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San Francisco Chronicle​

Castro Theatre's renovation could revive the iconic S.F. neighborhood. But a new backlash is building

Gregg Perloff is confident that the massive ongoing renovation of the historic Castro Theatre, one of San Francisco's cultural icons, will revive a beloved neighborhood that has struggled in recent years. The CEO of Another Planet Entertainment pointed at the exposed concrete floor in the theater's auditorium during a tour last week, where new seats, a flashpoint in the intense debate over the future of the theater, will soon create more space to hold more spectators for films and concerts once the venue reopens early next year. 'There used to be 250 days of film here, but they averaged 200 people a show. We plan to triple that,' said Perloff, as shrouds of construction dust swirled around him. Despite skyrocketing costs, his team is executing its vision to restore the century-old venue as a nightlife destination for the city's famed Castro neighborhood, he said. 'There's over 20% (retail) vacancy in the Castro, depending on who you talk to,' Perloff said. 'We'll be bringing in over 200,000 people a year, and that is extremely important to the restaurants, the bars, the coffee shops.' Another Planet has a chance to be a hero to the Castro, a global symbol of queer liberation and pride now beset with shuttered stores and difficult street conditions. But controversy is once again brewing around the renovation project, which is contributing to the commercial casualties on Castro Street by pushing out a pair of longtime small business owners. … Riyad and Ken Khoury, brothers who for decades have operated a nail salon and a coffee shop out of separate storefronts that flank the theater and share the same landlord, say they will be displaced once their leases expire next month. Another Planet confirmed that the company needs those spaces to expand its box office. The Khourys said they were initially misled about the extent of Another Planet's plans for the theater's building. They said landlord Chris Nasser told them three years ago that Another Planet's renovation project would not impact their ability to renew their leases. 'He told us, …'Don't worry about it,'' said Ken Khoury. The brothers shared emails with the Chronicle that appear to substantiate their claims. The Khourys said they were shocked to learn in January that the entire building had been signed over to Another Planet. The Khourys, Palestinian immigrants in their 70s, are asking customers to sign petitions to sway Nasser to offer 'options or alternatives.' 'We have built our businesses on the premise of service and being decent, and by working with the community on all aspects — they support us, we support them,' said Ken Khoury, who owns the Castro Coffee Co. at 429 Castro St. The Khourys initially supported Another Planet's bid to revitalize the aging theater, which came as many businesses on the corridor struggled to reopen following pandemic shutdowns. 'Castro was not in good shape. We thought this would give it a shot in the arm. We thought, maybe it will help all of us,' said Riyad Khoury, owner of the Castro Nail Salon at 431 Castro St. 'I did not know that we were going to be the victims of that (the project).' The Khourys said they appealed to Another Planet for assistance, which offered to 'help' cover buildout costs should the brothers secure new storefronts elsewhere. A spokesperson for Another Planet denied that the company made such an offer and suggested that the Khourys relocate their businesses into 401 Castro St., a building adjacent to the theater that's owned by their family. That building's ground floor commercial spaces are occupied by longtime businesses, except for one that was vacated last month. Riyad Khoury said their businesses can't fit in that space. Supervisor Rafael Mandelman said that Another Planet is making a 'very bad call' by displacing the brothers' businesses. 'This is Another Planet's project, and none of this was disclosed to the broader community,' he said. But for Perloff, of Another Planet, the Khourys' situation is 'a landlord-tenant issue.' He said the theater needs those spaces for a 'proper' box office, and that they were included in his lease with Nasser. … Perloff said during last week's tour of the theater that the renovation project faces its own struggles. He argued that multiple meetings and hours of public input delayed the renovation, which along with commitments made to the community, is making it less lucrative. Costs have ballooned from an anticipated $15 million to over $40 million — an 'untenable figure,' Perloff said. 'We're going to have to raise some money,' he said. The theater's reopening has been pushed back to early next year. Another Planet agreed to include 75 days of programming per year for film screenings and festivals, add separate sound systems for films and concerts, and put in a new projector and screen. Other improvements include the restoration of its decorative ceiling, which had turned brown over the years, and replacing its house organ. A motorized raked floor system providing tiered seating, will be installed, and a second floor space will be transformed into a bar and lounge area. Moveable bars will be added on the ground level. 'What would make me happy is we get this theater going and two years later, we just see so much more activity in the Castro District, with people from all over the Bay Area saying: 'Of all the theaters that went away, I'm so glad that this one got saved,'' Perloff said. … Perloff is also worried about empty spaces outside his theater. He pointed to two boarded up storefronts in another building steps from the theater, at 449 Castro St., that have sat vacant for years. Another Planet's attorney, Dan Serot, told Castro stakeholders in February that the company had met 'several times' with the owner of 449 Castro to discuss relocating the Khourys into the vacant spaces. But the owner 'rebuffed every effort,' Serot wrote in an email obtained by the Chronicle. Efforts made to reach the owner for comment were unsuccessful. Mandelman, the supervisor, said there's a 'real challenge around property owners who don't actually seem to have any interest in renting out their properties.' Another large property nearby at 2390 Market St. at the intersection with Castro has been sitting empty since Pottery Barn departed in 2018. Real estate sources told the Chronicle that the city made an offer in the past to purchase the building, potentially to house the LGBTQ history museum. But the parties could not come to terms on pricing. Down the street, at 531 Castro St., a 'for-lease' sign hangs in the window of the former Hamburger Mary's restaurant, which shuttered in 2020 after two years in operation. Before that, the storefront was vacant for nearly two decades. Landlord Les Natali also owns the adjacent building at 541 Castro St., which features another vacant storefront. Real estate agent Cheryl Maloney, who is representing Natali in leasing up both buildings, said he has been working to fill the buildings. Some new businesses that have attempted to set up shop on Castro have struggled to open. The large corner space at 500 Castro St. at the corner of 18th that once housed nightclub Harvey's was supposed to be rebooted with a new bar concept. But the project has stalled due to 'unbelievably high' rents and costly renovations, said Maloney, who does not represent that building's owner. 'Everybody pulled out,' she said. Robert Emmons launched his gift shop, Welcome Castro, out of a storefront at 525 Castro St. in 2023. He said it's been a tough two years. 'It's probably my most expensive rent of all my three businesses, and the least productive,' Emmons said. 'There is just not much draw to the Castro anymore. We have way too many empty storefronts, and with the Castro Theatre closed, we just don't have the activity to keep people coming back into the neighborhood.' Emmons is hopeful that Another Planet can help revive the neighborhood. But across the street, Tim Flint, the owner of a six-decades-old antique shop, is skeptical. 'When Another Planet first came, they said they wanted the support for changing the interior of the theater…and they got that,' Flint said. 'Now they want the coffee shop and nail salon. Well those are established businesses, just like my business. If you allow that, you're destroying neighborhoods.' … The dispute between Another Planet and the Khourys has divided the community. Paul Miller, board president of the Castro Community Benefits District, said the historically gay neighborhood faces changing demographics. 'There's always a sentiment that you want to keep things the way they are, but the world is a changing place, and the needs for LGBTQ heart of the community have changed,' Miller said. 'We also need to make sure that we continue to be a place that serves the community as its identity changes and grows.' Nate Bourg, president of the Castro Merchants Association, said a new entertainment zone allowing alcoholic beverages on streets and sidewalks will begin with the Castro Night Market on Friday, a monthly event that has drawn new crowds to the area. He described the theater renovation project as a 'watershed' moment for the neighborhood. 'There's been some controversy… but there's no doubt that, and by and large, that project is going to be a big game changer for the Castro, and really, for San Francisco, to have such an iconic space reopened and renovated.' Stephen Torres, a bartender at the Twin Peaks bar near the theater, agreed that most want to see the Castro return to the 'vibrancy' it had during the 1970s and again in the early 2000s. But, he said the effects of 'speculative real estate turning a whole generation of landlords into gamblers willing to hold out for that big payoff' are being deeply felt in the neighborhood. 'What we're seeing is people not feeling a connection to their community, or even safe in their communities. One of the things that did actually hold the Castro together was the theater,' he said. 'The best case situation is a return to a more comprehensive venue that remains accessible to the community and is not a private and exclusive space, which is the divide.'