Eyeing higher returns, family offices to amp up real estate investments

They are increasingly cutting out private equity firms

TRD New York /
May.May 04, 2017 10:15 AM

New York skyline (credit: Getty)

Family offices are increasingly cutting out the middle man and directly investing in real estate and operating businesses.

A new survey by the Family Office Exchange found that 81 percent of family offices have at least one person scouting out direct investments, Bloomberg reported. Driving this focus is the feeling that hedge funds, bonds and stocks will produce lackluster returns. Family offices reported an average 7.2 percent return in 2016.

“The one place family offices think they can still generate double-digit returns is in operating businesses and real estate,” Kristi Kuechler, president of the Family Office Exchange’s private-investor center, told Bloomberg.

Returns on real estate averaged 9 percent last year, according to the survey. By directly investing in real estate and the like, these offices can also avoid fees charged by private equity firms (2 percent for annual management and 20 percent of profit).

Last year, average allocations to hedge funds dropped to 10 percent from 12 percent in 2014, according to the survey. Most of the families surveyed indicated that they didn’t plan to increase such allocations going forward.

The family office of Michael Dell, MSD Capital, has been an active investor in New York City real estate in recent years. It purchased a stake in Grand Central Terminal and participated in the $219 million Sharia-compliant loan Sharif El-Gamal landed last year for the shaky condo project at 45 Park Place.

Billionaire Steve Cohen has a personal fund — Point72 Asset Management — that plans to lease 175,000 square feet at 55 Hudson Yards. [Bloomberg]Kathryn Brenzel


Related Articles

arrow_forward_ios

“I can talk about erections all day”: NAR tech consultant’s bizarre fireside chat

Council member Vanessa Gibson (Credit: New York City Council)

Commercial landlords face new fines as City Council passes anti-harassment bill

As House begins impeachment inquiry, here’s what we know about Trump’s Ukraine-real estate ties

Embattled Prodigy Network CEO Rodrigo Niño to step down

The Watchtower building at 25 Columbia Heights, CIM Group’s Shaul Kuba (right) and LIVWRK’s Asher Abehsera (Credit: Wikipedia, CIM Group, and LinkedIn)

JPMorgan leads $335M refi for CIM and LIVWRK’s Watchtower renovation

Multifamily market still reigns in Queens, Blackstone balks after rent reforms and more of the biggest CRE trends right now

Real estate titans … and their toys

Developer seeks $40M for Opportunity Zone site in downtown Newark

arrow_forward_ios