DJ Van Keuren is currently a vice president for the Hayman Family Office, the family who founded Giorgio Perfume. He is responsible for the family office capital and real estate activities which support Hayman Properties. In this interview, he discusses how he fell into the family office space and why he'll never leave it; the potential impact of machine learning and other technology on the real estate industry; and why he founded a platform focused on real estate education for single family offices.
Previously, he worked as the director of family office capital for the Arsenal Family Office (SFO), working on their real estate portfolio and investments. DJ has underwritten and structured over $2 billion in real estate equity and debt. He is the publisher of The Family Office Real Estate Magazine, author of "Real Estate Investing for Family Offices" and is a graduate of Harvard University.
DJ Van Keuren was recently named on Trusted Insight's 2018 Top 30 Real Estate Investors At Family Offices. He graciously spoke with us on Jun 27th, 2018.
Trusted Insight: You have 25 years of real estate experience, and have recently been more involved in family office investing, which tends to have more complexities. What attracted you to investing through/for a family office as opposed to other institution types?
DJ Van Keuren: Back in the 90s, I did a lot of advisory work. Before the family office space, I was working with real estate on the investment banking side with institutional partners, like the Carlyle’s of the world. In the family office space, about 95 percent of the people who enter the space fall into it.
"Today, I probably know about 600 families personally, and understand the intricacies of how families like to invest in real estate, what they understand, what they don't understand and how they go about it."
That's really what happened to me. I moved from New York City out to Denver, and for about a year and a half, I hadn't met anybody locally. I was working with clients throughout the U.S. with their real estate projects. Then, I happened to run across and had a conversation with a group out of Boulder, and it was actually a family office. He had created his wealth through real estate, and they were looking to bring in some outside capital for estate planning purposes.
They asked me, "what would you recommend: institutions or family offices?" All my relationships were in institutions, but because it was a family office, I said we should go to family offices. I knew two family offices in the beginning, and by the end of the year, I knew about 300 families. We ended up getting about 15 families to co-invest due to the fact that real estate was the industry where my patriarch created his wealth and other families wanted to piggyback on his experience. Since I have started working for a single family office, I will never leave the space. I absolutely love it. I’ve been doing it for a little over four years now, and it's really just a great place. Today, I probably know about 600 families personally, and understand the intricacies of how families like to invest in real estate, what they understand, what they don't understand and how they go about it.
Family offices are more like retail investors than they are institutional. Institutional investors have no emotion, and there’s a box that they invest into. In a family office, it's more emotional. They're looking more to preserve their assets and to create wealth for future generations. They're brilliant people and have a thorough understanding of the industry where their wealth was created but they may not necessarily understand the intricacies of real estate, private equity, hedge funds, etc. For me, it's been a combination of using my last 25 years in real estate and finance, and that I love. It's quite fascinating.
Trusted Insight: The Hayman Family Office is an advocate of co-investing strategies, especially with other family offices. Can you shine a light on some of the opportunities and challenges associated with co-investing?
DJ Van Keuren: Our Family Office is on their third area of wealth creation, the initial source of wealth was from the creation and sale of Giorgio Perfume in 1986. Then after the sale happened, and one of the first generation family members realized he was not going to be taking over the family business, he invested $40,000 with two partners in a teeth whitening and dental product and grew the business to over 200 million in yearly revenues in over 100 countries.
"As technology continues to develop, it will level the playing field for a lot of smaller groups. Regardless, local market knowledge is still going to be important and that can’t be replaced regardless of how technology advances in real estate."
In 2011, he sold that business to Phillips and started to invest into real estate. Initially, all of the capital into real estate was from the family, but like many families, you get to a point where you are no longer able to allocate any more capital and that was when we started inviting friends and family to invest. The biggest challenges with family offices are that you may not necessarily have the organizational structure in place that is needed to take on a specific initiative like institutions or large companies would have in place. You also have quite a bit of a learning curve as they're building out their platform.
Trusted Insight: The real estate industry has managed to stay relatively hidden from major tech disruptions as compared to other industries. Do you see this trend persisting or do you see machine learning and AI technology becoming the disruptive wave that transforms the real estate industry?
DJ Van Keuren: The biggest thing about real estate is that it's quite a fragmented industry. That's why people would always say you should invest locally. Before technology came into play, there really wasn’t a way to check what was sold, when it was sold and there was quite a process to obtain titles and information on properties. Now you can access that all online.
It used to be that you had to order titles from the county clerk's office. The progression of Zillow, CoStar and others, started the whole process of moving toward being technology-based. This consolidation of information has continued to create additional technology which has pushed the industry a great deal. One of the things that are happening now is figuring out how /if cryptocurrency is going to make a difference in real estate investing. The other big disrupter is blockchain. Creating a blockchain within the real estate industry is truly going to disrupt the industry while making transactions much more seamless and less expensive to do transactions.
As technology continues to develop, it will level the playing field for a lot of smaller groups. Regardless, local market knowledge is still going to be important and that can’t be replaced regardless of how technology advances in real estate.
Trusted Insight: There have been experiments in the last few years where they compare a broker and a bot, to see who would more accurately predict a buyer’s preferences. Do you foresee real estate marketplaces relying on ML technology to deliver properties to customers in the future?
DJ Van Keuren: You definitely can't rely on a bot, because if you're doing any type of development or buying a building that you can add value to, it will always come down to being able to implement the required strategy. You must have people involved in the construction process and make sure of the quality of construction. That component cannot be replaced.
"I created the institute to be educational for families, and that started with white papers and fact sheets to, recommended articles and videos and then it grew into podcasts where I have interviewed over 20 family office investors and families over the last couple years."
But what you can do is enhance your decision-making through analytics, which is 90 percent of the process. You can make decisions from information such as demographics, construction starts, and prices of buildings, and then build proformas based upon what's happened in the past. The other 10 percent, is like when you clean a house. You can move all the big furniture out first but that last 10 percent takes you three times longer than it did at the beginning. All the little things will never be able to be replaced, and bots will never be able to actually implement the strategy, at least I don’t see that happening.
Trusted Insight: Can you tell us more about the Family Office Real Estate Institute that you founded in 2016?
DJ Van Keuren: The Family Office Real Estate Institute was initially called usfamilyofficerealestate.com. I started that within the first six to seven months after becoming involved in the family office space at my old family office.
How that came about, was from one of the first conversations I had with an industry veteran. I asked her what she has been working on and she said that she just had a seminar with about 60 families in Israel, and I asked, "What did you all talk about? She said, "You know, hedge funds 101." I'm thinking to myself, "Hedge funds 101?" Here are these people who are worth hundreds of millions of dollars, and have built major companies and has created a vast amount of wealth and you're teaching them basics on Hedge Funds?. After speaking with a number of patriarchs I came to the understanding of why Hedge Funds 101 was taught at that seminar. The Patriarch may have created significant wealth from working in a specific industry. If for example, it was the chemical industry, if you were to ask him anything about chemicals he could tell you things you would never imagine but ask them a question about the various investment spaces and asset classes and they wouldn’t have a deep understanding.
I came to realize that that was truly the case in real estate as well. I created the institute to be educational for families, and that started with white papers and fact sheets to, recommended articles and videos and then it grew into podcasts where I have interviewed over 20 family office investors and families over the last couple years. Then, that morphed into a book I wrote for family offices on real estate investing and then the family office real estate magazine, which is purely educational and focused on substance so that families can have a source to learn about different aspects in real estate.
Trusted Insight: The number of sophisticated investment offices is rising, making it difficult for some offices to really stand out. What's unique about the Hayman Family Office that is dissimilar to its industry peers?
DJ Van Keuren: There's a saying that when you've met one family office, you've met one family office.
That's a big saying within the industry, and still is the case. The family office space is continuing to expand. Like many other family offices, we are continually developing internal systems and processes and building the Hayman legacy for future generations. The father passed away just two years ago, and so it's really being overseen by one of the first generation family members.
One of the things that we have going for our office is having the controlling family member being relatively young. There's quite an opportunity for the creation of additional wealth over the next 20 or 30 years for future generations. I think we have the same issues that other families have, which really has to come with just the overall picture, and dealing with the family as a whole. I will say that our principal who is a patriarch in his own right is forward thinking, and still has a zest for creation.
For instance, we're on our third area of wealth creation, and we're in the process of developing what will be the first boutique office brand in the U.S. We've taken our existing portfolio of office properties that we've been acquiring over the last number of years with our own internal capital, and we're really formulating the next steps in the creation of a brand called “Vibe.”
Trusted Insight: What’s your number one lesson learned throughout your investment career? Perhaps something you’d share with an aspiring leader in the family office industry.
DJ Van Keuren: Working with family offices will always have challenges because you're essentially a part of a family.
As more professionals are becoming involved with families, they need to realize they're not alone. Any challenges that they may face or frustrations that they have is being felt by other professionals in their similar position as well. However, the benefits of working within that environment tremendously outweighs the downside, and creates an entrepreneurial environment. That can be really exciting and you get to meet amazing people. I'll never leave the family office space, and I don't think anybody that enters it would either.
Trusted Insight: Would you agree that it’s one of the most coveted jobs in the finance and investment industry?
DJ Van Keuren: It's funny because everybody wants to get into it. I get asked how they can all the time. I've even talked to headhunters before, and they say, "We don't know who the families are." They don't know how to find them. One downside is a lot of families won't necessarily pay what you should make in the industry, some do and are very generous while others are very cost-conscious. I think as the industry becomes more and more developed, some of that will shake out. It's certainly a very highly sought-after role. Now that I'm part of the "club," I'll never leave.
Trusted Insight: Is there anything that I’ve failed to ask that might be worth sharing with our LP community? It can be about yourself, the Hayman Family Office or real estate investing in general?
DJ Van Keuren: I believe that we are bound for a downturn, which I think we're going to see in 2019, 2020. Then, we'll see another uptake again for six to seven years. After that, I believe we'll see a recession coming into the end of 2029, 2030. However, there's still a lot of opportunities out there. You just have to be more cautious and don't let your personal excitement take over. You have to stay the course, within your goals and objectives.
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