n REAL ESTATE
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efore big-time Sacramento developer Mort Friedman strategies might make sense when transitioning leadership
passed away in 2012, he handed the keys of the family from the first generation to the second. But as time passes
business to his son, Mark Friedman. The transition and more relatives join the mix, that roof can start to show
was relatively seamless. Mort’s other sons pursued cracks. Then, the best bet may be to break up — even if it’s
careers outside the industry and in different cities. hard to do.
Mark had been helping his father grow their commercial
“These are classic family issues,” Friedman says. “The
real estate business since 1991, developing and renovating farther you get away from the founder, the more voices there
shopping centers, office buildings and mixed-use projects.
are at the table, the less likely they agree. Then people go
Now that Mark Friedman, president of Fulcrum Property their separate ways because they don’t want to see their as-
Group, is getting older, he has to think about the next gener- sets controlled by someone else — even if it is a cousin.”
ation. None of his sons has expressed interest in real estate,
he says, but he would never select a family member to run FAMILY MATTERS
the business unless they were fully qualified. Mort didn’t As a specialist in real estate, tax planning and tax controver-
have this issue.
sy resolution, Belan Wagner sees family-owned real estate
“There wasn’t any question about how it was going to con- businesses split up all the time. In fact, he says, he often rec-
tinue, because we were thinking about what the end game ommends it in situations where it looks like family drama
would look like at the
could foster instability
very beginning,” Fried-
down the line.
man says. “Now, it’s not
“There are a lot of
clear what will happen.
problems to address, but
It’s hard because it really
dividing the business
requires contemplating
can make the family
your own death, being
happier after the death
realistic about the future.
of the parents,” says
How do you set it up so
Wagner, the managing
other people aren’t left
partner of Wagner Kirk-
holding the bag if I’m not
man Blaine Klomparens
around to run it?”
& Youmans in Mather.
Succession plans can
“That’s an option people
be a nightmare for any
need to consider when
family business because
moving forward with
there are so many factors
their estate planning, so
to consider: Some family
each child has control of
— Mark Friedman, president,
members may have out-
their own destiny.”
Fulcrum Property Group
side interests, children
Different
perspec-
move away, economies
tives can lead to dispa-
shift, industries evolve.
rate opinions on wheth-
But compared to other
er a property should be
types of businesses, commercial real estate — which can sold, retained, financed or how it should be financed. This is
include construction, development and management — is why understanding family dynamics is critical for success,
unique because family-owned businesses can choose to he says. Parents usually want to keep the business together
divide multiple properties among children. Carving up the and treat their children equally. But what if a child has sub-
business to create separate entities may help families avoid stance-abuse problems or carries a grudge from childhood?
conflict. On the other hand, it could cause more friction with What if there is economic disparity among siblings? These
issues such as outstanding debt, estate taxes and tough deci- issues, Wagner says, rarely work in the context of shared
sions about who gets the highest value assets.
ownership.
Some families decide branching out, diversifying and
“If there’s some kind of problem that is known — marital,
expanding into new markets is the only way to keep the busi- drug dependency, acrimony between children — you’ve got
ness alive. Others set up a holding company to keep the busi- to be very careful about putting them all into a family busi-
ness intact, with all the entities under one legal roof. These ness together,” he says. “It’s rarely a good formula.”
“The farther you get away from the
founder, the more voices there are at the
table, the less likely they agree. Then
people go their separate ways because
they don’t want to see their assets
controlled by someone else.”
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comstocksmag.com | October 2018