By generation three there's a loss of the family ethos, and the family office splinters.

[21:13]

"So, let's get to best practices against the what's called the shirt sleeves to shirt sleeves parable, which means in essence your family office or family business only has a 100-year shelf life. 92% of the time unless you get involved with these interventions and invest in them."

[23:03]

"Rather, they learn to do rather than do to learn. And by generation three, there's a loss of the family ethos, where they are more or less living off the wealth and don't get with what the family is all about."

[26:07]

"So, I'm actually really excited about this year because we're buying stuff for 40% of what it was going for in 2022. The impact of interest rates and over supply in the Sunbelt markets actually provide a tremendous opportunity"

Full transcript

What investors are prioritizing, how decisions are made, and and what opportunities align with their mandates. We're probably seeing what everybody's talking about now, which is, you know, energy efficiency. What are you looking at right now? So, a lot of a lot of a lot of what I'm looking for has to do with strong, repeatable, proven, small to medium-size platforms.

In the last 2 years, we've been buying distressed multifamily. Primarily stuff that was purchased in 2022 with short-term debt. All right, thank you. Thanks for the introduction. Appreciate that. Let me first mention it's been my privilege to know uh be involved with the Family Office Club for about 9 years now.

Uh Richard has a first-class organization. I want to uh send out kudos to Rachel, Miguel, Tabitha, and several people who are just top-notch individuals to help us organize these events to network and get a lot done. So, it's my privilege today to moderate this panel that will be talking about preferences and strategies of ultra-wealthy private investors and what their mandates are. So, here's the format.

It's simple. We're going to understand how capital is deployed, what investors are prioritizing, how decisions are made, and and what opportunities align with their mandates. So, here's what we're going to do. We'll start with our first person I'll call on. They're going to introduce their name, their firm, and their information. They'll have 5 minutes.

They'll talk about their investment focus, the kind of preferred structures that they like, uh what they're seeking out right now, what they're looking for, what's hot on their plate, and then lastly, they're going to we've been asked to have them share with us a million-dollar lesson that they've learned in business, okay? So, you're going to walk away with $6 million worth of ideas if I'm counting right, okay? So, six distinguished panelists, let's begin by turning the our microphones over to Heath. Good afternoon.

Thank you, Todd. Good to see some familiar faces in the crowd. We act primarily as a multi-family office. We're here about 7 miles away. That took me about an hour and 15 minutes this morning to get here. So, for those of you who are local, you know how that feels.

We do not physically manage money for clients. We do work very closely with them on their investment portfolios. We're probably seeing what everybody's talking about now, which is, you know, energy deficiency. How to What can we do to clean up the energy? What can we do to produce more energy? The data centers is is an immense one.

And crypto. I saw my friend here down in there in the Bitcoin shirt this morning. He must have been buying a lot of it today cuz it's up about $7,000 a coin, but um we're still seeing a lot of information and a lot of interest in in the crypto space. Okay. I'm going to look at my cheat sheet.

Remind me. Yeah. Keep going, Casey. We want to hear about you can go to what you're seeking out right now. Seeking right now. Seeking right now.

Yeah, I think you know, somebody mentioned it this morning they were doing real estate in 49 states. Primarily not the one that we're sitting in and so we are seeing a lot of interest outside of California in the multi-family and industrial space. You know, obviously we all pick up the phone or use the computer to order from Amazon and you know, I walk outside there's boxes. Look at my wife, I'm like, "What did you get?"

Oh, it was soap. It was It was, you know, a new computer. No one We just don't go to stores. And Amazon shows up. So, we got to have a place to to put all that last mile stuff. And so, we're seeing a lot of interest in the industrial space.

So, any preferred structure you deal with? Co-investments, direct? Yes. Control your control positions, etc. Yeah, um it's probably mostly kind of LP structures Okay. For the clients.

Um somebody else is typically the sponsor. We're still still seeing some some GP stuff in the in the development ground up. Um but mostly it's acting as an LP and you know, the one thing my clients say to me is you know, how long have you known these these sponsors? And you know, some of these relationships go back 25 years.

Others are rather new and we've got to do a lot more due diligence obviously to figure out if it's the right relationship, but um somebody else we mentioned this morning on the first panel, it is really about relationships. And you got to take the time to develop those relationships. Do your research. Do your background checks. Spend the money to have somebody do a deep background check cuz you don't know what you're going to find.

And hopefully you don't find anything and you're off and running and you can make a million dollars. So, single most valuable business or investing decision that you can pass along? I'm going to I'm going to take one step further. Some of the people in the room know I spoke here last year. We talked about private placement life insurance and a lot of people said to me, "Ah, I don't want to hear about life insurance."

I said, "Well, this isn't life insurance as many of us know about." Private placement life insurance is using a custom life insurance policy created just for you and your family that can be wrapped around the investments that you're already doing. Why do you do this? You're creating a tax deferred environment for your assets to grow, whether it be royalty income, whether it be rental income, and eventually if those assets are sold you're avoiding the capital gains side inside the life insurance policy.

So it's a tax deferred vehicle. Uh people always ask me the first question I get when I mention tax deferred is when does it become tax free? Unfortunately when the insured of the policy dies, often times is the underlying client that I'm talking to but um you can have tax deferral for the next 50 60 years of your of your life if if that's what it is. So for me the the last question Todd is you know what's the million dollar lesson I've learned?

It's not what you make, it is what you keep. Okay, excellent. Thank you. Let's move to the best dressed man that I saw in the conference, Frank. I think you're up next. Oh man, I wasn't even ready for that.

I I thought we was going to order but um okay. I'm an NFL player for the Tampa Bay Buccaneers, Miami Dolphins, Houston Texans, and Chicago Bears. Yeah, I've been around a lot so but yeah, um my company is CCS Plan Legacy Institute. That stands for Churches, Community, and Schools. I'm also considered a sports community impact investor where we take athletes and we help athletes invest and become businessmen.

Not just invest in their community which is number one but understand business structure. Um we believe creating a new sports culture of athletes um to create a new culture is going to take them knowing exactly how to make better decisions. Not just on the field but off the field. So I've been excited um ever since I started doing this and doing it myself.

So this is where I'm at now. I enjoy it. I love motivating and intriguing others. Um I've been fortunate and blessed to have a best selling book called The Man Behind the Helmet. Coach Tony Dungy, Super Bowl coach forwarded and um now we're creating a movie so a lot more coming down the pipe. So what are you looking at right now?

What's interesting to you Frank right now in terms of investing? What are you looking at? For me, I I think I say this, the two P's and the L. Purpose, profit, and legacy. If it don't have purpose, and it's not going to be in the green for profit, and if it don't leave a legacy after I leave, I don't invest in it, or I don't advise athletes or my friends to invest in it.

You want to leave legacy cuz that takes you to relationships. And relationships we know is everything. So, one thing that we're doing right now is the man behind the helm at God Gave Me a Second Chance. That's the life story of Frank D. Murphy, and it's the movie. And you got to understand that sports is one of the number one things that motivate not only and intrigue young people, but adults.

Over 75% of people listen to athletes. So, you heard of The Blind Side. Um the investment was 29 million. They made 300 and something million. Um Remember the Titans? That was 30 million to make.

They made over 137 million profit. Sports movie that's invested into communications, and making sure that your purpose don't go to the graveyard is very important. And Frank, your $1 lesson that you can pass along to the group here? Man, that came quick. $1 million lesson. I'll I'll give you two then I'll close it.

Make sure you're in the right position for success. I remember Peyton Manning, he called me one day and said, "Frank, come to the park. We're throwing in a private place." So, I said, "Okay." I get to the park, and him and Tom Brady walk out. I said, "Oh lord, I'm going to catch with two of the best quarterbacks that ever lived."

And I noticed something that was different about Peyton Manning. He said, "Frank, if you're in that position right there, not to the left, not to the right, but in that position right there, you're going to catch I'm going to get it to you every time." Every time I was in that position, you guys, it was right on the money. Every time I was out of position, it would fall to the ground.

What I'm saying is there's There's certain position you got to be in, and sometimes going to be uncomfortable, but you got to make comfortable comfortable. If that makes sense. And you got to understand at the end of the day, you can't let your name, what happened to you in your past, creep into your present and destroy your future. There's going to be opportunities for you to give up.

The question is, will you give up? And you got to treat money like you treat people. Cuz if you mistreat people, trust me, they won't be around long. They'll fly away, or they'll be there and just uh like a like a rock on a log. They won't do anything. And that's what your money will do if you mistreat it.

Treat your money like you treat people. Excellent advice. You know, I could tell uh Frank is obviously tied into the sports community, investment community. As we were over on the side getting ready to walk up here, uh he said, "I just got a text that Lou Holtz had passed away." I hadn't heard that. He just passed away today.

So, interesting. He's obviously very tied to a lot of people in the sports community, and we lost a great one today in Lou Holtz. So, you'll see that in the news if you haven't already seen that. He's such a blessing. He he fought my new book. He's a friend of mine.

And when I got that text, I I I thought about how life how life goes. You guys, life is so gentle. It comes and it goes, but your legacy is forever. Make sure you don't let your purpose go to the graveyard. It It don't matter how old you are, how young you are. Your purpose has to live on.

If you're doing something, make sure you're doing it for not only the right reasons, but a legacy reason. Thank you. I run a global family office platform that currently is based just up the road, about 10 minutes away from here. So, I I drove here. It didn't take me an hour to get in. It was only 2 miles.

So, it only really only took about 10 minutes. But, um so, we operate across really all sorts of verticals that you can think of from general merchandising of of wholesale goods to logistics and light infrastructure and other third world countries. Um, but primarily our bread and butter is operating on both sides of the capital stock in real estate, both debt and equity. At the end of the day, I mean, people can talk about private credit all they want to, but at the end of the day you're loaning primarily on either one of two things, operating businesses or in real estate.

So, really you're involved in operating businesses or real estate. Private credit is not really a its own uh its own asset class. Okay. What are you looking for today? What are you looking at right now? So, a lot of a lot of um a lot of what I'm looking for has to do with strong, repeatable, proven small to medium-sized platforms.

You say an operator of say, you know, 20, 30, 40 different gas stations that are they are, you know, still a a nimble organization and they can still take advantage of a lot more opportunities that people much larger than them cannot. Um, but they still have a lot of room to grow and a lot of room for really strong returns for you to come in as as not just, hey, a silent partner, but as someone who's an active person who's invested in in, you know, that particular platform. Are you trying to do roll up in in a strategy like that or not necessarily? Just kind of leave it Not necessarily.

Um, I suppose in terms of roll ups, the the better thing to do from that perspective would be to go to somebody who is doing roll ups. Okay. All right, and then your opportunity to share with us a million dollar plus uh business or investing I mean, people people that have that have heard me speak here a few times know that I have too many bad answers to that question. Um, but what I will say is um is is to always nurture a healthy paranoia for established knowledge.

Um, you know, there's a reason why the Ottomans never made it to America. It is because they didn't think it was it was worth doing when they they were doing so many other good things. And we think right now, okay, well, you know, SAS businesses, you know, all these other industries, legal businesses, accounting firms, you know, they are what they are and they always have been in that format. Well, no.

The world is changing so quickly. The frontier is moving so fast that now somebody like me who doesn't have any kind of a background in software development or coding or whatever can build something that exists on the very frontier, on the very edge of what current technology is capable of doing just because, you know, I started there. I started at level nine rather than at, you know, level one. And you can just move that quickly.

Okay. Excellent. Thank you very much. Um, so I primarily made most of my uh wealth creating music for in the film and TV business and started to redeploying that over into the real estate business. And what I like to invest in is opportunities. And what I mean by that is um I like to be opportunist driven.

I think sometimes you fall in love with an asset class and you're there, but the the market the world changes, right? So you have to seek out those opportunities as the market changes. Um people say is self-storage a good investment? And it's like, well, maybe. It it is depends on a lot of factors. What's your cap rate?

What's your interest rate? What's the absorption? What's your occupancy, right? What's the number of building permits out there that are going to allow somebody to build right next to you, right? So there's a lot of factors in that. Uh stuff that I like right now is multi-tenant flex industrial.

And that's because the not that's necessarily the huge warehouses which are are great if you can keep Amazon as a customer, but the smaller businesses where you have a lot big pipeline of people who want to invest in those things. And then also I like the small um small bay industrial. And the play that I'm doing there is buying anywhere from like 28 to 50 units, putting a condo map on it, splitting those up, and then you can sell those off to an owner user who will pay more per square footage than a than you could buy it for. So, I also like land entitlement right now.

Um and that is because um the big builders have been conservative, right? As interest rates went up, they slowed down, they didn't fill their pipelines, and now they realize like if we not building, we're not making money, and that's going to be really bad for our stock. So, they're back out there actively. So, uh I'm doing another land entitlement deal right now.

So, you can buy land cheap. Uh you create a lot of value when you get that land to be entitled so it can be built. And I know this would be shocking to you who live here in the People's Republic of California, but for a rare change, California state government is actually on your side. So, they've mandated they've created a lot of laws that are forcing local jurisdictions because they need housing.

So, that state law actually supersedes local um law. And so, that's going to be um it's helpful in that industry. So, there I see opportunity there, so that's why I'm deploying there. Um Are you Let me ask a quick question. Are you looking just in California or you looking on the west or all over the country? The two projects I have are both California.

Okay. So, and that's because builders will pay more for a lot here, right? Takes similar time. Well, actually it takes more time cuz it's more complicated here, but if you if you can figure out how to do it here, there's a premium to be made. Okay. Okay, good.

Um and then as far as what I'm looking for, really looking for a good acquisition partner to go out and source deals, underwrite deals. Uh I have a wealth management partner now with a lot of capital and the idea is to deploy that capital. So, I've I've actually done as a LP, I've done that same model where family offices found a very sophisticated basically operator who would source deals. I've invested in those deals.

Now I want to set up the same thing for my own family office. So, that's something I'm looking for and if anybody has leads, I'd appreciate those. And I'm also looking for anybody who take 1031 money. I'm I'm deploying redeploying capital that's basically a lot of trapped equity moving it into other 1031 deals. And then I'll give you your not just one but three million dollar ideas for you guys.

So, the first is that partnerships can make you but they can also break you. So, be very very careful. It's more it's as important as a marriage and you don't get to sleep with them most of the time. So, and you probably shouldn't. So, so there's no makeup abilities there when things go bad. The next one is if you wouldn't invest a million dollars, you shouldn't invest one dollar.

Right? And oftentimes people can think oh, it's 50 grand, it's 100 grand, it's like you know what I mean? I'll take a flyer on it, right? But unless you're willing to invest a million bucks, right? You don't have to invest a million bucks but unless you're willing to put that much capital cuz if you're investing a million bucks, how are you going to be more careful with your due diligence, with your underwriting, with your right?

How much you're going to take a lot more time with that? So, treat every investment as if you were putting a million bucks in even if you're putting in much less than that. And then third is that um investing is not quite like baseball, okay? And what I mean by that, it's in baseball you can get up to the plate and swing for the fence every time, right?

And you can be a hero and if you strike out, you know, couple innings later you get another chance at it, right? It's not the same in investing. So, so who's here is the most famous not here, but who's the most famous baseball player ever? Babe Ruth, right? How many times did Babe Ruth hit a home run?

This guy knows his math, 744, right? And What's that? 14. Oh, there you go. Um, and how many strikeouts did he have? 1,330, right?

So, that's a that's a lot of strikeouts. So, if you try to do that in investing, you're going to have a world of hurt. So, if you've ever invested a hundred grand in a deal and it went bad, how much did you lose? A hundred grand. But, you lost the ability to grow and compound that hundred grand over the next 30 years, right?

And so, if you could compound that at 10%, that will actually grow into 1.7 million dollars. Right? So, that's why, you know, Warren Buffett's number one rule, don't lose money. And that's why the the home runs are great if you're in the venture space, that's the game you play, but if you're not in that space, be very careful.

Singles are good, doubles are good, triples are good, getting back at bat again, but strikeouts are very expensive. So, do your best to avoid them. Okay. Thank you very much. We went from six million to nine million dollars in in ideas, by the way. Know, I feel like I got cheated.

Like I I feel like I got some more answers. Okay, director Colton Alexander, which is an investment bank focusing on sustainable energy, materials, and transportation, series A and B. As well, I'm COO of Validation World, which focuses uh family offices on de-risked investments such as royalties, but we go beyond that. I'm also an independent compliance monitor, a private family trust company protector, and today's subject, an advisor regarding interventions in family office longevity.

There you go. Thank you. Thank you. So, let's get to best practices against the what's called the shirt sleeves to shirt sleeves parable, which means in essence your family office or family business only has a 100-year shelf life. 92% of the time unless you get involved with these interventions and invest in them. First of all, engaging trust protectors to make sure that your trust functions as the wealth creators envisioned for generations to come and using what we call seven-generation thinking.

We'll get to that in a moment. Additionally, using Delaware wellbeing trust structures to assure that beneficiaries flourish and we use the teachings of John Adams. We'll get to that in a moment as well. Making use of chief learning officers to be sure that there's financial literacy throughout the generations and that there is an awareness of family history such that you cultivate interest in community works.

Finally, embracing family retreats and properties to foster togetherness across the family spectrum and using funding by family advancement sustainability trust, which don't have beneficiaries, they have family activities that brings the family together. Now, what about this church the the shirt sleeves parable? What it means in essence is the family office creator or the wealth creator, as it were, is is not risk adverse. He's one that does before he learns.

He dives in. He creates wealth. Nothing stops him or her. And that's usually your generation one. Generation two is more reserved and may not be able to replenish the wealth. Rather, they learn to do rather than do to learn.

And by generation three, there's a loss of the family ethos, where they are more or less living off the wealth and don't get with what the family is all about. And so, the family office or the family business splinters and goes away. Now, how were you able to put this all together? Well, seven generation thinking is all about policies of the Iroquois Indians.

Every time they would start a a uh annual meeting in the tribe, they would start by saying, "We are here to honor seven generations that preceded us, and we intend to follow in their footsteps such that seven generations hence, we will be so honored." This is very important, thinking in terms of the long game. Then we have the situation of John Adams, our President John Adams. Well, what he said is I must study politics and war that my sons may have liberty to study mathematics and philosophy, geography, natural history, naval architecture, navigation, commerce, and agriculture in order to give their children the right to study painting, poetry, music, architecture, statuary, tapestry, and porcelain.

In order to be able to achieve this, one has to think in terms of family first. And that involves the idea of creating a balance between interdependence, which is very much the case with the family wealth creator, and independence, which comes with each passing generation. You need to pull both together for balance, for there to be teamwork and trust work such that the whole spectrum of the family is retained over generations and does not splinter, and everyone is appreciated for their own strength. And this is ultimately the recipe for longevity of your family office or family business.

We're having a meet-up after this session, and I hope to see you there as well to entertain additional questions and best practices in this area. Thank you a lot. And I'm founder of Neighborhood Ventures. We're a multi-family owner-operator based in Phoenix. And we launched 8 years ago. We originally did value add.

In the last 2 years, we've been buying distressed multi-family. Primarily stuff that was purchased in 2022 with short-term debt. And we bought four deals in Phoenix that were all distressed last year. We were the most active buyer in the Arizona multi-family market. And we do everything in-house, all our property management, maintenance. And I think the the next question is opportunities.

Um I I came from Wall Street, and this is the first time in the cycle where you can buy multi-family at the down part of the cycle. So, I'm actually really excited about this year because we're buying stuff for 40% of what it was going for in 2022. The impact of interest rates and over supply in the Sunbelt markets actually provide a tremendous opportunity right now. So, we we have a a deal that we close next week.

We We raised about $10 million in 30 days. And that's why we're here is talking to more family offices because we primarily work with high net worth individuals. And we're also buying in the Dallas market because we're seeing the same similar dynamics there. So, Phoenix and Dallas, anywhere else? Anyone else in the South? No, we're we're just in those markets because we we do everything from property management and every and so we go two two feet in in each market.

So just those markets today. Okay, excellent. And million dollar or more opportunity for the group. Um I think the biggest thing that I've learned is that uh it's good to have some gray hair on your team. I agree. Uh in 2022 I was pretty anxious to continue to buy more multi-family and my business partner had had some gray hair and he'd been through multiple cycles before and so we had a lot of hard discussions but we ended up going pencils down in 22 and 23 didn't buy anything.

And I was I was not real happy about it at the time but in retrospect now we're in a position to go buy stuff um at a much better price point and I I credit my my business partner. He'd he'd been in the industry for 35 years and I I came from investing and it'd only been in it five years. So I there's a lot of young groups in our business multi-family probably seen some of them and they had great pitches and they've they've fallen pretty far in the last few years. So I think some gray hair is important and that's the biggest thing that that I'd leave with folks.

That's actually the best advice I think I've heard on the panel so far. I love that idea. Join the Family Office Club by visiting familyoffices.com. We look forward to seeing you at our next live event.