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.

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."

The sale was good for the bank, and it was good for Walter Shorenstein, imagewise at least. The '80s, if you recall, swamped San Francisco in an ocean of out-of-town development cash, threatening to sink Walter Shorenstein's hometown show. Buying the biggest building for the highest price re-established Shorenstein as the city's pre-eminent real estate figure. But the sale was not as immediately beneficial for San Francisco itself.

After buying the building and the bragging rights, reports at the time state, Shorenstein argued with the city whether he would have to pay increased taxes on the property under Prop. 13. The law, which amended the state constitution, holds tax increases on real estate down to 2.5 percent a year. If a piece of property changes hands, the tax jumps to the current assessed value of the property. The city - which wanted more money - prevailed after a court fight.

Now Walter Shorenstein is making another attempt to pay less property tax on the Bank of America building, which he currently owns jointly with the bank itself. The Bank of America property is the most prestigious piece of real estate on the West Coast, one of the best business addresses in the country, utterly irreplaceable given current growth restrictions, widely known to be well-managed, and believed to be nearly full. It is assessed at $583 million. Walter Shorenstein has filed an appeal with the city saying the assessment is 20 percent too high. The appeal is slated to be heard in July.

Commercial assessment appeals are handled like this: The city presents one appraisal, the property owners counter with their own appraisal. The final decision is made by a three-member assessment appeals board, one of whose members is Peter Fatooh.

According to Fatooh's disclosure form, he is a Shorenstein employee. Although he does not participate in Shorenstein appeals, as a board member he is privy to the income statements of many of Shorenstein's competitors. Additionally, he makes assessment decisions affecting the finances of other city landlords and developers. The Assessor's Office has viewed this arrangement as a conflict of interest in the past, and at one point asked the board to remove him from a case, but was unsuccessful.

But the presence of a Shorenstein employee on the influential city board isn't the only thing about the property-tax appeals process that irks Calvin Welch. The housing advocate finds fault with the fact that in San Francisco, a commercial landlord can ask for a lower property tax assessment based on a complaint that rents are down. Oddly, renters can't appeal to landlords for a reduction in rent if their income is down, Welch says, using the example to illustrate how Shorenstein and other big commercial landlords get a break from the city.

"It's an incredible riggin of the tax system," Welch says. "These guys are classic takers. Classic takers. [Shorenstein] makes money on infrastructure that he does everything in the world to avoid paying for. He and his son are in my estimation exactly what is wrong with the San Francisco business community."

Strangely enough, Giovanni and Cosimo de Medici, father and son, might have agreed with that opinion.

The Medicis, you may remember, were a fabulously wealthy family in 15th-century Florence. Giovanni was the dynast - he wasn't the first wealthy Medici, but he was the formitive one. A banker by trade,he was also a politician, a builder, a churchgoer, a patron of artists and a friend to the poor. Kind of an all-around guy in his city-state, and favorably viewed as such. British author Christopher Hibbert, in his book The House of Medici: Its Rise and Fall, presents Giovanni's philosophy this way: live in a modest house, work behind the scenes, be discreet in exercising power, never display any pride and don't forget to build lots of buildings.

There came a time in Florence when the city needed money for its war with Milan. Giovanni and Cosimo - discreetly - took the opportunity to work out a new taxation system, one that was based, for a change, on people's ability to pay. No sense forcing the poor to pay for the rich, in other words.

"In these circumstances," James Cleugh writes in his book The Medici, "the action of the Medici in themselves paying up the arrears of taxation owed by their friends, in persuading families associated with them also to contribute, and in forcing the nobility to pay its own share, further enhanced Medicean popularity."

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