In the 1950s, when Moishe Sonenreich first set foot in Colorado, he saw a future in real estate. It started small; he bought a duplex and lived on one side while renting the other out. Later, he tried his hand at buying and operating motels, a tough business. By the ’80s, when his son, Izzy, joined the family business, he was tipped off to the future of warehousing.
At the time, it was the “butt-end” of real estate, according to his granddaughter Aviva, and the three C’s that helped drive industrial real estate to their current heights — Covid, e-commerce and cannabis — weren’t factors. Moishe began picking up smaller spaces for $15 or $20 a foot, properties his family firm now controls, which can go for up to $250 a foot.
“I don’t think there was any kind of long-term perspective other than generational wealth,” said Aviva Sonenreich, Sonenreich & Co. senior broker, who’s been engaged in the family business since graduation. “That was the goal.”
Sonenreich & Co., which now boasts a $250M portfolio of warehouses in Colorado, is one of many family-owned firms in commercial real estate. The traditional CRE world can appear filled with these dynasties, family-operated enterprises with huge holdings and occasionally messy leadership transitions.
For centuries, the long-term view taken by many family-owned real estate firms conferred an inherent advantage in a business that rewards long-term thinking. But the sector is changing at a pace unmatched in its history — can the family-owned real estate firm still thrive in a world of digital processes and global capital?
The industry is also filled with smaller enterprises like the Sonenreichs, a three-person firm where Izzy and Aviva still work side by side. There’s no definitive figure as to how many family-owned firms operate in CRE, but firm members and business academics say there’s a natural fit for the two, both culturally and strategically.
The ability to amass portfolios and property over time and play the long game gives family-owned firms an advantage. And as Aviva sees it, there’s so much about the real estate lifestyle that supports a family-owned enterprise.
“If you’re good at what you do in real estate, there’s a lot of upside,” she said. “If you can teach that to a family member, you aren’t just teaching someone to fish but handing them a fishing rod as well. Real estate is a lifestyle where you eat what you kill, you choose your own destiny. If you want to put in the work, family businesses present an unlimited upside.”
Family firms are much more dynamic and widespread than many may expect. While the percentage of companies that are family-owned has been declining in recent decades, they made up 95% of U.S. companies at the end of the 1980s, and consist of an array of ownership models and structures. But beginning in that decade, as the financialization of real estate began to pick up steam, more public firms began taking shape and stealing market share away from family concerns in commercial real estate.
The real estate world is filled with legendary family firms: the Rose Associates, Durst Organization, and the Pritzkers and PSP Partners, to name a few.
Gregory Reed, the associate director of the University of Wisconsin’s Graaskamp Center for Real Estate, who previously worked with many of these dynasties during his time as a director at MetLife, said there was always such a tremendous pride in what earlier generations had worked to developed, mixed with hope that the next generations would step in and share the same interest in the business.
That multigenerational mindset also puts them at advantage in the long term in many ways, Reed said, especially in comparison to publicly owned firms that may have more resources, but also have more immediate profit pressures. They’ll often pick up parcels, or part of an assemblage for a deal, looking 15 to 20 years down the road, holding onto it to avoid transferring out of the family and triggering tax issues. They have the vision, fortitude, and what Reed called the “optimistic and delusional demeanor to say damn the torpedoes, full speed ahead.
“I remember countless times when these firms were in acquisition mode and I couldn’t get my head around how a certain family could afford to pay so much for a property, and the feedback would be, ‘They’re buying this property for their children or grandchildren, this is a multigenerational hold,’” he said.
A detailed study published in the Harvard Business Review of an international array of family-owned enterprises from 1997 to 2009 found that family firms over time outshined their public counterparts. The difference, according to the study’s authors, was mindset; family firms prioritized resilience over performance, forgoing quick returns in the good times to plan and strategize how to get through market slumps. Their performance could be considered “role models” for the private sector.
Operationally, one of the main advantages of family firms can also overcome one of the detriments: the ability to move quickly and decisively in pursuit of business objectives. Brandt Bowden, CEO of Hanover Co., a Houston-based multifamily firm with $10.5B in assets, said he found working with his father, Murray, and brother, Jeb, means working at a firm with an incredibly tight culture that leads to a strong performance. What his firm may lack in capital access compared to public companies, they make up with the ability to quickly pivot.
During the coronavirus pandemic in 2020, when construction slowed down and many firms were trying to reorient their operations and plans, Bowden said the firm was able to quickly move through the chaotic moments of the crisis and quickly shift strategies and begin building again. Building multifamily can be a bit like manufacturing, he said, a somewhat slow, lumbering business. Having family leadership at the helm means steering quickly to avoid danger.
“We didn’t have to get a big committee together to talk about everything,” he said. “I simply met with my dad and my brother, went over a plan, and in two days, we put it into action.”
One of the biggest challenges facing family firms is the matter of interpersonal relationships and intergenerational struggles. Can younger members of the family not just claim leadership roles, but guarantee a smooth transition while evolving the firm for today’s changing marketplace?
Bowden says Hanover Co. has built-in safeguards and strategy to help overcome these issues. The firm operates with about 20 partners, meaning family members aren’t the only ones with economic interest in the firm, encouraging entrepreneurialism and shared economic interest. (The Sonenriech’s also utilize a partnership model and work with numerous investors.)
And Bowden’s father, Murray, the firm’s founder, did a good job steering the transition, “truly letting go” and helping to turn over the reins while he was still active in the business and could participate and assist new leadership, serving as a calming presence during the shift. Brandt and his brother Jeb also have key roles with different spheres of influence within the firm.
“It’s like we’re in a foxhole, Jeb and I,” Brandt said. “’Jeb, you shoot left, I’ll shoot right, we’ll divide and conquer and collaborate often.’ We’ve both always had a lot of real responsibility in our various roles in the firm, and both carry heavy loads.”
Real estate currently stands at a number of crossroads, including the need to adopt and adapt to changing technology and a need to diversify the ranks. Initially, family firms, considered perhaps hidebound and stuck with tradition, may not seem like the right enterprises to lead these kinds of shifts.
Reed, for one, sees the nature of the traditionally relationship-driven real estate industry shifting. With the advent of technology and current disruption, he believes relationships with fathers and grandfathers, for instance, won’t count as much with investors and banks, who will be increasingly more focused on the bottom line.
The phrase family firm can be a loaded term to a certain extent, according to Bowden, but for any naysayers, there’s plenty of successful track records. The Harvard study looking at family business performance found higher levels of diversification, better talent retention and lower amounts of debt.
CORRECTION: OCT. 8, 1.50 P.M. ET: A previous version of this story erroneously linked to and listed Edward J. Minskoff Equities among a list of family firms. The reference has been removed.