Real Estate: ‘An Incredibly Flexible Asset Class’

Investing in real estate can be particularly meaningful and beneficial for families — but managing and growing these assets can be a challenge. Seth Chadwell is president of Kibo Capital, a fully integrated real estate family office based in Nashville, Tennessee, and founder of Fire Tower, an independent real estate firm that provides comprehensive solutions for family offices. He discusses how real estate can fit into family offices’ investment plans, and the importance of finding the right team to support this function of the business:

How did you arrive at the intersection of family offices and real estate?

I’m a recovering lawyer who always wanted to be in real estate and spent a few years as a practicing attorney with a large law firm. I then jumped to the deal side and helped build out a multifamily company that was funded by ultra-high-net-worth individuals and family offices. That was my first introduction to that space.

After several years, I moved back to Tennessee and met the family for whom I now work. Ten years ago, I partnered with them to help grow their real estate portfolio and build their real estate platform. We spun that off into what is now called Kibo Capital. We have about 60 employees spread across the state: 10 to 12 back-office employees and about 50 property management employees.

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How did the family get into the real estate business?

It’s a very typical family office story. The patriarch built a large operating company 40 years ago and has been growing it ever since. About 20 years ago, he started buying real estate for a rainy day. When I came along, he had the desire to build and grow that portfolio, but he didn’t have the team.

Today, the family has two different businesses: a large, nationwide operating company and Kibo Capital, the real estate business. We call Kibo Capital “fully integrated” because we self-manage the properties we own. We primarily invest in and operate grocery-anchored retail and multifamily real estate here in Tennessee and the Southeast. That’s our core portfolio.

How is the family office structured?

We would describe it as an embedded family office within the operating company. While Kibo Capital has performed many of the family office responsibilities over the years, as both the family and the real estate company have grown, we’ve shifted the family office responsibilities back to the embedded staff in recent years.

What are some advantages of real estate investments for family offices?

Image by Cassidy Reed

While real estate can, of course, serve an important allocation need within the investment portfolio, real estate can provide numerous other advantages for a family office: Tax advantages, consistent cash flow, inflation-hedging and owning tangible assets all come to mind.

Real estate is an incredibly flexible asset class, and we can achieve certain outcomes that we simply can’t with other asset classes, especially when the family is a direct owner of the real estate assets. 

What other types of value do real estate investments provide?

A family’s definition of value may include sentimental value and operational value. Real estate is physical and tangible and lends itself to sentimental notions: The patriarch and children may have fond memories of visiting the assets, seeing their parents care for the assets or even having their first jobs on-site. Core family memories may very well be tied to certain real estate assets.

Additionally, for families that own an operating company, there may be significant value and synergies in developing, owning or managing the real estate portfolio of the operating company. We’ve been involved in several projects where solving a real estate need for the operating company provided immediate and significant value, both to the OpCo and the investment portfolio.

What are your future plans?

We think our model, which we built for one family, could be used for other families, providing comprehensive real estate solutions for family offices. We come from this world; we understand the complexities and the dynamics of family offices. We understand that it’s not “just real estate” — these assets can fit into the family in numerous ways and serve multiple purposes.

If you’re a family office of a significant size, you can build an in-house real estate team that can handle not only the investment portion, but the asset management. If you are a bit smaller, you may not need those services.

Image by Cassidy Reed

But we believe there are a lot of family offices — like us — that fit in the middle. These portfolios demand a qualified team.

One option is to outsource to a national real estate firm. They’re experts at what they do, but they don’t come from the family office world. Another option is to build your own in-house team, but this is difficult, expensive and time-consuming.

We believe there’s a third option: build a best-in-class team to serve multiple family offices. Real estate doesn’t always fit cleanly into a spreadsheet or a prescribed box — it’s tangible, concrete and human-driven. Finding the right team to oversee and support the portfolio is critical for family offices today.

About the Author

Margaret Steen

Margaret Steen is the editor of FO Pro, The Family Office Professional. Based in Silicon Valley, she has written for Family Business Magazine for more than 15 years.


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