The views and opinions expressed in this article are those of the speakers as of the date of the webinar, are subject to change without notice, and are provided for educational and informational purposes only. Nothing in this article constitutes investment, legal, tax, or accounting advice, or an offer or solicitation to buy or sell any security. Investors should consult their own tax, legal, and financial advisors before making any investment decision.

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Many family offices believe a new real estate cycle may be beginning. In Realberry's recent webinar, CFO Derek Evans and VP of Tax and Equity, Stephen Dennis walked through the mechanics family offices can use to evaluate real estate investments before capital moves rather than after. The session moved from what investors can buy, to how they can buy it, to what each route may mean for taxes, risk, and liquidity — and closed on the argument that, for a passive investor, sponsor selection may matter more than any of those choices.

Commercial Real Estate Property Types: Traditional Food Groups and Alternatives

Evans separated the traditional property types from the alternatives and offered his read on each. In his view, office remains out of favor in most markets outside New York, while retail — widely written off during COVID — has regained favor. Industrial and residential development face supply concerns, though multifamily acquisitions remain active and the 55-plus segment is drawing interest. Luxury hospitality, he noted, has benefited from what he called a K-shaped economy and post-COVID wealth creation. Among alternatives, data centers dominate headlines, though Evans cautioned that growing community and political pushback is a factor worth underwriting. Healthcare, in his view, is moving from alternative to mainstream on demographic trends, drawing notable capital inflows.

Access Vehicles: How You Invest May Matter More Than What You Buy

The heart of the session was the access-vehicle discussion, because the vehicle often determines liquidity, tax reporting, and control more than the property type does.

• Public REITs offer daily liquidity and a high degree of transparency.

• Non-traded REITs have expanded accredited-investor access over the past two decades, but Evans cautioned that they are often marketed as liquid when they are subject to redemption queues and do not trade like public companies.

• Private equity and hedge funds are typically closed-end vehicles with roughly 10-year lives, with capital generally returned only at wind-down.

• ODCE core funds have historically been institutional-only, though interval funds now give smaller investors indirect access, often paired with a public REIT sleeve for liquidity.

• Direct investment with a sponsor operates deal by deal, usually as a limited partner.

Each is a materially different product wrapped around similar underlying assets — and matching the vehicle to a family's liquidity needs is, in Evans's framing, a first-order decision.

Two Tax Reporting Worlds: 1099-DIV vs. Schedule K-1

Dennis mapped the tax consequences onto that structure. REIT income arrives on a Form 1099-DIV in three forms: ordinary dividends that may be eligible for the 20% Section 199A deduction, capital gain distributions, and non-taxable return of capital. Limited partnership interests, by contrast, arrive on a Schedule K-1, where items of income and deduction — including depreciation — flow through to the investor and keep their character. His most useful clarification: partnership distributions are generally not taxable to the extent of the investor's basis. It is the reported items of income and deduction, not the cash received, that generally drive the tax.

The Risk-Return Spectrum — and What It Means for Distributions

The strategies ran from core and core-plus to value-add, opportunistic, and distressed, with a practical corollary: core and core-plus strategies generally distribute income from the outset, while value-add, opportunistic, and distressed strategies generally do not distribute until sale. Families that need current income, Evans suggested, should match strategy to income needs before anything else. Asked how to build a portfolio across the full spectrum, Evans reframed the question: few sponsors operate across the whole spectrum, so an investor's risk mix is largely a function of which sponsors they choose. ODCE funds tend to be core; private equity firms and individual sponsors tend toward value-add and opportunistic; hedge funds often skew distressed. Realberry itself focuses on value-add and opportunistic strategies.

Buy, Build, or Lend

Within any strategy, Evans noted, investors can do only three things: buy, build, or lend. Development generally means going direct with a sponsor, since REITs do little development and private equity funds are often capped at 25% to 30% of committed equity for development exposure.

On lending, he offered a cautionary opinion: the number of sponsors in real estate debt has grown from roughly ten names before the Global Financial Crisis to hundreds today, and pressure to deploy capital may be pushing some managers into riskier loans. In his view, visible distress could emerge in real estate debt vehicles over the next 12 to 24 months. This is a forward-looking opinion, and actual outcomes may differ.

Depreciation, Bonus Depreciation, and Cost Segregation

Dennis made the case for depreciation as a central tax feature of direct real estate: a non-cash, straight-line deduction over 39 years for non-residential property and 27.5 years for residential rental property, beginning when the asset is placed in service.

Two accelerators can amplify it. First, 100% bonus depreciation was permanently reinstated by the One Big Beautiful Bill Act in 2025 for most qualified property with a MACRS recovery period of 20 years or less. Second, cost segregation studies — performed by engineering firms — reclassify portions of a building's basis into those shorter recovery periods, and can be performed years after acquisition to recover missed deductions.

The potential benefit is rate arbitrage: deductions taken against ordinary income rates of up to 37%, gain realized at capital gains rates of 20%, with depreciation recaptured at 25%. Individual tax outcomes vary, and investors should consult their own tax advisors.

The Guardrails: Passive Losses, Interest Limits, PTET, and 1031 Exchanges

Dennis was careful to bound the benefits. Real estate is generally passive by default, and passive losses are deductible only against passive income — a K-1 showing losses does not necessarily produce a current-year deduction. The Section 163(j) limitation caps deductible interest, and the election out is irrevocable and forfeits bonus depreciation, making the timing of that election a genuine calculation.

Pass-through entity tax elections, available in most states, remain a workaround to the SALT deduction cap — raised to $40,000 for 2025 under the 2025 legislation — by passing a credit through or using another state-level method to help reduce the state tax burden. And 1031 exchanges can defer both gain and depreciation recapture, subject to strict 45-day identification and 180-day closing clocks, use of a qualified intermediary, and the exclusion of dealer property. As Dennis emphasized, a 1031 defers tax; it does not forgive it.

Return Metrics and the One Decision Passive Investors Control

Evans closed on measurement. In his experience, family offices tend to underwrite on equity multiple and cash-on-cash yield rather than IRR, reflecting longer hold periods and a preference for current income. Cash-on-cash has a practical virtue: it compares directly to a 10-year Treasury yield or a REIT dividend.

His final point tied the session together: as a passive investor, sponsor selection is the one decision you actually control. Property type, strategy, and structure all matter — but the sponsor determines how each is executed.