Ian Jacobs, a former Warren Buffet apprentice whose family made a killing buying distressed properties in New York a half century ago, is making the same play in San Francisco.
The heir to the Toronto-based Reichmann real estate dynasty has lined up $75 million in family and investor funds to snap up nearly empty offices in Downtown, the Wall Street Journal reported, citing unidentified sources. Total purchases could reach $900 million.
The Reichmanns made a fortune in the 1970s buying properties in nearly bankrupt New York City.
Now Jacobs, a bargain-seeking stock investor who until now has mostly avoided the family business, has looked West to make another fortune.
Over the past year, the 47-year-old investor rounded up financial commitments from relatives and other wealthy families to buy up San Francisco office buildings, people familiar with the matter told the WSJ.
He wants to dispel the office naysayers who say its Downtown offices won’t fill up again soon.
“We know the Reichmanns,” the unidentified head of a Latin American family office investing in the venture, told the newspaper. “They are a very trusted partner.”
San Francisco became the epicenter for a commercial real estate collapse after its tech companies launched a shift to remote work. The city’s office vacancy is 35.9 percent — expected to grow worse before it gets better.
The hollowed out offices have pushed down values, with recent sales bottoming between $200 and $300 per square foot.
Jacobs, who has lined up $75 million for his first few deals, wants to buy 3 million square feet of offices — valued between $600 million and $900 million, the unidentified sources told WSJ, with prices at 70 percent below what it would cost to build the buildings.
He has bid on a few properties, but hasn’t completed any deals.
His plan is dubbed “Project Uris,” in honor of the Reichmanns’ 1977 purchase of eight Manhattan buildings from Uris Buildings, including several skyscrapers, through the family’s Olympia & York Developments.
New York, like San Francisco, struggled with crime, corporate flight and political dysfunction, according to the newspaper. Five years later, a Wall Street rebound lifted the local economy — and the buildings were worth 10 times what the Reichmanns had paid.
The Reichmanns, an extended family of Orthodox Jews, developed Canary Wharf in London and the World Financial Center in New York. The empire grew to $10 billion by 1991, collapsed when debts bankrupted Olympia & York, then slowly recovered to at least $880 million by 2005.
Albert Reichmann, the patriarch behind the firm that was once New York City’s largest private commercial landlord, died early last year at 93.
More than two decades ago, Jacobs apprenticed with Buffett, doing financial analysis for his idol.
After the Great Recession in 2009, Jacobs only bought stocks when values were low — a lesson learned from Buffett, who has held back when valuations are high and swooped in during crises. When stocks dipped in 2022 with higher interest rates, Jacobs turned to buying offices on the cheap.
Jacobs has told investors it might take San Francisco 10 years to recover, according to his marketing materials. The key: buying cheap and holding on till tech companies return. The biggest short-term risk: that the window of opportunity slams shut before he can buy.
“His whole professional career has been around value investing in public markets,” Max Raskin, an adviser to Jacobs on the project, told the WSJ. “This is the first time he can do value investing in real estate.”
— Dana Bartholomew