Neil Mehta, a VC who has acquired several properties on San Francisco’s upscale Fillmore Street, made waves earlier this week when he reported that he was abandoning old neighborhood restaurants to attract more high-end retailers. For example, the San Francisco Chronicle interviewed the owner of Ten-ichi, a neighborhood sushi restaurant in operation for nearly 50 years that will be vacating the space next month. “This is the opposite of what San Francisco does with its long-term, long-established business tenants,” the restaurateur told the publication. “This guy (Mehta) is replacing us.”
But sources close to the low-flying Meta paint a very different picture. They say Meta’s focus is on attracting a wealth of restaurants to the area, and that it’s even planning a sort of “Y Combinator for restaurants.”
According to the source, Meta has a pretty grand vision for the four-plus city blocks he quietly acquired last year, turning them into an oasis for ambitious restaurateurs to set up shop, a place for San Franciscans to find a variety of dining and shopping options, and a place to restore the 111-year-old movie theater on the street to its former glory and make it “unchanging from spring to equinox.”
Asked for comment earlier this week, Mehta, who reportedly purchased a 117-year-old, 9,000-square-foot home just blocks from his newly acquired commercial property in 2022 for $17.6 million, declined to comment publicly, saying he speaks to reporters only on behalf of his portfolio companies.
Up and to the right
Some of Meta's plans were first reported by The Information earlier this year, which delved into how Meta, a lesser-known company compared to many VCs, was able to invest so much money.
The 40-year-old has been on a fast but steady rise. A graduate of the London School of Economics, Mehta was a star investor in a spinoff of quantitative hedge fund DE Shaw before using his reputation and network to co-found venture firm Greenoaks Capital in 2010.
The San Francisco-based firm, which first raised institutional capital in 2015, has since invested in some of the hottest private companies in tech, including Stripe, Databricks, Rippling, and Canva, all of which are now valued by their backers in the billions of dollars.
Greenoaks was also an early investor in Wiz, a lesser-known cybersecurity startup that reportedly turned down a $23 billion acquisition offer from Google (it’s worth noting that Wiz was founded just four years ago).
Now, Meta is putting some of that money toward Pacific Heights, the San Francisco neighborhood where he grew up. He’s founded a $100 million nonprofit to help people enjoy shopping. The plan is not only to turn the Fillmore into a must-visit restaurant destination, but also to make it easier for aspiring restaurateurs to thrive by cutting through the hassle of rents, and in some cases, charging a percentage of sales instead of rent.
Friends say Mehta doesn’t see his growing real estate empire as another financial gamble. They insist his primary concern is making sure the San Francisco area fully recovers from the pandemic. About half of the stores on Fillmore Street have closed permanently, according to commercial real estate services firm CBRE. One source says he “believes in the city a lot.”
Either way, the move is likely to solidify his fortunes.
First, Meta is largely avoiding what it calls “formula retailers,” companies with more than 11 stores worldwide. Some are already in the process of getting conditional use permits, but those can take up to 12 months to process, which is why many of the stores on the tree-lined streets now appear to be empty. (In other San Francisco neighborhoods, chain stores have been banned altogether.)
Meta will also benefit from 100 changes to San Francisco's city planning code that passed in December that streamline the permitting process for private businesses.
Given his financial resources, Meta can be selective about which businesses he wants to help, which is probably less of a stretch than the previous private owners of the building, who had less choice about who would pay the rent.
Meta doesn’t buy his buildings cheaply. For example, he bought a retail building adjacent to the theater on the street for $11 million, compared with $4.8 million paid by the previous owner 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 those elements of buying buildings and renting them out below market value to minimize turnover could create a more vibrant scene that would increase Meta’s real estate value over time.
Alex Sage, a senior vice president who leads CBRE’s urban retail team in San Francisco, says many shopping districts succeed when they’re carefully planned. “You don’t want two coffee shops next to each other,” Sage says. “But if you take a bakery and put another coffee shop next to it, that business can grow.” Likewise, he says, “All the wineries in Sonoma add to the appeal.”
Saguis says the risk of cannibalism is less than people might imagine, given the ubiquitous high-end food on Fillmore Street. “People go there for a specific experience. They don’t go there and choose between Mixt (a salad restaurant) and Atelier Crenn (a three-star Michelin restaurant),” he says, adding that the more populated the area is, the more people come.
Meta's movements may already be influencing the market.
Pacific Heights has long been one of San Francisco’s most expensive and sought-after neighborhoods, but home prices have fallen during the pandemic. Now, according to Redfin, the median home price in Pacific Heights is rising again, reaching $2.25 million in July, up 28.6% year over year.
