Case study · from Think Like a Family Office · $85 million financial + $40 million legacy real estate · third generation · nine beneficiaries
The Reyes Family Trust: restraint as a skill and governance bought in advance
A modest trust that knows its edge (buildings) and its humility (everything else), and wrote its buy-sell and capacity protocols while nobody was angry.
What this case teaches
- Distribution policy against real-estate cash flow
- Property-level, never cross-collateralized debt
- Swap-till-you-drop and the 1031 discipline
- The branch dispute and the buy-sell protocol
- The patriarch’s capacity protocol
Chapters 1–5, 7–11, 14–16, 18–19, 21–26
The balance sheet
Who they are
Illustrative composite. Not a client; figures are teaching constructs.
- Size
- Approximately $85 million in financial assets plus an additional $40 million in a legacy commercial real estate portfolio.
- Source of wealth
- Legacy commercial real estate built by the grandfather (first generation) and organized by the second-generation patriarch, who established the trust in the 1980s; the buildings are concentrated in a single market and single property type.
- Generation and structure
- Third-generation family office transitioning from informal management by the second-generation patriarch to professional management on behalf of nine third-generation beneficiaries (in three branches) and their children. A granddaughter now chairs the investment committee.
- Governance
- Board of four trustees (one family member from each of the three third-generation branches plus an independent professional trustee); beneficiaries informed but without direct decision authority; pure OCIO model with no internal investment staff; a long-standing buy-sell protocol giving any branch a formula-priced, five-year-funded exit from any legacy asset.
- Objectives
- Real after-tax return of at least 3.5 percent annually over rolling ten-year periods, supporting a 4.5 percent annual distribution rate (3.5 percent return plus 1.0 percent expected real growth in distributions from the real estate) that funds approximately half of each beneficiary's lifestyle; one-in-ten-year annual loss limited to 12 percent.
Entities and documents
- The original trust (established 1980s; DAF relationship added 1995; situs moved to a more favorable jurisdiction 2008; decanted into modernized terms 2018)
- A separate FLP holding the legacy commercial real estate, with every property in its own LLC under a holding partnership
- Property-level, non-recourse mortgages, deliberately never cross-collateralized
- Trusts holding third-generation interests (tested by two divorces)
- A donor-advised fund at the local community foundation—no private foundation
The decisions
What they did, chapter by chapter
“It is the only exhibit in this book a family ever framed.”
— Think Like a Family Office
- Chapter 1 / 2Introduced at $85 million financial plus $40 million legacy real estate, supporting a 4.5 percent distribution rate for nine beneficiaries; liquidity constraint of at least 50 percent daily liquid and no more than 20 percent below annual liquidity; allocation of 45 percent public equity, 25 percent municipal bonds, 21 percent alternatives, and 9 percent cash to fund quarterly distributions reliably.
- Chapter 3 / 4Distributable cash flow from the buildings covers the family budget in most years, but the family now reserves for capital expenditure before declaring the distribution, having once learned the difference between a building's cash flow and its income; the second generation declined a banker's master facility that would have let one troubled building infect seven healthy ones—'the family's best trade.'
- Chapter 5 / 7 / 8 / 9'Swap till you drop' (1031 exchange plus basis step-up) is the strategy for the commercial portfolio; munis held in a ladder for quarterly distributions, equity in index funds and ETFs; restraint as skill: 5 percent in a single multi-strategy hedge fund and 8 percent private equity in three relationships.
- Chapter 10 / 11Buys only buildings in sub-markets it knows block by block and has declined every operating-company deal ever brought to it; the $40 million real estate is managed as a separate pool while the financial portfolio holds 8 percent in real assets deliberately diversified away from U.S. commercial real estate (3 percent global REIT index, 2 percent timber and farmland, 2 percent infrastructure, 1 percent TIPS).
- Chapter 14 / 16 / 19Reporting costs roughly $40,000 annually; pure OCIO under trustee oversight at $85 million scale; total operating cost roughly 60 basis points.
- Chapter 15Three years earlier the eldest sibling's branch proposed selling the family's largest building (roughly a third of the legacy portfolio); two council meetings failed and the group chat went silent for six months, until the decade-old buy-sell protocol gave that branch a formula-priced exit from its share of the one building, funded over five years, and the family kept the property.
- Chapter 18 / 21Chose no foundation; gives through a DAF at the local community foundation funded with appreciated REIT shares and once a fractional interest in a building; every third-generation member works one summer in property management before any governance role.
- Chapter 22 / 23 / 24Trust restructured in 1995, 2008, and 2018 but showing its age (international moves, divorces, evolving philanthropy), prompting a comprehensive review; a member's Madrid posting crossed residency thresholds, so the inventory now tracks days abroad; every property in its own LLC with insurance audited annually.
- Chapter 25The second-generation patriarch adopted a capacity protocol eight years before he needed it; in his late seventies it ran exactly as drafted—observers raised, his own physician evaluated, co-trusteeship engaged—and he presided, honored and unburdened, for four more years; his granddaughter keeps his copy framed.
- Chapter 26 / Final ThoughtsSold its first building in three generations and ran the proceeds through the ladder, the policy, and the family meeting, in that order.
The lesson
What The Reyeses teach
Restraint is a skill and governance is bought in the years you do not need it: a modest trust that knows its edge (buildings) and its humility (everything else), and that wrote its buy-sell and capacity protocols while nobody was angry, survived both a branch battle and its architect's decline intact.
The same disciplines — the investment policy built from the four flows, the family P&L and spending policy, after-tax allocation, private markets pacing, governance calendar and continuity rehearsal — are the daily work of Vistamark’s Private Wealth & Family Offices. If this balance sheet looks like yours, the chapters listed above are where to start — and a partner will tell you which matter first.
The other families
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The VistaWealth Office™ is the practice the book describes. Two of its contributing authors work with families there.