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San Francisco’s office real estate has been struggling in recent months, leading the nation with a vacancy rate of 37% in the second quarter of 2024, but one prominent investor thinks now is the time to act.
Financial disclosures from the portfolios of politician Nancy Pelosi and her husband Paul revealed that Paul Pelosi invested between $250,000 and $500,000 in REOF XXVI, LLC, an entity responsible for acquiring and managing a commercial office building at 631 Howard St. in the South of Market or SoMa area of San Francisco. The investment occurred on August 13 and was reported on September 11.
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The five-story Class B office building was purchased for $36.4 million by a partnership between business owner Greg Flynn and real estate firm Ellis Partners. That was about 42% less than what Invesco paid for the property in 2014. The five-story building was built in 1929. “Our baseline bet is that the market is going to improve significantly over the next five to 10 years,” Flynn said at the time of the purchase.
The San Francisco Standard also reported in earlier disclosures that Pelosis invested in several other Flynn entities, including REOF XX LLC, which has invested in hotels across the United States, and REOF XXV, which is modernizing and restoring a luxury hotel in San Francisco. Flynn and a group of investors bought the Huntington Hotel on Nob Hill out of foreclosure in March 2023. The hotel had been closed during the pandemic and was collateralized by a $56.2 million loan.
The Pelosis own multiple homes in the San Francisco area. This can be seen as a wealthy local investing in the city where she lives and represents, but it also shows the power of real estate to expand and grow net worth. Pelosi’s stock market moves have been well-watched. She has invested in Nvidia, Broadcom, and other leading technology stocks. Several ETFs are dedicated to tracking her moves and following her investment style. Paul Pelosi is a venture capitalist who understands the risks and rewards of investing in different types of assets.
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Many family offices and ultra-high-net-worth individuals have these investments in their portfolios for a variety of reasons. Investing in commercial real estate assets not only provides diversification from stocks and bonds, it can also provide tax benefits. For projects like the Huntington Hotel, which is being redeveloped and is not generating cash flow, Pelosis can use any temporary losses to offset capital gains taxes in other parts of their portfolio.
You don’t have to have Pelosi’s wealth to invest in these types of opportunities. One company that is leading the way in the real estate investment space is EquityMultiple. EquityMultiple offers individual real estate investments, such as an industrial facility near Orlando, FL, and funds backed by commercial real estate assets. EquityMultiple’s Ascent Income Fund targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-oriented investors. Beginner investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000.
The fact that the Pelosis are making these kinds of investments in the San Francisco market indicates several things. First, there is a significant opportunity for investors with cash in the market right now. Second, patience pays off. As long-term investors, even in their 80s, the Pelosis see real estate values as a way to potentially make significant returns by investing in the potential for San Francisco’s recovery.
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This article Nancy Pelosi’s Husband Bets Big on San Francisco Office Real Estate, Is a Turnaround Coming? originally appeared on Benzinga.com
