even though we are using modular units to do it. it would be of particular interest in making federal investment. if there is an opportunity to have a renewal option at the end of 10 years, it would make it easier for us to invest in the project. it is quite a burden to pay that off over 10 years. we do -- probably going to bring in $30,000 a night every time we do a show, and also parking. it is up broadway from us. we are committed to working with local vendors in the food area, preferably organic. we look forward to actually continuing the fine tradition. the particular site is quite special because it was on clerk point, where the first pier in san francisco was built, and it

became the city gate to the city, which began with barbara coast becoming a great tradition. there was a circus that combine the theater and circus, which is what we do today. we feel like the spirit of the incredible entertainment scene that grew out of san francisco, we follow that and we feel it every time we do a show. if there is any question, -- no questions? thank you. >> commissioners, any comments? public comment? >> good evening, commissioners. thank you for staying solely.

my name is frederick and i am here tonight speaking on behalf of recreation open space for the waterfront. i also am the president of the eureka theater company, located three blocks from this proposed location. i am sympathetic to the process of providing theater in san francisco. i am here concerned about the design of this building. it has nothing to do with this business or how it has operated, all the money it brings in, the benefits it brings. this site is part of the san francisco nebraska national historic district. this is not something -- san francisco national historic district. this is not something more you want to find the buildings complement that go back to the 1960's. it is nice to say that this group is going to make the neighborhood aware of this, but the first time anybody heard about this was in a newspaper or -- newspaper article one day

before the historic committee was mentioned. there was no outreach to anybody about the plan to do this. they have been looking at other sites in the city and other places to put this theater. the building that they're proposing is a metal building. it is made out of corrugated metal. it is 35 feet tall on the embarcadero, made out of red metal. it does not complement the historic buildings whatsoever. the committee heard their presentation 2-voted1 -- voted 2-1 not to accept it. i know you are aware of the value of that location. our group presented a view. on what should be done at that location when a hotel was proposed to be 84 feet. we were successful in getting it is zoned down to 40 feet. that site is very valuable and it deserves something more than a parking lot or the revenue

that can be generated by this entity. i suggest, even though they are looking for a better spot to relocate, that to consider the overall value of that parcel and what it can really do. it is zoned for a 40-foot tall building, a more permanent than the temporary-type they're proposing. it might be more popular with the neighborhood. i think you should consider these things. i know the neighborhood is not happy with a corrugated metal building to be built on that side. thank you. >> thank you. >> my name is james cunningham. i am a resident of this area. my apartment looks straight on the parking lot at the front door of the building they're proposing. i have enjoyed the teatro zinzanni four or five times in

the times i have lived year. it is a delightful show. i have nothing particular and i don't think many of my neighbors do, either, of having a potential location in this area, but i have to agree with the previous speaker that the building the proposed is ugly, cheap, not appropriate for the area. i would hope that they could do something better. it would be kind of an eyesore the way they're proposing at that the current time. i regret that they have done nothing so far to reach out to any of the neighbors. three months ago, when they were turned down at the architectural committee, i was also there. they made a big point saying they would reach out to the neighbors. this is the first time i have heard of it since then. i hope this is given very careful consideration. i hope it is done properly. thank you.

>> thank you. is there any further public comment? >> a few things i would like to point out in the process, because of a sole source, staff needs to come to the commission and get an authorization to begin the sole source because -- before we do it. this is the initial step in the relocation process. we expect it is going to be six months. we would ask you to waive your pre authorization, but to the pope. some speakers, this is the first up in the authorization -- but to the point of some speakers, this is the first step in authorization. there is no vote. it was an information item like this. the concept and design is still under review. i am working with mark and dan,

who are working on the design plans. this will be thoroughly vetted. the third comment i would make, teatro zinzanni when -- when teatro zinzanni first came in 1999, we took them up and down the waterfront and settled on this location. had echoes from the community. if you know that area, you know there is a residential across the street. teatro was a very good neighbor, a very good -- worked with the groups on sound, traffic on all their concerns. they were very open. so, yeah. happy to answer any other questions. >> i know we are looking at very least standard leases. what are renewal options that are typical? >> initially, as it stands now, we're looking at a 10-year term for that site.

>> with no renewal option? >> you know, i am taking my lead somewhat from director more air -- moyer on the limitations of what we can do there. >> did you answer the question? i do not think you answered the question about the standard term. >> there are no standard terms in retail leases. it depends. everyone is a unique deal. if someone is going to invest a million dollars, we may offer them a five-year extension option. every deal has a different flavor and different negotiation. >> i would just suggest that when we landed on this site, this has long been in the waterfront land use plan. long ago it has been a high

priority site for development. we have tried before. had it not been for the amount of our resources we have been dedicating to the america's cup effort for the last two years, we probably would have been moving forward with a development proposal for this site. it is in our interest to be able to do that at a future date for the reasons that a been mentioned. what that exact date is, i don't think we have a crystal ball. >> if we were to go with this lease and they invested the $2 million or $4 million they're thinking of investing in it -- >> i don't want to negotiate. i am hearing this for the first time. i assume there would be offering us some sort of market step up in the rent and other financial compensation for that and exclusivity. i have not heard that from speakers. i am sure that conversation can be had. >> there would be a review of

what type of improvements, infrastructure, water the improvements. if you bring in a building, a modular building, and the cost you a certain amount, that does not necessarily a benefit for the port. however, we are in the beginning of the negotiation, if you will. respecting the commission, i need your authorization to begin that process. >> so -- go ahead. >> i would like to thank you for bringing this to us as an informational presentation so that we can start the discussion. i am not a big proponent of sole source leasing because i think we have a leasing policy in place for a reason, and that is to give everybody the same advantage regarding our port properties. this is different. this is the current port tenant that has relocated because of our cruise terminal. i am glad that we are working to find another location. i am for this, and i am happy

that the minimum is going to be where we can get the rent that we're getting now, hopefully more. this is the beginning of the process, not the end. >> just wanted to make one other echoing -- i do appreciate attendance -- tenants' willingness while we do relocation. it has been difficult on our staff juggling relocation. i would like to thank everyone for working together and make the point that support is making the effort to do well by our tenants and get the message out there that we are reasonable and recognize changing circumstances impact all of us here. thank you for that. >> what are the implications of losing all that parking? >> well, you know, parking, it

is not sexy, but it makes us a lot of money. we are hoping we can frame the deal that we make the same money, the base rent would be the same money we are getting for the minimum rent on the parking, and that, you know, the upside would be, if it were replacing the 100 cars to park in seawall lot 324, we will get those 100 cars paying us in addition to the minimum and hopefully percentage rent that teatro will be paying. >> we're losing parking. >> we are going to lose parking. the parking lot holds about 400 stalls. this will take up about 88. however, we do have two other lots that are within walking

distance. we control about 700 parking stalls. >> going back to the right question, they are paying according to what was in the report, around a quarter of a million dollars per year. we are taking it at about 1.4 annualized from the parking lot. >> for the whole lot. if you look at their peace, which is 88 stalls, it is about $35,000 a month. that might be a place to start with minimum rent. >> if we were just looking at this on a pure leasing up to retell, i understand the circumstances, relocation, what we are trying to do. we do have to compare. what would you be charging? >> this is a very unique situation. what we are renting them as asphalt. we are not granting them a building, and existing restaurant. they are not building a

restaurant, that after the term, we would get possession back. it is a little bit of a hybrid. if we receive the same amount of money we are getting from the parking lot, i would be pretty happy about that. i think if we negotiate a fair amount of percentage rent, i think we would be very happy. we want to make sure they are viable. we do not want to over-negotiate something that is economically not going to work for them or for us. it is an asset, that parking lot. >> i guess we want to make sure -- we all want to be fair. we heard earlier today the port is in dire need of making sure we also get revenues. we have a lot of improvements and other things we need to make with the capital plan. i think it is striking the right balance as far as what is fair

for all parties involved. in terms of just looking at that, we don't want to lose anything from what we are gaining today, and to make sure we also benefit on the upside. >> agreed. >> going to the aesthetics issue, and investing some of the concerns raised by neighbors, the design has not quite been finalized, and there 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.