By Biz Carson | Bloomberg Markets

In San Francisco’s financial district, the One Montgomery building evokes the opulence of America’s turn of the 20th century gilded age. With its Tuscan columns, marble staircases and bronze doors, the Renaissance Revival landmark once housed Crocker Bank, named after one of the tycoons who built the western portion of America’s first transcontinental railroad.

These days, the property exemplifies the city’s shifting fortunes: Ghazi Shami, chief executive officer of the record label Empire, bought it in January for $22.5 million, more than 70% below its selling price only six years before.

Ghazi grew up in San Francisco, depositing coins from his family’s laundromat at a Crocker Bank branch and then founding Empire in his hometown. In buying One Montgomery, he seized on what he calls a generational market opportunity. “I could have easily picked up, planted the flag in LA or New York, where there’s a fervent music scene,” says Ghazi, 48, who’s worked with artists Kendrick Lamar, Snoop Dogg and Shaboozey and goes by his first name professionally. “I was interested in being an entrepreneur that invested in my city.”

Ghazi is part of a vanguard of ultrarich investors betting on a particularly down-and-out asset: San Francisco commercial real estate. The city, a boomtown in the last decade thanks to the explosion of wealth generated by its homegrown tech industry, has struggled more than almost any other US metropolis to rebound after the Covid-19 pandemic. Now, local business leaders and entrepreneurs are swooping in to fuel a revitalization—and score bargains from depressed property values.

Jony Ive, the former Apple executive who now runs the design studio LoveFrom, has spent more than $100 million buying and renovating property in the city’s Jackson Square neighborhood.

Golden State Warriors star Stephen Curry purchased a building not far from the Chase Center, the team’s home, with intentions to redevelop it as headquarters for his Thirty Ink business. (He recently canceled those plans after a union dispute, though city leaders hope to revive the plan.) Google co-founder Sergey Brin’s family office bought out a $55 million loan on an apartment building, the same month the city’s tax appraisers cut its value in half, to $41.3 million.

Others have been more under the radar. Neil Mehta, founder of tech-focused investment firm Greenoaks Capital, is the backer of several limited liability companies that purchased buildings on Fillmore Street in the storied Pacific Heights neighborhood.

Venture capitalist David Sacks, recently named as President Donald Trump’s artificial intelligence and cryptocurrency czar, is a limited partner in projects by local developer Brick & Timber Collective, according to loan documents and people familiar with the matter. A spokeswoman at Sacks’ firm Craft Ventures confirmed his role.

It’s a prominent display of the wealth in San Francisco, a city that ranks fifth in the world for the number of billionaires among the 500 richest tracked by the Bloomberg Billionaires Index. Even with rock-bottom prices, only those with plenty of cash and an unshakable belief in the area can stomach the risk of waiting out a comeback.

“At the bottom of a cycle, it’s usually high net worths that jump in first, because the math doesn’t make sense,” says Christopher Roeder, a real estate broker with Jones Lang LaSalle Inc. who’s led leasing on projects including the $1 billion revamp of the landmark Transamerica Pyramid, the city’s second-tallest building. “You’re throwing your spreadsheets out the window.”

The math for San Francisco has been particularly tough after the pandemic emptied out its buildings and sent residents fleeing for cheaper destinations, with the city losing more than 6% of its population from 2020 to 2021. As Covid ebbed and workers returned to offices around the country, San Francisco had a slower recovery. Office vacancies shot up from below 4% in 2019 to a near-record 37% in the fourth quarter of last year — exceeding the rates of major hubs such as Manhattan, Chicago and Los Angeles.

The spiral has left the city facing an $800 million-plus budget deficit as its new mayor, Daniel Lurie, wants to spend more on policing and cleaning up the streets. Elected in November, the political outsider and Levi Strauss & Co. heir has pushed for investment from San Francisco’s business leaders and wealthy residents.

Early signs of recovery are leading many to feel optimistic. The streets are cleaner and busier. City Hall is getting more aggressive with crackdowns on drug dealing and has ordered government employees back to the office four days a week. The AI boom has lured tech workers back from Miami and Austin and into the office. The most valuable AI startups, including OpenAI, Anthropic, Scale AI and Perplexity, are headquartered in the city. In the fourth quarter, more office space was leased than vacated for the first time since 2020.

“Usually turnarounds, either downturns or recoveries, are already on the way before most people recognize it, and they go much faster than most people expect,” says billionaire Greg Flynn, who runs restaurant franchise giant Flynn Group. “In my observation of San Francisco, I think that’s happening right now. It’s well underway, and it’s moving at lightning speed.”

Flynn, who grew up just across the Golden Gate Bridge in Marin County, knows the ups and downs of San Francisco’s market well. Along with the wealth generated from his company, which operates more than 2,900 Pizza Huts, Panera Breads, Wendy’s and other restaurants, he’s gained a reputation for his real estate timing.

With the help of investors—including former US House Speaker Nancy Pelosi and her husband, Paul—Flynn bought the Huntington Hotel in 2023. The shuttered 103-year-old property atop Nob Hill sold for about 70% less than its assessed value. A year later he teamed up again with the Pelosis and others to purchase an office building, 631 Howard St., in the tech-heavy South of Market neighborhood.

Outside his 18th-floor office window at 225 Bush St., you can see Flynn’s next target: Market Center, a pair of buildings that he’s poised to take over by scooping up a distressed loan, according to two people familiar with the deal. He declined to comment on that property.

Flynn has bought and sold the office tower he’s sitting in three time­—last cashing out in 2017. The building now symbolizes the city’s low: In November, its owner, Kylli Inc., the local unit of a Chinese investor, defaulted on its loan, and the building is now being prepared for sale, loan documents show. (Kylli didn’t respond to a request for comment.) Flynn himself has a property he purchased in 2019 that’s in distress.

“You can do everything right, but if you get the timing wrong, there’s probably no salvation,” says Flynn, 61. “And you can do almost everything wrong and if you get the timing right, you’re probably going to make money. And so the thing we focus on first and foremost is getting the timing right.”

Timing has long been key in San Francisco, with a legacy of booms and busts going back to the gold rush and the 1906 earthquake. But the growth of the tech economy over the last 30 years has compressed the cycles into a spectacular series of highs and lows, from the dot-com boom and bust to today’s AI frenzy.

The tech industry has been both celebrated as the city’s economic backbone and vilified for the role it played in increasing income inequality. As startups flourished in the 2010s, making household names out of the likes of Uber, Airbnb and Twitter, the median home price shot up above $1 million, beyond the reach of many residents. A homeless crisis deepened. Vandals defaced private buses that whisked workers to Silicon Valley. City supervisors have questioned big gifts from billionaires and condemned the naming of Zuckerberg San Francisco General Hospital after the Meta Platforms Inc. CEO donated $75 million.

The bubble burst in March 2020. The Bay Area was the first metropolis to issue shelter-in-place orders, starting a remote work exodus as coders and corporate chiefs left San Francisco’s downtown core. Some major employers, such as Twitter and Salesforce, said flexible work would be the norm even after lockdowns ended.

Scenes of public drug use and homeless camps made national news. Car break-ins reached 3,384 in September 2022, a decade high for a single month. Retailers including Nordstrom, Walgreens and Whole Foods closed stores in the city center. The 2023 collapse of lenders Silicon Valley Bank and First Republic Bank added tumult to the local financial industry.

The issues made the plunge in real estate demand, felt in cities around the world, particularly acute in San Francisco. In the US, office values in central business districts have fallen about 45% since 2020, according to the MSCI Inc. commercial property price index. In harder-hit places, it’s been difficult to gauge the true extent of the decline: Investor interest in San Francisco was so weak after the pandemic, and later as interest rates began to rise in 2022, that there were few transactions to measure just how low prices would fall.

The San Francisco market started to thaw in 2023, when the Swig Co., a local family-owned real estate company, purchased 350 California St. The old Union Bank property sold for $205 a square foot in August 2023, a quarter of what brokers estimate it would have been worth pre-pandemic.

Since then, properties have changed hands, though at big discounts. Hong Kong-based Gaw Capital Partners sold a trio of buildings collectively called North Park in the Jackson Square neighborhood to private equity giant Blackstone Inc. for $245 million in 2018. It bought them back last year for $82 million. The family-owned Hearst Corp. earlier this year purchased an office building for $47.5 million, about 47% below its last sale price, to temporarily house the San Francisco Chronicle while it builds a condo tower next door to the newspaper’s historic building.

In 2019, there were 34 office sales in San ­Francisco—20 priced at more than $100 million, according to data from brokerage CBRE Group Inc. Last year only two of the 23 office sales exceeded that figure, and they were part of a ­multicity portfolio sale. Only two transactions had some financing attached, according to the brokerage.

High-net-worth people or their investor coalitions can self-finance the deals at lower prices and also have more flexible holding periods that enable them to take more risks than institutional buyers, says Kyle Kovac, CBRE’s executive vice president of capital markets. “At this stage, where there’s so much risk and uncertainty, the private capital goes further out on the risk spectrum and tends to win all the deals,” he says.

The bargain prices may be a motivator for some, but others are simply investing in San Francisco because they want to help their city—no matter the cost. The UK-born Ive, 58, who during his nearly three decades at Apple oversaw the design of products including the iPod and iPhone, says he visited the Jackson Square area on his very first trip to the US in 1989. He discovered the neighborhood bookshop William Stout Architectural Books and went on to fall in love with the area.

Buttressed by Chinatown on one side and the glass skyscraper skyline of the financial district on the other, Jackson Square is one of the city’s oldest commercial districts. Its brick buildings and cobblestone alleys date to the gold rush days, giving it a quieter and more quaint feeling than other San Francisco neighborhoods.

Ive, who’s often spotted lunching at local restaurants, has amassed a collection of buildings to remodel into new headquarters for LoveFrom, which works with brands such as Airbnb and Ferrari on their designs. “This is an important historical part of San Francisco but also a profoundly creative place,” Ive said in an email. “I’m deeply proud that LoveFrom is contributing to that.”

The creation of the “Ive Hive,” as LoveFrom’s new compound is nicknamed, has helped lure others to the ­neighborhood. Joshua Kushner’s Thrive Capital, a major backer of OpenAI, bought a century-old former firehouse for $9 million in May 2024. Brick & Timber Collective, the group that counts Sacks among its project investors, plans to spend nearly half a billion on purchasing and renovating buildings in Jackson Square.

In December, it teamed up with investment firm Barings to purchase 500 Washington St., which it plans to renovate into a modern office space with a restaurant and other amenities. “Brick & Timber Collective has a multitude of ­different limited partners, both individual and institutional investors, on any investment,” says Jesse Feldman, a partner at the firm.

The office market is still struggling. San Francisco’s downtown vacancy rate remained a stubbornly high 35.8% at the end of the first quarter, and average asking rents are still a depressed $68.63 per square foot, according to CBRE. There also is a major divide between the most desirable buildings and older properties. Top buildings such as the Transamerica Pyramid have been able to sign leases well above $130 a square foot, nearly double the city average, but many more properties are struggling to find tenants. “It’s still the highest vacancy rate in the country,” says Colin Yasukochi, executive director of CBRE’s tech insights center in San Francisco. “That’s something that is probably not going to come down super rapidly in the next few years.”

And not every project has gone off without a hitch. Even Ive has had to explain himself to the community to quell fears of tech gentrification. After Greenoaks’ Mehta was revealed to be the investor behind several anonymous LLCs that had purchased some $100 million of properties in the Upper ­Fillmore district, people on social media threatened to ram a car through his front door. Local businesses raised ­concerns they’d be displaced. Mehta, who declined to comment, has since placed the properties in a nonprofit foundation and pledged not to benefit personally from the neighborhood project.

Mayor Lurie, who formerly ran an antipoverty nonprofit called Tipping Point Community, funded in part by San Francisco’s wealthy, is turning to the same group for answers to the city’s fentanyl crisis and other problems. “When you have those people that live and work here investing, they are hopeful, they’re optimistic and they see already the changes that are happening,” Lurie says. “We are clear-eyed about the challenges that we face, but there’s no question that San Francisco is on the rise.”

Aaron Peskin, a former member of the city’s Board of Supervisors and frequent critic of San Francisco’s rich, says he largely supports the local property buyers, calling Ive’s efforts to bolster Jackson Square the “personification” of responsible investing. But he worries wealthy buyers will gain undue political influence and angle for special treatment. “I welcome Mayor Lurie getting his billionaire friends to believe in and invest in SF,” says Peskin, who lost to Lurie in the November election. “But not at the cost of impoverishing the San Francisco taxpayer and giving away the store.”

Laurene Powell Jobs, founder of the philanthropic organization Emerson Collective and widow of Apple founder Steve Jobs, assembled a nonprofit last year to buy the San Francisco Art Institute campus, with plans to renovate the historic property into a new art school. She’s co-chairing an economic initiative called the Partnership for San Francisco that’s working with two dozen business leaders, including Ive and OpenAI’s Sam Altman, to boost the city’s economy. Another new coalition, led by David Stiepleman, co-founder of the investment firm Sixth Street, is creating an economic development fund dedicated to the downtown.

“There are companies that have been here since the gold rush,” says Katherine August-deWilde, the former First Republic president who will lead Partnership for San Francisco. “We have some of the largest tech companies here and some of the newest innovative companies. And for the first time, we’ve all come together as stewards in the city.”

For Ghazi, buying One Montgomery is a chance to plant a flag in San Francisco for Empire and raise the art and music scene’s visibility. Walking through the building, he envisions how the old bank teller area will become a bar with a restaurant whose vibe he describes as Restoration Hardware meets Soho House. The second floor will be his headquarters, while the rooftop deck could host music events or be a lounge for employees during the day. His ultimate vision is to create a level of prestige where people see the building and say they want to work for this company, in this city.

“If you’re looking at San Francisco as just an opportunity for a money play, then that’s the disposable behavior that got us to where we’re at now,” Ghazi says. “I’m hoping that as we have this uptick, we create a balance between tech, which is obviously always going to thrive in the city, and some type of mixture of people that are looking for legacy and heritage.”—With John Gittelsohn

Carson covers wealth from Bloomberg’s San Francisco bureau