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In recent months, San Francisco’s office real estate has been struggling. It led the country with a 37% vacancy rate in the second quarter of 2024, but one famous investor thinks now is the time to strike.
Financial disclosures of the portfolio 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 property at 631 Howard St. in the South of Market or SoMa area of San Francisco. The investment took place on Aug. 13 and was reported on Sept. 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 around 42% less than what Invesco paid for the property in 2014. The five-story building was built in 1929. "Our basic bet is that the market will greatly improve over the next five to 10 years," said Flynn at the time of the purchase.
The San Francisco Standard also reported in previous disclosures that the Pelosis invested in several other Flynn entities, including REOF XX LLC, which has invested in hotels around the United States and REOF XXV, which is updating 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 closed during the pandemic and had a $56.2 million loan against it.
The Pelosis have multiple homes in the San Francisco area. This could be seen as a wealthy local investing in the town she lives in and represents, but it also hints at the power of real estate to expand and grow net worth. Pelosi’s stock market trades have been well-followed. She has invested in Nvidia, Broadcom and other high-profile technology stocks. Several ETFs are dedicated to tracking her moves and following her investing style. Paul Pelosi is a venture capitalist who understands the risks and rewards of investing in various asset types.
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Many family offices and ultra-high-net-worth individuals have these investments in their portfolios for various reasons. Investing in commercial real estate assets not only provides diversification from stocks and bonds, it can also come with tax breaks. For projects such as the Huntington Hotel, which is being redeveloped and not generating cash flow, the Pelosis may be able to use any potential temporary losses to offset capital gains taxes in other parts of their portfolio.
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The fact that the Pelosis are making this type of investment in the San Francisco market indicates several things. The first is that right now there are substantial opportunities for investors with ready cash in the market. The second is the value of patience. As long-term investors, even though they are in their 80s, the Pelosis see the value of real estate as a way to potentially earn significant returns by investing in the potential for the San Francisco rebound.
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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