will be room to discuss that? >> yeah. it is under review, under development. we have met with the architect, a tenant of hours. teatro zinzanni, we have given them thoughtful comments in areas to go. the reason why i am not presenting it to you, the initial design, is we wanted to be developed further. >> it is not what was originally on the site originally. it would not look the same. >> no, absolutely not. that was more of a hodgepodge. again, this was done in a 15- month, a temporary deal. it became wildly successful. here we are, 11 years later. they did not build it to a permanent, you know, -- >> future. >> exactly.

>> we do have a lot of work to do. we have to ask your permission to start that work. i just want to reiterate that this is a very elegant solution, as commissioners have said, to keeping a good tenant, keeping that area of the waterfront activated. we will get back to a more detail of the trade offs on daytime parking and get more demand as a result of them at night time. we have work to do. we cannot do it until you tell us it is ok to do it. >> is that coming back in the fall? >> there are a few ways we can handle that. i can formally ask you to engage, to allow me to engage in sole-source negotiation. >> today, it is labeled as an informational presentation. >> it is part of the process. we wanted to get it out and let you digest and understand what

we are going to do. if you want, we certainly can come back in march and ask for that at a later date. >> it says you will come back in the fall of 2012. what was the anticipation? >> i am trying to be flexible in listening to your comments and concerns about the process. in the best of worlds for court staff, it could be to allow most of the ability to negotiate the deal and to bring it to u.s. fully formulated and ask for your -- bring it to you as fully formulated and ask for your -- >> it is difficult when we do not know the terms. i don't know. maybe something needs to be changed in releasing policy in order for staff and the commission to be able to discuss or staff to be able to talk to current or potential tenants about lease deals,

because it is really hard to give you approval for a sole- source when we don't know what we are giving approval for. >> i appreciate that. that is one reason why we are here having this discussion. >> that is why i said i appreciated your doing the informational presentation. >> i think on the timeline, when he thought he would be back with the final lease. i suspect that we would be seeing you for negotiating guidelines as we do other projects as needed. you're staring at me blankly. >> we want to get her some of the steps. we need to get through the architectural review, the design review, community outreach. we need to get through those. we can have a parallel negotiation and understanding. there are a few ways we can handle that. >> i think we are hung up is

sole-source retail. we appreciate the informational presentation and we understand that you're looking at this sea wall lot 324. we are hesitating whether we should go forward with the sole- source at this meeting because it is an informational presentation. i think we are saying we should continue to work on the direction here, but come back for formal approval. >> i agree with that. >> let me understand. can you not talk to the various community groups or to the tenant without us saying it is ok? >> we are going to invest a lot of time. they are going to invest a lot of time. we have a formal policy, as does the board of supervisors, for competitive bidding. the reason we are here today is to get your feedback on whether

you are open to us doing that. if you were not, i assume you would say so. at some point, we will ask the port commission formally to approve the sole-source in the board of supervisors. >> historically, i think we have done a backwards. we come with the whole deal and then we ask you. then we heard from you that it was too late. >> if you give us a theoretical waiver to do a sole-source separately from looking at the whole deal, it is -- >> no, we could have asked you for that approval today. our practice has been different, to do it when we have the whole deal together. we wanted to give assurance to teatro and other is that this is time and money well spent. if it is your preference to have an approval, we could be back with the next meeting. >> that is not what we're trying to get that.

we were trying to say, to me, this is a unique circumstance. this is a tenant that is being relocated because of development. i feel it is ok because they have been looking for a space and this is an available space right now. as far as the terms of that sold-source and approving that, -- sole-source and approving that, i guess my issue is that once we approve the sole-source, we are saying we will approve this actual project taking place. then you go into negotiations. >> yes. >> you will still come back for approval on negotiations. we are giving that person -- >> the exclusive right to negotiate. >> we want to negotiate with them. >> that is exactly right. >> if the deal i bring before you, you cannot approve it --

you can not approve it. i want to come with the deal that i know will be approved because i don't want you to say now. -- no. [laughter] it does not fit that it is of -- it is really a hybrid. they were an existing tenant. a very cooperative tenant in good standing. what i did is, what tools and mechanisms do i have to fully vet this? it is retail. we are in the public arena. have it very above-board and open, and open process. i chose, let's do a retail leasing policy. >> perhaps i could make a suggestion. given all the circumstances, we have talked about that. we appreciate it being brought forward and the uniqueness of the situation. perhaps we could have some

briefing once negotiations are under way, perhaps we could get an update brought to us in some fashion to give us a sense before are weighing in. >> sure. >> it may need to be in closed session or something. >> we are looking at a 10-year lease and maybe extensions. we are also looking at -- from development. how does it work together? >> we will have to look at that from negotiation. we are friends now withteatro -- with teatro, and hopefully we will negotiate and stay friends. i want to represent the port and make the best deal i can while being fair to the tenant, making sure they are viable and economic, but i am happy to give

you a term sheet in closed session or in open session if that is the vehicle you want. >> it sounds like there might be questions about the lease and the location. maybe we should come back quickly on the location and the aspects of the location. then either continue to work on the lease -- i am not clear on your direction. sort of stabbing in the dark. >> i think we should have a discussion that covers some of the points mentioned in closed session. you work on negotiations so it does not come to us with a full term sheet, which is reoffered. i think we need to have some sense of where you're headed. >> in executive session, you would like to give us what the plan is and give us negotiating direction. ok. >> the converse to that is, do

it sooner rather than later so you can be clear with teatro zinzanni. >> we want to deal with our tenant in good faith. >> i appreciate that. very good solution. >> one other question. is there a second choice site? >> no, not on port property. >> ok. i think it is processed. i like anything theatrical done at the port. with that being said, i also think it is important that -- we are in a couple of different -- we are neighbors. the way this is being built, i don't have the full vision, nor do you at this point. that is what we're stumbling on. the process by which is going forward, we want to give them a good tenant.

we've relocated them. the opportunity to move forward. we want to take care of the neighbors as well. it is not easy. whatever the processes, i am happy to move whatever forward we can with that, with having the meeting as soon as we can. >> thank you. i think you have given us the kind of feedback all the parties in the room were looking for. >> thank you. >> thank you very much. >> public comment on this item? ok. >> i am jim rubin and i am working with teatro zinzanni. i think buried in your conversation just now when your dialogue is the answer to this question, but over the 25 years i've been doing this, i am sensitive to public outrage. i know that is the way we do things.

-- to public outrage. i know that is the way we do things. -- -to public outreach. i know that is the way we do things. i want to make very clear on the record that there was no intent not to get out into the community and talk to everybody. there is one other small point about teatro i am sure you recognize. they are not a restaurant. there is no menu or up selling. the meal is delivered and that is it. it is an odd duck to fit into president -- precedent for other uses. thank you. >> ok. request approval of direct negotiation of the golden bear --

[no audio] request approval to enter into bad word, golden bear bought kelly's mission rock. they declared bankruptcy in february of 2011. between february and november, the trusty attempted to sell the lease without success. on november 21, 2011, kelly notice the sale of its assets, including the lease. it was presented with the opportunity for over-bids. mr. osbourne took possession per

the court order on january 3, 2012. the existing lease will expire march 132013. -- march 13, 2013. once the sale closes, the back rent of just under $95,000 will be paid to the port. they're entering into a new lease that will extend the existing term by 10 years to derive the following benefits to both parties. a new lease will provide the maximum investment into a facility that has been long neglected, which includes not

having a properly operating kitchen. the property most recently had fallen into being used as a nightclub anbar only. mr. osborn's projections show there will be $1 million in construction in improvements and another $1.5 million. a new lease will allow the implementation of updated laws and ordinances to include card check and ada requirements. a new lease will enhance the current terms by providing increased revenue opportunities through sharing in 7% of gross revenues. a new lease will allow him to attract investors needed to make this a successful venture. he has a proven track record with three other restaurants in the area. without the ability to

advertise all the planned improvements, it will not be financially or make a good financial sense to invest these types of dollars. getting the restaurant open within the next six months would create an estimated 40 to 50jobgs, -- 50 jobs, plus the construction jobs it will create. this restaurant will activate that portion of the waterfront that is in need of investment and will bring benefit to the community to have the facility and area improve for public enjoyment. mr. osborn has offered to extend his improvements to aqua vista park, which the port may not get from other bidders. mr. osborn will also improve public access for completing the visitor dock that was always intended for that location that has been approved. if you approve this request

today, court staff will begin negotiations with golden bear, including market data that the new transaction would bring market rents and be in keeping with port retail leasing policy, which allows for extended terms if a tenant is making a significant investment in the property. at that time, you will have the option of approval. the transaction will also require board of supervisors approval. thank you for your consideration and i am available for questions. mr. osborn regrets that he cannot be here today, but he has invited other representatives to speak for him. >> so moved. >> second. >> public comment. we have john, then topher. >> good evening, members of the

commission. i am john. i have been fortunate to have had a relationship with peter osborn since the development of momo's restaurant. we have begun the conceptual design work for mission rock. we are at a point now where we have taken that conceptual design and distributed it to those who are distributing it to the subcontractors. we are compiling the estimate that susan has referred to. what i can say is that peter has been a tremendous asset to king street. he has a passion for san francisco. he is a tremendous restaurateur. he has conveyed to all of us his commitment to san francisco into this particular area, despite the notice today that sales forces have outgrown their campus before they have broken ground.

that has not deterred his spirit to participate in developing mission bay to a greater extent. i am here for any questions you might have or technical issues you are curious about. i will turn it over to topher, a member of the community and someone we will be working with as we develop our "vista park -- aqua vista park. >> wait for her to call you, please. >> topher delaney. >> this one is yes, yes, yes. we have been terrorized by this kelly mission rock for the last nine years and i am so thrilled to have this guy here. i just ms. -- met him. he is a responsible restaurant eur. he is going to help us out.

he has a wonderful restaurant that is run like a grown-up. that is really fabulous. we are thrilled to have him. i hope you will give him whatever this guy needs to come in. he is going to run a good ship and it will be a good reflection on the port. it is going to be fabulous for the community. that is it. three cheers for the sky. >> thank you. -- for this guy. >> thank you. >> good evening, commissioners. i am the managing partner at water bar. just down the street. i am the newly elected president of the golden gate restaurant association board of directors and i am late for dinner service right now.

i have known pete osborn for little over 10 years. he is a wonderful human being. you are not going to find a more dedicated and passionate restaurateur. a super-smart businessman and someone who is committed to san francisco. i will recommend that you approve this measure as a fellow waterfront restauranteur. we are all there scratching, fighting every day to fill our seats. even with pete as a new waterfront restaurateur, i welcome the new addition to the area. thank you. >> public comment? questions? >> i just want to add, i have known mr. osborn personally through being a soccer mom and dad together a few years ago. i want to reiterate what

everybody said. we are fortunate that somebody of that caliber are rows -- arose to take a look at this. i think it would be a wonderful addition and solves problems that residents have been complaining about for a long time. >> i think mr. osborn is a great restaurateur. still, i guess my concern with this one is that we welcome him to the neighborhood, we welcome him to take over kellies mission rock -- kelly's mission rock, it has been a problem since mr. kelly passed, and there are 11 years left on the lease. i want to understand what his

vision was when he purchased the lease out of bankruptcy for that 11 years verses what he needs -- what, 20 years on the lease? we have teatro, investing $4 million and wanting a 10-year option. this has 10 years and did -- and is investing $1 million. he says better is not sufficient time to advertise. what does support staff think? have we done market research on the area and what that property will bear? and there are developments. it is a prime piece of property. >> it will be part of our negotiation and research. i have reached out to the association. we are going to use some of our economic development analysis consultants based on what he is

going to invest and to get investors, they are going to want to know that there is some term to their investment. it is the end of 11 years. 11 years is chewed up. if you were to invest in business, you would want to know that they would be there beyond 11 years. the difference i see in this and teatro is that this is a restaurant. it is going to be a restaurant. we have to make sure that what is paid by whatever operator is in there is the best that thet port can get in today's market. >> i agree. >> that will be part of our negotiation. what i am asking you today is to

be able to negotiate with that tenant that is already occupying the space. that he will want to invest his money and other investor money. that the return will be as good to them as it is to the port and that is what the goal is of war will bring that back. there has been a request of terms, and it is the base rate of the current rate on annual adjustment. i guess when you say you can look at it in terms of market rent and other things, and this is a new lease, not just taking over the existing lease end extending it, i think it is afford to understand between the old and new. and given there will be an investment in higher value in terms of what their restaurant

will be, and we also understand the economics of mr. osborn's projections. if you're going to pay the existing rent of two percent, that does not sound like a good deal for us. i understand he is investing. we want to picture we understand the economics of the deal, and he is asking for further extension over time, so police is very valuable. -- so the lease is very valuable. we want to make sure we understand the return on the investment and what the poor is. i am not clear yet on what the balance is. >> we will bring that back to you. if that enat the end we had to t out, we would lose close to a billion dollars in revenue because we would have to go

through the new process of bidding a new owner. since he is already there, there is of value to have a tenant on site paying rent. >> you lose a million dollars though. i would disagree with that. >> if he vacated the property and we have to go through the process we are going through now without somebody in the building, then we would lose that. >> we have to remember 10 years from now what the neighborhood will look like. we understand that. we're projecting there are lots of activities. it's great to have that investment. it will be more valuable 10 years from now than it is today. >> i would offer what we're asking for today is the ability to negotiate. you can see notes, and you will be stuck with the least you

have. >> i do not think we are saying do not enter into negotiations, we just want to make sure we're giving direction on making sure the least comes back with what we think are beneficial to the port. that is what i am saying. >> that is our intention, to make sure through market analysis that what he is requesting an not -- is not necessarily what will be the final lease that we present to you. we're just committing to use that through an using educated information in the marketplace, looking at the future value of the lease, looking at the current value of the lease and property, we are going to take that into consideration as we design the deal we would bring back to you for approval.

>> hopefully we would see the performance of how he expects for restaurant will do. >> i actually have that with me today. and until we start negotiating with him, i did not know how much information i could share. in we would want to see it n we negotiate a lease terms. take a that was part of our due diligence that we see his pro forma. we have a lot of that information that helped us make our decision to come and ask you to go forward. >> he could have been bought out and told 202until 2023? we get not only the base rent