A venture capitalist’s under-the-radar effort to purchase a string of commercial properties on Fillmore Street in Pacific Heights has blown up into a political fight of a type familiar in San Francisco.
In broad strokes, the conflict pits mom-and-pop businesses against tech interests. But, as with most commercial real estate deals in the city, the details are more complicated.
Supervisor and mayoral candidate Aaron Peskin has jumped into the fray with his plan to introduce temporary zoning controls next month on the Upper Fillmore Neighborhood Commercial Historic District, which spans four blocks between Jackson and Pine streets. The Chronicle first reported news of the planned policy.
The legislation would increase the negotiating power of businesses to stay in their current locations by requiring landlords to get additional approvals for replacement tenants. These protections would apply specifically to companies in the city’s Legacy Business Program.
Peskin’s effort is in response to complaints from two long-standing businesses on the corridor that accused VC investor Neil Mehta of pushing them out as part of a property-buying spree.
The real estate play is funded by a $100 million capital allocation from Mehta, the founder and managing partner of Greenoaks Capital, who grew up in Pacific Heights and in 2022 purchased a $17.6 million estate a few blocks from Fillmore Street.
Mehta’s team in January purchased the shuttered Clay Theater at 2261 Fillmore St. and an adjacent retail space for $11 million. Since then, the group has spent tens of millions to pick up six storefronts across a three-block stretch between Pine and Clay streets.
A source familiar with the plans said the team plans to revive the Clay as a theater and is in conversations with two companies to operate it.
Cody Allen, a longtime food and beverage and entertainment operator, has been tapped as Mehta’s representative, interfacing with tenants on the corridor.
“There have been several unfortunate inaccuracies reported in the last few days,” Allen, managing director of Aegis Reserve, said in a written statement. “We have not proposed or implemented rental increases with any commercial tenant on the street, nor have we encouraged any sellers to evict or raise rents on in-place tenants.”
Allen said the building purchases are being made on behalf of a nonprofit called the SF Reserve Foundation, funded by Metha “with the objective of bringing in more small businesses, rather than introducing chain or formula retail tenants.” The organization has no website, and no record of it could be found with federal tax officials.
“Our aim is to bring in an even wider variety of food and beverage operators; to revitalize the iconic Clay Theater; and to restore Fillmore storefronts in need of investment,” Allen said.
Sushi restaurant Ten-Ichi and Middle Eastern eatery La Mediterranee said the purchase of their buildings by Mehta’s team means their days on the corridor may be numbered.
Steve Amano, the owner of Ten-Ichi, which has been on Fillmore for more than four decades, sparked the furor when he posted a sign in his window that announced the restaurant’s closure.
“We are being forced out, please help!” the sign reads.
“There was no negotiation; there was nothing other than a meeting set up by our landlord’s asset manager,” Amano said in an interview. He said his restaurant has been operating on a month-to-month lease for several years, but any effort to stay on longer fell on deaf ears with former landlords.
Two sources said Amano did not have a term lease for the space, in part because he previously planned to sell the business, meaning the landlord could ask him to leave at any time. Amano’s opening gambit in negotiations was asking for $250,000 in payments that would seed his family’s next business; the seller’s representative balked at this, he said.
The parties agreed to a termination agreement that included the forgiveness of nearly $60,000 in back rent and a $20,000 upfront termination fee paid to Ten-Ichi. Amano said this money is being distributed among his staff as a form of severance. The restaurant is forced to vacate by Sept. 30.
Amano said he would like to stay but admitted that the prospect is unlikely. He has started a GoFundMe campaign to help pay for relocation.
Vanick Der Bedrossian, co-owner of La Mediterranee, said that when his building was purchased, he was told there were plans to do seismic upgrades and eventually introduce a high-end retail tenant.
“I was in shock,” Der Bedrossian said. “I don’t want to say they are bad people or have evil intent, but unless they clarify their position, we just don’t know.”
The last message the restaurant owners received from their landlord said Mehta’s team is unsure of plans for the property. Der Bedrossian said La Mediterranee’s lease ends in May, and if he were allowed to renew for five years at the current rent, he would do so, even if he needs to close temporarily for seismic upgrades.
“We have no interest in seeing a retail tenant in that space, and under no circumstances will we attempt to convert that unit to retail use,” Allen said in a statement.
While La Mediterranee is an official legacy business and subject to the planned protections in Peskin’s legislation, Ten-Ichi’s application for legacy status is pending, and the ordinance would not be enacted in time for the restaurant’s Sept. 30 move-out date.
Supervisor Catherine Stefani, whose district includes the Upper Fillmore, is convening a meeting this week with stakeholders from the Fillmore Merchants Association and Mehta’s group to discuss the plans for the neighborhood.
“I’m collaborating closely with the new property owners, our long-standing small businesses, the Fillmore Merchants Association, city departments, and residents to ensure clear communication about the future of our cherished corridor,” she said in a statement.
Stefani is considering introducing her own legislation meant to protect the corridor’s small businesses from displacement.
There have been rumors that Cielo, a womenswear store, was pushed out at the behest of Mehta’s team. However, two real estate sources said the retailer’s decision to relocate a few blocks away to a building owned by its existing landlord had nothing to do with Mehta’s team. A prospective buyer exploring 2043 Fillmore St., which houses Italian restaurant Apizza, is not Mehta’s group, according to a real estate source with direct knowledge of the transaction.
Peskin gave a press conference Monday in front of La Mediterranee that veered at times into a stump speech for November’s mayoral race. The Board of Supervisors President tied what was happening on Fillmore Street to a larger initiative to upzone a large swath of the city to allow taller buildings meant to help meet San Francisco’s housing requirements.
He compared Mehta’s efforts to California Forever, an initiative funded by Silicon Valley billionaires to create a utopian city from scratch in East Solano County. In the face of mass community opposition, a planned ballot measure on California Forever was scuttled this year.
“Fundamentally, it is irresponsible to signal upzoning plans to real estate interests without first creating the protections for our beloved neighborhoods serving businesses,” Peskin said. “They aren’t even getting a bus ticket.”