The Vanderbilt Family Shows Why There is a Need for Family Office Real Estate Education

Real estate is the second greatest wealth creation area for a family after the primary area where they created their wealth. The number of millionaires real estate has created over the years is significant. With real estate being a hard and tangible asset, it's no wonder why 22% of the families' wealth is within their real estate portfolio.

For years I've been asking family offices questions on what's important to them when it comes to real estate investing. The answers come back very similar each time. It's widely known that 70% of families lose their wealth by the 2nd generation and 90% lose their wealth by the 3rd generation. There are several reasons for this: family members not understanding or being part of the wealth creation or understanding how to maintain the wealth. More often than not, education is needed for family members to know how to pass the wealth to future generations.

An excellent example of this was with the Vanderbilt family. (www.fore.institute) When Cornelius Vanderbilt (the Commodore) passed away in 1877, he left most of his fortune valued at $95,000,000 to his oldest son. In today's dollars, this fortune would be worth around $2.1 billion. He left smaller amounts to all of his other children. However, one particular son, who received the majority of his fortune, actually doubled it over the next ten years, creating the largest fortune in the world at the time. Within a few short years, his children (the Commodore's grandchildren) had spent almost all of it. This fabled golden era, this extraordinary world of luxury and privilege that the Vanderbilt's created, lasted but a brief moment. Within thirty years after Commodore Vanderbilt died in 1877, no family member was among the United States' wealthiest people. When 120 of the Commodore's descendants gathered at Vanderbilt University in 1973 for the first family reunion ever, there was not a millionaire among them. The Commodore, who created the initial fortune, could have set every future generation of his family up for life, but he completely messed it all up. An example of a plan put correctly in place for future generations was John Jacob Astor. A German- American businessman, merchant, and real estate mogul created massive wealth in real estate a few years before the Commodore. Unlike Commodore, he set up a way for that fortune to continue for future generations in perpetuity. Had the Commodore copied this approach, the family would have maintained their wealth through additional generations in a similar fashion as John Jacob Astor. The main reason? A plan that included a considerable amount of real estate. A key component for families to end up like the Astors rather than the Vanderbilt's is education, specifically real estate education. 

In the Family Office Real Estate Study, 81.3% of families indicated a need for real estate education. In the current 2021 study, 75.86% of family offices feel that having additional education on real estate-related issues would be helpful. When asked who could most benefit from real estate education, the next generation was cited at the top of the list, followed by the current generation and internal CIOs.

To help with this education I have recently endowed the Family Office Real Estate Institute (www.fore.institute) which will provide Family Office Executive Education programs with Nationally recognized faculty from Harvard, Wharton, the University of Denver and Family Office Industry Experts. There are many family office targeted programs in university/executive education from significant universities across the country, including from Harvard, The University of Chicago, Wharton, and Pepperdine, to name a few. There are also real estate programs, but none specifically designed for family offices and their real estate portfolios. Because of that, The Family Office Real Estate Institute was created. The Institutes objective is to provide education, research, and community interaction on issues critical to family offices, and will play a pivotal role in helping families maintain and create generational wealth. To ensure that that their family legacy will continue. Professor Glenn R. Mueller, PhD has been named the Academic Director of FOREI. Mueller, a 45-year real estate veteran has been a developer and builder, holds a PhD in Real Estate and has worked with institutional investors and public REITs for the past 31 years. He is internationally known for his Real Estate Market Cycle and investment strategy research. “Bringing institutional level sophistication to family office investors in real estate should be a great leap forward. Also providing research and an investment index for family office investments can help families’ benchmark their individual performance while maintaining privacy.” said Glenn Mueller in a recent interview. The Institutes education programs will allow Family Office participants to learn how to grow their real estate acumen, with guided discussions from the challenges affecting their real estate portfolios from the interaction with other family offices.

 "It is very exciting to have the Family Office Real Estate Institute available to provide education for family offices and help with the critical challenges facing family offices real estate portfolios and real estate businesses."

Glenn Mueller, PhD. Franklin L. Burns School of Real Estate and Construction Management, University of Denver / Academic Director of the FORE Institute

Faculty from Wharton, Harvard, the University of Denver's Burns School of Real Estate and Construction Management and other industry professionals will teach courses. Here they will provide research-driven practical applications and professionally relevant knowledge, with a distinctly pragmatic focus that enhances student learning. Additional faculty from other major universities will be added for future classes. Different instructors with a depth of experience distinguished in their field will also participate. Programs will consist of traditional lectures, case studies, and interaction with other family offices and family office professionals. Family Office Real Estate Institute was designed for family offices, family members, family office executives, and family office professionals to gain a greater insight into issues that wealthy families deal with regarding their real estate portfolios.