Private investment firms associated with the ultra-wealthy are increasingly seizing opportunities in the domestic real estate market, even as overall market recovery shows signs of stagnation. Family offices expressing interest in these investments cite the ability to make long-term bets that are not available to traditional asset managers, particularly in a climate marked by high interest rates and geopolitical tensions.
Travis King, CEO of Realm, a collective of 100 families, revealed that they have invested approximately $100 million in Northern California real estate over the past six months. This group has capitalized on significant market downturns by acquiring properties at deeply reduced prices. For example, Realm purchased an office building in San Francisco for about 21% of its last trading price—essentially a bargain compared to current construction costs. King remains optimistic about the future of San Francisco, especially in relation to the technology sector, which he believes will continue to be a key driver of the U.S. economy.
“San Francisco has been beaten up, but we believe that tech is going to continue to be a very robust environment,” King commented. He noted that while some families are hesitant to deploy funds during uncertain times, many are eager to take advantage of low valuations in the real estate sector.
Matthew Cohen, a partner at Declaration Partners, echoed King’s sentiments by leveraging the firm’s long investment horizon, which allows for patience not typically afforded to institutional funds. Recently, Declaration Partners closed its second real estate fund, raising about $303 million. Among its recent transactions is a $50.1 million master lease for three storefronts in New York City’s SoHo neighborhood, characterized by an extended lease structure spanning 25 years, which included an option to extend until 2091.
According to Cohen, institutional funds often seek quick returns and may overlook such long-term investments. His firm instead focuses on flexibility and patience, enabling them to negotiate beneficial agreements with private property owners.
Despite a general ambivalence toward real estate among family offices, those in the U.S. seem more optimistic than their international counterparts. A recent J.P. Morgan Private Bank survey indicated that 35% of U.S. family offices intend to increase their real estate allocations, compared to only 24% of their international peers. Interestingly, about 40% of all respondents reported having no allocation at all toward real estate.
Investment professionals highlight inflation as a critical concern for portfolios, with family offices that view inflation as a risk maintaining an average 16.3% allocation to real estate—double that of other respondents. Jennifer Nellany, a real estate attorney at Cozen O’Connor, remarked that tangible assets become increasingly attractive in times of inflation.
Furthermore, wealth manager Jason Ozur emphasized that while acquisition prices remain low, factors such as increased leverage and insurance costs must be assessed to achieve superior inflation-adjusted returns. His firm has made investments in multifamily properties at discounts of 20% to 30% compared to replacement costs, primarily targeting major urban areas like Salt Lake City and Denver, where demand remains robust.
Clients also appreciate real estate for its tax efficiency, taking advantage of strategies like depreciation deductions and 1031 exchanges, which enable deferral of capital gains by reinvesting into similar properties.
However, the commercial real estate sector has its challenges. Nellany noted that some family offices are cautious about investing in emerging asset classes like data centers, partly due to concerns over their environmental impacts.
Chaz Lazarian, who leads the Elle Family Office, has taken a more aggressive approach by focusing on distressed office real estate. He recently acquired the former Home Depot headquarters in Atlanta for about $21 million—approximately 18 cents on the dollar of its previous valuation. Unlike many family offices, Lazarian seeks to flip properties within two to three years, aiming to create generational wealth through calculated risks.
“This opportunity didn’t exist in 2007 and 2008, and we just want to rinse and repeat until the market dries up,” Lazarian noted, underlining the volatility and potential profit in a fluctuating market.
