Business

Is there any truth family offices are moving to Florida and Texas?

People are moving to Florida and Texas, many of them rich. That’s happened for many years. But are the very rich more than just buying vacation homes in Florida? Are they moving their business interests to these two states as well and are they taking their family offices with them? 

Florida and Texas have always been popular states for the very rich. Not only have the two states attracted the rich, especially Florida, they have also given rise to the very rich, especially Texas. 

South Florida is fast becoming the centre of excellence for family offices

Now there’s some real and anecdotal evidence this is happening at an accelerated rate since the onset of the Covid-19 pandemic. 

Here’s the real evidence. Venture titan Jim Breyer opened a branch of his personal investment vehicle Breyer Capital in Austin, Texas last year. Another venture titan Peter Thiel bought two properties in Miami and opened a branch of his venture group Founders Fund in the city at the end of last year. In a highly publicized move, tech innovator Elon Musk moved to Texas last year; he also took his private foundation with him to the Lone Star state. 

Tech corporate giant Oracle said it was shifting its headquarters to Austin from Silicon Valley late last year. Its founder Larry Ellison has moved to Hawaii, although he’s also just bought a big mansion in Palm Beach, Florida. Billionaire Carl Icahn moved to the Sunshine state from New York City in 2019. Paul Singer’s high profile hedge fund Elliott Management moved its headquarters from Midtown Manhattan to West Palm Beach, Florida last year.

Where the big named business tycoons move the lesser well known, but also very rich, follow. And there’s anecdotal evidence to suggest the migration of business elites is happen more than just at the margin. 

Angelo Robles, whose group the Greenwich, Connecticut-based Family Office Association hosted four select family office events in Miami in the last year and is returning there next week to host another, reckons the migration is for real – at least for Florida.

He says Miami’s finance district Brickell, nicknamed “Wall Street South”, is attracting family offices. “Those in the know tell me enquiries from family offices wanting to open offices in Brickell has risen substantially in the last year,” says Robles. “Right now the smart money is moving to Florida.” 

Samy Dwek, who runs consulting firm The Family Office Doctor from his base in Delray Beach in the sunshine state, says Florida is witnessing a renaissance and this is attracting the super-rich. “South Florida is fast becoming the centre of excellence for family offices,” he says. 

“There is quality of life, good weather, taxes are lower, plenty of office space at more affordable rates, local government is giving business incentives, more start-ups are setting up in the area, and local government is business-friendly. As remote working has become part of the norm, the need to be in a metropolitan city is less of a necessity.”

Florida and Texas have their appeal like warm weather, pro-business culture, and fewer state taxes than either New York or California. Also, Florida and Texas, both with Republican governors, tended to follow a more open policy towards the Covid-19 pandemic than their Democratic counterparts in California and New York. That’s had its appeal to both the rich in California and New York and the less rich. “New York City right now feels like it’s only operating at about 5% of its capacity, pre-Covid,” says Robles. “Most of the city still feels closed down.” 

But what do the numbers say? How many family offices are there in Florida and Texas, and how does it compare with the northeast of the US and California? Most family offices are, according to the Family Capital 500 list of the top US family offices, still based in New York, with 123 headquartered in the state, 108 in New York City. California has 87. Florida and Texas are somewhat behind, 19 and 51 respectively. Connecticut, with 18 family offices, has about as much activity as Florida. 

So the numbers suggest Texas and certainty Florida have a long way to catch up with the supremacy of New York as the most popular state in the US for family office headquarters. But these are static numbers. The more important trend is the rate of growth and decline in the absolute numbers for each state. And those numbers are difficult to ascertain. 

But a good example of a New York billionaire setting up his family office operations in Florida in recent years is Leslie Alexander. His Delray Beach-based CEAS Investments has been an active investor as portrayed by Family Capital last year.  Clearly, Alexander likes Florida, and not because it has a Republican governor. Alexander is an ardent supporter and funder of the Democratic Party

That said, it clear the US northeast states, and especially New York, and California still have big appeal. As Robles says, much of the centre of intellectual life in terms of good high schools and universities are still dominated by the northeast and California. “Flordia can’t compete in that respect,” he says. 

That helps with supplying these states with a huge depth of talent for groups like family offices. Some of that talent will also be one day become the owners of family offices themselves. And right now they’re more likely to set up family offices in places like New York and California. 

And the long-term prospects for coastal cities like Miami and its surrounding beach districts might not seem too great given what climate change could do to seaborne populated areas in the future. Of course, New York City has that problem as well. 

Perhaps Wyoming, another state that is booming, would be the best state to locate a future-proof family office…

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