The key to successful investing often lies in the ability to distinguish between conventional wisdom and reality. Eli Edwards, Head of US Real Estate Equity at Fortress Investment Group, recalled such a personal dissonance that guided him about three years ago regarding the much-debated loss of San Francisco’s reputation as a safe haven for investment.
Edwards commented that it’s about recognising issues that present short-term headwinds but also long-term tailwinds. This, he said, is the hardest part of investing. The general perception was that San Francisco was in decline. There was talk of a 'doom loop' or the 'next Detroit'. However, Edwards, who lives in the Bay Area himself, did not see this confirmed on the ground.
For the multi-family housing sector in San Francisco, the discrepancy between perception and reality, which often proves to be a shrewd investor's best friend, was particularly striking for Edwards. He recognised the resulting opportunity. Although the national media conveyed the impression that San Francisco was ablaze, Edwards saw that some problematic sub-markets were inaccurately presented as representative of the entire city's fate. Most of the neighbourhoods where people actually lived bore no resemblance to the terrifying image being broadcast in the news.
Data-Driven Decisions and Market Niches
Data also substantiated for Edwards that the multi-family housing market in San Francisco was thriving. All of this led Fortress to invest in over 40 multi-family properties in the city, precisely when the rest of the world seemed to be turning its back on the city. Edwards, who previously worked in Barclays’ real estate investment banking division and before that at Bank of America, reported that they were able to acquire multi-family assets there at approximately 50 percent below pre-COVID prices. Furthermore, there was already rental growth in the city's better districts, unlike other regions of the country, such as Texas, where cap rates were lower but no actual rental growth occurred.
This precise judgement has made Fortress Investment Group, founded in 1998, a company with current assets under management (AUM) of US$55 billion. Throughout the company's history, over US$200 billion has been invested on behalf of more than 1,600 institutional investors and high-net-worth individuals. While other firms achieved success in the San Francisco market by buying distressed loans, Edwards' market knowledge steered Fortress in a different direction. He explained that large note sales were available, from which some of their competitors had profited very well. However, they decided not to pursue these, as about a quarter of these assets were in sub-markets the company wanted to avoid.
Agility and Differentiation in Competition
Instead, the company noticed a lack of liquidity in some of the better neighbourhoods like Pacific Heights, Russian Hill, and the Marina District. Edwards stated: “Instead of doing these note sales, we said, 'Let's buy what no one was showing up for, and let's aggregate a portfolio of best-in-class assets in San Francisco to attack that thesis.'” It's about where the greatest illiquidity lies to achieve the best basis. In this case, it wasn't about distress, but about buying smaller deals and aggregating them to get the best product.
This is typical of the approach of Fortress's real estate division, which has deployed nearly US$9.5 billion in over 400 equity transactions since 2009. The real estate division is headed by Tim Sloan, Vice Chairman and Global Head of Real Estate. The leadership team includes, in addition to Edwards, Cyril Courbage, Head of Real Estate Equity for Europe, David Hammerman, Chief Operating Officer for Fortress’s Real Estate Equity business, as well as Akio Yamashita and Eric Golden, Co-Heads for Asia and Japan Real Estate.
David Hammerman, who has been with the company for over eight years, emphasised that a crucial competitive advantage of the company is its ability to regularly be as agile and selective as it was in San Francisco. Furthermore, Fortress's status as an institutional investor received a significant boost earlier this year: In March 2026, the company announced the launch of Fortress Real Estate Exchange, a new 1031 platform that will provide access to institutional real estate investments in student housing, senior living, and multi-family properties via Delaware Statutory Trusts (DSTs).
