DYNASTIES
FOR FAMILY DYNASTIES: ADAPT OR DIE
Real estate families are shaking up strategies and battling forces, like REITs and private equity, to stay competitive
From left: Jerry Speyer, Douglas Durst, Bill Rudin and Tony Malkin
BY KONRAD PUTZIER amily real estate dynasties — from the Rockefellers to the Zeckendorfs — have been building up the Manhattan skyline since the days of John Jacob Astor back in 1799. But in the past few decades family firms have lost their dominant stature in the industry. Over the past five years, the biggest commercial investors in New York City real estate have been SL Green Realty and Vornado Realty Trust — both publicly traded real estate investment trusts. And mega private equity firms, like the Blackstone Group, have been aggressively buying up buildings, to boot. Faced with these aggressive rivals, family firms have shed significant market share. “You have to change or adapt, or else you don’t survive,” said Bill Rudin, CEO
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of Rudin Management, a third-generation family company. This month, The Real Deal looked at how four storied New York City family real estate dynasties — the Rudins, Dursts, Speyers and Malkins — are doing just that. The families, which all own major Manhattan real estate portfolios, stand out for one key reason: they have radically changed their strategies to compete.
strategies to stay in the game. Unlike many of their family firm counterparts, they are adapting aggressively to the 21st century, rather than simply sitting on assets amassed years ago.
Are dynasties doomed? In his 1997 book “The Visible Hand,” the leading U.S. business historian Alfred Chandler argued that public companies led by professional managers would drive
How four storied family real estate dynasties have radically changed their strategies in the 21st century. They are venturing into new markets (whether in Queens or China), they are teaming up with tech tenants, going public and coming up with other novel
real estate growth and eventually push owner-operated firms out of the market. While that hasn’t fully happened yet, many still subscribe to his view that it will.
Even Anthony Malkin, head of Empire State Realty Trust and himself the scion of a real estate dynasty, believes that the family business model is doomed. The main problem, he said, is the potential for competing interests and disputes among the heirs, especially at smaller family firms. “The very, very big [family companies] have the balance sheets to continue to be able to support varying family desires for a long time,” he said. “But there are many families which have smaller portfolios, and where the number of offspring to family assets is getting really damn big. That poses real problems for a lot of people.” Malkin went on to say, “these smaller players are challenged to enter the 21st century.” That may be because disputes within family companies are often far more destructive than within public firms. ILLUSTRATION BY NOAH PATRICK PFARR