Challenges Faced by Wealthy, Multi-Generational Family Real Estate Enterprises
Families who have created wealth over time through real estate development and ownership have even greater opportunities, but very different challenges, when their focus shifts to preserving that wealth. As the author explains, in many instances, using appropriately trained professionals to guide in the process and electing to create a single family office, or retaining the services of a specialized multiple family office organization, will enable a family to maintain its legacy as new generations emerge.
Many family-owned real estate enterprises have demonstrated extraordinary skills and success. While their achievements have arguably been augmented by favorable tax and securities laws, and a long-term commitment to a core strategy, they have also been fortunate, opportunistic and capable in achieving success over time. However, these private enterprises are not without their challenges. Many ultimately realize that the strategies and organizational structure that brought them their prosperity in the past may need to be re-examined to ensure continuation of the family's legacy. These families also recognize the need to strengthen and develop their human capital and governance practices to preserve and manage the aggregate wealth, oversee its deployment in the future, and serve the interests of a larger group of stakeholders. There may also be differing desires among family members regarding connectedness and a desire to sustain the previously destined strategic vision.
In response to these complex needs, there is a growing trend among families with significant wealth to create formal organizational structures that allow them to manage the diverse desires of the family members into the future. These organizations are often generically referred to as “family offices.” Of course, there are varying forms that a family office can take based upon each unique family situation; what follows are the functions that all offices generally must address.