VC is quietly taking over prized San Francisco property and planning a ‘Y Combinator for restaurants’

Neel Mehta, the VC behind the acquisition of several properties on San Francisco’s tony Fillmore Street, made waves earlier this week by closing long-established local restaurants in a bid to reportedly bring in more high-end retailers. For example, the San Francisco Chronicle spoke to the owner of Ten-Ichi, a neighborhood sushi restaurant for nearly 50 years, who now has to vacate his space next month. “This is the opposite of how San Francisco treats long-term, legacy business tenants,” the restaurant owner told the outlet. “This guy [Mehta] It is displacing us.”

However, sources close to Mehta paint a different picture. They say Mehta is focused on opening multiple restaurants in the region and is also planning a kind of “Y Combinator” for restaurants, said a source.

According to this person, Mehta has a big dream of turning the four-plus blocks he quietly acquired last year into an oasis where ambitious restaurateurs can set up shop, San Franciscans can find plenty of options for dining and shopping, and the 111-year-old movie theater across the street can be restored to its former glory and “not turned into an Equinox.”

When contacted for comment earlier this week, Mehta — who reportedly plans to buy a $17.6 million, 117-year-old, 9,000-square-foot home just a few blocks from his newly acquired commercial properties in 2022 — declined to speak on the record, saying he does not speak to reporters on behalf of his portfolio companies.

up and to the right

Some of Mehta’s plans were first reported earlier this year by The Information in an article that went into detail about how Mehta, who is far less well-known than many VCs, has so much money to invest.

It has been a rapid but steady rise for Mehta, 40. A graduate from the London School of Economics, Mehta was reportedly a star investor for an arm of quantitative hedge fund DE Shaw before he used his reputation and network to co-found his own venture firm, Greenoaks Capital, in 2010.

The San Francisco-based firm raised its first institutional capital in 2015, and has since invested in some of the tech industry’s most talked-about privately held companies, including Stripe, Databricks, Rippling, and Canva — all of which are now valued in the multi-billion dollars by their backers.

Greenoaks is also one of the early investors in Wiz, which was a lesser-known cybersecurity startup until recently, when it reportedly turned down a $23 billion acquisition offer from Google. (It’s worth noting that Wiz was founded just four years ago.)

Now Mehta is pouring some of his profits into Pacific Heights, the San Francisco neighborhood where he grew up, through a $100 million nonprofit he founded to promote its shopping. The apparent plan is not only to rebuild the Fillmore as a favorite dining destination but, as part of that process, to tackle some of the red tape that faces many aspiring restaurant owners, as well as pay them lower rents — and in some cases even charge them a percentage of revenue instead of rent — to make it easier for these businesses to thrive.

According to friends, Mehta doesn’t view his growing property empire as another financial gamble. He insists his primary interest is in making sure his San Francisco neighborhood fully recovers from the pandemic, even though about half the shops on Fillmore Street have closed permanently, according to commercial real estate services firm CBRE. He’s “a big believer in cities,” says one source.

These moves are likely to strengthen their fortunes in any case.

For one thing, Mehta mostly avoids what he calls “formula retailers,” meaning companies that have 11 or more locations worldwide. While some are already in the process of obtaining conditional use permits, it takes up to 12 months, which is why many of the shops on the tree-lined street currently appear vacant. (Other San Francisco neighborhoods have banned chain stores altogether.)

Mehta will also benefit from 100 changes to San Francisco’s planning code passed in December that will simplify the permitting process for independent businesses.

Because of his financial capacity, Mehta can be selective about the businesses he wants to support, whereas previous individual owners of the buildings may not have been selective about who would pay rent.

Mehta isn’t buying his buildings cheaply. For example, he bought the street’s theater and adjacent retail building for $11 million, after the previous owner paid $4.8 million for them 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 the pieces — buying the buildings, leasing at below-market rates to reduce turnover — could create a more vibrant scene that boosts the value of Mehta’s properties over time.

Many shopping districts succeed when carefully mapped out, says Alex Sagues, a senior vice president who leads CBRE’s urban retail team in San Francisco. “You don’t want two coffee shops together,” says Sagues. “But you take a bakery and put a coffee shop next to it, and business can grow.” Similarly, he says, “every winery in Sonoma makes it more attractive.”

As for the high-end food that may soon be everywhere on Fillmore Street, there’s not as much risk of cannibalization as one might think, Sayagues says. “People go for a special experience. You’re not going there, then deciding between mixes [a salad restaurant] Or [the three-Michelin-starred restaurant] Atelier Crane.” He says the more density a district has, the more people move there.

Mehta’s moves may already be having an effect on the market. Although Pacific Heights has long been one of San Francisco’s most expensive and most desirable neighborhoods, the median price of homes in Pacific Heights rose to $2.25 million in July, according to Redfin.

This is 28.6% more than last year.