With the new year on the horizon, we look ahead this week to see what investments will curry favor with family offices in 2024. We know that families have what we call in the industry “patient capital,” so they can withstand more liquidity than other investors but may still not have the stomach for volatility. The investment professionals who spoke with Nora Macaluso for our feature see a bright future ahead for private lending and distressed real estate. But what might be more interesting at the end of the day is what investments they might shy away from next year.
We also bring to you a comprehensive guide of Palm Beach and what is affectionately now being called “Wall Street South.” Given the influx of finance professionals moving there in the aftermath of the pandemic, the once-seasonal destination is now a bona fide full-time metropolis. Given the expansion, the region is now home to some of the most high-end restaurants, private clubs, art galleries, events and galas in the country. It even has its own new art fair — the New Wave festival, which took place this weekend — just ahead of the annual Art Basel Miami, kicking off Dec. 8.
As always, we appreciate any comments, ideas and insights that would make this newsletter more useful. I look forward to growing this family office community with your help. Please email me at [email protected].
HANDPICKED: Private lending, real estate among family office priorities for 2024
By NORA MACALUSO
Private lending and distressed real estate are shaping up as popular investment choices for family offices in 2024, advisers say. Many families will also continue to hold funds in fixed income and cash as geopolitical and economic concerns keep weighing on markets, they said.
A Citi Private Bank survey conducted this year found that fixed income has been the most favored asset class for family businesses in 2023, followed by private credit, private equity, then cash. Crypto was last. Those trends are likely to continue into next year, said Hannes Hofmann, global head of Citi’s global family office group.
“If you like fixed income, you like private credit and you like cash, you’re actually in a pretty safe place,” Hofmann said. “I think folks, broadly, in every region have positioned their portfolios in ways that they could deal with higher inflation."
Turmoil in the Mideast “creates an additional layer of complexity and risk,” Hofmann said. But those who are invested in fixed income and private credit are in many ways positioned to weather a turn in events like an oil price shock, he said.
Meanwhile, a pullback in bank lending over the past year has led to higher demand for private lending, particularly real estate and construction loans, advisers and investors said. “We’re seeing a huge number of private lending funds come into the breach,” said Martin Gross, founder and president of Sandalwood Securities, a family office that offers alternative investments to other family offices and financial advisers.
“Yields in the private lending space are upward of 10%,” so it makes sense for investment managers to step in where banks won’t, said Steven Karsh, senior adviser at Ulrich Investment Consultants.
More loans are coming due, and property owners who are unwilling to refinance at current rates are turning their properties over to banks, which don’t want them on their balance sheets, Karsh said. “This creates interesting investment opportunities to buy assets at a large discount,” he said.
“Opportunistic” real estate investments and “high-quality hedge funds” will also be popular alternative investments next year, Gross said.
Family offices can be 'a little more patient
Family offices are uniquely positioned to take advantage, advisers said.
“As long-term investors with perpetual capital, family offices are able to have higher allocation to the illiquid markets,” said Trish Halper, chief investment officer with Northern Trust Corp.’s global family office group.
Because of their longer investment horizon, family offices can be “a little bit more patient” than retail investors and “tend not to overreact” to market moves, said Halper. They also may be able to invest in “more esoteric” opportunities with potentially lucrative results, Karsh said.
That’s true for Josh and Tara Joseph, whose Big Plan Holdings invests in areas including cannabis, entertainment, hospitality and sports. The Josephs parlayed an early cannabis investment into real estate and entertainment after selling their company to Curaleaf Holdings for more than $875 million in 2019, and they’ve been expanding into related areas. They’re in the process of opening two celebrity-endorsed bars in Nashville.
“We’re very fortunate that we can jump on things that are very unique and that we have interest in,” said Tara Joseph.
Big Plan intends to stay the course in 2024, looking at distressed assets in cannabis and entertainment in particular, the Josephs said. “I don’t think we’re going to change up too much of our narrative,” said Josh Joseph. The plan is to continue investing in the cannabis industry, where “there’s a significant amount of distress,” as well as entertainment, he said.
“Wherever there’s distress, there is also opportunity,” Josh Joseph said.
End of Fed’s rate-rise cycle
Investors hope for more clarity on interest rates in the coming year. The Federal Reserve’s indication that its rate-rise cycle is coming to an end will enable investors to make more informed decisions about capital allocation, said Alex Horn, managing partner at BridgeInvest.
“We believe private credit will be the primary focus of family offices heading into 2024,” Horn said, as current high rates “can provide equitylike returns with significantly less risk.”
In recent years, family offices have shifted to alternative assets, particularly private equity, though “largely as remote participants” in limited partnerships, said Ashley Whittaker, president of global sales for the software analysis firm FundCount. “There is now an increasing trend to find, invest and manage investments directly, cutting out the expensive general partner,” Whittaker said.
Family offices have unique advantages but also unique concerns. They need to consider the family’s cash needs, and that can complicate investment plans, Citi’s Hofmann said. Only half of family offices surveyed for the firm’s report had an investment policy statement, he said.
“There is room for more governance and professionalization of family offices,” Hofmann said. “Some families are very clear about what they’re focused on, but some families need more clarity.” Families increasingly recognize this and are working on it, he said.
“This is the right time to do these kinds of things,” Hofmann said. “In times of uncertainty, you need a cool and clear head."
“Often a family has different interests,” and members “might react emotionally” to market moves, Hofmann said. “In the next year, the ability of the family office to follow a clear and logical path for the benefit of the family will be really important."
Now an all-seasons playground, Palm Beach emerges as ‘Wall Street South’
By KRISTEN OLIVERI
Palm Beach, Florida — the newly minted “Wall Street South” — now enjoys year-round popularity. What was once a seasonal playground for the ultrawealthy has now become the place to live, work and play following the migration in recent years of key financial players such as Black Rock, Goldman and Citadel.
“An entirely new economy, society and culture is being born right now,” said Camilla Webster, CEO of Camilla Webster Inc., a South Florida artist and designer. The region, which was once a hot spot for retirees, now has younger professionals in their 20s and 30s calling Palm Beach home.
Because of the migration of high-net-worth individuals, Palm Beach is exploding with new luxury hotels, private clubs, restaurants, high-profiled events and charity galas like the famed American Heart Association’s Palm Beach Heart Ball and the newly launched art festival called New Wave, rivaling the likes of Art Basel.
Ronald Kessler, the man who literally wrote the book about Palm Beach — titled The Season: The Secret Life of Palm Beach and America’s Richest Society — has been tracking the region and its transformation since the early 1990s. “It’s the who’s who of American success stories,” Kessler said. “You go to a bar, and it’s an heiress to the Campbell soup fortune or a Rockefeller. It’s a fascinating place.”
In addition to Palm Beach proper, a noticeable expansion into West Palm has occurred. “While Palm Beach Island was the center of life and society,” Webster said, “I am observing a dramatic expansion to West Palm Beach, particularly as out-of-towners snap up multimillion-dollar apartments at The Bristol and the Olara and are investing in an explosion of superluxury apartments in new building developments like the Forté on Flagler, South Flagler House and The Cove.”
Here is a curated list of openings and events to have on your radar.
DYNAMIC ART SCENE
Palm Beach has long been home to emerging and established artists. The Norton Museum of Art, which has been renovated, is becoming a driving force for arts and culture, with programs including its “Arts after Dark” event. The Bunker, Beth DeWoody’s private art collection, has become a huge draw for collectors.
The new kid on the block is the New Wave festival Dec. 1-3. This year’s event, with the theme freedom of expression, includes a host of public programming as well as private collection tours, lunches and dinners.
Webster has also set up her own art studio and gallery in the heart of the art and design district on South Dixie Highway. “I have found myself extremely busy not just creating paintings and designing art-inspired pieces but creating art experiences for charity galas and private clients at the Norton [Museum of Art] and The Breakers,” she said. “Mega-collectors and art enthusiasts want to feel a fresh wow factor. These aren’t just your grandmother’s charity balls any longer.”
GALAS AND EVENTS
The Palm Beach Food & Wine Festival will take place Dec. 7-10 in partnership with Wine Spectator magazine, featuring culinary talent including Daniel Boulud, Robert Irvine, Antonia Lofaso, Stephanie Izard, Michelle Bernstein and Maneet Chauhan. The event will showcase 26 food and beverage events, including one coined Rosé Parté at Palm Beach’s Almond.
Adopt-A-Family of the Palm Beaches’ Tree Lighting Celebration will take place Dec. 5 to support those facing homelessness in the community. The event will welcome guests with a serenade by the voices of The Kings Academy Choir. Tickets start at $400.
The Palm Beach Symphony, celebrating its 50th anniversary season, will host four world premieres it commissioned for the occasion. This season the symphony is tapping into a Wall Street South offering — “Meet me in the Mezzanine,” featuring networking opportunities for all the tech and finance firms that have opened in or moved offices to Palm Beach.
RESTAURANTS
The Mainstay Restaurant inside the Norton Museum of Art and offers light, modern American fare with nods to coastal influence. Complemented by beautiful garden views and a casual setting, the menu consists of flavorful entrées, light bites, creative cocktails, wine and Champagne.
Pink Slate, Palm Beach County’s newest steakhouse, is expected to open in December. The brainchild of chef and restaurateur Julien Gremaud, the restaurant will present fresh Florida ingredients in innovative dishes to modernize the steakhouse experience. The lightened menu will include dishes such as sauteed broccoli rabe instead of creamed spinach or grilled artichoke rather than mashed potatoes.
Two other popular places are the Tropical Smokehouse, a West Palm Beach restaurant that combines indigenous and local ingredients with the kind of barbecue traditions found across the South, and the Caribbean and Bodega Taqueria y Tequila, a Mexican-inspired concept that features a menu showcasing authentic Mexican favorites along with unconventional and innovative interpretations.
PRIVATE CLUBS AND HOTELS
Last year, Palm Beach welcomed the Carriage House, an invitation-only private club — with a waitlist — that boasts Mediterranean and Japanese fine dining as well as a spa and a strict no-photo privacy policy. The property was created by architects Addison Mizner and Maurice Fatio, who sought a new place for those in the elite community to gather.
Coming in 2024 will be the luxury hotel Amrit Ocean Resort & Residences, a wellness resort on Palm Beach County’s Singer Island. The property will feature 100,000 square feet of spa and wellness facilities spanning four floors, plus beachfront watersports, extensive indoor-outdoor fitness and mind-body offerings, a landscaped third-level pool with cabanas and daybeds offering views of the Atlantic, and extensive meeting facilities and conference capabilities.
LOOSE CHANGE
Luxury hotel in Maine unveils holiday events: The Inn by the Sea in Cape Elizabeth will offer a variety of crafts and wellness activities — including wreath making, holiday cookie decorating, s’mores by the fire, yoga classes, nature walks and family movie nights.
Hong Kong billionaire's family succession under spotlight: This month, the status of heir apparent Adrian Cheng at the $26 billion family empire was thrown into doubt after his father, Henry, said the conglomerate is still looking for a successor.
Atlantis celebrates 25th anniversary and celebrity-chef restaurant openings: The famed resort on Paradise Island in the Bahamas is going all-out for the occasion, offering a luxe travel package.
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