A Bishop Street lawyer once invited me to present a Broker Opinion of Value to a local Hawaiʻi family at the Pacific Club. I delivered Sales Comparables and Income Approach analyses for a warehouse and a shopping mall.
After my BOV presentation, several siblings asked valuation questions — in plain English: "What are the properties worth?" I gave out some numbers.
Then the patriarch, an elderly Chinese man with a cane, smiled and said: "We don't sell the land."
Under the ornate table, the lawyer kicked me on my shin.
I left frustrated. I had come prepared to talk about value. The patriarch was talking about something else.
It took me years to understand that I had been looking at the problem through the wrong lens.
The issue was not simply what the properties were worth. It was how a family manages wealth when much of that wealth is tied up in real estate — and how that wealth can be managed in a three-generation family.
That is becoming an increasingly important question for Hawaiʻi.
For generations, local families accumulated wealth differently from many families on the Mainland. Their balance sheets often contain land, apartment buildings, commercial properties, hotels, agricultural property, long-term leases, and family businesses rather than primarily stocks and bonds.
Many of those assets have appreciated enormously.
But appreciation creates a new challenge: Wealth becomes more valuable, more complicated, and harder for one person to manage.
The question is no longer simply, "What do we own?"
It becomes: Who is making the decisions about what we own?
This is where the family office concept becomes relevant.
The idea is not new. Wealthy families in Europe, Asia, and the Middle East have used various forms of family offices for generations. What is new in Hawaiʻi is the recognition that some local families are already performing family-office functions without necessarily calling themselves a family office.
A family may have an attorney, CPA, banker, investment advisor, property manager, and real estate broker. Each may be excellent at what they do.
But who is looking at the entire picture?
Who understands the family's real estate portfolio, liquidity, taxes, insurance, debt, estate structure, investment objectives, and succession plans — and helps the family make decisions that connect all of those pieces?
That is one of the fundamental roles of a “family office.”
I saw this firsthand when I lectured at an Ivy League executive program on family offices. The attendees included representatives of major European, Asian, and Middle Eastern fortunes.
One lesson was striking: Sophisticated family offices are not simply investment offices. They coordinate investments, taxes, legal structures, risk, philanthropy and, most importantly, family decision-making.
One Dubai family, with assets larger than Bank of Hawaiʻi, deliberately brought outsiders into the organization as checks and balances: a British executive as COO, a Lebanese lawyer, and an American banker.
Another family kept investment decisions entirely within the family, with two daughters working alongside the patriarch.
Different structures. Different cultures. Similar questions.
Who decides? Who advises? Who has authority? And who is being prepared to take over?
Those questions can become especially difficult when the wealth consists of real estate.
I once advised a Maui family whose siblings were geographically dispersed. Some believed they did the heavy lifting managing the family's retail properties. A Mainland sibling argued that the family should sell the Hawaiʻi properties, conduct 1031 exchanges, and pursue higher returns elsewhere.
The disagreement was not simply about real estate.
It was about governance.
Who had the authority to propose a new strategy? Who would evaluate the replacement investments? How would the family decide whether maximizing financial return was actually its objective?
These questions rarely appear on a property valuation.
They should.
There is an old saying in family wealth circles: "Shirtsleeves to shirtsleeves in three generations."
The first generation creates the wealth. The second manages it. By the third, the connection between the family and the source of the wealth can weaken.
For Hawaiʻi families, succession can be particularly complicated because the inheritance may consist of real estate that require active management.
A founder, like the patriarch with the cane, may know every tenant, every lease, every parcel, and every banker.
The next generation may know none of them.
That does not mean the next generation is incapable of managing the wealth. It means the family needs a system for transferring knowledge, responsibility, and decision-making authority, not simply assets.
That system does not necessarily require a large staff or a Bishop Street office. A family might establish a single-family office. It might use a multi-family office. Or it might appoint one trusted executive or advisor to coordinate a network of attorneys, CPAs, bankers, investment managers, and real estate professionals.
There is no single formula. What matters is that the family has a structure.
That structure should answer some basic questions:
· What do we own?
· What do we owe, and what risks do we face?
· What is the family's investment strategy?
· Who makes important decisions?
· How are disagreements resolved?
· Who is being prepared to take over?
For Hawaiʻi, this may represent a new stage in the evolution of family wealth.
The traditional model was simple and effective: acquire property, maintain it, generate income, and pass it to the next generation.
But the environment has changed. Property values are higher. Ownership structures are more complicated. Insurance, operating, and construction costs have risen. Family members increasingly live thousands of miles apart. And younger generations may have vastly different ideas about risk, liquidity, and investment.
The challenge is no longer simply preserving the family's assets.
It is preserving the family's capacity to manage those assets.
That is the real meaning of family wealth stewardship.
A family needs to become intentional about how decisions are made, how knowledge is transferred and how the next generation is prepared – it is beyond holding the land, it is about building the institution around it.
Ray Tsuchiyama’s series explores one central question: How does Hawai‘i use the wealth and land it already has to create its next economic future? He can be reached at ray@guild.im
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