Neel Mehta, the venture capitalist behind a series of property acquisitions on San Francisco's upscale Fillmore Street, made waves earlier this week when it was reported he was forcing a string of long-established local restaurants to close in order to make way for upscale retailers. For example, the San Francisco Chronicle spoke to the owner of Tenichi, a nearly 50-year-old neighborhood sushi restaurant that is being forced to vacate next month. “This is the exact opposite of what San Francisco does with long-established tenants,” the restaurant owner told the paper. “This guy is [Mehta] They are pushing us out.”
But sources close to the struggling Mehta paint a very different picture, saying he is focused on bringing a lot of restaurants to the area and is even planning a sort of Y Combinator for restaurants.
According to the person, Mehta has some pretty grand visions for the roughly four-plus blocks he quietly acquired over the past year: to turn the area into an oasis where aspiring restaurateurs can set up shop, a place where San Franciscans can find a wide range of dining and shopping options, and to restore the 111-year-old movie theater on the street to its former glory so “it's not an Equinox.”
Reached for comment earlier this week, Mehta — who reportedly purchased a 117-year-old, 9,000-square-foot home just a few blocks from his newly acquired commercial property in 2022 for $17.6 million — declined to make a public statement, saying he doesn't speak to reporters except on behalf of his portfolio companies.
Up and to the right
Parts of Mehta's plans were first reported earlier this year by The Information magazine, which detailed why Mehta, who has a much lower profile than many venture capitalists, has so much investment capital in the first place.
It's been a quick but steady rise for Mr. Mehta, 40. A graduate of the London School of Economics, he was reportedly a star investor at an offshoot of quantitative hedge fund DE Shaw before using his reputation and network to co-found the venture firm GreenOaks Capital in 2010.
The San Francisco company, which raised its first institutional funding in 2015, has since invested in some of the tech industry's most talked-about private companies, including Stripe, Databricks, Rippling and Canva, all of which are now valued by their backers at billions of dollars.
Greenoaks was also an early investor in Wiz, the until recently little-known cybersecurity startup that reportedly turned down a $23 billion acquisition offer from Google (Wiz was founded just four years ago, by the way).
Now, through a $100 million nonprofit he founded as a catalyst for his shopping frenzy, Mehta is pumping some of his profits back into San Francisco's Pacific Heights neighborhood, the place he grew up in. His apparent plan is not only to transform the Fillmore into a popular restaurant district, but also, as part of the process, to make it easier for such businesses to thrive by cutting out some of the red tape aspiring restaurateurs face, offering cheaper rents and, in some cases, charging a percentage of sales rather than rent.
Friends say Mehta doesn't see his expanding real estate empire as just another financial gamble. About half of the stores on Fillmore Street have permanently closed, according to commercial real estate services firm CBRE, but they insist his biggest concern is seeing his San Francisco neighborhood fully recover from the pandemic. He's a “strong believer in cities,” one source said.
Either way, the move will solidify his fortune.
For starters, Mehta is largely avoiding so-called “formula retailers” with more than 11 locations worldwide. Some are already in the process of getting conditional-use permits, which can take up to 12 months, which is why many of the storefronts on the tree-lined street currently look vacant. (Other neighborhoods in San Francisco have banned chains altogether.)
Mehta also should benefit from 100 changes to San Francisco's zoning code passed in December that streamline the permitting process for independent businesses.
Mehta's financial resources also allow him to be more selective about the businesses he wants to help launch than previous building owners, who may not have had the luxury of choosing who paid rent.
Mehta doesn't buy his buildings cheaply: He bought a theater and adjacent retail building down the street for $11 million, for example, well above the $4.8 million the previous owners paid in 2008. He paid $9.7 million for another 7,300-square-foot building, or $1,329 per square foot. Still, it's easy to imagine that buying a building and renting it at below-market rents to minimize turnover would create a more vibrant scene and make Mehta's properties more valuable over time.
Alex Suggs, senior vice president who leads CBRE's San Francisco urban retail team, says many shopping districts thrive on careful planning. “You don't want to put two coffee shops next to each other,” Suggs says. “But if you put a coffee shop next to a bakery, sales will increase.” Similarly, “all those wineries in Sonoma add to the appeal,” Suggs says.
As for the fine dining options that will soon be found all over Fillmore Street, Suggs says the risk of cannibalism isn't as high as one might imagine: “People are coming in for a specific experience. They're not coming in and choosing between the Mixto and something else. [a salad restaurant] or [the three-Michelin-starred restaurant] “Atelier Crenn.” The more densely populated the area is, the more visitors it will attract, he adds.
Mehta's move may already be having an impact on markets.
Pacific Heights has long been one of San Francisco's most expensive and popular neighborhoods, but home prices have fallen during the pandemic. Now, the average home price in Pacific Heights is soaring again, hitting $2.25 million in July, according to Redfin, a 28.6% increase from a year ago.