for further details regarding the reduction request and project financing. thank you. >>: do i have 12 minutes or 5 minutes? >>: being that this is the first time we are hearing this particular item we'll allow for 12 minutes. >>: we don't have any 12 minutes. >>: guys with the have there? >>: i'll try to do very fast.

>>: it is up to the chair to determine if you need the full 15 or a reduced amount. >>: he's going to show the rendering of what we are hoping to build. i am actually really pleased to be before you know. this means prop c has passed. >>: could you state your name for the record. >>: my name is oz ericson i am the chairman of (indiscernible) - a little background. i worked on prop a, an earlier housing proposal bond. i was the only major developer

to work on it. i raised money for it; i pushed it. it did not pass. it was not accepted by the real estate industry. and was not promoted. it did not pass. with prop c there was a big ten approach at the first meeting there were 50-60 people from all walks of life, it provides 60 million dollars a year for affordable housing and affects market rate housing. the requirement for planning approval it to demonstrate to the planning commission that the proposed reduction will enable the project to obtain financing

and commence construction within the one-year period following the money commission approval. that is the actual language from the proposition. in your package i included a number of documents that relates to the fact that we have financing. the fact is a financing package that we prepared in july right after this had gone to the board, based on the proposition. i have to say here that we started out in 2011 with the project budget that was 90 million dollars. i will hand this out to you. that is where we started. right now we have a project budget with plant which is 111 million dollars, a huge increase.

excuse me i give you something of mine. ( laughter) we have had a huge increase in our budget. proposition c is becoming increasingly important for us. the first thing we have is the financing memo which shows that we went out with a 12 percent affordable. 48 affordable units and 351. based on that financing we got some proposals from lenders the most .serious one was prudential.

-- -0 what we have is we have something, the formal appraisal that prudential authorized had that as part of their basis. next, we went and got it formal commitment from prudential on december fourteenth; we got a 90-day locked rate. right now we have a 142 million

dollar with a lock that expires on march 14. it is expressly conditioned on getting prop c approval. the next document is a letter from -- and material consideration of pmc underwriting the loan is inclusion of affordable housing. key assumption is the 12% affordable. boy, am i nervous. sorry. finally, with regards to prudential there is the actual construction loan agreement. i have not included the whole thing. page 59 of that expressly once again says that this loan is absolutely conditional on the prop c approval.

finally, in your package we hav e the plant letter. we are prepared to execute the contract next week with plant, based on 111 million construction cost. the letter from -- states plant has finalized the contract and stand ready to sign to begin the renovation work. we basically-to the best of my ability we have proven that we have a financing available and the financing is contingent on getting the approval. the question comes up, what happens if we don't get the approval?

i'm handing this out if you don't mind. this is a letter from prudential, from today, expressly states that if we don't get approval we don't get this loan. language says, pmcc will not fund this loan unless the company approvedthe reduction of the inclusionary housing. that is where we are as far as potential goes. we don't have a construction loan we don't get the approval. if we get the approval we have a construction loan which has been totally negotiated, ready to execute. stepping back from this thing a little bit, when we were contacted by nabf well over to the years ago they issued a request for ideas basically about the project. we got extraordinarily involved.

in fact, we submit it on our own dime a 700-page proposal to analyze the building. will look at this building from every possible way that you could look at it. one of the big ways that we looked at it was keeping it as an office building. it had been vacant since aaa moved out. our analysis on the office was that basically this would be a 29 dollar a foot analysis, based on talking with many of the office users and with talking with brokers and developers. here is a statement that we did all this. sorry for the % and by the way here is the plant budget which shows the 111 million dollar

construction cost. what is happening the last year is that construction costs have gone up 21 million on this thing. rents have gone up somewhat. it has made up for most of the difference but even with the prop c approval we are just barely good profit. these big institutions use return on cost parameters; napf uses a 6% return. even with this approval we are down to 5.8% which is risky for a construction project. we have to go back to napf to get approval under the new

construction budget. we got approval on monday night after putting four million dollars of cash in the deal. please convey to them that the 12 percent requirement was a key component in both equity and debt financing for the project. we have formal approval from nabf that they will go to the next step. if this does not get approved, this will stay as an office building is what i think will happen. this is the latest cac analysis of offices. (off mic)

we budgeted $29 a foot. if you look south of market overview, the current market for that space is $42.30. that is a 46% increase in rents. we are a unique building. it is a legal office building they could turn. around and lease that -- an annual increase in revenues of 5.3 millon. if we don't get this approval, i am a local developer. we don't have a project.

that thing will stay as a big ugly building which i thoroughly dislike. in conclusion, prop c was designed for this. all bunch of us work hard to get through prop c. we are the first folks to come to you and we need this approval. we don't have a project if we don't have this approval. we will start this project in the next two weeks if we get the approval. that's it. 12 minutes. not a very good presentation, i apologize. >>: calling for public comment. i have one speaker card. paula richard.

>>: good afternoon. i am paula richard. i work with plant construction. i have been at plant for about 13 years, construction manager and vice president on this project if there is a project. i was asked to take a minute and reiterate what is in my letter. we bid out all of the subcontract work, probably 50 subcontractors ready to go as well once the project goes forward. if you're not familiar with plant construction we want to

point out a couple of things. we are a san francisco company company, we been here for 65 years. of the next 26 months there will 521,000 man hours translated in the range of 125 people average per day and up to 200 workers at the peak. if you have any questions i will be glad to answer them. i wanted to put in our support for the project. >>: any additional public comment on this item? >>: good afternoon commissioners, president fong. my name is john huang, and member of the international brotherhood of electrical

workers local 6. i live and work here in san francisco. i'm in front of you speaking in favor of this project. this project is partially funded by emerald fund and nabf, national electrical benefit fund, our union electricians pension fund. in the last three years when the construction industry hit hard by recession nabf funded a couple of large projects in san francisco, one is finished, one is at the end of construction. we do need this project to move forward simply because we have our pension money in it, we depend on it.

this project is good to be all union built. they can put a lot of members to work. we ask you to support this project. thank you for your time. >> president fong: thank you. >>: good afternoon president fong and commissioners. my name is michael mckenna, director of business development for ivw here in san francisco. this is a project that we need; it is ready to go, puts our members to work, gives us a return on investment. it is a project to beautify this area the city. we have residential units going up everywhere.

this vitalizes the area. with people living here it brings new life to the city in this corridor. it really needs to grow and change; this is part of that, to bring residents' ability to live and work here, and be around this area. it is something that we need to continue to foster. an office building at this area has left; aaa dispersed the satellite offices throughout. nabf is proud to pick up this building and transform this on something more useful for the city. we hope that you move this project forward. thank you. >> president fong: anymore public comment? seeing none, public comment is

closed. >> commissioner borden: all the paperwork that you provided us, i think what might be helpful for the future, having a lot of people maybe we can get in advance; it may be helpful to show the financial differential between the 12 percent and 15 percent so we have visualization in our minds what financially that means. in general we have always had this conversation about what is a cost to provide a below market rate unit. i don't know that we necessarily know what that cost is. you have always been an advocate for affordable housing. everyone understands why it is necessary and desirable to have this housing project

versus an office project. is a great adaptive reuse. i regret that i was not here in the original hearing i'm happy to be part of the secondary hearing, the type of project that we would want to be supporting, especially since it looks like you have a financing in the opportunity to move forward so we will see at least 48 units of below market rat eunits moving forward. i know that the building since it's vacant not as much foot traffic. a friend was mugged in front of that building. it is quite ugly.

i don't see enough adaptive cool use. a lot of other cities do a better job at that. we do a lot of new construction. i am very supportive. i will let the other colleagues speak. >> president fong: commissioner hillis. >> commissioner hillis: a question, how we are moving forward in this proposition. do you know how many units are at stake? how many approved projects we have that have not started construction that can come back and request the reduction? >>: this was an issue that came up the conversation around prop c. i don't bring with me today the pipeline. we have the conversation i don't know if mr. rand would like to comment on the pipeline %

have to consider the number of projects entitled that have yet to receive your instruction permit. this only applies to projects that choose to go from another option to an on-site option; it limits the universe of projects in the pipeline for whom this reduction would be applicable. the other thing that is import to know is that prop c although it articulates a reduction in the on-site -- establishes the floor of 12%. high-rise developments which comprise part of our pipeline which are under the 12 percent onsite obligation would not be eligible for for the reduction. i apologize. i don't have more data. >> commissioner hillis: can this be sought anytime?

i forget with a maximum is, five year entitlement. can they come back after five years and request a reduction? >>: i believe there is a three-year sunset cost. >>: one someone has received the first construction document they are no longer eligible to come back and seek the reduction. >> commissioner hillis: have you ever received a permit? you have up until the time that you can apply for the permit, until your approval sunsets to seek this reduction? >>: right. and then you have to start construction within one year. >> commissioner hillis: is that a requirement? >>: it is a requirement it can

be extended by the zoning administrator. >>: there is included is a that period in which we will consider this kinds of requests expires in january, 2016. that is a window of opportunity. that is in the charter. >> commissioner hillis: that is helpful. i don't want to lose too much inclusionary housing. this could turn into an office in the project were not to proceed. it is good that this project is proceeding quickly and we will get housing as well as inclusionary housing. it would be good to bring this policy back. it sounded good in the charter amendment but the devil is in the details. maybe we can have more discussion about the policy and

timeframe, not just an invitation to reduce inclusionary to 12%. in this case i am supportive. >>: i want to point out, it is a project of for hundred units. the difference between 12% and 15% is a difference of 12 units. him a larger thinking i am thinking that not approving it and giving up -- for a difference of 12, the benefit is in more bedrooms, more doors in san francisco to meet the need. >> commissioner wu: i want to follow on some of the thoughts of commissioner hillis. i wanted to see today that the project would not be financially feasible at 15%;

letter from prudential shows that. i want to make sure that we are not opening the door for all the projects want to come back and get a reduction. it is important for us to take this case seriously is the first one coming back. i'm happy to hear that there is clarity around the fact that this program ends january 1, 2016. i also want to make the statement that staff said that the entitlements are open for grabs. this project is easier because it came to this commission more recently. there may be projects that have gotten approved five or however many years ago. the commission may have a different take on what the titlement to be at the time; developers should know that if they ask for a reduction they are

also asking for a review for all their entitlements. >> commissioner antonini: this is a very good project. a compelling case is been made for the need for 12% to allow for the financing. if memory serves me right over the years that i have been here for approvals many of the earlier approvals were already built. even if there are some coming back to us they were approved at the time of lower bmr anyway. this provision would not apply to them. i don't remember project in the last few years especially the larger ones that have elected an on-site option. most of them have done this off-site. this would be on a case-by-case situation,

to look at them and whether or not % this particular one is a no-brainer. this brings to mind a similar situation that occurred earlier in the last decade when the two chevron towers were actually approved for residential % it never got built maybe because of cost, maybe because of the economic downturn. maybe because of the inclusionary requirement, that could be a lot of reasons as to why that never happened. they are now occupy commercially, still just as unattractive. i'm not talking about that. we have the possibility of making them more attractive building, a sideline of what we are trying to do here. the other thing pointed out is a need

for 24-hour residents in the area. crescent heights is almost finished, trinity will be building a lot of units. you need a critical mass of people to support a lot of retail, a lot of other uses to make a neighborhood in the does not happen unless you have enough residents there. this goes a big way in providing that. and having the on-site inclusionary of course allows for the diversity of income in those units too. i think that it is a very good project. the point was made that an office could be built probably but the building would remain as it now is. there is more of a demand for office; we have approved a lot of office projects south of market and the financial