Having served families in the commercial real estate industry for the last 25 years, we have come to understand that there are some strong trends and commonalities between families, despite their individuality.

When it comes to large, family-owned commercial real estate portfolios, we have found it is a rare case in which the properties are thriving and family relationships are strong and harmonious.

More often, we have encountered families dealing with the natural tensions that arise when owning and operating a large real estate portfolio, particularly as the portfolio moves to the second and third generations.

Typically, there are some family members who are working in the business and others who are not involved in daily operations yet are part owners with their own priorities and perspectives. These varying levels of involvement naturally lead to conflict between family members, and unless addressed, the conflict tends to deepen over time.

We have learned that as a best practice, ownership structures should be reassessed and redesigned to suit the current shareholders every 15-20 years. This review of the company ownership is critical because the complexities and tensions will only continue to increase as the family grows.

Since real estate is not easily divisible between family members, the portfolio is often left intact under the status quo, but by doing so the difficulties the families face only grow greater.

Many options for families to consider

The good news is that there are many options available for these families to consider; options that will allow each shareholder’s goal or objective to be obtained. With a combination of portfolio split, partial and/or full sale, refinancing, and buyouts, a solution can be achieved that benefits all owners and allows each shareholder to take control of their assets.

But there are always many questions . . .

– Who do you turn to?

– Do you hold or sell?

– What about taxes?

– Who do you trust?

– How do you get everyone around the table to discuss the situation and alternatives?

This is what a good real estate services firm/broker can assist with. These professionals have developed processes based on unique experience, knowledge and skills to best serve families in situations like these.

For best results, you’ll need a multitude of advisors to provide tax planning advice, real estate analysis and corporate split options just to name a few.

These professionals tend to work in silos and do not always see the big picture – this is where a professional real estate advisor comes in. They act as a quarterback, connecting the dots, bringing the experts together, and managing the process.

These advisors have helped many families through this process, leading to outcomes including buyouts, refinancing, partial and full sales – each time, achieving the particular goals of each shareholder.

Evaluating a multi-generational real estate portfolio

A simplified flow of a typical process involves:

1. Initial meetings with the shareholders: An advisor recognizes it will take time to build trust and gain an understanding of the unique family situation. Most often our relationship begins with one family member and then as the advisor learns more, they are introduced to others in the family. Our goal as your advisor is to have you feel understood and supported.
2. Preliminary portfolio valuation: As advisors/brokers, we are able to put our market knowledge to use to underwrite your properties, even if all you can provide is high-level financial statements. This will help to set the stage and provide knowledge to the shareholders as to the property’s value in the market today as well as potential ways to increase its value such as intensification or improved property management.
3. Assessment of different options: An advisor helps you assess the options available. Whether it is more advantageous to refinance, arrange a buyout, sell some or all of the assets will be dependent on your family situation and the differing objectives of each family member.
4. Assemble a team: You will need a team of experienced professionals. A well-connected advisor can introduce you to the right people and bring them in at the right time in the process. As your quarterback and advisor, they can ensure that your accountants, lawyers, appraisers, tax specialists, engineers and financial advisors are all working cohesively to help you achieve your goals. A trusted advisor will provide leadership and continuity between the different steps involved.

At SVN Rock Advisors, we’ve recently published a white paper which goes into much greater details of the services provided to families. It addresses many of the situations we have encountered and the ways in which we have helped families achieve their goals. The white paper is also accompanied by a series of 12 short videos that provide additional insights

You can access the video and other resources at https://svnrock.ca/family/ where you can learn more about the services available to families and the different options that are available to you.

Derek Lobo is the CEO of SVN Rock Advisors Inc. ─  a unique full-service brokerage firm. He has focused his entire career on the North American apartment building business. He’s recognized as an expert in new apartment construction, affordable housing, student housing, and has established a sterling reputation as an expert advisor in this field.