San Francisco Faces Mall Collapse, RICO Turmoil and Political Shake-Up

If Merriam-Webster had to choose a Word of the Year for San Francisco, it might go with “up.” As in rents, home values, venture capital funding, office leases, and a general sense of optimism that just a few years ago seemed to evaporate like the marine layer in late morning.

However, this week, one filled with prominent names and properties, “down” might be a more apt characterization.

Down, as in, the San Francisco Centre’s value after the property foreclosed and was sold back to bank lenders this week. JPMorgan Chase and Deutsche Bank bought the roughly 800,000-square-foot Market Street property for just $133 million, a steep fall from its 2016 valuation of $1.2 billion. Of course, maintaining value often requires maintaining active leases, which the San Francisco Centre has failed to do. Over the last few years, 95% of the property’s tenants, including anchors such as Bloomingdale’s and Nordstrom, have left, relegating the city’s largest shopping mall into a dead mall.

The property represents a sort of paradox for the city’s latest and ascendant chapter. It’s a major commercial space in a major commercial corridor, yet no one has presented a meaningful vision for what the prominently located retail center could add to San Francisco’s future. Conversion to housing appears to be out of the question due to the center’s big mall bones — large floor plates and few interior windows — that make a residential retrofit prohibitively expensive. Keeping the mall as a shopping center also raises questions, considering the general uncertainty around the viability of retail.

CBRE, the broker for the property, is actively courting buyers in any case.

“Down” also applies to takedowns, which is what the owner of the TransAmerica Pyramid is attempting to fight off this week as he faces a lawsuit from business partners and dissatisfied condo owners.

Michael Shvo, chairman and CEO of the SHVO real estate development company, was accused of participating in a Racketeer Influenced and Corrupt Organizations (RICO) conspiracy. As The Real Deal’s Jake Indursky reports, the lawsuit was filed by the Core Club and its CEO Jennie Enterprise, and two residents at Shvo’s Mandarin Oriental condo project in Manhattan. The suit alleges that Shvo lured “investors, condo purchasers, tenants, and business partners into multi-million dollar transactions, the proceeds of which were diverted to enrich Shvo and his associates, and to fund their lavish lifestyles.”

After inking a deal in 2021, Core Club, the elite, members-only social organization was set to lease the first three floors of the TransAmerica Pyramid after inking a deal in 2021. However, those plans were interrupted by a series of legal issues that boiled over into this week’s RICO allegations.

“Down” also pertains to a step down, as in Christine Pelosi’s political ambitions. As talk around Rep. Nancy Pelosi’s retirement had picked up in recent years, so, too, did the notion that her daughter, Christine, would step up when her mother stepped down. Yet, a few days after the elder Pelosi announced her retirement, the younger Pelosi said she wouldn’t be seeking the seat either. Instead, Christine announced her intent to represent San Francisco in the state senate.

That state senate post is held by Sen. Scott Wiener, who is leaving the senate to run for Pelosi’s congressional seat. Wiener, the housing policy guru whose legislation has reshaped the state’s approach to housing production, launched his congressional campaign last month. Without a Pelosi on the ticket for the first time in 40 years, Wiener’s chances to bring his housing momentum to Washington have improved by orders of magnitude.