand and a successful revenue stream including live events, recorded music, and merchandise.

When Kenwood started 25 years ago, investors were similarly asked to embark on a journey. The plan was more defined than Springsteen’s and offered more stable collateral, yet the outcome was also unknown.

Now that Kenwood has reached its quarter-century milestone, we thought it would be fun to review that initial philosophy, evaluate its performance, detail what we’ve learned, and peek into the crystal ball at potential future endeavors.

Kenwood's Principles

Since the beginning, Kenwood’s guiding investment principles have focused on the following ideals:

  1. To build a real estate investment portfolio, utilizing private equity from high-net-worth investors without pressure to acquire just to deploy equity.
  2. Acquisitions needed to be strategic, based on a sound plan, reasonable assumptions, and a conservative approach.
  3. Every property would be managed internally with the belief that when ownership and management interests are aligned, the investor’s returns would be enhanced.
  4. The Sponsors would invest 10-20% of the equity in every property. Having “skin in the game” keeps the Sponsors focused and engaged. 
  5. Incentivize the Sponsors on the “back end,” meaning only after the investors have achieved certain minimum levels, or their initial equity has been fully returned. This makes the investor’s returns paramount over fees.
  6. Identify properties with long-term growth and consistent cash flow from rents (value-oriented) as opposed to quick appreciation and then selling (growth-oriented).
  7. Focus on multi-tenanted properties to benefit from a diversified rent roll and to minimize investment risk if any tenant vacates.
  8. Remain geographically centric on the Washington, D.C., and Baltimore markets that we know well.
  9. Identify acquisition opportunities where we can utilize our real estate expertise to create value for our investors. 
  10. Return all or most of our investors’ equity as quickly as possible. This generally occurs at the property’s first refinance. Currently, we have returned 100% of investors’ equity in more than 50% of our portfolio. These investors still own their share in the property and continue to receive regular distributions.

Twenty-five years later those initial philosophies remain valid and continue to be our mission. And the results validate the principles! For every property that Kenwood has owned for more than 10 years, our investors’ returns, after all fees and expenses have exceeded the S&P 500 over the same period. The chart below summarizes those results. 

Kenwood Investor Returns Versus S&P 500

Property Name

Starting year

Kenwood Percentage Return (Cash Flow and Refinance Proceeds only)

S&P 500 Percentage Return

Kenwood Building




NOVA Industrial




NOVA Storage




Lottsford Business Center




Hampton Commerce Center




Preston Court




Westmore Avenue




B&O Office Building




Since we still own all of these properties, the investors’ overall returns are actually higher because none of them have been sold yet. Kenwood’s returns noted above represent only cash flow and refinance proceeds.

Switching to properties that have been sold, the chart below summarizes those results.

Properties Sold

Property Name

Purchase Price

Sale Price

Investor IRR

Edgeworth Drive Warehouse Condos




Cherry Lane Business Center




Ashton Road




Dulles Design Center




8023 Corporate Drive




Note that the Internal Rates of Return (IRR) represent actual returns investors received after all fees and expenses.

What We've Learned Along the Way

Over the past 25 years, we’ve learned some noteworthy things that we want to share.

  1. Discipline. Remaining a disciplined investor has been critically important to our success. Every new investment must be modeled, scrutinized, and tested for sensitivities. 
  2. Market Fundamentals. We understand that real estate investments are not risk-free and remain dependent on many factors, including some that are outside of a Sponsor’s control, such as interest rates and the overall economy. It also means that understanding other risks—such as effectively managing operating expenses, timing to lease vacant spaces and related costs, new supply potential, and demand drivers—must be thoroughly evaluated. By identifying and understanding these risks, we can work to minimize their impact on the investment. It also means recognizing that the “risk spread” between 10-year treasuries (considered risk-free) and capitalization rates needs to be appropriate given the specific property being evaluated.
  3. Fairness to Tenants, Investors, and Contractors. If you are a long-term real estate investor and operator, it is very important to be fair to everyone. Our industry is small, and reputations matter. Being fair, sometimes means negatively impacting the short-term bottom line. However, our experience has been that by being fair, better results are achieved over the long term. 
  4. Kenwood Community. More recently we recognized the impact that the Kenwood Community can have on everyone we interact with. The network and resources that our tenants, vendors, and contractors have is enormous, and tapping into that provides everyone with additional value. For our tenants, it enables us to expand the Landlord-Tenant relationship so that it becomes less transactional and more collaborative, which ultimately provides more value to our tenants and investors.

What Does the Future Look Like?

  1. Expand the Kenwood Community. We still haven’t reached the Kenwood Community’s full potential benefits. Its potential power from the resources, knowledge and contacts that our investors, tenants, and contractors have is significant. For example, we plan to enhance engagement by offering tenants opportunities to learn about various topics specific to small business owners from the experts within our community. These events are free and can also assist our guest speakers (usually also tenants) to generate new business leads.
  2. Continue to focus on local real estate markets. Although we are aware of other private equity Sponsors expanding their acquisition footprint beyond Baltimore and Washington, we will not be pursuing this route. We still believe that local knowledge and the relationship we’ve developed with local brokers and vendors will produce more consistent results.
  3. Consider shorter-term investment opportunities. Ashton Road is an example of a short-term investment. It was purchased at 40% occupancy, leased to 100%, and sold, all within a four-year period. The Ashton Road investors doubled their investment. When sold, some investors elected to “cash-out” their investment while others reinvested their proceeds in a tax-deferred 1031 exchange. Periodically, some investors prefer a shorter-term investment strategy.
  4. Take on more joint venture (JV) opportunities. As our reputation has grown, we have been presented with increased JV opportunities. Ashton Road, noted above, was one such opportunity that produced very impressive returns. We anticipate additional opportunities to become available because of our platform where we raise equity and manage the properties directly. JV opportunities could also include working with larger, well-funded tenants who are interested in committing to a long-term lease as well as providing some equity to acquire the property.

So, to all our investors: THANK YOU. We appreciate and are humbled by the trust you have in us and hope that you also feel we have delivered on our goals.

In celebration of our 25th anniversary, we will be holding an investor event on September 8 at The Marriott Convention Center in North Bethesda. Our guest speaker will be well-known economist Anirban Basu. Please hold the date. Invitations will be issued soon. Also, spouses/significant others are welcome as are any of your friends who would be interested in learning more about our investment opportunities.