On the Legacy Front: Real Estate Succession Planning for Families
While partnership disputes are one area where the aging population has created a need for third-party professional services, legacy asset planning is another where recent inquiries signal an influx on the horizon.
As families with real estate assets look to transfer tens of trillions of dollars’ worth of value to their future generations, many of them will find that what worked in the past, both operationally and in terms of highest and best use, may not be optimal in the future.
“While we are addressing a growing need for receiverships among families facing challenges in transferring their wealth or for assets in distress, at the same time we are seeing an uptick in demand for advisory services among families that aren’t dealing with distress; in fact, quite the opposite,” says DWC President Michele Vives. “In a lot of cases we see this in generational families for whom assets have come to the adult children, and those children are asking: ‘How do we leverage this in terms of liquidity? How can we generate cash flow? Are these assets being optimized?’ Even with the uptick we are seeing in receiverships, we see families are coming to us with these forward-looking advisory needs.”
A historic Los Angeles property facing rezoning
DWC is currently advising a family the firm worked with on a separate engagement several years ago. The property in that case was a unique site, well known to the public, that required a close review of its highest and best use. Today, the family has engaged DWC for legacy asset planning on a well-known property in Los Angeles that has historic roots but faces new city rezoning that may change the nature of the site.
“We were hired to first do our analysis, completing Phase 1 to determine the possible site uses under current zoning,” Vives says.
DWC’s four-phase advisory process
DWC’s advisory services process includes four phases:
- Asset and wealth analysis
- Discussion of goals and desired outcomes
- Development of a legacy asset transfer plan
- Implementation of the asset transfer plan
Clients have the flexibility to engage in the phases one at a time without commitment to completing all four phases.
“In this case, we are now engaged on Phase 2, which involves things like environmental evaluation, examining structures and getting into the specifics around what redevelopment opportunities might look like,” Vives says.
Two office complexes, two paths to market
In another current advisory project, DWC is supporting a family that held two office complexes. The initial analysis found it would be more advantageous to bring the properties to market separately versus keeping the portfolio together, due to new zoning and development regulations.
“Because of our experience advising families in the area, we are familiar with the benefits around office conversion and why it would be desirable for one of the properties,” Vives says. “Without a professional analysis, the family may have been inclined to keep the properties together in their existing uses, which likely would have limited the market value.”
As families with legacy real estate assets continue to pursue the highest and best use for their portfolios in light of the Great Wealth Transfer, or simply as they are seeking ways to plan for the next generation’s future, professional advisors like those in DWC’s legacy asset planning group can often offer a perspective not found elsewhere.
“With flexibility around how we approach every single project, DWC’s services can be a boon to families with large portfolios or those with single assets they are looking to reposition or preserve,” Vives says. “Regardless of the real estate cycle and the timing, our team offers perspectives and creativity through our phased approach that often only a third party can see.”
Planning the future of a family real estate portfolio? Read What Is Legacy Asset Management?, or learn more about DWC’s legacy asset management and financial advisory and real estate services.
