Are Real Estate Families a Safe Career Haven?
Perhaps more than any other industry, real estate seems to run in the family. Names such as Gural, Ratner, and Tishman reflect multiple generations of family members who have joined the kindred trade in good times and bad. Even for less recognizable names, real estate is an uncannily common career choice for the sons and daughters of real estate professionals.
A study conducted among current first and second year Program in Real Estate (PRE) students at Cornell found 47 percent cite familial influence as a reason they have chosen to pursue a real estate career. For those who have family background in the industry, 40 percent expressed an interest in returning to their family’s company at some point, with that option perhaps even more appealing now. Development, brokerage, and property management are the most common real estate backgrounds for students currently in the Cornell Program in Real Estate.
Theories on why there is such a tight career connection in real estate families abound. For many, management and investment discussions permeate dinner table conversation in the same way other families talk about sports and politics, and industry concepts simply become ingrained. Experience in the business is carved out early and cultivated through progressive responsibilities, leading to real estate businesses becoming family establishments. Younger family members also tend to learn pride in good management of a tangible asset and older family members—consciously or not—groom trustworthy successors to take over.
Jeffrey Gural, Chairman of Newmark Knight Frank, a global real estate service firm located in New York City, is the second generation to control his family’s real estate holdings. He believes keeping real estate within the family is the surest way to know it will be cared for. “I think it’s very hard to own real estate and not have a family member succeed you,” says Gural. “I’ve seen it turned over to banks, REITs, and it’s not the same.”
Today, Newmark stands as one of the largest private real estate service firms in the world, and Gural holds the same position previously held by his father, Aaron, although the company is much larger today than when his father was at the helm. According to Ronald Ratner, CEO of the residential branch of Forest City Enterprises, balancing the family culture with shareholder interests has worked well for his company.
Founded by his father, Max, among others, Forest City began as a lumber company before transitioning into one of the world’s largest publicly traded real estate development companies. “When we operate well, we are the best of both worlds,” he says. “We have the rigor and discipline of a public company, with the entrepreneurial balance of a family business.”
Survey respondents who had chosen a real estate career noted that growing up in a real estate family provided “perspective and exposure,” while another mentioned having observed “the quality of life that a career in real estate can bring.” Ratner considers the multigenerational perspective a key to navigating the current slow market and concedes that Forest City draws inspiration from his family’s navigation of the Great Depression. “I am hesitant to compare historical periods,” says Ratner, “but some things are built into our nature [as a company]—You put a bunch of immigrants into a depression and this is what you’re going to get.”
Gural notes that there is a delicate balance to working within a family and maintaining appropriate power distance but that real estate may provide an inherent advantage. “As you grow older, you grow more conservative,” said Gural, adding, “When I was starting out, my father had become more conservative and I wanted to be aggressive and try to expand.” Now that Gural has welcomed his son, Eric, into the business, that philosophy has come full circle. “Now, I’ve grown more conservative and my son wants to be more aggressive and expand. For me, I want to be able to sleep at night.”
Many family-operated businesses are hesitant to bring new members on board unless they have accumulated some experience or education outside of the family firm. Ratner operates Forest City with a specific rule in mind: “No one from the family is allowed to join the company unless they’ve worked somewhere else.”
Ultimately, the decisions are made on a family-by-family basis. One current PRE student noted, “I [have been] brought up to take over the family real estate business upon graduating from college,” while others expressed no interest in returning to their family’s business.
“It’s always hard to work for your father,” says Gural. “It’s one thing to tell someone [from outside the family] to do something and they don’t do it. It’s another to tell your son to do something and he doesn’t do it.”
Those who choose to pursue a career building a real estate family business are in good company. One of the oldest family businesses in the world operated in the real estate industry. Kongo Gumi, based in Osaka, Japan, was founded in the year 578 and constructed and repaired Buddhist temples over 1428 years and 39 Kongo family generations, weathering numerous market ups and downs. Unfortunately, Kongo Gumi didn’t survive Japan’s recent real estate woes, and finally closed its doors in 2006. U.S. real estate families aren’t asking for another 500 years, but maybe just another few, until 2011?
Author: Paul Koch, Cornell Program in Real Estate Student