Family offices and the private market

Twenty years ago the top of a prime market was individuals: an entrepreneur who had sold, an heir, a star. Today it is increasingly an office, acting for a family, with a mandate, an allocation and a spreadsheet. The change has made the private market larger, faster and more disciplined, and it has changed what a seller can expect from a buyer.

How an office buys

A family office does not fall for a terrace. It begins with the allocation: what share of the family's wealth belongs in real estate, in which jurisdictions, in which structures, with what horizon. The house is then found to fit the allocation rather than the other way round. Jurisdiction comes first, because the exit tax in the year the grandchildren sell is modelled before the first viewing; structure second, because the buying entity must be ready to sign; and only then the house.

What sellers like about them

Certainty. An office has evidenced funds before it makes the first call, its structure is incorporated, its lawyer is instructed, and its decision is made by one or two people who have authority. It does not renegotiate over a survey, because it priced the survey in, and it does not need a mortgage, because it decided the leverage elsewhere. For a seller with a blind instruction, an office is the buyer the instruction was written for.

What offices want from a desk

• To be qualified once, with a conversation and evidence, and never again house by house.
• To see only what fits the mandate, and to hear about it first.
• The file before the visit: plans, the planning history, the accounts of the house, the exit modelled.
• A desk that stays through completion in the jurisdiction, with the lawyer, the notary and the tax adviser it already knows.
• Silence. An office that is known to be buying in a market moves the price against itself.

Where they are buying

Zürich and Zug for the principals who have become resident. London for the family's base in a market that is cheap to hold. Como and the Riviera for the named villas that pass between families. Monaco for the residency and the regime. Munich and Hamburg for the German industrial families whose offices sit in those cities and buy on the same streets their grandparents did.

The risk of the spreadsheet

Offices make one mistake, and it is the mirror of the collector's. They treat the house as a security and price out the thing that makes it worth having: the frontage that cannot be built again, the licence the neighbour does not have, the view that ignores the cycle. The desk's advice to offices is to let the principals see the house before the committee prices it, and to remember that the return on a Suvretta chalet has come from the fact that it does not behave like a spreadsheet.

The portfolio instrument shows what a purchase does to the family's allocation and how fast the whole position could be sold. It is the first thing an office runs and the last thing a collector wants to see.