What Jeff Learned From A Family Office Background

Wally Smith:
Okay. Like to dive in a little bit to some of your background there. It’s interesting, with the family office background. When I think of family offices, I think of a lot of wealthier people, single family or even multifamily offices. And a lot of those people had to work really hard to inherit their money. So they’re very protective of it, but they’re not trying to shoot the moon. Layman walks in off the street, and they feel like they wish they could invest like the big guys because surely those rich guys, they’re making 20, 30% on their money. Right?

Jeff Montgomery:
Right.

Wally Smith:
I think it’s more of a reality that they don’t want to lose it. They want to get a good return. They want to keep ahead of inflation. What kind of lessons do you bring from the family office perspective?

Jeff Montgomery:
And it’s the name of the game of the DST almost, is wealth preservation and growth, stable growth. From the family office side, you’re right. They either started in a different avenue, were able to build a mass of wealth or started in real estate, a lot of them, and through time were able to grow their portfolio. So great way of doing that is through refinances and, ultimately, long-term ownership. So the guys who are really making wealth are long-term owners. The guys who might get a good year, might have some bad years, are the ones shooting for the moon.
So when you’re looking for the stable investment and the stable investors, which family office does, you are looking for that longer-term hold, longer-term investment period. Or even, shops that I was at before, it was a shorter term. It was more five years, but it was done under a umbrella structure, where the investment turns over. So we’re building a fund that will deploy. The property may be owned for five years, but its business plan will be shorter. It gets recapitalized, refunded into the fund and continues. So name of the game on the wealth preservation side really is the longer-term investment period.

Wally Smith:
Mm-hmm. Okay. Would you say that’s the main difference between family office and retail investors? Retail clients?

Jeff Montgomery:
Family office and the retail DST side, I guess it depends on which perspective. From the perspective of the company, acquisitions, family office is a simple LP, limited partnership, GP, general partnership-type structure, where your LP partner will be an outside investor potentially, or even inside investors. And they’ll be 70% of the equity on a certain deal, or more or less. The partnership, the sponsor in this case, GP in that case, operates the company, makes the decisions day-to-day, executes the business plan, and pays a percentage share of the revenue that comes off of that to an LP investor.
On putting in the perspective of DST, the DST acts like that LP investor, where it’s limited partner. It’s a kind of hands-off investment, where they’re not having to deal with the day-to-day, and the day-to-day dramas of leasing, multifamily and turnover and things like that. So us as the sponsor will handle that for them.

Wally Smith:
Okay. So even though they’re a family office, they still enjoy the DST structure.

Jeff Montgomery:
Similar. Yeah.

Wally Smith:
Yeah. Okay. Is CORE involved much with doing custom deals? Would a wealthy family come to CORE and say, “Go find me something?” or, “What have you seen out there?”

Jeff Montgomery:
No, our current focus is 100% on the DST raises right now.

Wally Smith:
Okay. Retail DST side.

Jeff Montgomery:
Retail DST side.

Wally Smith:
Okay.

Jeff Montgomery:
Yeah. We could go that direction in the future, but currently focused DST.