Over my many years of working closely with successful apartment developers across the country, I have had a front-row view to the family dynamics that accompany a prosperous real estate business, especially as new generations come into the picture.
Sometimes, as I’ve written before, there can be serious conflict between family members and, in some cases, this can ultimately lead to a separation and sale of the assets.
More often, however, I have worked with families which have a great culture, great relationships and a strong history of working well together.
Even for these families, however, there are certain tensions and underlying pressure points members may experience.
For the senior matriarchs and patriarchs of the family, one such pressure point is that of engaging the next generation in the family business.
Every first-generation developer knows this feeling. You have poured your sweat and tears into your business and you’ve reaped the rewards of that work.
Your children or grandchildren have grown accustomed to the comforts of the life you’ve given them, but haven’t had to work for it in the same way you did.
Furthermore, they may not have the same fire and excitement in them for the business as you do and as you hoped that they would – both for their sakes and for the sake of the company.
Family-business succession planning is critical
Family-business succession planning is a complex and important topic for every successful developer to think about and it’s one that I have spent a lot of time thinking about and advising my clients on.
I would say that when it comes to engaging the next generation, one of the most important things to prioritize is education.
Sure, your children and grandchildren have grown up hearing about the family business, but the learning that happens at a kitchen table can’t necessarily be compared to the in-depth education that can be found in designations like CCIM (Certified Commercial Investment Member) and CPM (Certified Property Manager).
Not to mention the gratification that comes from pursuing and completing something like that independently as a young person who has previously relied on family to show them the ropes in the family business.
When a family member makes the commitment to engage in a designation, they will learn the ins and outs of the business as well as gaining a bigger picture of the associated risks and rewards.
I’ve seen first-hand how this type of education can really fire up a young person who otherwise wouldn’t have thought they had a significant interest in the business.
That being said, not every family member is going to have the same response and that’s OK. Not everyone is wired to run a real estate development company.
Another option to consider is seeking out new positions and opportunities within your family office and how they might be attractive to different members of the family.
Set up a structure, consider new options
If there’s one thing I’ve learned working with families experiencing conflict, it is the importance of good family governance and a well-run family office.
So much strife can be avoided by setting up good governance and organizational systems for your family and your business.
Once you go through this important exercise, you may be able to consider new avenues for the family business, whether those are based on the interests and aptitudes of certain family members or the financial assets of the company.
We often see successful families looking for private equity opportunities in the multifamily development space.
This is an area that we (and other professionals) can help with as we have our ear to the market and work with developers across the continent who are in need of potential investors.
We are connectors and this can be helpful for expanding your family office.
Why not consider setting up a separate division of the company for investment and venture capital – perhaps this might be an area that is of more interest to the next generation?
The opportunities for engagement of the next generation are there – you just have to be thinking outside of the box and looking for them. Or, perhaps, creating them yourself, based on the specific interests of your family members.
I’ll be digging in deeper during my free webinar on Jan. 11, Motivating Generations II and III Into Your Real Estate Business.
