We Are Family: Private capital funding and family offices
Jan 27, 2025
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Boryana Zamanoff, a Senior Wealth Strategist at BNY Mellon, expert in capital deployment, joins CBRE's Zaahir Syed, Managing Director and co-head of real estate for private funds, along with Compie Newman, Executive Director focused on family offices. They dive into accessing the vast but elusive capital from high-net-worth individuals and family offices. Topics include the importance of trusted relationships, evolving investment strategies in current market conditions, and the next generation's impact on investment preferences, emphasizing flexibility and sustainability.
Building trusted relationships with advisors of family offices is essential for accessing their significant capital for real estate investments.
High-net-worth individuals are increasingly focused on direct investments and sectors like data centers, reflecting evolving investment preferences and market challenges.
Deep dives
Understanding Family Offices
Family offices serve as private wealth management advisory firms, primarily established to centralize and manage a family's wealth in a tax-efficient manner. These entities can be structured as partnerships or LLCs, focusing on personalized investment services for families or family groups. They are increasingly used by high net worth individuals to preserve and grow wealth across generations, often investing significant portions of their portfolios in alternative assets, including real estate. The scale of capital managed by such family offices is substantial, with trillions of dollars available worldwide, making them a significant player in the real estate investment landscape.
Accessing High Net Worth Capital
High net worth capital is becoming increasingly important in commercial real estate as traditional institutional investment vehicles experience a decline. Accessing this capital can be challenging, as many high net worth individuals and family offices prefer to maintain a low public profile and operate through trusted advisors. Building relationships with these advisors is crucial to gain access to potential investment opportunities, as they are often the gatekeepers to wealthy families. Developers seeking to attract this type of capital must tailor their approaches, emphasizing the tangible benefits of real estate investments that appeal to these investors' desire for more personal and direct involvement.
Investment Trends and Preferences
High net worth individuals often prioritize direct asset investments or specific opportunities over traditional fund commitments, seeking customized deals that align with their financial strategies. Many are currently focusing on bottom-up investment opportunities and are willing to take on risks that may not appeal to institutional investors. This trend is evident in current investment flows towards sectors like data centers and multifamily housing, which offer long-term stability and potential for appreciation. The flexibility in decision-making and the long-term investment horizons of family offices create a distinct investment landscape compared to institutional investors who may have more rigid allocations.
Challenges and Future Projections
The capital markets are currently facing challenges due to high inflation and interest rates, prompting many high net worth individuals to pay cash for acquisitions to capitalize on distressed pricing. As interest rates eventually decline, an arbitrage opportunity is anticipated whereby clients can borrow against their portfolios at lower rates and deploy capital in undervalued assets. Additionally, the conversation around control in investment decisions is critical, with many high net worth investors insisting on significant oversight of their investments. As generational wealth continues to shift, it will be vital to address evolving preferences, sustainability initiatives, and how future investors may diverge in their approaches compared to previous generations.
High-net-worth individuals and family offices can be a lucrative, though difficult-to-access source of real estate investment capital. BNY Mellon's Boryana Zamanoff and CBRE's Zaahir Syed and Compie Newman discuss how to tap into funding from family offices and the strategies these investors are employing under current real estate market conditions.
Significant Pool of Capital: Family offices and high-net-worth individuals collectively represent hundreds of billions of dollars seeking real estate investment opportunities.
Access and Relationships: Family offices often do not entertain unsolicited approaches. It's crucial to build trusted relationships with their advisors who act as gatekeepers.
Investment Preferences and Structure: Family offices often prefer direct investments and opportunities where they can have more control and flexibility.
Market Conditions and Opportunities: High interest rates and current market conditions have prompted family offices to invest cautiously with a focus on data centers, logistics and housing.
Evolving Preferences: The preferences of the next generation are critical considerations. Younger family members often prioritize impact investing and newer asset classes.
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