A man whose family fortune was built in part on investing in New York real estate during the dark days of the 1970s in the city is reportedly bargain hunting right now in the San Francisco office market.
Ian Jacobs, an heir to the Toronto-based Reichmann real-estate dynasty, is looking to make some deals in the near term in downtown San Francisco, lining up office properties that are currently being sold for far less than they worth five and ten years ago. And the Wall Street Journal points to this as a sign of an eventual reversal of fortunes for the city's office market — at least as far as big real estate mogul prognosticators are concerned.
Jacobs joins local investors like Presidio Bay Ventures, SKS Partners and San Mateo-based Roger Fields in trying to swoop in on a down market and score deals on downtown buildings. And as the Journal notes, the effort is being internally referred to in Jacobs's office as Project Uris — which is a direct reference to what his uncles did in the 1970s, buying eight Manhattan buildings from Uris Buildings Corp., buildings that went on to be worth ten times what the Reichmanns paid for them by the booming 1980s.
(Jacobs's uncles, Paul and Albert Reichmann, developed New York's World Financial Center — next to the World Trade Center — and Canary Wharf in London.)
Per the Journal, Jacobs has noted to co-investors that the biggest short-term risk they face in San Francisco is not acting quickly enough — with the best deals likely to disappear in a short window. Long-term, Jacobs expects San Francisco's recovery to possibly take ten years.
Other investors are eying SF's office market now, knowing that prices are not likely to go much lower — and that a recovery should be due in the city's famed boom-and-bust cycles.
"There are a lot of people now who think that San Francisco has hit its bottom in terms of valuations,” says Scott Harper of Colliers, speaking to the Chronicle. “Office buildings are discounted significantly compared to pre-COVID and compared to replacement costs. Most investors are saying that now is a good time to buy in San Francisco.”
Jacobs is reportedly looking for up to 3 million square feet to buy up in SF — which at current rates could cost as much as $900 million. And this apparently falls in line with a key lesson Jacobs learned while working in the 2000s at Warren Buffett's Berkshire Hathaway — do nothing when prices are going crazy, and jump in whenever there's a crisis, and take advantage of a bargain.
Reportedly, Jacobs has "lined up" $75 million in deals, but nothing is signed yet. And quickly amassing this large of a portfolio in San Francisco could be tough.
Many investors are looking at construction costs and seeing that replacing buildings like those that are sitting empty in SF would costs many times more than what they're selling for — and they assume it's just a matter of time before companies need offices again.
Photo: Shen Pan
