Long Term Holds and Master Plans

Many times family offices hold a property for a period of time greater than 10 years. This is considered a long term hold. This can be a differentiator from institutional or private equity funds that take a short 2-5 year hold period due to fund liquidity requirements.

A long hold period may be intentional, due to a solid annual cash on cash return on a property, it may also be unintentional and because a property was inherited, came with another business deal, or because the family just happened to assemble a portfolio of investment properties over time.

A strategic approach that involves holding property for a long period of time is to create a master plan or vision for a neighborhood.

This may require the family to purchase multiple parcels in a neighborhood over time. The family will also need to coordinate with the city and neighborhood, hire an architect and a land use attorney, and then to work redevelop the properties.

The pieces of a master planned community might be developed by one or multiple owners with a common goal to improve the neighborhood and generate higher returns for property owners.

When assembling parcels as long as a property can “carry itself”, or break-even, then holding the property may make sense.

When a longer term view is taken, losses on some properties may be taken to set up larger development plays that ultimately benefit investors and surpass losses on the smaller properties.

To develop a master plan for a neighborhood the family may either re-zone properties or use existing zoning to build them out.

This thoughtful approach requires relationship building with the city, other property owners, neighborhood groups, and business owners in the area.