Seven months ago, the Four Seasons in San Francisco sent out a news release announcing the glad tidings that would come soon: New residences for the new money.
Builders were hoisting glass and steel into a 43-storey tower where residents would have their own on-staff wine concierge, plus Blue de Savoie French marble, German milled Poggenpohl cabinetry and Dornbracht fixtures. The building’s $US49 million ($71 million) penthouse would be the most expensive in San Francisco.
“Just in time for the coming wave of IPO millionaires in San Francisco,” the Four Seasons said, promising “an elevated sales experience” to cater to “this new class of buyers.”
But then the wave of tech initial public offerings — the one that was supposed to mint San Francisco’s new ultra rich — fizzled. The stock of Uber, the ride-hailing giant, has dropped nearly 30 per cent since the company went public in May. Lyft shares are down nearly 40 per cent. Pinterest and Slack have declined, too.
San Francisco has been left as a slightly more normal town of tech workers who got rich-ish, maybe making a few hundred thousand dollars. But that doesn’t go far in a city where the median cost of a single family home is about $US1.6 million.
“Everyone that came back post-IPO seemed to be the same person. I didn’t see any Louis Vuitton MacBook case covers or Champagne in their Yeti thermos,” said J.T. Forbus, a tax manager at Bogdan & Frasco in San Francisco.
At the end of the day, it’s funny money until it’s realized. I’ve got Uber and Lyft clients that are disappointed. It’s a different house now. It’s a different school situation for the kids.Private wealth advisor Jonathan DeYoe
Private wealth managers are now meeting with a chastened clientele. Developers are having to cut home prices — unheard-of a year ago. Party planners are signing nondisclosure agreements to stage secret parties where hosts can privately enjoy their wealth. Union organisers are finding an opportunity.
Everyone had gotten too excited, and who could blame them? The money was once so close: A startup that coordinated dog walkers raised $US300 million. The valuations of the already giant ride-hailing behemoths had nearly doubled again. WeWork, a commercial real estate management startup that owned very little of its own real estate, was valued at $US47 billion.
City of Towers
Towers rose across San Francisco to house the money. The marble was polished. The bathroom floors were warm. The private pools were being filled.
“The world has changed in a year,” said Herman Chan, a real estate broker with Sotheby’s International. “We expected an upward trajectory at least, and it really kind of deflated. These companies aren’t dying but the cultural zeitgeist, that momentum of IPOs, is gone. You don’t even hear anyone talking about it anymore.”
The developers who had fought the odds of regulation and zoning to build their glass residences in the sky had timed their units to the IPOs. But on a recent visit with the Four Seasons sales team, they acknowledged that techie wealth was not what they were seeing. Interest was mostly coming from overseas buyers, young heirs to foreign fortunes and older executives looking for city pieds-à-terre, they said.
Before the tech IPOs, Deniz Kahramaner, then a real estate data analyst with the property brokerage Compass, had rallied packed rooms of real estate agents and investors about the bonanza that lay ahead. He had charts and estimates of thousands of new millionaires raising the average price of single family homes in San Francisco above $US5 million.
Now, he is more muted. “The IPO cash-out hasn’t played out as I mentioned in my original presentation,” he said.
Kahramaner added, hopefully, that it was still early. “People need more time,” he said.
Wealth and unions
Instead of yachts, tech workers are funding more mundane ventures like college savings plans.
“This year brought a lot of people back to reality,” said Ryan S. Cole, a private wealth adviser at Citrine Capital, a wealth management firm in San Francisco. “We’ve had a lot of people fund 529 plans for their kids. Pretty boring stuff.”
Some private wealth managers said they were actually somewhat relieved.
“At the end of the day, it’s funny money until it’s realised,” said Jonathan DeYoe, another private wealth adviser. “I’ve got Uber and Lyft clients that are disappointed. It’s a different house now. It’s a different school situation for the kids. But they’re still by and large in good places. No one’s impoverished.”
And so workers who thought they would upgrade from Allbirds to Berluti shoes are remaining, after all, in the Allbirds.
As some rank-and-file tech workers realise they might not get rich from company stock, the allure of working long hours without comparable real money pay is also wearing thin, said labor organizers. They have found traction this year in an industry long resistant to unions.
“The incentives to take the licks that you do are in the hope of some sort of big payoff down the road,” said Paul Thurston, who focuses on unionising San Francisco tech workers and is the organizing director at the International Federation of Professional and Technical Engineers.
Now, “the engineers and the app designer and the developers are going to be treated a lot more like the employees that they are rather than like partners, which is what they’re told pre-IPO,” he said.
Jonathan Wright, organising director of Engineers and Scientists of California, said he was in talks to unionise the workers of several big tech companies.
“There’s a promise: you work 100 hours a week, you sleep under your desk, and then you’ll be rewarded with the wealth of Bezos,” Wright said. “That mythology has been fading for years. The day of the unicorn is over.”
The New York Times
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