3 months ago
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Neil Mehta, the VC behind the acquisition of a string of properties on San Francisco’s tony Fillmore Street, made waves earlier this week for reportedly throwing long-established local restaurants to the curb to bring in more high-end retailers. The San Francisco Chronicle talked, for example, to the owner of Ten-Ichi, a neighborhood sushi restaurant for almost 50 years that now has to vacate its space next month. “This is the opposite of what San Francisco does to long-term, legacy business tenants,” the restaurant owner told the outlet. “This guy [Mehta] is displacing us.”
Sources close to the low-flying Mehta paint a very different picture, however. They say that Mehta’s very focus is on bringing a wealth of restaurants to the area, and that he’s even planning a kind of “Y Combinator for restaurants,” says one source.
According to this person, Mehta has a pretty grand vision for turning the roughly four-plus blocks he has quietly acquired over the last year into an oasis where ambitious restaurant owners can afford to set up shop, San Franciscans can find a wealth of dining and shopping choices, and a 111-year-old movie theater on the street is restored to its former glory and “not turned into an Equinox.”
Reached for comment earlier this week, Mehta – who reportedly purchased a $17.6 million, 117-year-old, 9,000-square-foot home in 2022 just blocks from his newly acquired commercial properties – declined to talk on the record, saying he does not speak with reporters except on behalf of his portfolio companies.
Up and to the right
Some of Mehta’s plans were first reported by The Information earlier this year in a piece that largely delved into how Mehta, who is far less famous than many VCs, has so much money to invest in the first place.
It’s been a fast but steady rise for the 40-year-old. A graduate of the London School of Economics, Mehta was reportedly a star investor for an offshoot of the quantitative hedge fund D.E. Shaw before using his reputation and network to co-found his venture firm, Greenoaks Capital, back in 2010.
The San Francisco outfit, which raised its first institutional capital in 2015, has since invested in some of the tech industry’s buzziest privately held companies, including Stripe, Databricks, Rippling, and Canva – all of them now valued in the many billions of dollars by their backers.
Greenoaks is also an early investor in Wiz, a lesser-known cybersecurity startup until recently, when it reportedly turned down a $23 billion acquisition offer from Google. (Wiz, it is worth noting, was founded just four years ago.)
Now Mehta is pouring some of those profits into Pacific Heights, the San Francisco neighborhood where he largely grew up, via a $100 million nonprofit that he has established to fuel his shopping spree. The apparent plan is not only to remake Fillmore as a go-to dining destination but, as part of that process, tackle some of the red tape that many aspiring restaurant owners face, as well as offer them lower rent – and even charge them a percentage of revenue instead of rent in some cases – so that it’s easier for these businesses to thrive.
Mehta, according to friends, doesn’t see his growing property empire as yet another financial bet. They insist that his primary interest is in ensuring that his San Francisco neighborhood fully rebounds from the pandemic, when according to the commercial real estate services company CBRE, roughly half the shops on Fillmore Street permanently closed. He’s a “big believer in cities,” says one source.
The moves are likely to cement his fortune either way.
For one thing, Mehta is mostly avoiding what are called “formula retailers,” meaning companies that have 11 or more locations around the world. While some are already in the process of obtaining conditional use permits, these take up to 12 months, which is why many stores on the tree-lined street appear vacant currently. (Other neighborhoods in San Francisco have banned chain stores altogether.)
Mehta should also benefit from 100 changes to San Francisco’s planning code that were passed in December and that streamline the permitting process for independent businesses.
Given his financial muscle, Mehta can afford to be selective about the businesses he wants to help stand up, too, compared with the buildings’ previous, individual owners, who perhaps could less afford to be choosy about who pays the rent.
Mehta isn’t buying his buildings on the cheap. For example, he acquired the street’s theater and an adjacent retail building for $11 million, compared with the $4.8 million their previous owner paid in 2008. He paid $9.7 million for a separate, 7,300-square-foot building, or $1,329 per square foot. Still, it’s easy to see how all of the pieces – buying the buildings, leasing at below-market rates to minimize turnover – could create a more vibrant scene that increases the value of Mehta’s properties over time.
Alex Sagues, a senior vice president who leads CBRE’s urban retail team in San Francisco, says many shopping districts succeed when mapped out carefully. “You don’t want two coffee shops side by side,” says Sagues. “But you take a bakery and put in a coffee shop next to it, and business can go up.” Similarly, he says, “every winery in Sonoma makes it more of a draw.”
As for the high-end food that could soon be featured everywhere on Fillmore Street, there’s less of a risk for cannibalization than one might imagine, says Sagues. “People go for a specific experience. You’re not showing up, then deciding between Mixt [a salad restaurant] or [the three-Michelin-starred restaurant] Atelier Crenn.” The more density a district boasts, the more people come, he adds.
Mehta’s moves may already be impacting the market. While Pacific Heights has long been among the most expensive and sought-after neighborhoods in San Francisco, according to Redfin, the average home price in Pacific Heights rose to $2.25 million in July.
That’s up 28.6% year over year.
