Why Meg Whitman and other ultra-rich are investing in real estate

20 Sep

Why Meg Whitman and other ultra-rich are investing in real estate

The investor group coming in to buy the 21-acre Potrero Power Plant site in San Francisco surprised many in the city’s development community.

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The group is led by the relatively unknown Associate Capital — but it also includes Meg Whitman, CEO of Hewlett Packard Enterprise (NYSE: HPE) and chairwoman of HP Inc. (NYSE: HPQ), and her husband, neurosurgeon Griffith Harsh IV.

Those investors beat out 10 other prospective buyers — including some bigger, more established real estate players — that also bid on the property, said Tim Maas, a broker with Colliers International who represented the seller.

“What made the offer particularly attractive to the seller was Associate Capital’s aggressiveness and how quickly they could complete due diligence and close,” Maas said. “What was important to the seller was the proceeds and timing of the transaction, not necessarily who bought it.”

The investment by the Whitman Harsh Family Office is part of a larger trend of private money pursuing real estate assets, said Chris Foley, a principal with Polaris Pacific, a condo marketing and research firm, who specializes in development sites.

Ultra high-net-worth investors, from the tech industry and beyond, are looking for investments that might generate better returns than venture capital or the stock market, he said. For that, real estate is hot.

The Power Plant drew a lot of interest from prospective buyers, Maas said, because the site sits on San Francisco’s southern waterfront in an area that is a hotbed of major mixed-used properties.

But, Maas pointed out, the site is still zoned for industrial use, is still undergoing significant environment cleanup and does not come with entitlements. It could take several years to resolve those issues and entitling any large site in San Francisco is a complicated endeavor.

The seller in the deal, Houston-based NRG Energy, had brought on District Development as a consultant to develop the site, but ultimately decided to “capitalize the asset” instead of developing it themselves, Maas said.

The sale is expected to close next week. A source familiar with the deal said the price was just under $90 million.

Source: bizjournals.com