We Are Family: Private capital funding and family offices

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Spencer Levy 
In a complicated capital markets environment for commercial real estate, there are alternatives to big banks and other institutional investment vehicles. One such source could be hard to access, but is becoming more important. On this episode, high-net-worth individuals and family offices; a unique source of funding. 

Compie Newman 
It's in the hundreds of billions of dollars that are out there that are seeking real estate opportunities. 

Spencer Levy 
That's Compie Newman, a CBRE Executive Director of private clients. A veteran of nearly three decades in commercial real estate, Compie’s latest role was to oversee CBRE’s efforts to serve family offices and high-net-worth clients. 

Zaahir Syed
A lot of this capital tends to be a bit more opportunistic in nature, so being able to access the pricing that meets the cost of capital… that's the gap right now. 

Spencer Levy 
And that's Zaahir Syed, a CBRE Managing Director who also serves as U.S. Co-Head of Real Estate for the Sera Private Funds Group within CBRE’s investment banking business. In that placement agent role, he's responsible for advising operators and managers on capital sourcing strategies, vehicle structuring, and equity placement, including institutional investors, and, of course, family offices. And we're also joined by a leading advisor whose firm looks at real estate, among other investment vehicles, for private clients with at least $200 million or more of investable assets. 

Boryana Zamanoff 
You have to be in the inner circle of the network because those folks are keeping a very low public profile, because their loyalty is really dedicated to a family or a family group. 

Spencer Levy 
That's Boryana Zamanoff, Senior Wealth Strategist at BNY Mellon Wealth Management. Boryana works closely with a range of select investors, helping them find opportunities to deploy capital and build tax efficient strategies and generational wealth. Boryana and Zaahir, by the way, are based in Los Angeles, and we recorded this conversation prior to the devastating wildfires that tore through the city. They're doing okay, though, and we're grateful to have them on the show, while sending our best wishes to them and everyone in Greater L.A. Coming up: a master class on this emerging source of capital, with expert advice for accessing this valuable yet exclusive investment pipeline. I'm Spencer Levy, and that's right now on The Weekly Take.

Spencer Levy
Welcome to The Weekly Take, Boryana Zamanoff, Family Wealth Strategist at BNY Wealth based in Los Angeles. Thanks for joining us. 

Boryana Zamanoff
Thank you, Spencer. Nice to be here. 

Spencer Levy 
Great to have you. And then my old friend, Compie Newman Executive Director, Private Clients, CBRE based in Charlotte. 

Compie Newman
Spencer, great to see and good to be on The Weekly Take. 

Spencer Levy
Great to have you, Compie. And then Zaahir Syed, Senior Managing Director, Private Funds Group, CBRE’s Investment Bank. Coming to us from New York, but based in Los Angeles. 

Zaahir Syed
Thanks, Spencer. Excited to talk about real estate capital markets today. 

Spencer Levy 
Terrific. And so let's start with the basics. Boryana, can you just give us a quick 101? Explain to us what is a family office? How is one typically structured? And how is it different than a traditional investor? 

Boryana Zamanoff
A family office, very simply, is a private wealth management advisory firm. It can be structured as an LLC, a partnership, which provides investment and other personalized services to typically a family or a family member group. And family offices are generally created to centralize the management of a family wealth in a tax advantageous manner, ensuring that it is preserved and grown through the generations. 

Spencer Levy 
And Compie, just to give us a sense of scale, I know that institutional investors are in the trillions of dollars. How big are we talking about the pool of investors, high-net-worth? And then if you can narrow it down to how many that might consider real estate.

Compie Newman 
There are trillions of dollars in family wealth around the world. Typically, what you see is about 20% investment in alternatives, which include real estate. So it's in the hundreds of billions of dollars that are out there that are seeking real estate opportunities. 

Spencer Levy
So Compie, you and I have been friends for a long time. Almost 20 years, for that matter. You shifted to this in part because you saw a big opportunity here to help shepherd family offices, high-net-worth individuals, into real estate. Tell us about that. 

Compie Newman
Yeah, it was a logical progression for me in my career. I've been doing this for about 20 years. I used to lead a mortgage company for a bank owned mortgage banking operation. We placed loans through financial advisers all over the country, and I built a debt and structured finance practice around this concept. And we've been marketing to high-net-worth families and individuals here in Charlotte for about eight years. And now private capital and family office capital and high-net-worth capital is very relevant to our capital markets business. And private capital is the number one group that's buying properties right now. 

Spencer Levy 
Zaahir, what Compie said I completely agree with, is that in this marketplace, we've seen a significant falloff in what we would consider traditional institutional capital. Certainly into areas like development, and a rise in private, sometimes known as high-net-worth, sometimes known as family offices. What are you seeing? 

Zaahir Syed
Yeah. That's not too dissimilar from what we're seeing. So again, we represent institutional capital, so that's anywhere from public pension plans to endowments, foundations, sovereign wealth funds and secondary funds and whatnot. I think that there is an ample amount of dry powder in the marketplace right now. I think it's near $400 billion. And that's been on the sidelines since about April 2022. 

Spencer Levy 
Let's back up for just a second on that 400 billion. Define that. Where is that 400 billion? Is that high-net-worth? Is that institutional? Or is that both? 

Zaahir Syed 
That’s mostly private funds. And the groups that circle around that. Back in the GFC, that was around $200 billion worth of dry powder across funds and other folks that have capital to put into commercial real estate. That's globally. We’re about double that right now. So it's when you think about how much money is on the sideline, it's heaps and heaps of it. And I think part of that is high-net-worth capital. There is a meaningful amount that's in funds like BREIT and SREIT and other non-traded vehicles that are private capital in nature. But there's also a huge amount that are within institutional capital, meaning within private real estate funds, that are sitting on the sidelines. Part of that is due to the bid-ask spread between buyers and sellers. And there's also the cost of capital because a lot of this capital tends to be a bit more opportunistic in nature. So being able to access the pricing that meets the cost of capital; that's the gap right now. So that's why there's been a moment of sideline activity for the past two and a half years. 

Spencer Levy
So Zaahir, you mentioned BREIT. Just tell our listeners what that is. 

Zaahir Syed 
BREIT is Blackstone's non-traded REIT. It effectively is a permanent capital source for Blackstone. I don't have the size, but it is core-plus oriented, as far as return profile, yes. 

Spencer Levy 
Compie, I think the trillion dollar question that all of our brokerage professionals in particular, but our developer clients, as well, are asking is how do you access this capital versus institutional capital? 

Compie Newman
Well, it's very difficult. A lot of these high-net-worth individuals and family offices are ones that you just don't cold call out of the blue. You need to find the trusted advisers of these families. And they are really the gatekeepers to the families. A lot of these folks don't want to be found. They don't want people calling on them. But when you find a family that their advisors said you might want to look at this real estate deal, that's a golden opportunity to introduce them to a developer. And we're seeing more and more developers want high-net-worth capital, trying to create a vehicle to deploy that capital into real estate. And I think people are realizing the bricks and mortar kind of investment that they can touch and feel and see and drive by and say, gosh, I own that. I helped build that. You know, I think we'll see more and more of that. But a lot of the developers like working with families because I think their decision making processes are pretty fluid and they can meet with them and talk through issues. And it's a great investment opportunity. 

Spencer Levy 
And Compie, let's pause there for just a moment. Because the advisor could be a broker. It could also be a financial advisor at one of the big investment banks. How do you define advisor? 

Compie Newman 
Well, we provide advisory services as they relate to real estate. We're not in the wealth management business, but we're very comprehensive to the wealth industry and to these families and individuals as it relates to what they want to do with real estate. And we have research, we have thought leadership, where we can provide insight to them: where the market is, where it's going, where they may want to invest, and have metrics to back it up. 

Spencer Levy 
Zaahir, what do you see right now in terms of accessing this cap? How is it different accessing high-net-worth capital versus those other types of capital sources? 

Zaahir Syed
I think that there's a couple of avenues to take that route when you think about the ultra-high-net-worth and high-net-worth capital. There's the ultra-high-net-worth that tend to manage maybe north of $1 billion family offices, right? And we tend to talk with those groups about direct real estate opportunities or direct asset opportunities versus like a fund, because the way their capital is set aside, them writing a fund commitment is less interesting because funds tend to be 500 to $2 billion in size, and they don’t tend to write tickets that are meeting the minimums where you're in a family office of that size. Your ultra-high-net-worth family office, in this market environment… they're tending to be a lot more focused on bottom-up opportunities. So there's no portfolio necessarily that they need to have a specific allocation to X percent real estate, X percent infrastructure, X percent private credit. They tend to be a bit more opportunistic in nature, and that's not a return-oriented descriptor. It's literally looking at each opportunity on a standalone basis and how that fits into their broader portfolio. The other side of the spectrum is, and where we've seen a lot of activity really since BREIT jumped into the marketplace, is with these private wealth platforms. And these are private wealth platforms that are separate and apart from Goldman and Morgan Stanley. There's a lot of other groups that have emerged over the last several years that have… some have white label products where a manager will come in and white label it for that particular wealth platform and they'll go around and pass the hat to their investors and then kind of roll it up into a feeder vehicle that goes into a fund or goes into something else. Or, like BREIT, they'll work with that GP to get it onto their platform. And then that manager will go on a podcast, for example, for that wealth platform, and evangelize their story to their investors and get them to invest directly into that product. So there's a couple of different ways to take it when you want to tap into that retail capital, which is very different for the most part for how you want to tap into traditional institutional capital. 

Spencer Levy
And Zaahir, in terms of accessing the capital, I think that the route that most of the institutions that have formed BREITs in particular have done is they've gone through the broker-dealer network and raised checks from $10,000 to $10 million and up. But is that the easiest path? Is that too expensive? Is there another way is really what I'm trying to get after, other than a more efficient way than the broker-dealer network? 

Zaahir Syed 
It's not easy. It's a lot of work, and it's a lot of heavy lifting. And I would probably say there's definitely an alternative source of capital outside of that that developers are seeing. I think where that comes from is to the comment we made at the onset of the call, is that there's $400 billion of dry powder right now. There's institutional fund managers out there that have capital that they're sitting on that they want to put to work. So I think that that universe, that sponsor capital that's out there, yes, it's more expensive than passive LP equity, but it's also capital that is super charged to go out and deploy right now. And if there's developers with opportunities…. well, I would say more so opportunities and scale because a lot of these groups prefer to do more than just one deal. That's something that we as capital advisors, as my team, we advise those GPs all the time. Like how can we build out a pipeline with you, take it to those sponsors, get you some activated capital to put that to work, whether it's in a deal buy deal format or something a bit more programmatic in nature? So I think that those are the groups that should be getting a lot of in those. I'm sure they already are. 

Spencer Levy 
And so if you're an existing fund manager that uses institutional money, the first step is to call somebody like you, Zaahir? Or what is their first step? 

Zaahir Syed 
We're constantly talking to those groups. That's part of our job. That's why I'm in New York this week, is to talk to them about our deal flow, and then matching it up with what they're trying to do and what their cost of capital is. The beauty of groups like Blackstone is that they have lower cost of capital vehicles and then have the opportunity fund capital. So they go up… and they have a debt vehicle. So they go up and down the risk return spectrum. So we tend to spend a lot of time with groups like those because they have multiple pools of capital that they can access. 

Spencer Levy 
And Boryana, tell us about some of the ways that these family offices might structure not only themselves, but also the way they invest in transactions to make it most efficient for them. 

Boryana Zamanoff 
Great question. The biggest interest in kind of the family office space has been, from my perspective, around the ability to deduct on the investment expenses and other management expenses that are related to running the family investment office. And there are several important court decisions that came down. One of them is Lender Management and a lot of our clients have… and that's Lender’s Bagels. A lot of our clients who have family office have either compared their blueprint to Lender Management, which has been blessed, or rebuilding a blueprint for their family office from a structural perspective based on that case. But the idea is the entity that sits on top, which is usually an LLC or partnership, is that entity engaged in the trade of business, of providing investment services to the underlying assets or entities? There could be upwards of ten or more LLC’s that are holding different asset classes, but the LLC on top that serves as the family office has to be deemed to be in the trade of business of providing investment services to members of the family and to those underlying assets and be paid a carried interest, very much like a hedge fund, in order to get to deductibility under Section 162 of all of its investment related expenses. That's where a lot of the focus on the legal and structuring and focus is on. I want to mention for a few listeners, and those who are interested in the family office concept, because maybe they're sitting on their own $200 million and are thinking, is a family office right for me? A lot of folks have to answer two questions very preliminarily. A, what am I trying to solve for by building a brick and mortar family office? And B, am I prepared to shoulder the costs of running one? Not only of setting one of these things up, which legal costs probably run into, let's say, 200,000 to maybe even half a million to something very complex. But also, can I run a family office of my own? The cost of a million to $2 million a year versus essentially a virtual family office in which I create a tightly knit team of advisors, and to that end, I'm seeing more and more large clients kind of playing this virtual office scenario because they're either saying, well, who's going to run this for me? I want to be in charge. And B, I don't want to spend that much money if I can organize my advisors and I have a quarterback amongst them to do the advice for me. 

Compie Newman 
And Spencer, multifamily offices are a solution, as well as a virtual family office, where you have folks like Boryana mentioned, between maybe 30 and 200 million who don't want to have their own family office. But these multifamily offices have all of the functions that they need to act like a single family office, but they can spread the costs over a number of families. 

Boryana Zamanoff 
That's a great point, Compie. 

Spencer Levy 
Are there any other advantages that people might get once they get past the cost item of forming a family office, from your perspective, Boryana? 

Boryana Zamanoff 
Absolutely. I mean, in a family office scenario, you're creating a level of privacy and centralized decision making, which is not, largely not within the umbrella of an established financial institution, right? You’re running it yourself. You are deploying and maybe you're delegating the investment management of certain asset classes and reporting or custody to large institutional players. But what you do is largely protected with greater privacy and confidentiality. I think family offices are increasingly interested in all sorts of investing in all sorts of asset class, depending on the family, right? The family offices that invest in art, that invest in timber, that invest in other commodities; they’re family offices that are really structured around providing a centralized management for the legal marital household lives of the family members, right? Typically, the family office would handle premarital agreements, estate planning for the family members, all sorts of household employee management, right? And all of this is done through the centralized umbrella of a family office that keeps all of that information confidential, that protects the family information and values, and is doing it consistently within a multigenerational structure that the type of generational wealth that a family office would require has. So there are a number of advantages. 

Spencer Levy
Zaahir, let's talk now about where this money is going. And when I say this money, we’ll expand the conversation both by the source, the endowments, the pension funds, and high-net-worth. But I then want to go into another direction in a moment, talking about individual developments. And the reason I want to go in that direction is I'm fortunate to represent a lot of clients. Some of them are high-net-worth and they're in the real estate business and they are doing things today that a lot of institutions aren't, most notably development. So number one, where is it going? And second, why not development? 

Zaahir Syed 
So I think I'm gonna answer both questions first with one comment that I think is consistent for a lot of these groups. I would phrase it and say it would probably fall with the institutional family offices, as well. So think about the Iconix’s, the Coke’s, the Willet’s of the world that are managing multiple, multiple billions of dollars. ICs. I think investment committees, their bar is extremely high and it has continued to be extremely high over the last two and a half years. So anything that has the optics of brain damage, any brain damage at all, is kind of frowned upon. And I'll give an example of it. I was working with an investor that took about 15 meetings with one of my clients. And 15 meetings in the normal environment, that means you're getting the check. They ended up not committing to my client and the rationale being that they'd prefer to go into data centers versus going into what we're doing. So where you're seeing capital flow to your second question is into data centers, consistently, everything around the eco…. the gray that sits around logistics, and where we're anticipating to see a lot more movement in the next 24 months is the gray around housing. So that includes student, that includes manufacturers, it includes capital-A affordable, it includes build-to-rent, and it includes obviously multifamily, all shapes and forms. So we're anticipating seeing a lot more of that. But to the earlier point, though. The ICs have raised the bar so high, the question is timing. With data centers, I think everyone has a view that putting it in yesterday was probably good. So that bar amongst the ICs is a bit lower, because you don't want to miss that window of opportunity. But with housing, the question is still out there. Obviously there's a clear supply-demand imbalance, and that's easy to see. So I think the logic around it makes sense. But the pricing is where people are starting to have a bit of caution. 

Spencer Levy 
I want to put a finer point on this, not just by asset type. What are the types of vehicles are they putting it into? You mentioned co-mingled vehicles like the BREIT. There's also co-mingled funds. Anybody doing it directly? Saying, you know what, I like this developer. They've got a big project here. I'm going to give them X million dollars to go into that. 

Zaahir Syed 
Yeah. So I think there's a variety. So the Canadians, for example, years ago, doubled down and said they were going to do platform investments. They were going to invest in platforms, and that's going to be my multifamily group, and I want to give them money. Now, when the market shifts and when rates went up, the deployment of capital in that underlying platform had to halt a little bit. So the question that a lot of the Canadians had is should we continue this platform-oriented strategy, or should we be more indirect in nature so we can be a bit more nimble? I know it's slowed in multifamily. We can pivot and go into maybe retail or some other asset class. So I think that there is this question of do we want to double down and get more into platforms or do we want to be more indirect and go into funds? And that's different by investor. Like if you talk about family offices, a number of groups missed the industrial boon and the multifamily boon. And this is the larger institutional family offices. So their view is like, is this a good time to go in, when we know these GPs and operators need capital, to buy them as a platform and then plow additional capital into them so they can take advantage of the buying opportunity that emerges over the next two years. Where we're seeing a lot of challenges is in the co-mingled funds, in general. A lot of that has to do with, and I shared this anecdote with a colleague earlier… A change in base rates is a leading indicator for transaction volume, right? A fall on 75 basis points is going to ultimately and hopefully lead to more transaction volume. That said, if you think about a private fund in a real estate fund or an investor in that fund, it leads to lower rates. There's a transaction, the investor gets liquidity, they get their distribution, they start underwriting the market, they start identifying the right asset class they want to get into, they find a manager, then they deploy the capital. And this is such a long lead time before that capital goes back into a co-mingled fund, which is why you're seeing a lot of funds that are out here right now extending their funds. So they were supposed to raise for 12 months, now they’re raising for 18 months, 24 months. And a lot of that has to do with the fact that there's just a lack of liquidity in the marketplace. 

Compie Newman 
Spencer, let me chime in, too, and give you another variation on this. We're seeing families wanting to partner with other like-minded families to invest. There's some multi or large family offices that may have their own infrastructure and they want to bring in other families so they can deploy their capital more smoothly. So there's any number of ways that these families and high-net-worth individuals can invest. And a lot of it depends on, you know, how did they make their money, what is their risk tolerance, what are their return expectations, what is their time horizon on how long they want to own the asset? I mean, they're very different investors. A lot of the families that I'm working with want to hold properties for as long as they possibly can, and they may set up ground leases to do it. So it's very, very interesting to see all of these different ways that families are deploying their capital. 

Spencer Levy 
Before we get to market conditions, I want to get to what I consider to be a key consideration for high-net-worth individuals either deploying into somebody else's high-net-worth vehicle or a high-net-worth developer taking somebody else's money. And that is control. Do you agree that that's a gating issue? And how do you overcome it? 

Compie Newman 
I agree. That's a gating issue. And especially if you get a handful of families. You know, who's going to be in charge? And it may be that a high-net-worth family has a development and they want to bring a few others in. And the rules of the game are that we're going to control this. But here's our plan. And maybe here's some buy-sell options that maybe you can buy us out at some point down the road. So it's just like everything else. Everything's negotiable. 

Boryana Zamanoff
I also want to make another point here, Compie, is that after I think the collapse of reputable regional banks like First Republic and Silicon Valley Bank in 2023, where all the depositors were made good by the FDIC, but we could have seen a different scenario where that didn't quite pan out. I think investors, if these investors we work with, are really much more careful. If they cannot have control, they're really vetting. And sometimes they're approaching us and saying we need BNY to vet this trust fund, which is not a BNY fund. It's not on your platform. But we really want you to use your institutional intelligence to tell us what should our exposure be and what you can find out about the people who are leading it. I think all of you would agree people hate two things: paying taxes and losing money. So, I think our clients have become more careful about due diligence on projects to which they're committing major capital, because I think they saw it's possible for even a reputable bank to fail. 

Zaahir Syed
One of the things that we've seen, and again, this is on the placement side of the business, is the rise of Co-GP funds. And the Co-GP funds are the ones that are evangelizing exactly what you're saying. That there's an opportunity right now to take advantage of these development opportunities in the marketplace that are starving for capital, and this is the right time to build. So a lot of Co-GP funds are in the market raising capital from traditional LP investors. And I think they're special differentiator when they're talking to the developers is that they believe that they can go out and raise that JV equity that can be the LP equity that the developer needs. So the developer gets the Co-GP equity from the fund, and then that Co-GP fund goes out and sources additional LP equity from their investor universe. It's an interesting play, but I feel like that's something that's emerging over the last couple of years. 

Compie Newman 
Yeah. And then too, let me just let me pick up on that. People are having a hard time getting things to pencil, Spencer, I mean, with the costs and the cost of capital. So that's maybe a factor in why things aren't happening. But I think we're all hopeful that ‘25 is going to be a good year to get things moving again. 

Spencer Levy 
Well let me use that term penciling because I think it's a two part question. I think the reason why a lot of high-net-worth individuals that have their own development companies are putting the shovel into the ground today where others are not is because their definition of penciling is different than the definition of penciling for an institution, in large part because their time horizon is longer. That is penciling number one. But penciling number two is market conditions. Let's talk about that for a moment, Boryana. Given the conditions that we've gone through over the last two years, high inflation, high interest rates, how has that impacted your clients, and how do you expect that to change as interest rates continue to improve? 

Boryana Zamanoff 
Great question. Our clients are perfectly positioned to take advantage of opportunity, right? In a high interest environment, they pay cash and pay cash to get in and get at the distressed price. Our clients lend money to their own children at the intra-family loan rates that the IRS publishes, which are still lower than what their children can get from a commercial lender. Our clients are creating intra-family wealth transfer vehicles like qualified personal residence trusts, charitable lead trusts, which benefit and perform better in a high interest rate environment. So they’re taking advantage of those opportunities. I think as the interest rates come down and we find ourselves where we were 3 or 4 years ago, maybe not as low, the opportunities for arbitrage will again present themselves because in those interest rate environments, essentially our clients borrowed against their portfolios to generate or to use really cheap capital and deploy it outside of their wealth management portfolio, and either acquire companies, acquire commercial, personal real estate. And a lot of our clients are going to look for that arbitrage opportunity again when interest rates drop to basically make money on the difference between what their portfolio returns and the cost of borrowing capital. So I think there have been tremendous opportunities. They're just different in the different interest rate environments. 

Compie Newman 
Yeah, the discretionary cash that these individuals and families have is so powerful. And like Boryana said, they're not as reliant on debt and they can do things that other investors won’t. And like you said, Spencer, their longer term horizon makes the returns smooth out for them over a long period where they want cash flow to build intergenerational wealth. 

Spencer Levy 
So, Zaahir, in terms of the other issues that you think are either the gating issues or the incentive issues for folks to invest, particularly high-net-worth individuals, is it solely based or largely based on just return on investment, security of that investment? Just traditional metrics? Or are there other things coming into play now like sustainability? Or, I’ll go one step even further than that. What are some of the incentives or the motivators to put capital in beyond the obvious return on investment? 

Zaahir Syed 
I think on the sustainability side, the U.S. is going through a slower change than, say, the Nordics and European investors, I think. And Canada, to be candid with you. They're much further on the sustainability curve than the U.S. is. There’s probably been quite a bit of a pullback in the U.S. It's still getting there, but it's not getting there as quickly as the non-U.S. countries are. I think the other consideration, and I think Compie, you kind of hit on this earlier, is that there are investors, and I see this from the family office side… I remember when rates blew out. One of the investors I know in the family office said, I would like to invest in something I can walk around in and look out the window in, versus something that I'm just going to trade, with respect to real estate. I thought that was really interesting. And it was iconic real estate. Some hospitality assets don't rarely ever trade. If I can say I own that, that will be meaningful. And I think we're going to see that transition kind of fall into other asset classes, as well. I think capital-A affordable housing, where you can't raise rents because of the AMI protections that are in place. But you can own those assets and print passive income, as long as you have the right debt to meet the right cost of capital. So there's segments of the market where it's less of a trade and more of a longer term hold. And we think that there's investors that have that capital. The reality is that this core-plus risk that people were seeking and opportunistic returns, it's very hard to find that and scale it in the marketplace. So I think that as long as investor return expectations are able to come down, you'll see a lot more capital go out and scale. 

Spencer Levy 
Boryana, this is what you do every day. You're dealing with the structural issues. How do you see the family office high-net-worth world evolving over the next five years as the cost of capital gets cheaper, as you see the capital markets get more vibrant? Or does it stay largely the same as it is today? 

Boryana Zamanoff
I see one issue remaining at the forefront of decision making and also work we do with the advisor team. And that's the issue of succession, right? Regardless of the exact structure, right? Whether the family owns the GP interest, is the LP investor, whether the underlying project is multiple commercial buildings or a shopping mall or now data centers, right? A lot of families are facing within the existing structure because largely everything that's in an LLC or an LP is ultimately owned in a trust which has a trustee, right? And then distributions to those trusts are managed by the underlying managers of the LLC’s. The succession issues are deep within families where they look at the next generation and generations and are not either immediately identifying candidates to run this for the family or are not yet people who are up to speed and well-prepared. To give you some stats, we have something like 1.7 billion of assets over which we are trustees just in terms of trust real estate, and closely held about 1600 assets across the country. Which means that all those folks look to BNY as a trustee to say you manage it, because we are not actually seeing the ideal fit for succession within our own ranks. And one thing that is changing, I think the next generation of investors are looking for different things. I think Zaahir mentioned sustainability, right? ESG initiatives, sustainable initiatives. The U.S. is fluctuating back and forth, right? Maybe a little behind compared to Europe and Canada. The younger investors are sometimes or often more aligned with investing around their values and de-prioritizing return. They're more interested in alternatives and new technology, in startups, in having an impact, in greater philanthropy vehicles. So in essence, the structures are staying the same, more institutional successors. But what the family offices and ultra-high-net-worth families will invest in will change because the next generation of investors is looking different than the people who are controlling the capital today. 

Compie Newman 
Yeah, it's interesting. We're seeing that, Spencer and Boryana. The generational transitions in these families, the Gen-Zers and millennials don't think like baby boomers. They want different things. They want to experience things differently. And we're seeing some situations where they just wanted the vest of real estate that the prior generation created. And it's an interesting dynamic that I think we'll see over the great wealth transfer over the next 20 years. And business owners who are reaching a point where there's no succession within the business that they're running and they own real estate, that's creating opportunities for sales of real estate. So, I think this is going to be something we'll be seeing for quite a while. 

Spencer Levy 
And Zaahir, I'll give you the final thought on this one, but it relates to this massive intergenerational wealth transfer we're going to be seeing over the next 20 years, part A. And part B is, there are very few new defined benefit pension plans being formed. So that is a source of capital that will go down. Then who knows where endowments are going? They obviously have done incredibly well recently. But nevertheless, we're likely to see less of the pension funds in particular. Does that change our capital world for real estate going forward? 

Zaahir Syed 
It's a great question. The defined benefit versus defined contribution transition has been happening for years, and something that hasn't been fully addressed. I think what we're seeing amongst groups that are launching these permanent capital vehicles that have liquidity options, is the next step going to be creating a defined contribution vehicle? And I think whether it's in the form of a target date fund or something else, I think that makes a ton of sense. And in a real estate perspective, what does that mean? What assets are going to have the durability to last for your retirement? And I think there's a number of assets that we can talk about quickly, whether its data centers, infrastructure assets, some industrial logistics assets that you can kind of own forever and keep inside these vehicles and print income that would benefit, not for the pun, but would benefit a defined contribution plan because you would have these assets sit in the vehicle. And when you think about data centers, there's nearly $1 trillion worth of real estate that's probably under development that's in the data center space. The Odyssey funds alone are $250 million of NAB. So there's not one vehicle, or one index, that's going to hold all of these assets in perpetuity. So thinking about the next step, like you said, I think defined contribution can play a much larger role within real estate in general. 

Spencer Levy 
On behalf of The Weekly Take, what a great discussion around capital. How do you access capital? What's the future of this capital? Talking about family wealth, high-net-worth individuals, starting with Boryana Zamanoff, Family Wealth Strategist from BNY Wealth in Los Angeles. Boryana, well done. 

Boryana Zamanoff
Thank you so much. I really enjoyed this conversation. 

Spencer Levy 
Compie Newman, Executive Director, Private Clients, CBRE. My long time friend, Compie. Nice job. 

Compie Newman 
Always good to be with you, Spencer. Enjoyed it. I enjoyed being with everyone. 

Spencer Levy 
And Zaahir Syed, coming to us from New York, but based in Los Angeles. Senior Managing Director, Private Funds Group, CBRE Investment Banking. Well done. 

Zaahir Syed
Thanks a lot, Spencer. And Compie and Boryana, great meeting you guys. 

Spencer Levy 
For more, please visit our website, CBRE.com/TheWeeklyTake. You'll find related content, ways to share your comments and questions, as well as share the show. We'll be back next week with upcoming episodes featuring market sectors and asset types that are making real estate headlines. And if there's any topic you'd like us to cover, make sure to let us know. For now, thank you for joining us. I'm Spencer Levy. Be smart. Be safe. Be well.