Over one-third of all Commercial Real Estate is owned by wealthy families in the U.S., similar to a lot of other businesses. And that ownership is often referred to as a “Family Office,” wherein the members of the family work in the family business.
I have worked in many family offices over the years; however, I have never had the right last name. Not many DeKruiffs are in the Real Estate business— more likely you’d recognize Kennedy, Vanderbilt, or even Trump.
Most personally held Commercial Real Estate is run as a business, while others own it as part of an overall investment strategy. Commercial Real Estate can favorably impact an investors return given certain provisions in the IRS code, such as depreciation. And leverage can further enhance overall returns, Commercial Real Estate is one of the few investment vehicles that provides an investor the ability to economically finance part of the cost of the investment. Some types of Commercial Real Estate, like Multifamily, have multiple debt options, such as Fannie Mae, Freddie Mac, HUD, Life Companies, Pension Funds, and CMBS (Commercial Mortgage Backed Securities), giving that asset class the most liquidity.
What makes the Family Office unique is, in part, that some of the most knowledgeable individuals in Commercial Real Estate are the second and third generations in a Family Office, having grown up in the business mostly around the kitchen table; thus, creating significantly knowledgeable young people.
Yet, Commercial Real Estate investing is still not for the faint of heart. It needs attention and you need to work at it, and that is, in part, why it is a good investment for the Family Offices.
