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The Last Tycoon 

Walter Shorenstein's skyscrapers shaped San Francisco. His cash configured City Hall. Publicly, he's pristine. But there's more than meets the eye to the man behind the megaliths.

Wednesday, May 10 1995

Page 2 of 5

"San Francisco after the war was kind od uniquely suited for commercial real estate penetration," says Clavin Welch, director of the Council of Community Housing Organizations, an affordable housing group. "Walter Shorenstein was kind of the pioneer in terms of San Francisco developers. He was the major San Francisco player."

"He had a vision," says state Rep. John Burton. "Some people wouldn't like the vision - I'm not the world's greatest fan of high-rises - but I think Walter's the guy who saw we could be a commercial center, and that he could make a ton of money."

From a $500 commission on a sale of a vacant building in 1946, Walter Shorenstein built a company that now owns or operates 10 million square feet of class-A commercial office space in San Francisco. That's more square feet than anyone else, and more than anyone else is ever likely to acquire, thanks to a bit of government intervention called growth control. By curtailing the height, width and depth of future developments, the growth control movement of the '80s cemented the real estate hegemony of Walter Shorenstein. His skyline of glass and steel may be sold, may even collapse in an earthquake; still, the explosion of construction he participated in - which made him San Francisco's buidling baron - will never happen again.

But wheter Walter Shorenstein's vision for - and grip on - downtwon San Francisco has been a good thing for the city as a whole is another question.

Consider Muni, for a moment. In San Francisco, there's wide agreement that Muni could use more money. The thing that people tend to disagree on is where the money should come from. Political progressives - the people who fought the high-rises in the '80s - finger downtown. Downtown gives the finger right back.

An example: Last fall, there was a proposition on the ballot that would have created a downtown tax district to raise more money for Muni. It was a logic-based agrument: The area that Muni serves most should pay more. Tax, however, is not a popular word in business circles - unless they're levying it themselves. Which, they did. To crush the ballot measure, the big commercial landlords sent a letter around asking their tenants for cash donations. The request: a voluntary "tax" of 2.5 cetns per square foot of office space occupied, payable to the Committee Against Proposition O. Tenants were very exact in their remittances: $1,712.35, $4,767.46, $836.88, according to records filed with the city's Registrar of Voters. The math alone makes the mind boggle. Shorenstein and his affiliated companies contributed more than $97,000. Thanks to this real estate blitz, the measure went down to defeat.

"It's very shortsighted for the business community to cut the money off for the operations of the city," says attorney Sue Hestor, an opponent of high-rises. "It's basic greed. Without transit service their property isn't valuable because people can't get to it."

"It has to do, eve, with the meaning of the city," says Richard de Leon, a San Francisco State University political science professor and the author of Left Coast City, a book on S.F.'s development politics. "Is it just a place to build tall buildings? Or is it a place where people live a communal life?"

Well, maybe the city could be both: home to skyscrapers, home to people. That's the argument, in any case, at the center of another tax debate concerning downtown in general and, given his holdings, Shorenstein in particular. Put another way, the issue is this: Do the big buidlings pay enough in property taxes?

Opening this debate is like peering into a can of worms and realizing all of them are armed to the teeth. Nobody's neutral - people think either that downtown is sluicing service money out of the economy or that ant-downtown politics are forcing corporate jobs to flee. The debate's rancor is fueled by a general anxiety over finances, because San Francisco is $100 million in the hole. That's a lot of cash, especially now that the real estate market is down, which makes people think they're paying too much in property taxes. Property tax is the city's prime source of revenue, financing everything from police to firefighters to public works. But as we've seen, commercial property owners aren't keen on paying taxes unless they're exacting them. In 1993, more than 7,000 people requested new assessments from the city, asking for permission to pay less tax. Most of those people were homeowners, but there were plenty of commercial landlords in the mix. Walter Shorenstein was one of them. Among the buildings he wanted reassessed: the Bank of America tower, at 555 California.

You know which one that is. The big brown behemoth at the corner of Kearny and Pine, 53 stories of glass and granite, as in sync with the San Francsico aesthic as Victorian grill-work would be in a Japanese rock garden. In 1985, Walter Shorenstein bought the buidling from the bank, which was going through hard times. He paid $660 million for it, at the time the highest price ever paid in a U.S. real estate transaction - and about $100 million than the bank itself thought the building was worth, according to Dan Costello, the executive vice president who handled the sale for BofA. The bank had resisted putting an asking price on the building, figuring that a savvy investor or a big ego would be willing to pay extra for the pleasure of owning San Francisco's top tower, Costello says, adding: "Which is what happened."

About The Author

Ellen McGarrahan


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