Introduction
Everyone, and I mean everyone, knows about the subprime mess. Readers of the financial press also know that sovereign-wealth funds are buying big chunks of American financial institutions. This Pulse draws parallels between the sovereign-fund activities with our own San Francisco residential real estate.

Sovereign-wealth Funds
The unraveling of subprime loan portfolios and the concomitant staggering losses of America’s leading financial institutions has led to a need to bulk up their capital structure – quickly! Sovereign-wealth funds have ridden to the rescue big time, though one might question the extent of their due diligence, but I’ll leave that to others.

Sovereign-wealth funds are investment vehicles established by national governments. The most prominent are Middle Eastern funds, which have become flush with rising oil revenues while Asian countries such as China, Korea and Singapore have accumulated enormous balance-of-trade surpluses thanks to American trade deficits. Both groups are pressed to find investment opportunities.

According to a recent article in the Wall Street Journal, these government-financed pools have about $2.8 trillion in assets, which Morgan Stanley estimates could grow to $12 trillion by 2015 as Middle Eastern funds generate more oil revenues and Asian countries expand their trade surpluses. In the last few months they have invested some $50 billion in Citigroup, Merrill Lynch, UBS, Morgan Stanley and Blackstone Group – to name a few of the more prominent.

Why are they doing this? Because they see beaten down prices for blue chip names, a highly favorable exchange rate with the US dollar, and the ever-present political stability of the USA. Here’s the irony. Many of the Wall Street firms responsible for decimating their balance sheets are the same Wall Street firms that are doing the deals to bring in new money to shore them up. It is just a different side of the house. The boys in the mortgage-securitization department lost the money (and earned a big fee in doing it), and now the boys on the investment banking side are delivering new money (and earning a big fee in the process as well).

San Francisco
San Francisco residential real estate is already benefiting from the same global issues. I’m just not sure how much, but I have decided to facilitate the process.

Here’s the deal. While different parts of the country are dealing with different levels of foreclosures, short sales, high inventory, falling prices, etc., San Francisco is not. I am talking about the City of San Francisco and not the greater San Francisco Bay Area, which reflects a much different picture. The City is relatively small, with a population of just 800,000; it has a varied and robust economy; it serves as the business, shopping and entertainment hub of the greater Bay Area with some five million residents; and it receives about 16 million visitors a year who leave about $8 billion behind, not to mention a piece of their heart. There is no place to build a single-family residence and only limited land to build new condominiums, not to mention the difficulty in getting entitlements and permits.

Foreign Buyers
Many of the same fundamentals enjoyed by the sovereign-wealth funds also support foreign buyers of San Francisco real estate. Though our prices are not beaten down, the discounts are enticing in the face of the discounted American dollar compared to the strength of the Euro, British Pound, Canadian Dollar, Korean Won, Japanese Yen, Hong Kong Dollar, and Chinese Yuan. These buyers benefit from the same political stability as their sovereign-wealth cousins, and they can be assured that there is an ever-ready and efficient market when it comes time to sell. Foreign buyers can enjoy the best of both worlds. Good discounts, but not at the cost of a battered market, nor uncertainty of the future value of the investment.

So what’s missing?

Trusted Advisors
If you want to buy a piece of corporate America, you hire a Wall Street firm to act as your advisor and guide through the financial investment landscape. There are a lot of investment opportunities, and if you are a foreigner, you need someone who speaks not only the language of finance but someone who can tell you which deal is good and which deal is a dog.

Though San Francisco real estate is fundamentally attractive, there are so many development opportunities that making sense of the competitive landscape and separating the good from the bad is an overwhelming and daunting task.

There are some 50 or so recently completed or soon-to-be-completed developments in SOMA, South Beach, Rincon Hill and Mission Bay (see our maps – and know that not all are depicted). I am convinced that one reason sales are so slow in these neighborhoods – over and beyond the impact of the subprime fallout, the uncertain economy, tightening mortgage standards, etc. – is because of the sheer number of condominium opportunities. There are hi-rise towers and low-rise podiums, ready-to-move-in, yet-to-be-completed buildings, concierge and basic attendant buildings and so on. Even the locals find that determining relative values is a daunting task. Where does a buyer, particularly a foreign buyer, go to get an overview and help in making sense of San Francisco’s version of Wall Street opportunities? Nowhere, till now.

I have hand selected a team of first class San Francisco agents who speak German, Russian, Cantonese, Mandarin, Hebrew, Italian, Spanish, Hindi, Punjabi and Korean; soon French and Japanese will be added to the fold. They not only speak the native language of the foreign buyer, but know the culture. I speak the language of financial investment and know the competitive landscape. Together we are the trusted and knowledgeable guides that enable foreign buyers to distinguish the pedigreed dogs from the mutts.

Buying a residence in San Francisco, if you want to be smart, requires a knowledge of what is likely to happen in the next 5 to 10 years – particularly south of Market, where today’s view from a specific unit can be obscured by tomorrow’s new hi-rise building, and where a shiny new building can lose its luster in the face of the changing competitive landscape.

If you are a golfer and you will indulge the metaphor, it’s about staying out of the sand traps. This takes knowledge and skill, and it helps to know the course.

Welcome to globalization on the home front.