latest on Shorenstein?
Noticed they just picked up a stabilized deal in SoHo from Tishman Speyer. What's the latest on them?
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Over the summer Shorenstein bought a deal in Nashville that was ~60% anchored by TikTok. Top floors too. A few weeks later, TikTok shut down its entire Nashville office. We looked at the deal and passed because we couldn't get comfortable with the uncertainty around TikTok, especially after the recent restructuring of its US business. Pretty massive diligence miss for them. 150,000 SF is a very hard block to backfill in Nashville, especially since two of the obvious large users, Amazon and Oracle, already have major dedicated footprints, with Oracle building out its own East Bank campus.
and Amazon's space is subleased or empty
Even my grandma knew what was happening with TikTok
word is that several of their funds are sitting at negative IRRs
Also hearing they're holding onto a lot of the legacy portfolio even though they're way out of the promote. Hard not to wonder how much the fee stream factors into that.
Why not sell to recycle the capital into better opportunities?
Coming up in this business in the 2000s, I used to really look up to them. Literally. Their office was at the top of 555 Cal, back then one of the best seats on the West Coast. Today they’re probably not even a top 20 seat in SF. Divco surpassed them long ago. Brendan is no Doug.
say more
Everyone in real estate knows Brandon never seemed especially interested in the business and came into it with every advantage. Then he had the WSJ run a piece about how difficult things had become because rates went up and he had to lay people off, all while being photographed wearing a $100,000 Patek Philippe. It came across as incredibly tone deaf and classless. I imagine the situation started to feel a little more real once several family-owned properties that had been held for generations ended up in foreclosure.
There was a real brain drain in SF during covid, with several of the strongest MDs leaving. They never really rebuilt that bench. Instead, they promoted people quickly to fill the holes. That’s part of how a platform goes from one of the best seats in the business to something far less relevant.
del
Prior to the pandemic, they made some pretty questionable investments. Then during the pandemic they leaned even harder into doing deals, developing spec office and lots of acquisitions. Once rates moved, they ended up handing back keys and forcing sales all over the country. Burned a lot of their relationship lenders in the process.
A buddy of mine was part of the more tenured executive group that got laid off a year or two ago. They did the cuts right before Thanksgiving. His view was basically that acquisitions shit the bed, but instead of cleaning house there, they cut a ton of people across asset management, leasing, operations and debt. Some of them had been there for more than 20 years.
Kind of explains the move toward boring stabilized core. Hard to do much else after cutting the AM and leasing teams lol
We sold them a building recently. Lots of retrades with them. At some point the juice isn’t worth the squeeze
What happened to their COO? He basically vanished over the summer. He was Brandon’s right hand man/consigliere for a decade and part of a very small executive team. Any color here?
He left office entirely for R&D/advanced manufacturing. After ten years with a front row seat to Shorenstein's portfolio, he chose a different asset class. Says a lot.
Some of these commenters have no idea what they’re talking about. Shorenstein has the been one of the biggest buyers of class A/trophy office over the past few years. The Nashville deal is a shitty situation but they will make a killing on some of these other deals. They’re also still able to raise capital very easily.
More than a dozen foreclosures/deeds-in-lieu in SF, NYC, LA, Chicago, Denver, Seattle, Philly, DC, Minneapolis, Pittsburgh, Houston and elsewhere. Hard to “make a killing” buying stabilized core office. The ODCE funds can tell you how that usually goes. If you’re underwriting core returns, go to a debt fund. Better yield, less risk, lower fees.
Basically everyone that bought office pre covid has gone through foreclosures/DIL. Yes all of the “best” investment shops too. Also they are buying trophy assets, at core plus/light value add return pricing given liquidity for office is so low right now. Most of the assets they recently bought were pre this rise in interest rates too, so they probably locked in good debt on a lot of them. Firm has been around for decades and has fared better through the office slaughter than many other firms.
I forget the exact numbers, but didn’t they already shrink from roughly 25M SF to around 10M SF? Pretty wild that they still have a significant amount of distress in the remaining portfolio after years of forced sales and handing back keys.
They've been active in Dallas
Interviewed with them 2 years ago. Hiring manager acknowledged office is a challenging asset class but they had no intentions to diversify. They wanted to lean more into it because they had a lot of dry powder. That struck me as a shop that had a stubborn, anachronistic mentality on investing whereas comparable generational family run shops like Silverstein, Rudin, and GFP pivoted to multifamily.
sounds like you dodged a bullet
I heard AUM has dropped pretty significantly, from around $10B before the pandemic to closer to $3–4B today
following
In SF, the family used to own somewhere between half a dozen and a dozen properties. Today they’re down to three, and two are in trouble. 188 Spear is 95%+ vacant after Amazon and New Relic left, with a loan maturity coming up. Their HQ at 235 Montgomery is roughly 40% vacant, and Shorenstein is even trying to sublease two of its own floors. That building has been in the family since the 1970s.
One of their VPs has been looking around for a new gig for a while now. Hope it works out. Tough job market, especially at that level.
Is this not a breach of confidentiality? Unless that person has been public about looking for new roles...
Intern, what confidentiality has been breached in that comment? 😂
Makes you wonder how much of the “retention” is actually retention versus a frozen job market. It’ll be interesting to see what happens once people have real options again.
Pretty poor taste to out them like that.
How is an anonymous person talking about an anonymous person on an anonymous message board “outing” anyone?
You guys are softer than kitten pillows.
Yeah, I’ve heard something similar.
Interviewed with them earlier this year for the SF spot. Lots of junior turnover and basically zero upward mobility. Seems like the only way to move up is another round of layoffs.
curious if the junior turnover had more to do with associates being let go, or them leaving for greener pastures. If it's more of the latter, it sounds like there's still decent job opportunities in some markets
2–3 years ago it was mostly people leaving for greener pastures. More recently, seems like a mix of people getting let go and people quitting with no gig lined up.
This is why being effectively office-only feels increasingly anachronistic. Office has more embedded risk today because the tenants do. The companies that fill office buildings (law firms, accountants, consultants, software companies) are exactly the ones AI is coming for. Not just their headcount, but the economics of how they operate. You're signing 10-year leases with tenants who may be materially smaller in five years or whose businesses could look very different. The lease locks in the rent. It doesn't lock in the tenant. Underwriting office now means underwriting whether your rent roll survives AI. Core-plus returns don't pay you for that risk.
Well said
Literal AI slop. You can smell it from a mile away. WSO mods you guys need to clean up the AI spam. It's making this place a lot less fun and helpful.
I actually like this thread. Way more substance than the usual on here.
Yes it reads AI heavy but directionally the point he’s making is substantive to the overall conversation. Who knows if those thoughts are purely original and were put into an LLM for proofreading/grammar or if he just went “write me an opinion piece on the future of office”. If it’s the latter I’d discount the post purely for laziness
Regardless of how it’s written, does AI introduce another layer of risk to office investing? Obviously yes. That’s the point.
Missing the SF recovery is wild to me. They've been there for generations. If they missed the recovery in their own backyard, where's their competitive edge?
I used to work at an institutional investment manager in the Bay Area. We stopped re-upping with them after Fund XI. My understanding was there were concerns with leadership.
Shorenstein is one of the oldest and most respected real estate firms in the United States. The privately owned firm is known for its disciplined approach to owning and operating high-quality office properties in major markets. Over the past two years, Shorenstein has completed 13 acquisitions totaling $2 billion in Class A office assets, underscoring its continued conviction and leadership in the sector.
This is proper ai slop
“underscoring its continued conviction and leadership” lmao come on
Lol this reads like a press release
Idk if I’d be bragging about buying $2B of core office with the 10Y UST up 1.25%. Not a lot of room for error on those deals. Curious where they mark today
Feels like COVID/rates have become a convenient excuse for a decade of bad office calls.
Before the pandemic, they bought a lot of transitional office that tenants already weren't lining up for. COVID hit and a bunch of it eventually went back to lenders.
During COVID, they made the contrarian bet to double down on office through acquisitions and spec development. Rates obviously hurt, but a number of those deals are already distressed or sold off. With the 10-year at its highest since 2002, wouldn't be surprised if more forced sales follow.
Now they've gone contrarian again, this time on leased-up core office. As others have pointed out, Nashville went sideways almost immediately, and there's not much margin for error on core deals.
COVID was bad luck. Doing this across three different periods starts to look like a pattern.
Looks more like incompetence than bad luck.
Public markets has "Inverse Cramer" while real estate has "Inverse Shorenstein"
Anyone else remember that Journal piece on Brandon? It came off like someone born with a silver spoon blaming the market. It looks a lot more self-inflicted now.
Is Danielle Shorenstein at Prospect Ridge related? She’s sharp AF and ex-Blackstone
That's Brandon's sister
Why isn’t she involved in the family business?
It sounds like because she wants to be successful
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