Pier 38 Drama Isn’t Over Yet

9/14/11Follow @wroush

[Updated 3:20 pm PT with comments from Jason Wong, see page 2] Entrepreneurs trying to prevent the eviction of more than 20 tech startups at San Francisco’s Pier 38 haven’t yet won a reprieve, but they’ve won a meeting with Mayor Ed Lee.

Jason Wong, CEO of San Francisco-based software consultancy i5Labs and leader of an informal group of tech executives protesting the Port of San Francisco’s recent eviction order, reports on his blog today that the Mayor’s office, Pier 38 tenants, and Port representatives will meet Friday to discuss the situation. District 10 supervisor Malia Cohen and District 6 supervisor Jane Kim will also participate.

The meeting was arranged after Wong and other entrepreneurs held a protest rally in front of City Hall yesterday, toting signs saying “Save Pier 38.” (Local news station KTVU covered the rally on TV.) Wong says the protesters were able to speak with members of the San Francisco Board of Supervisors, who offered expressions of support. Wong says Board president David Chiu told him he would “do anything he could to support us.”

The drama at Pier 38 has been building for months, if not years, but boiled over on September 6 after the Port of San Francisco posted eviction notices on the building, citing fire code violations and unsafe conditions (see photos below). Unless a deal can be worked out, the building’s tenants—which include approximately 40 small businesses with more than 150 employees—will all have to clear out by 5:00 pm on September 30.

The inspections leading to the eviction notices took place after the Port reclaimed Pier 38 from longtime leaseholder Carl Ernst on August 1. Ernst had subleased space in the building to a variety of other companies such as SOMAcentral. (The full web of leases and sub-leases at Pier 38 is difficult to untangle, but the list of companies with space there includes Automattic, 99designs, Socialmedia, True Ventures, Dogpatch Labs, and all of the resident startups at Dogpatch.) The Port said the inspections found problems relating to the building’s electrical, plumbing, mechanical, and structural systems that make it “too dangerous for occupancy.”

Ken Thom, managing director at SOMACentral, told KTVU that he would be willing to make the necessary repairs, but he said the Port has not responded to the offer. “Any other city in this country and probably the world, if they had what I call a jewel of job creation and tech innovation like we do here at Pier 38, they would bend over backwards to say, ‘What can we do to help you?’” Thom told the station.

If no help is forthcoming, Pier 38 tenants such as Dogpatch Labs, a startup incubator created by Polaris Venture Partners, will likely be forced to scatter to various locations in the South of Market neighborhood, such as Hatchery, a new coworking space that opened this month on Second Street. But they’ll face substantially higher rents; after a long post-dot-com period of moderation in the real estate market, rents in the SoMa district are back up in the neighborhood of $40 per square foot per month.

Real estate blog Curbed SF reports that SOMAcentral is looking at new space in the One Market Street building, which is already home to large tech companies such as Autodesk and Salesforce.com. Dogpatch Labs, meanwhile, is also searching for space. “We are committed to the future of Dogpatch Labs, and are in the process of finding a new home,” says Gus Weber, an entrepreneur in residence at Dogpatch Labs in Cambridge, MA.

Is Pier 38 really unsafe? Certainly, the facility is none too modern—and the big upgrades that were supposed to have occurred under Ernst, such as a public promenade around the pier, would have been useful. But there’s an abundance of alternative theories about the reasons for the Port’s eviction notices. Observers such as GigaOm’s Om Malik have speculated that the Port wants to clear out the space as part of its preparations for the America’s Cup sailing races in 2012-2013. One local real estate developer I spoke with offered a different explanation: the Port decided it didn’t want to be in charge of the morass of leases, sub-leases, and sub-sub-leases set up under Ernst, and decided to clear everyone out and start fresh.

Whatever the case, it appears that for the first time since the eviction notices went up, there may be some chance of a negotiated solution that keeps Pier 38 in place, or moves them to a temporary location while repairs are carried out. Wong says inspectors from the Port, the city, and the San Francisco Fire Department revisited the pier yesterday to conduct new inspections while the rally was going on at City Hall. “You don’t get two inspections in the course of two weeks under ordinary circumstances, unless there is a lot of public pressure coming into play,” Wong says.

The hope for Friday’s meeting, says Wong, is to see whether Pier 38 tenants can hammer out an agreement with the Port and City Hall that would allow companies to remain at Pier 38 while safety upgrades are completed—or, failing that, to lay a plan for swift repairs so that displaced tenants can move back into the space as soon as possible after September 30.

Even if some current Pier 38 tenants end up fleeing due to the current chaos, there’s still a strong core of startups who would stay if allowed, Wong says.  “I know that 99designs would want to stay here, and I’m pretty sure that Automattic would want to stay here,” he says. “If any companies leave, there are any number dying to take their spots, because of everything that happens here.”

Of course, it’s not just technology tenants who would be affected by a shutdown at Pier 38. Juraj Martanovic of Euro-Sail, a boat maintenance and diving operation based at the pier, contacted Xconomy today to let us know that he has started an online petition to save Pier 38 at Change.org. (It’s got 139 signatures as of this writing.) “It is our waterfront and we should ask Port to do more to maintain and fix all the piers, not just Pier 38,” says Martanovic.

[Update 9/15/11 9:30 am PT] Port and city officials have repeatedly denied that the Pier 38 evictions are related to preparations for the America’s Cup events in 2012 and 2013. But KTVU reports that it has uncovered an environmental impact report stating that Pier 38 may be used as an area for spectators during the sailing races. A spokesman for Board of Supervisors President David Chiu told KTVU that the agreement refers only to the waters around Pier 38, not to the pier itself.

Below are snapshots of the eviction notices and “red tags” posted at Pier 38 by the Port of San Francisco.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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