Real Estate Journal — 2016 Forecast — January 15 - 28, 2016 — 21A


M id A tlantic

2016 F orecast

any of New Jersey’s mo s t s u c c e s s f u l multi-family apart- By Allen J. Popowitz, Esq. and Samantha A. Karni, Esq, Brach Eichler L.L.C. Succession planning: How to keep the family-ownedmulti- family housing business together without really trying M the portfolio or if there is even one obstructionist in the group, an otherwise healthy business may be forced to liquidate.

sion planning for the family- owned multi-family housing businesses, however, the more removed the second and third generation of passive owners get from the business, the more challenging it becomes to identify the key players who will play an active role in the management of the business and the ones whose involve- ment in the active manage- ment of the business should be limited. Whether management is controlled by one or more individual managers or another family-run holding company formed solely for the purpose

of serving as manager of each of the property-owning entities, at some point these real estate families need to make some tough decisions as to who will be the designated individuals to take the helm of the family business, who their successors will be and what mechanism will be set up to select these successor individuals. Once succession planning is established, the family owners must also decide whether the designated manager(s) should have unlimited power for all decisions, whereby rendering continued on page 22A

include (1) a written succession plan incorporated into the gov- erning legal documents of the holding companies and their subsidiaries, identifying those representatives of the assorted branches of the descendants who will be the managers of the companies and their succes- sors, (2) the scope of authority of such representatives, and (3) the list of “major actions” (try- ing hard to limit the final list of such actions) for which consent of a majority of the beneficial owners is required. There are a number of ways to provide for adequate succes-

ment holding c omp a n i e s are family- owned with humble be- g i n n i n g s . Yo un g im- m i g r a n t s ventured to supplement their blue col- lar incomes by investing in the own- er sh i p and management or develop- ment of an a p a r tme n t

The solution to such dilemma is succession planning, which is the process of identifying and developing internal people with the potential to fill key management positions in a company as they become avail- able. Succession planning is a vital component of optimizing efficiency and streamlining the management of any busi- ness, large or small. In a fam- ily owned real estate business, succession planning should

Allen J. Popowitz

SamanthaA. Karni

house. Eventually their busi- ness acumen resulted in exten- sive real estate holdings and marquee names in the market and their families became part of the fabric of the New Jersey multi-family housing industry. American success story? Yes, but sometimes with logistical nightmares for the generations that followed. The original entrepreneurs may have been siblings or friends, each with equal con- sent rights, ownership, and day-to-day management re- sponsibilities, and the cor- porate governing documents required unanimous consent for all actions relating to the properties which was not an issue when there were only two or three people involved. How- ever, those young entrepre- neurs eventually married, had children, grandchildren, and great-grandchildren. Through inheritance, the simple organi- zational charts for the property owning entities which started with two principals morphed into tangled webs of partner- ships comprised of fifteen or twenty individuals who may or may not even know each other or have a desire to play an ac- tive role in the family business. Failure to update the govern- ing documents of the property owning entities as the families burgeoned has resulted in to- day’s day-to-day managers of these businesses being faced with the daunting task of ob- taining consent from all ben- eficial owners for all decisions, big and small. The challenge is augmented when the original partners become incapacitated or die—if the numerous heirs disagree on how to manage

Brach Eichler: A Leader in Real Estate

Working with the Leaders in Multifamily Real Estate Transactions and Tax Appeals For Over 40 Years Brach Eichler’s Real Estate and Tax Appeals Practice Groups combine a practical, business-like approach with creative solutions to give our clients a competitive edge. We are able to meet the needs of our multifamily clients in matters ranging from the most complex transactions to smaller, routine transactions. In addition, with our extensive experience in real estate tax appeals we offer a full range of sophisticated representations for any size owner of a multifamily property.

CONTACT: Alan R. Hammer ahammer@bracheichler.com 973.403.3113 Allen J. Popowitz apopowitz@bracheichler.com 973.403.3134 Daniel J. Pollak dpollak@bracheichler.com 973.403.3119 M. Sidney Donica sdonica@bracheichler.com 973.403.3125

101 Eisenhower Parkway | Roseland, New Jersey 07068 | t. 973.228.5700 | f. 973.228.7852 | www.bracheichler.com

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