Every family office has its own origin story, and for Lisa Quateman’s family, it started with some vacant land in Los Angeles County, California.
Her maternal grandfather, who came to the United States as an infant, eventually made his way to Southern California. From a start in manufacturing and a beauty supply business, in the 1930s and 40s, he was able to begin acquiring real estate in Southern California.
“In one case, he was owed some money in a business transaction, and instead of taking the money, the person who owed him the money gave him some vacant land way up in a remote part of northern Los Angeles County, in a place where nobody was,” Quateman says. “He would drive us up there, and we would watch the tumbleweeds roll by. Nothing was going on.”
Eventually, the state of California decided to build a highway through the property. Quateman’s grandfather approached restaurants, hotel chains and gas station operators and got some to sign leases for the property — then used those commitments to get loans to build.
This property, along with some other properties in Los Angeles, was the foundation of what the family office is today.
Quateman’s uncle joined the business with his father. Eventually Lisa, the first grandchild, was born.
“My grandfather was grooming me to manage this real estate eventually,” Quateman says. “He supported me to go to law school, which I did. I was raised to expect that this would be my role.”
On the death of Quateman’s grandparents, the heirs ultimately divided the real estate portfolio to simplify it and so that cousins would not co-own property. Today, Quateman is the CEO of Belldale LLC, which manages the real estate (and other) investments for her branch of the family.
A distinctive family office structure
The real estate portfolio was originally held in a family trust of which Quateman was the trustee, which the family converted to an LLC. The new structure offered benefits in terms limitation of liability and ease of administration. But Quateman, as manager, agreed to retain a fiduciary obligation to the family.
“The underlying components of being in a family, and having the first grandchild be responsible, are still there,” Quateman says.
Belldale does not assist family members with estate planning or tax returns. Instead, its purpose is to help the family manage the assets which have been passed down through generations.
“The members of this family are a new generation of co-owners of a commercial real estate portfolio,” Quateman says. “The focus is on building and managing that portfolio, preserving the wealth and investing the reserves.”
Much of Quateman’s work at Belldale focuses on questions like how much money should be reserved from the real estate income for capital improvements, for example, instead of being distributed to family members. She also stays on top of local governance issues, particularly with respect to the portion of the portfolio that is vacant land.
“We work on planning development, liaising with government officials, financing sources and potential partners — be they tenants or buyers or other professionals who can help us grow the value of that property for our members and our future generations,” Quateman says.
Because Belldale operates primarily as a ground lessor, with the lessees having responsibility for taking care of buildings, taxes, maintenance and insurance, it has a fairly lean operation, with no full-time employees. Even so, Quateman visits and inspects the properties. Belldale outsources different aspects of its work to architects, engineers, consultants, real estate brokers, security patrols, bookkeepers, tax professionals and, in one case, a property management firm.
Governance for the future
Quateman is currently working with her family to shape Belldale’s future. Long-term succession planning is an ongoing project, though Quateman has put in place an emergency succession plan if something were to happen to her.
To make the LLC work in the present and also lay a strong foundation for the future, the family invested a lot of effort in governance issues when they created the family LLC operating agreement. It outlines the scope of Quateman’s authority as manager: what she can do on her own and what needs approval from the members of the LLC.
“It is a small, closely held LLC, so decision-making can be efficient, and fortunately, there’s usually consensus,” she says.
Quateman is also working with members of the rising generation to get them engaged. They are in their 20s and 30s and are primarily focused on their own families and careers at the moment. To familiarize them with the portfolio, Quateman has given tutorials and taken family members on tours of the real estate holdings.
Some NextGen family members are using their professional skills to benefit the family LLC: One who went to law school has been helping with legal work, for example, and two others helped Quateman digitize the family records.
The experience has given Quateman good perspective on what is needed when establishing governance for a family office. One challenge will be determining the extent to which Quateman’s successor or successors may need to reside near the real estate.
“You’ve got to really talk through who needs what in terms of governance, who’s got what kind of skills,” she says. “Do you have people who really know what they’re doing in the business, or do you have people who have not been involved with the business at all? Communication — and understanding the strengths and weaknesses that each owner brings to the table, and being honest with yourselves about that — is really key.”
Quateman hopes that the governance structures her family has established, along with solid communication and understanding of each other’s skills, will allow for a smooth generational transition when the time comes.
“Our grandparents wanted us to hold onto this property,” she says. “I’m hoping that we can fulfill their goals and create some magic with the vacant property — so that future generations will be able to continue to co-own and operate it if they so choose.”