Family Office Elite Spring_16
Family Office Elite Magazine, the wealthiest audience in the world. Family Office Elite Magazine is a very high class bespoke publication and a porthole to the ultra-wealthy family offices and UHNWI sectors. The magazine includes editorials from recent events and experts from the ultra-wealthy Family Office community.
Family Office Elite Magazine, the wealthiest audience in the world.
Family Office Elite Magazine is a very high class bespoke publication and a porthole to the ultra-wealthy family offices and UHNWI sectors. The magazine includes editorials from recent events and experts from the ultra-wealthy Family Office community.
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
Partner’s Experience<br />
What is the partner’s experience? Does the real estate<br />
partner have experience in similar types of deals,<br />
property types, and geographic markets for the asset<br />
that the partner is asking the family office to invest<br />
into? Does the partner have an excellent reputation in<br />
its field, a focused investment strategy, a proven track<br />
record, and management by a team of experienced<br />
professionals?<br />
As the family office will look to its partner for relative<br />
expertise in the day-to-day operations of the real<br />
estate opportunity, it must have complete confidence<br />
in the partner’s ability to manage the project not only<br />
during good times but also when things don’t turn out<br />
as projected or the market changes direction.<br />
Partner’s Strength<br />
Does the partner have both a strong business balance<br />
sheet and a personal balance sheet to complete the<br />
suggested project(s) and weather any storms? How<br />
many projects does the partner have in their pipeline<br />
and how many opportunities are they evaluating on a<br />
monthly basis to choose from? Is the partner spreading<br />
themselves too thin, or do they have the capacity to<br />
see each of its projects through to fruition? The last<br />
thing the family office wants is to see an investment<br />
fail because the partner spread itself too thin or took<br />
on too many opportunities because “the market was<br />
hot.” Lastly, if you are investing as a Limited Partner<br />
or LP, make sure that your documents do not make<br />
you liable for any recourse or carve outs as part of the<br />
joint venture or investment. This should be standard<br />
so that the only financial risk you assume concerns the<br />
capital you invested, but it is better to check before the<br />
transaction is completed in case a problem exists.<br />
Partner’s Track Record<br />
When evaluating an investment with a real estate<br />
partner, the following questions must be asked: What<br />
does the partner’s history show? Have its returns been<br />
consistent? How long is its track record? One year?<br />
Five years? Twenty years? If the partner’s track record<br />
started in 2010, ask whether its success is simply due<br />
to a favorable market. Has the partner weathered<br />
multiple real estate cycles? If so, how did it perform<br />
during those times? The track record says a lot—it can<br />
give insight into the future relationship with your real<br />
estate partner. Don’t take your partner’s word for it; be<br />
sure to confirm the track record.<br />
Economic Viability of the Investment Project(s)<br />
The investment opportunity must be carefully<br />
reviewed to ensure it’s economically feasible and<br />
the partner’s ability to secure financing, whether it<br />
comes from public, commercial, or private sources. The<br />
funding sources and profits earned must be legitimate<br />
and transparent. Also, you should understand whether:<br />
• The project is able to cover operating costs over its<br />
lifetime and generate an acceptable rate of return for<br />
you and the family office.<br />
• The project is flexible enough to adapt to future<br />
changes in user needs, ownership, laws, regulations,<br />
and economic fluctuations.<br />
• The project’s financial models proposed to the family<br />
office by the partner are aggressive or conservative?<br />
Ideally, you should understand your potential returns<br />
from three vantage points: the worst-case, bestcase,<br />
and middle-case scenarios. Too often, all that is<br />
presented to the family office is the best-case scenario.<br />
• There are similar properties with similar markers from<br />
existing or recent sales:<br />
• the cap rate projected at purchase or sale;<br />
• any increase in percentage in rent over the<br />
estimated period; and<br />
• Construction costs and price per square feet are<br />
applicable; for example, if everyone is renting a<br />
space for $100/month, the last thing you should<br />
expect is $150/month.<br />
Alignment of Interests<br />
Conceptually, in the majority of partnerships, the<br />
family office is considered a Limited Partner (LP) and<br />
is a passive partner in the management of the deal.<br />
Investment and risk management considerations, for<br />
example, are entirely delegated to your real estate<br />
partner, who is also considered the General Partner<br />
(GP)––but that brings us back to what you are looking<br />
for and hoping to accomplish: finding an experienced<br />
partner that you can trust and rely on. The success of<br />
the partnership model relies on the interests of both he<br />
passersby.parties being adequately taken into account.<br />
WWW.FAMILYOFFICEELITE.COM<br />
68
Change language