Family office investing trends

Family offices invest together in US real estate

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At Ernst & Young Capital Advisors, LLC (EYCA), we regularly meet with single family offices to discuss their wealth management approach, investment focus and opportunities in the marketplace. In these conversations, we see an array of real estate allocation strategies, asset classes and investment structures because real estate is a bedrock asset in the wealth preservation and wealth creation strategy for ultrahigh net worth individuals and family offices.

While allocations to the real estate asset class have been increasing, little is known about the nature of family office holdings and the collaborative “investment clubs” that are being privately formed.

To provide some insight in this area and the offer to connect interested families, we want to share a few thoughts on family offices investing in US real estate.

Types of family office investors

Generally, we see two different types of family offices that invest in real estate.

The first type is the family that has generated the majority of its wealth in real estate and is an active investor. These family offices continue to invest at the general partner (GP) level and sometimes seek outside equity partners.

The second type is the family that has created significant wealth outside of real estate and allocates capital to the space as a passive investor. Typically, this type of investor will invest either in funds, real estate investment trusts (REITs) or directly in an asset as a limited partner (LP) via a joint venture structure.

When investing as an LP, the family office relies on the GP’s expertise to generate a return. In both cases, families are looking more and more into “club” transactions with other families.

Why do family offices invest together as a club?

According to Jonathan Carroll, Executive Director, Ernst & Young LLP's Family Office Advisory practice, stable and value-add real estate can be a safe haven for families concerned about volatility in the marketplace.

He suggests that families are focused on risk management as well as wealth preservation and creation and that investment in US real estate is a natural part of a diversified portfolio:

“Many of my family office clients are looking for other family offices to partner with on investments. What is most important to them is connecting with others who share their values and approach to investing. The enhanced due diligence, exposure to new ideas and research, and the shared vision approach are key benefits that families gain from investing with other families.” –Jonathan Carroll

Family offices will “club” with other family offices to leverage the experience of other families in the club, especially when their own experience with the asset class is limited.

According to Karen Ward, US Head of Real Estate Investment Banking for EYCA:

“Sometimes family offices prefer to write a smaller check and ‘club’ with other family offices to limit concentration and de-risk the investment, whether filling the LP equity need or co-investing with the GP. Throughout EY, we work with families that are solving for investment needs, particularly created via liquidity events. They club resources so they don’t have to ‘bet the farm’ on a single investment.”

The “how”

There are two primary ways family offices invest as a club or on their own in real estate:


  • Joint ventures with an operating partner
  • 100% fee simple ownership
  • Purchase of a real estate platform or company that owns and operates real estate


  • Investment in private equity funds
  • Purchase of REIT units/shares (both traded and non-traded, public and private)


  • Joint ventures

The most common way we see family offices direct invest is through a joint venture with an operating partner. This structure is a partnership between two or more parties:

  1. Limited partners — groups that have capital they wish to deploy in real estate, but they need assistance identifying and acquiring it — and;
  2. General partners — operators that possess experience in acquiring and operating real estate and seek capital to execute their strategy. Deals that are capitalized with this structure involve the LP putting up the majority of the equity, typically 90%, with the GP putting up the remaining 10%. Equity percentages, economic terms and governance vary by deal.

100% fee simple ownership

Another way that a family office can direct invest is by purchasing 100% fee simple ownership of a real estate asset.

These transactions tend to be “trophy” or stabilized assets that have a core return profile. However, we do see the full range of return requirements from core to opportunistic, including build-to-core strategies.

Some family offices will manage the property themselves or may outsource to a third party. Asset management can be done in-house by an investment management team.

Real estate terms: core through opportunistic?

Real estate investors typically use different terms to categorize investments that range from core to opportunistic as a function of risk and return:

EY - Infographic

Core: Generally stabilized, low-leverage trophy properties located in strong, primary locations of major metropolitan areas with returns of roughly 6% to 10% to investors.

Core-plus: Generally a relatively stable asset with either rollover risk or risk from leasing some vacant space for instance. Returns can vary, but are generally around 10% to 13%.

Value-added: Investments can be found in primary, secondary or tertiary real estate markets where the sponsor is seeking to “add value” by making some kind of change to the property, such as changing a largely vacant building to a higher occupancy or making significant repairs and improvements. Returns are roughly between 13% and 16%.

Opportunistic: These are the most speculative of investments, including highly distressed properties, new development projects or properties in emerging markets. In many cases, opportunistic investments are generating little to no current cash flow, with much of the return generated on the back end, in the form of future rental income or the sale or refinancing of the asset. Overall returns are generally 16% or more.

Purchase of platform or company

The last method of direct investment is the purchase of a real estate platform or operating company. These investments can occur via minority, control or 100% positions. For instance, EYCA is currently advising an international family office that has substantial real estate investing experience and offers the following statement:

“We are seeking minority positions in US real estate operating companies that develop and acquire asset classes that are outside of our existing investment focus. We can leverage our UK capital to fund companies in sectors like student housing or industrial sectors that we think are prime for growth in the US.”


As family offices become more sophisticated and build out their internal investment management teams, and look to club with other families, EYCA offers real estate investment banking services to share in proprietary deal flow and connectedness to other investors. EYCA is a trusted advisor to many family offices and would welcome the opportunity to discuss real estate investing strategies with those that have interest.

As part of EY’s commitment to family offices and the individuals, families and family businesses those offices serve, EY’s Private Client Services Family Office Advisory practice is available to create, re-engineer and improve family offices.

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Ernst & Young Capital Advisors, LLC (EYCA) is a registered broker-dealer and member of FINRA ( ) providing sector-specific advice on M&A, debt capital markets, equity capital markets and capital restructuring transactions. It is an affiliate of Ernst & Young LLP serving clients in the US.