Mid-Market mogul: How Urban Realty quietly cornered San Francisco’s troubled main drag


David Rhoades, 61, co-founder of Urban Realty, surveyed 925 Market St., one of his eight properties on Market Street between Fifth and Sixth streets. Photo by Monica Jensen/SF Public Press.

Update: Urban Realty is currently taking bids from prospective tenants for CityPlace, the mid-level retail mall that will be located on Market Street between Fifth and Sixth streets  ­— after the San Francisco Planning Commission voted 5-2 in favor of the project late last week.

The vote came after a seven-year saga of garnering public approval from neighborhood groups, area businesses and citywide activists by the project’s developer, Urban Realty.

The two dissenting votes came from Commissioners Kathrin Moore and Hisashi Sugaya.

David Rhoades surveys his 2,500-square-foot retail space behind the boarded-up storefront at 925 Market St., on the mostly abandoned block just west of Fifth. The property’s interior is beautifully restored. The smell of fresh paint wafts through the air. Its walls are all exposed brick; the third-story floor-to-ceiling windows overlook Market Street. Outside, it’s barren. Rhoades acknowledges that the street scene is “derelict,” a haven for crime and homelessness.

It may be ready to lease, but Rhoades is in no hurry to fill the space — or any of the other eight buildings he has acquired on mid-Market over the past five years. He has been waiting for the right moment to bring San Francisco’s depressed central boulevard back to life. And he’s prepared to wait years more.

“If we rent now, we’ll get locked into a 10-year lease with some terribly low rate,” said Rhoades, co-founder of Urban Realty, a commercial real estate business with financial backing from a $40 billion Connecticut-based lender. “We’re waiting for the area to start to really pop. Then we can get someone in that’s much higher-end.”

Urban Realty’s eight mid-Market properties represent 62 percent of the assessed value on the troubled block between Fifth and Sixth streets. When the company finally opens all that commercial space, it will have gone a long way toward the redevelopment of San Francisco’s once-proud commercial spine, attracting investment and spurring more construction.

That goal has eluded local government for 15 years, as publicly funded redevelopment schemes were proposed, then foundered.

This spring, the San Francisco Redevelopment Agency allocated nearly $1 million in funds aimed at revisiting the mid-Market as a redevelopment project area. This would allow the city to direct property tax and redevelopment dollars toward initiatives to improve the strip, such as adding affordable housing and a theater district, and preserving historic buildings. Supervisor Chris Daly halted similar plans in 2005 mostly because he said they didn’t include enough affordable housing.

Mayor Gavin Newsom said in January that, by establishing the area as a redevelopment district, “Central Market Street, once a pivotal part of our city’s economy and cultural life, has great potential to once again be the grand thoroughfare that it was meant to be.”

Yet by leaving so many storefronts intentionally empty, Rhoades’ slow-churn real estate strategy has made city planners’ work largely moot. Urban Realty is sitting on a cluster of vacant commercial spaces and will redevelop them on its own timetable.


How did one developer succeed at acquiring so much valuable downtown real estate, less than a block from the high-end Westfield San Francisco Centre mall?

One word, Rhoades said: “Stealth.”

Rhoades said that in order to build anything of scale in the area, he has to purchase large swaths of land at reasonable rates. His business strategy, he said, is that of a lion. He prowls into a neighborhood and pounces on the properties he wants without anyone knowing.

“We were very, very quiet about this,” Rhoades said. “No one knew about any of the transactions, and we had to keep them quiet, because if people got wind of it, they’d start buying up other sites to try to kill the project.”

Rhoades said by buying properties under several shell limited-liability companies, he was able to outwit competitors.

“We didn’t really want people to know what we were doing,” he said. “We bought them in different LLCs, so if people looked they would say, ‘Oh yeah these aren’t the same people.’ They wouldn’t trigger immediately if they ran a search.”

A public records search showed ten active LLCs, with David P. Rhoades as one of the agents. Many of them listed the same Bush Street mailing address.


Just as the city’s interest in mid-Market waned, Urban Realty’s swelled. It started buying more blighted buildings, and continued as property values plummeted during the recession.

Rhoades bought mid-Market properties every year from 2004 to 2008. He said he saw the area as an “obvious great investment,” despite the profusion of run-down façades. “Our most significant investment is in mid-Market,” Rhoades said.

Residents and business owners haven’t seen much but gloom and doom in the mid-Market area for about 40 years, said Carolyn Diamond, deputy director of the Market Street Association, a nonprofit business association that advocates for redevelopment.

Diamond witnessed the slow disintegration of mid-Market into a stretch of abandonment, grime and crime.

“We saw some hope when BART was built and some investment during the dot-com era,” she said. “But besides the occasional pawn shop or jewelry store, there really hasn’t been anything down here since the late ’60s and ’70s. People didn’t want to take a chance.”

Daly, whose district includes mid-Market, said Rhoades “seems to have staying power” because he has a history of other Market Street acquisitions.

Since 2004, Urban Realty, a privately held company, has acquired nine properties on nearly two acres of blighted, vacant downtown real estate in the heart of mid-Market, through seven separate off-market transactions and more than $100 million in investments.

Urban Realty’s main capital partner, the $40 billion Wilton, Connecticutbased Commonfund — an investment company that helps fund educational institutions, nonprofits and health care organizations — has also invested in companies as diverse as vineyards and venture firms. In 2008, the San Francisco Business Times reported that the company invested $50 million in Premier Pacific Vineyards and a portion of $375 million in the San Francisco-based venture capital firm Sofinnova Ventures.


Rhoades’ biggest Market Street development, CityPlace, will be a mid-priced retail mall that will swallow up more than an acre where three buildings currently stand. CityPlace had been slated as the centerpiece of a mid-Market master plan envisioned in 1995 by San Francisco planners and neighborhood activists.

But by 2005, after the city had spent $1.3 million from the General Fund and the Redevelopment Agency, local politicians put the project on ice when they determined it would not include enough affordable housing.

Rhoades is still moving forward with plans to build CityPlace between Fifth and Sixth streets. He owns eight of 21 buildings on that block.

The acquisitions happened in quick succession: Rhoades bought 939 Market St., the old Social Security Administration building, in 2005; 949 Market St., the old St. Francis Theatre, in 2006; and 943 Market St. in 2007.

Urban Realty also owns the old Maxferd’s Loans pawn shop at 972 Market St. and the two nondescript buildings flanking it at 966 and 974 Market St.; 925 Market St. — the tiny slice of a building nestled against the old First Step shoe store; 901 Market St., the building at the corner of Fifth and Market streets where Marshall’s, a discount department store, is the ground-floor retail tenant; and 799 Market St., leased to Ross Dress For Less, a block down at Fourth and Market streets.

Though many of the buildings were leased when Rhoades first took an interest in the area, he saw untapped potential in the mishmash of businesses that did not seem to fit together.

“To me it’s so simple, but it’s kind of scary when you see potential and no one else sees it,” he said. “You have to do something at a certain scale because the incremental properties can’t seem to do it.”

Rhoades has now dusted off the plans for CityPlace. He said he has garnered support from business leaders, politicians and property owners, whom he said will be instrumental in getting the project approved by the Planning Commission next month.


Currently there are no tenants in the properties needed to build CityPlace. When Urban Realty started its acquisition, several businesses had to be moved. “We had to take care of everybody so everybody likes us,” Rhoades said.

“There were no cheap deals, but there was nothing extraordinarily tough, and no one knew we were buying so no one jacked their prices up,” he added. Urban Realty cut the rent in half for three years for the Asian Law Caucus, until it was able to purchase its own building at 55 Columbus Ave. The developer forgave back rent for the First Step shoe store so it could move to a larger space directly across the street. Rhoades and his partners reduced the rent for In-Home Support Services — a publicly funded program for low-income people with disabilities — which was relocated to Folsom Street.

Urban Realty also moved Citywide Case Management, an organization assisting 500 low-income and homeless psychiatric patients, to 982 Mission St. “We had been in that building with options to renew but David made it real clear from the beginning that he’d be a responsible developer,” said David Fariello, the group’s division director. “I found him to be a straight shooter.”

During this four-year span, a 7-Eleven store in mid-Market also closed, and the Social Security Administration moved to the Federal Building on Seventh Street near Mission Street.

At least two property owners on the block are holding out for the economy to turn around. They see the potential growth that CityPlace could stimulate. Blick Art Materials, scheduled to open this summer, hopes to position itself to benefit from future mid-Market development, and in the meantime expects to start strong by filling the void created by the closure of another art store, Pearl, on the same block.

Shiekh Ellahi opened a designer shoe store in a building flanked by Urban Realty properties three years ago — his second Shiekh Shoes location in San Francisco. Before Ellahi opened his doors, Rhoades offered to buy his building; but Ellahi had already recruited staff and promised jobs.

“I want to say Urban Realty offered me like $6 million,” Ellahi said. “But they weren’t willing to commit to a time frame for opening. I know when they say five years they mean 15, and I already had committed to hiring some people.”


Growing up in Los Angeles, Rhoades learned real estate from his father. He bought his first six residential units when he was in his 20s and has been doing land deals ever since. He said he takes inspiration from Chicago’s Magnificent Mile.

Before forming Urban Realty, Rhoades worked as a valuation expert and appraiser for Wells Fargo & Co., GE Capital and Bank of America Corp.

Rhoades and his partner, Martin Sawa, started Urban Realty in 2002 to buy large properties with debt and turn them around to “fill in the market on what’s missing,” Rhoades said. “Then we started buying more and more properties because I found out I kind of knew more than other people about the marketplace.”

Urban Realty has had significant redevelopment success in San Francisco. Rhoades points to the overhaul of one property at 228-240 Post St., a 39,000- square-foot retail building between Stockton and Grant streets, as an example of why he expects to succeed on Market Street. He’s done it before.

During escrow on the property, Urban Realty got tenant commitments for the entire building from what he calls “luxury retailers.” Construction began immediately upon closing, and since then net income for the property has increased more than 400 percent since the early 1990s. The property is now worth more than $42 million.

Development on mid-Market may be risky, but Rhoades said he likes taking chances and “buying on the edge.”

In 1999, before Urban Realty bought the building that houses Ross, at Fourth and Market streets, it was leased below market rate. After the acquisition, Urban Realty negotiated the retail lease up to market rate — an 80 percent increase.

“We bought this thing,” Rhoades said. “Then the Four Seasons and the Metreon opened, and, wow, this is a great location!”

Rhoades said there’s a good chance his mid-Market properties will have the same financial success as the Ross building and Post Street property.

“Now that we’ve gone public, people have started buying properties and there’s a lot of interest from prospective tenants,” Rhoades said. “The market is changing, it’s coming back.”

Neighborhood groups in SoMa and the Tenderloin are conflicted. They say although development can spur economic and social growth in the area, they are concerned about the destruction of historic buildings, increased vehicle congestion and rising rents on area streets.

Paul Hogarth, an attorney at the Tenderloin Housing Clinic and managing editor of the political blog BeyondChron.com, organized against the first mid-Market redevelopment plan. Five years later, he summarized the quandary many neighborhood groups face when power brokers seek to transform their home turf: Does doing something — anything — always mean progress?

“What’s the alternative,” Hogarth said, “nothing?”

Also, what killed mid-Market development in 2005, were groups that said, "large business is going to kill small business and displace people," Diamond said.

That’s a feeling that persists today.




A lengthy environmental review and a public approval process will determine whether the San Francisco Planning Commission will approve the plan for CityPlace — a five-story retail mall with 188 subsurface parking spaces on Market Street between Fifth and Sixth, across from the Warfield Theatre.

CityPlace developers David Rhoades and Martin Sawa, founders of San Francisco-based Urban Realty, will not reveal who they plan to court as tenants for the 250,000-square-foot mall, but say there is a lot of interest.

"We can’t mention them, but we have tenants interested in being located right across the street from Bloomingdale’s and Nordstrom,” Rhoades said. "People have been waiting for something to happen in mid-Market for a long time."

CityPlace will house stores that bridge the retail gap between the ritzy stores of Union Square and those that stand between Fifth and Eighth streets on Market Street as well as stores that are having a difficult time staying in business, Rhoades said.

Out of the 35 storefronts between Fifth and Sixth on Market, 17 are vacant. There’s a wig store, a pawn shop, a Western Union, liquor stores and a Metro PCS, just to name a few.

Rhoades called his mall "value-based" retail. He will not give specifics, he said he hopes to attract stores like Target, T.J.Maxx and Bed Bath & Beyond.

"There’s always been a neighborhood barrier between Fifth and Sixth streets," Rhoades said. "But CityPlace will make this a good location; it’ll give people a reason to cross the street."

The most contentious issues about CityPlace remain parking, traffic and historic buildings. In response, the draft Environmental Impact Report includes alternatives: reduced parking down to 88 spaces, and a "no garage alternative."

"However," Rhoades said, "no parking, no tenant."

We don’t want to see destruction of any historic buildings," said Elvin Padilla, a Tenderloin affordable housing advocate.



The south side of mid-Market Street between fifth and sixth. Urban Realty’s properties represent 62 percent of the assessed value on the block. Photo by Michael LaHood/SF Public Press.
The north side of mid-Market Street between Fifth and Sixth. Urban Realty’s properties represent 62 percent of the assessed value on the block. Photo by Michael LaHood/SF Public Press.
David Rhoades owns properties on the north and south side of Market Street. The Urban Realty properties are colored gold, and the vacant properties are striped. Graphic by Cody Rishell/SF Public Press.
CityPlace: Urban Realty plans to complete construction of 250,000 square feet of retail space on Market Street by 2010. Rendering courtesy of Urban Realty Co., Inc.
CityPlace rendering courtesy of Urban Realty Co., Inc.
CityPlace rendering courtesy of Urban Realty Co., Inc.

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A version of this article was published in the summer 2010 pilot edition of the San Francisco Public Press newspaper. Read select stories online, or buy a copy.