Developer Crow Holdings plans to expand Old Parkland with a second phase of the eastern portion.
Courtesy of Crow Holdings
Dallas has long been home to wealthy dynasties. But as wealth increases and money-makers flock to North Texas, more and more families are setting up private companies, so-called family offices.
Family offices have been around for a long time with different structures, but ultimately they help families manage money, assets and personal affairs.
Over the past decade and a half, however, many family offices have become major investors, working in everything from AI to real estate to technology, with North Texas as their hub. Although Praxis Rock Advisors says there are between 280 and 340 Texas family offices managing $320 billion in assets in the Dallas, Houston and Austin metro areas, the impact of individual family offices is difficult to track because they are not required to register as investment advisers with the U.S. Securities and Exchange Commission.
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“They are very influential,” said Leslie Gunawan, a Dallas-based managing director at UBS. “One reason for this great growth in the family office community, particularly in Dallas-Fort Worth, is that the community is very well connected.”
Private wealth intelligence platform FINTRX has identified 137 of 2,387 family offices in the Dallas-Fort Worth area nationwide, according to data shared with The Dallas Morning News, although many family offices are not publicly traceable.
The Old Parkland campus is the center of the city’s influential family offices.
Crow Holdings
Here are five things you should know about family offices:
Table of Contents
They invest in direct businesses, not just public markets
Many family offices have become magnets for private equity and companies seeking direct investment.
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“Some people just want to be deal shops,” said Carter Tolleson, CEO of multi-family office Tolleson Wealth Management. “No one wants to be left out. Everyone wants to go to the country club and say they were there for SpaceX’s IPO.”
In Dallas, family offices often work together on deals and exchange ideas, with exclusive Old Parkland being a hotspot.
Family offices in North Texas still invest in the state’s historic oil and gas and real estate industries. However, wealth advisors, family office employees and lawyers said they are also diversifying and investing in industries such as technology, AI, AI infrastructure, personal credit, medical innovation and financial services.
Many family offices invest in the industries from which their founders made money. In North Texas, the most common sources of wealth include oil and gas, real estate and insurance. Others are looking for a variety of investments.
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Every family office looks different
Family offices hire employees to handle investments, estate planning, legal matters, accounting, philanthropy, household staff, housing and even travel. They could have chief investment officers or chief executive officers.
“Their assets have become either so large or so complex that they need someone to help them structure them full-time, and they want to do that in a more private setting where they hire people who are committed to them,” said Jamie Lavin Buzzard, regional head of investments and advisory for the South region at JP Morgan Private Bank.
Some family offices are more focused on investments than others. The number of employees can vary from a few to 20 or more, and they may outsource tasks to financial companies.
Brendan McGuire, regional president at PNC, formerly worked as a technology banker in Atlanta. There, “entrepreneurs built a business, sold it, made money from it, and started a new business.”
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When it opened in 1986, the Crescent in Dallas’ Uptown neighborhood was the largest and most lavish private real estate project ever built in the area.
Crescent Real Estate
In Dallas, “I saw these entrepreneurs take the money and structure it into this family office concept,” he said.
Major family offices in North Texas include Crow Holdings, Deason Capital Services, the Hersh family’s HFI Capital Management, firms affiliated with the Perot, Bass and Hunt families, and philanthropist Lyda Hill.
There are also multi-family offices – including Tolleson Wealth Management, Legacy Knight and Cresset – for those who don’t want to spend money on a single family office.
“When we offer our services, I say, ‘We’ll do anything you don’t want to do so you can focus on what you want to do,'” Tolleson said.
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They are worried about succession
Preparing the next generation to manage family wealth is a key concern as the “great wealth transfer” begins.
Some family offices find ways to involve their children early in conversations about money or philanthropy.
However, others are less prepared. Kate Flume, senior managing director of the family office run by Angeles Investments, said tax and estate plans are often “put on hold” but updating them is key to a smooth succession.
They are personal
Spending decisions can become complicated when family members have different interests and personality types.
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“It’s really important to know, what is the purpose of wealth and what values does the family hold dear and how do they implement those things?” said Emily Bouchard, who advises family offices in Texas.
Family dynamics can also become complicated when assets are involved. Bouchard offered a Texas-friendly hypothesis: A ranch could be inherited from grandparents, who want to preserve some families and modernize others. Disputes can also arise over income-producing properties, she said.
They are very private
Many single family offices like to keep their investments private.
This is made easier because they are not required to register with the SEC, which critics say is unfair. Allison Tait, a law professor at the University of Richmond, said people deserve to know which family offices are investing in because they are effective.
“It’s important for us to think about what kind of legal exemptions we give to wealthy families because at a certain point they should be treated more like a business,” Tait said.
Those who work in family offices say they manage their own family’s wealth, unlike traditional investment firms.
“Family offices are deeply personal. They’re relational, they’re a family,” Flume said. “It’s a private operating company.”
https://www.dallasnews.com/business/article/family-offices-five-things-to-know-22319442.php
