What leverage level do family office advisors recommend for real estate funds right now?

Joel Houck, CIO of HB Wealth Management, LLC, advises clients to avoid real estate funds with a leverage ratio exceeding 65%.

Investment Strategies

Family Offices Pull Back From Real Estate as High Rates Curb Dealmaking

Milwaukee-based Michels Family Financial now invests only in "truly exceptional" projects, focusing on deeply discounted buildings with tenants in place.

By the Family Office Real Estate Daily Desk·Thursday, October 29, 2026·1 min read

Editorial summary of reporting bymoneyweekly.com.tw Our editorial standards →

The answer · checked against moneyweekly.com.tw

How are family offices adjusting their real estate investment strategies in response to high interest rates?

Family offices are adopting a more selective approach to real estate as persistently high interest rates weigh on dealmaking. Michels Family Financial, LLC and River1 Asset Management's CIO Rob Haugen said the firm will only invest heavily in 'truly exceptional' projects unless confident rates will fall. HB Wealth Management CIO Joel Houck advises clients to avoid real estate funds with leverage exceeding 65%.

Key facts

Rob Haugen, CIO of Michels Family Financial, LLC and River1 Asset Management LLC, said the firm will only invest heavily in 'truly exceptional' projects unless it is confident interest rates will fall.
Michels Family Financial, LLC, based in Milwaukee, seeks opportunities such as office buildings acquired at a discount with tenants already in place, or large retail properties, according to Rob Haugen.
Joel Houck, CIO of HB Wealth Management, LLC, said an increasing number of wealthy clients are interested in real estate and other physical assets due to inflation concerns.
Joel Houck of HB Wealth Management, LLC advises clients to avoid real estate funds with a leverage ratio exceeding 65%.
Rob Haugen said data center projects typically involve a 10-to-15-year lock-up period, making investment too risky in a high-interest-rate environment.
Mike Silverman, CIO of Cresset, said Cresset avoids data centers because it views them as a 'technology bet' rather than a traditional 'real estate bet,' with long-term lease safety potentially threatened by technological obsolescence.

Family Offices Pull Back From Real Estate as High Rates Curb Dealmaking — Image: editorial illustration · Story sourced from moneyweekly.com.tw

Family offices managing private wealth are adopting stricter investment criteria for real estate as global interest rates remain elevated. The institutions, which handle assets, investments and personal affairs for wealthy families, are now concentrating on properties available at significant discounts or those with leases that can be repriced quickly.

Rob Haugen, chief investment officer at Michels Family Financial and River1 Asset Management, said his firm will commit substantial capital only to "truly exceptional" projects unless it gains confidence that rates will decline. Michels Family Financial, based in Milwaukee, is targeting office buildings acquired at low prices with tenants already in place, as well as large retail properties.

Despite the challenging rate environment, large family offices continue to view real estate as an inflation hedge and are monitoring industrial property, farmland and timberland. Joel Houck, chief investment officer at HB Wealth Management, said more wealthy clients are showing interest in real estate and other tangible assets due to inflation concerns.

Houck said the inflation-hedging benefit of real estate works only when property managers can reprice leases quickly. Industrial and residential properties typically have regular rent adjustment mechanisms and limited supply, which supports rental growth, he said. Houck also advises clients to avoid real estate funds with leverage exceeding 65%.

The depreciation tax shield that real estate provides allows family offices to defer taxes on distributed income until the asset is sold, adding to the asset class's appeal.

Family investors are taking a cautious stance toward technology infrastructure such as data centers. Haugen said data center projects typically come with lockup periods of 10 to 15 years, making commitments in a high-rate environment too risky.

Mike Silverman, chief investment officer at Cresset, said his firm avoids data centers despite frequent client inquiries. Cresset views data centers as a "technology bet" rather than a "real estate bet," he said, because long-term lease security may be threatened by rapid technological change that diminishes building value.

The Deployment Angle

Family Office Real Estate Daily Desk · our analysis, not the source's

The pullback described here argues for co-GP structures over blind-pool commitments. When a family office says it will invest only in "truly exceptional" deals, it is signaling that capital will flow deal-by-deal rather than through programmatic vehicles. A separate account alongside a sponsor with asset-level veto rights preserves optionality that a closed-end fund does not.

The 65% leverage threshold cited by HB Wealth Management is a concrete screen. If a sponsor is marketing a fund with targeted leverage above that line, price in either a smaller allocation or a negotiated cap. The arithmetic matters: a property bought at a 6% cap rate with 70% leverage at 6.5% cost of debt produces negative cash-on-cash return before any principal amortization. A family office writing an eight-figure check can demand structural protections that a smaller LP cannot.

The industrial and farmland tilt reflects a preference for inflation protection through rent escalators and supply constraints. Underwrite the lease structure directly. If industrial NOI is growing at 4% annually through contractual bumps and the portfolio has 80% occupancy with staggered rollovers, that is a different risk than a triple-net lease to a single tenant with no adjustment clause. The former justifies paying a premium to replacement cost; the latter does not.

The data center caution is about duration mismatch, not sector aversion. A 12-year lockup at today's rates locks in a forward return that assumes no technological obsolescence and no shift in hyperscaler demand. The alternative is a shorter-duration industrial portfolio where leases roll every three years and the principal can exit in five. The shorter lockup is worth a lower headline IRR because it preserves the ability to redeploy if the rate environment changes or if better opportunities emerge.

Questions this story answers

01How are family offices changing their real estate investment strategy because of high interest rates?

According to Rob Haugen, CIO of Michels Family Financial, LLC and River1 Asset Management LLC, family offices are becoming more selective, only making large investments in 'truly exceptional' projects unless confident that interest rates will decline. The focus has shifted to deeply discounted assets or properties where rents can be quickly reset.

02What types of real estate are family offices still buying in a high-rate environment?

Michels Family Financial, LLC targets office buildings acquired at a discount with tenants already in place and large retail properties, according to Rob Haugen. Joel Houck of HB Wealth Management, LLC noted that many large family offices continue to focus on industrial, farmland, and timberland for inflation protection.

03Are family offices investing in data centers?

Family office investors are cautious about data centers. Rob Haugen said data center projects typically carry a 10-to-15-year lock-up period, making them too risky in a high-rate environment. Cresset CIO Mike Silverman said Cresset avoids data centers, viewing them as a 'technology bet' rather than a 'real estate bet,' with building values potentially threatened by rapid technological change.

05Does real estate still provide an inflation hedge for family offices?

Joel Houck of HB Wealth Management, LLC said real estate's inflation-hedging effectiveness only holds when property managers can quickly reset lease prices. Houck noted that industrial and residential properties typically have regular rent adjustment mechanisms and limited supply, which supports rent increases. He also noted that real estate's depreciation tax shield allows family offices to defer taxes on distributed income until asset sale.

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Original reporting

moneyweekly.com.tw

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