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Carol Lloyd: Surreal Estate
Real estate broker helps retail chains find a home in SF neighborhoods

by Carol Lloyd, Special to SF Gate
Tuesday,June 20, 2000

"The dot-coms have caused all our problems," bemoans silver-haired, self-described leftist Michael Epsteen. "They've sent commercial rents through the roof. No one can compete with that venture capital funny money."

If this sounds like an embittered director of an ailing nonprofit, think again. Outspoken, inclined to philosophize, sporting curls around his collar, Epsteen could certainly play the part. But his South of Market offices are a far capitalist war cry from the struggling social service organizations whose heart-piercing evictions have lately splattered the news.

Not only is he a real estate entrepreneur, his business is every bit as instrumental in the recent plastic surgery of San Francisco as the dot-com start-up and the loft developer. Only his scalpel works along retail arteries.

That's right, he's a broker for chain stores.

I was immediately curious when I heard about Epsteen and Associates several months ago. How would a firm working the chain store niche regard themselves within the polemicized cultural landscape of the city? After an initial phone conversation, during which Epsteen first complained about the dot-economy and then invoked the "small-is-beautiful" wisdom of Buckminster Fuller, I became even more intrigued. So he graciously agreed to sit down with me and his partner Matt Holmes to discuss the state of the retail estate. We met in his casually stylish oak and Afghani-rugged San Francisco offices, complete with an LED display offering pithy snippets from gurus like Gandhi.

Epsteen got his start as a retail broker in 1960, just a couple of years after the first shopping centers were built. Most of the chain stores at that time were centered on the East Coast, so many companies needed West Coast representatives to do preliminary location scouting and property development.

"In those days, there were only about 12 of us," Epsteen told me. "We called ourselves the chain gang." While most of his competition focused on selling suburban shopping malls, Epsteen noticed that cities were being left out. So he founded Epsteen and Associates in Los Angeles to hone in on the urban market, especially ethnic neighborhoods.

"I started out as a broker, but became a demographer and a researcher," he explains. "It's not enough for us to know it's a Latin neighborhood, we need to know it's Salvadoran and that they have certain needs in taste and sizing and color."

Interestingly, working to get retail into generally poorer, inner city neighborhoods in places like Los Angeles generally reflects a more progressive brand of capitalism. Lack of such developers, for instance, keeps South Central residents dependent on small exorbitantly overpriced grocery stores. It's only in places like San Francisco, where the idea of "neighborhood" is a guarded treasure, that development like Epsteen's might be accused of endangering a neighborhood.

At the urging of his clients, Epsteen opened a San Francisco office with Matt Holmes in 1986, thereby joining a tiny club of real estate puppeteers that orchestrates the movement of retail chains into the Bay Area. He now counts among his clientele some of the most successful (and controversial) of the local and national retail chains -- including Starbucks, Chevy's, Blockbuster, Noah's Bagels, Home Chef, Borders and Pottery Barn. In the last 14 years, Epsteen and Associates helped to open over 1,000 shops and restaurants in San Francisco, Berkeley and the greater Bay Area.

Unlike the residential real estate brokers who simply represent a buyer or seller of a house that's already on the market, Epsteen and his team of five SF-based brokers do more than sign paperwork and haggle over numbers. For their corporate clientele they research neighborhoods, target potential locations, find owner/developers for the properties and then negotiate leases or sales.

Sometimes this involves unusually creative tactics. When Matt Holmes targeted a vacant storefront in Noe Valley for the next Starbucks, he didn't just call up the owner -- a local doctor -- and try to convince him to sell or rent. First he became his patient.

But in San Francisco, securing property is only the beginning. The company also spends a good deal of time negotiating with City Hall and neighborhood activists. Although recently neighborhood groups have convinced the planning department to reject a number of their proposals -- a Blockbuster on Polk, a Borders on Union, a Beverages and More on Geary -- the company has also had a success which they seem eager to tell me about.

"They flipped out," says Matt Holmes, speaking of the moment word got out that they were planning to open a Pottery Barn at the site of the long-vacant Fireman's Credit Union on the corner of Castro and Market. "We had four different neighborhood associations -- all saying forget it."

Initially Epsteen and Associates had brought in an owner/developer and went looking for a tenant. Knowing that a chain store might be a hard sell, they approached local merchants like Cliff's Variety and Books, Inc. to see if they wanted to expand. When no one took up their offer, they decided Pottery Barn might be a good fit for a neighborhood with no furniture stores. When the neighborhood groups objected, they asked them to make suggestions that might sweeten the deal and benefit the community.

The result of such negotiations was Pottery Barn adopting domestic partnership rights (already under way but as-yet instituted), a plan for a community meeting room and a non-profit ATM whose fees will be donated to local charities. "We paid a 5-year lease up front which amounted to $160,000 and we're furnishing the room with all the furniture from the credit union," says Matt Holmes.

Lion Barnett, president of the Castro residential association (aka the Eureka Valley Promotion Association), admits he was surprised that negotiations with Epsteen and Pottery Barn turned out the way they did. "I was very intrigued by these people because they seemed like they actually wanted to add something to the community," he said. "At first I never could decide if they were putting us on but eventually I decided they weren't."

Working with corporate interests hasn't converted everyone in the Castro and in some circles it's made Barnett rather unpopular. "I've been called a traitor and a sell-out," he said. "But I don't think these people understand the real world. This project didn't need the approvals that might have allowed us to block it outright, and since their approach was so positive from the beginning, it seemed worthwhile trying to work with them instead of fight them."

As I listened to these tales of corporate-community harmony, I recalled a town hall meeting about gentrification and development in the Mission District about a year ago. Among the radicals, merchants, old-timers, homeless and youth, almost everyone had a different idea about "what the neighborhood really needed." About the only thing that this motley crowd could agree on was the undesirability of chain stores. Could good corporate citizenship be enough to change that feeling?

"It takes the flavor out of the neighborhood," says Marta Sanchez of Casa Sanchez on 24th Street. She says she would fight any chain store that tried to gain a foothold in her 'hood. "We're not about competition here, we're about family," she says of her fellow merchants, "A chain store would actually be taking food out of children's mouths."

When questioned about the predatory nature of chains, Epsteen and Holmes maintain that they have their standards. They wouldn't work with a company like Wal-Mart that tries to underprice the local competition as a means of putting them out of business. And sometimes, they say, they make demands on their clientele.

"Blockbuster is one of the most vilified chain stores in the nation and we told them, 'we don't want to work with you unless you change your ways. You can't come into San Francisco and throw up big obtrusive stores and move on.' They listened to us -- got involved in the community and various charities, they opened the store on 3rd Street corridor where they're losing money, because developing Bay View was one of the Mayor's priorities." They've recently opened one of the smallest Blockbusters in the nation (2,000 square feet) at Bush and Leavenworth.

Still, Epsteen and Holmes make no bones about their frustration in what they deem to be an "over-legislated" city.

"San Francisco is way beyond reasonable," says Epsteen, comparing it to Los Angeles. "Neighborhood groups can represent only 10 or 20 percent of a neighborhood but they speak for everyone. But Blockbuster has 200,000 card holders in the city -- that's almost a third of its population."

Are they concerned about making every neighborhood look the same?

"That's the most difficult question," concedes Holmes, "keeping the character of the neigborhoods."

When asked about how they respond to the charges that chain stores drive local shops out of business, Epsteen gives me the "better mouse trap" lecture, and concludes: "Chain stores are nothing more than mom and pop stores that outgrew themselves. If, say, a coffee house wants to compete with somebody like Starbucks they can do it easily. All they have to do is serve a good cup of coffee and say 'good morning, Carol.' The fact is that in the end, the chain store can only survive if the customer -- who also presumably is a part of the neighborhood -- votes with his or her dollar."

Voting with dollars has the euphemistic ring of Reagan-era whitewash. Sure, the customer "votes" as long as there's a choice, but once the local businesses disappear, voting for Bank of America or Wells Fargo becomes a little like, well, voting for Bush or Gore. The playing field has been cleared of all the little guys to make room for big guys who aren't so different after all: Maybe they do make a better mouse trap and maybe they don't.

Yet in another sense, voting with dollars is a terribly accurate metaphor and one that few consumers actually take seriously when they're out shopping.

This sad fact becomes all the more vivid as Holmes tells me about a local old-fashioned movie house. Unable to fill so many seats, the operator is steadily losing money and desperately wants out of his lease. But he can't get anyone to take it because no neighborhood group would approve closing a neighborhood movie theater. Yet obviously, the neighborhood *in toto* is not using the theater except as a nostalgic idea of neighborhood that they no longer actually support.

Once San Francisco was a city where you had to go downtown to patronize retail chains; now practically every neighborhood has a few slick new shops whose familiar logos flash like brand names from a teenager's closet. Now our neighborhoods have more in common with one other than simply uniqueness.

To be sure, San Francisco has maintained its character through hard work and neighborhood activism. But it's not that simple. We also escaped being chained down because until recently few chains actually pandered to the desires of its ultra-liberal, health-conscious, college-educated urban dwellers and immigrant communities.

Like most Americans, my political principles end where serious inconvenience begins. Last time I visited the independent copy shop, I circled for half an hour searching for parking then gave up and went to Kinko's (I would have ridden my bike but I was too pregnant); when I'm starving and late for an interview, I see La Salsa promising a low-fat burrito with no lard or preservatives, I cave; and at 105 degrees, after my local cafe has run out of ice, that Jamba Juice sign works like an oasis in the desert.

The rise of fancy coffee (Starbucks) -- along with fancy burritos (Fresh Latitudes) and fancy third world interior design (Urban Outfitters) -- has meant marketing to the corporate worker who has no time to hang out or cook or travel but whose memories of coffee houses and taquerias and that summer in Indonesia burn with an intensely affectionate nostalgia.

So if Michael Epsteen and Matt Holmes are the pushers of a dangerous drug called consumer desire, it's still up to us to "just say no."

Next Surreal Estate: Coming July 4.

Carol Lloyd is currently at work on a book about gentrification in the Mission District. She is a senior editor at Salon.

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