widened sidewalks, to obtain critically needed parking to inspect the adjacent historic district, and to withstand the test of time. this had to be balanced with an economic engine that would pay for these benefits. we chose a mixed use residential project that would allow a market rate housing, housing with a broad range of pricing, not a minimum of 2.5 million, as some suggested, and an enormous amount of money, and $11 million to be paid for affordable housing. this is the project before you.

in this balancing act, it is not possible to please everybody. this is san francisco, but we hope you agree the majority of sentences since -- san franciscans will be better served. the environmental impact report that was approved was started in december of 2007 and was meticulously prepared by the planning department and a team of the city's leading consultants over the ensuing four years and three months. it is a complete and accurate environmental impact report. thank you very much, and i would

like to introduce him. he will answer any questions you may have triggered >> -- you may have. >> i would like to talk about issues raised concerning the adequacy of the eir. a thorough analysis has been provided by planning staff. we agree with his analysis. i do not want to repeat what he said, but there are a few issues i would like to touch upon is the board has any technical issues that would best be addressed by an air quality consultant, now is the time to ask. the zoning for the site is residential-commercial high- density.

this is a figure on the overhead. there has been acclaimed the uses inappropriate because it is not recreational use. goothere are no land use restrictions that would pre slowed -- but would precluded the use here. all of the proposed uses are permitted. turning to recreational uses, there is a loss of nine private tennis courts associated with this. new open space will be provided superior -- will be provided.

one argument has been made and there has been a guaranteed of our recreational use by the existing club has been guaranteed. that is not accurate. the elimination of those tennis courts for ceqa purposes is not a significant impact. that is not to discredit the people who are sincerely displeased by the prospect of losing the tennis courts. we get out. gov -- we get that. it is not a ceqa issue. this project goes include some significant resources open to everybody, not merely members of a private health club.

i would like to talk about height limits. there was some discussion of that earlier this evening. the existing height limit is 84 feet. one of the entitlements requested is an increase for the maximum height for a portion of the site, and it would allow 136 points. the eir analyzes the impact and concludes it is not significant. the focus is appropriately on the existing environmental sexting, what surrounds the site of 550 feet, the complex next door about 22 stories tonya. but as the existing sexting. -- that is the existing setting.

on the screen is a depiction showing the project but was proposed that was found to have a significant negative impact on views. there were four towers proposed, and they range from 250 feet to to harvard 20 feet tall, much taller than proposed for this project and this site where my hand is appointed, -- is pointing, said the conclusions were for a different location in a different era. is that binding on the board today? the answer is no. this is ultimately an arbiter on

what is a significant impact, and you are not bound by conclusions of an earlier eir. earlier this evening there was some discussion of what the visual impact might be. this is actually a page from the eir, showing a visual simulation of the view looking to the north. this is the depiction without the project and then a depiction of what the project will look like, and its concludes that is not as significant as headache impact -- aesthetics impact.

there is an area on telegraph hill. this shows the top of you without the project and the lower part with it. staff concluded this was not a significant impact. it is about the board trying to decide whether to limit the zoning code. you need to exercise your discretion, and to save is not a significant impact is supported by the record. that is separate from the issue of whether you wish to amend your zoning code. this site does stretch across the entire parcels, and the

height limits to step down from 136 to 90 feet to 60 feet, and on the north said it is 0 feet because it is open space. we agree with planning staff conclusion. i would like to talk about the land exchange involving lot 351. good i am looking to the imu are referring to, and it is hard to discern what the view quarters are if you are looking to the northeast where water from. in -- the northeast waterfront. i am interested, and it seems to me you could step it down in a

different way, and it all comes down to what is necessary. are you the person that could answer questions around the financials of this project? i know a lot of my colleagues have questions. >> i am not sure i am the person who should answer questions. >> i have requested some answers and was not able to get any. my understanding is this will end in $470. good $470 million total, and if you assume typical ratio is, my estimate is a total cost could be around $252 million, which means this is going to cease and

87% return on investment, which is awfully significant, and i want to understand that. >> i would like to return to the question about desirability. i think he explained very well the context. it talks about the accountability of the area, and the speak to the urban design issues. i think he did an excellent job of laying the dow tonight. i would like to bring to your attention with respect to this use, the economics will be before the board at a later date when it's before the board, but with respect to a conditional

use authorization in this district, i want to draw the board to the fact there are instances where economic viability is under the code. this is not one of those instances. in a conditional use section there are certain subsections and require the board before they permit changing use from our particular use, they have to look into economic viability of the project. that would be motels and hotels, grocery stores, formula retailers, so with respect to the issue before the board, that is not co-mandated. it looks out urban design about

transitioning to the 230-foot towers down to the lower towers. >> i think the reason it is relevant is i have heard from representatives of your team that you believe you need this height for this project. there is a dispute about what is an approach. urban form in this area. -- what is an appropriate urban form in this area. the issue of whether an 84-foot building with a 65 the forefront building, whichever is more relevant, the arguments for us is whether this is what is required, so i want to understand, and i think what i understand is the fact. this is going to bring your client $407 million, and to me

that suggest you do not need that height for this project to cancel out, and we could have a disagreement as to what form is appropriate, but i think it is important for what we are discussing tonight. >> let's get to your issue. i believe where we are out with this project, the project exists not only win thin the fiscal space but the recommendations but we move from the original buildings to this proposal in the study, but it also occurs to of the context earlier. the parks and open space will be provided and in terms of the housing, if it occurs to done in

the economic and -- it occurs to the economic context. it had been in consideration for many years of this point. we started this process in 2007. we have come all the way through this, and it works out a whole. good -- as a whole. each of these has a series of benefits andin terms of changinn at this point. one is that the viability of the pontiff is measured as a function of time. as you know, this is a time measurement of return, and this project has been delayed very considerably, so further changes and further delays would erode that. president chiu: i appreciate you

are saying, and if you want to present us with what has been spent so far, it has probably been about $25 million. >> i would like to make the point that it goes without saying that on a project like this, and a whole bunch of decisions to put into an equation about had to make an economic engine that supports all of the public benefits of the project. i believe it is the case that if we were to change this project here, to make any net major modifications would require us to go back to the planning commission if it is a significant change. it would cost an amount of time and delays that the projects simply cannot tolerate. respectfully, i would say that would answer the questions are posing with respect to the economic viability, and it would absolutely harm the economic viability of the project. and so i think the question you are posing is why do we need it at this configuration, and the question i believe i am answering is because the project

would erode considerably if we were to try to make any significant changes to it at this point, and i think it goes without saying on some level that the project yields, certain units would be of greater value than others, but it is conventional in a circumstance like this that the public side of the project is going to be debated fully at the board when the port portions of the project are before this board, and the financial information has been provided to the budget analyst by the port already. the report staff has generated a report already to its own staff about the financial aspects of the project, and i think that that is conventional and consistent. it is also a conventional and insisted that in the context of a private development, there is certain information that is proprietary information with respect to the development, but i think it is fair to say that we can speak in more general terms without revealing any

proprietary information that some units will bear more of the board in order to generate revenue for the public benefit. the lower units, the units without interior views or views across the street, of neighboring buildings, i think we could all agree would trade at a lesser value and would produce less revenue for this project and less revenue in the form of transfer fees than the upward units. i think that is fair to say, and i think we can assume there will be a range of return and that the higher value units will be on the higher floors. i think we could take protect -- collective judicial notice of that idea. it all works together as a whole is what i am saying. president chiu: it all works together as a whole, and if i could add more things that were together to the whole, this is going to make $400 million, and

if i add soft costs to that basically an 87% return on the investment. we heard from one that he believes that there will be projects that will be $7 million. that may be true, but we know that the average cost to build the unit is about $2.50 million, and if you're looking at an average sale price that gives you, , a 20% on top of that, if you sell one unit on top of $1 million, you left to sell more units at $5 million to $6 million, and i think it is important for us to understand this in relation to our housing mix and how this will impact the housing element and if we are building housing that is relevant to san francisco and now we think about affordable housing, if you are providing, because $11 million from one prospective sounds generous, but when you compare $11 million on top of $470 million, that is a

small percentage of the total problem you are seeing at the end of the day. or plot -- put it differently, there has been a question at the planning commission to say that whether a housing unit that is $500,000, that sells at that, ought to be providing the same fate as a condominium at 8 washington that sells $5 million. by my constellation, it looks that only about essentially the equivalent of what you are providing is about four units out of your 134 units to the affordable housing plot, and so again, i think the financials are important to help us frame whether this is a deal that is necessary or desirable. >> mr. president, i do not want to go from this eir hearing into a financial matter, but the $470 million you referenced is what

we would love to get if you sell them all, but you that got to pay them all, in you are not paying $2 million to build it. you are paying about $350 million to use round million -- brown dollars, so there is an $80 million profit. there is a capital market that requires a certain amount of return for these types of projects. for condominiums, is typically a 20% intro rate of return, so we are not making 89%, i can promise you that. the affordable housing fees are part of an enormous public benefit. there are subsidies for parking garage is. there are payments to the porch. there is $10 million to buy the land to give the port back

$14.70 million to buy the land from the port. there is these in lieu , transfer fees that will result in about $100 million. president chiu: and what is the present value of that? >> depending on what cap rates you use, the whole thing comes to about $15.70 million, so land that is valued at eight is being purchased for 15.7, and we are spending another millions to give support to back so they get the same, about 30,000 feet of land. the 27,000 feet they have now. this is a subject that is probably best addressed in the finance committee, and we would be glad to do that, so i do not want the clock to run against us, and we will answer any questions regarding the eir.

president chiu: which i appreciate, and the process that you have chosen to move forward, which is the same with other projects, we have legislative hearings at the budget committee and land use to go through these issues so we could understand them in the overall context of the entitlements you're asking for. you're asking us to provide you with many, many exceptions in the planning code that will give you an awful lot of profit and an awful lot of value, so what i am trying to understand is if we're going to give you a 60% increase in your height, exceptions to your book, allow you to park at not a one to four -- but a one to one rate, if we are going to give you these benefits, i think it is fair for us to understand some of the finances, and from what i can gather, there seems to be a lot left on the table, and i think

to be fair, if i am going to be considering providing these entitlements with my vote, i do want to understand and place all of this in context. >> excuse me. >> that is a day. >> respectfully, mr. president, i understand that that is your point of view, and i would respectfully submit to you that these are very commonplace considerations. these are primarily about designs, and bulk exceptions i think as very eloquently explained are anticipated, and the code understands that it just cannot get a box and expect every building to fit with and it. they are often granted in this. the only path or in thailand for a project such as this is a conditional use authorization because it is a cited excess of one half acre, and in the pud it

anticipates an welcomes better design, and it proposes that the board, on an appeal, and the planning commission take under advisement whether or not it is an appropriate treatment overall taken in its context, and so i would respectfully submit that is the matter that is before the board this evening, and i do think that these financial issues, to the sense said there is a public-private nexus of this project, which it is, it will be before this board, and i would respectfully submit that for this evening, it would be inappropriate for us to focus on those items that are before the board with respect to the eir and with the conditional use authorization that is before this board. president chiu: supervisor cohen? supervisor cohen: thank you, mr. president. supervisor chiu was asking you

several questions about money, how much it is costing, about your financing, and you were very eloquent and loquacious but did not quite zero and our answer the questions, so you describe it as an erosion to the project, and i was wondering if you could explain to me exactly in what way with the project road? >> well, -- in what way with the project erode? >> well, is significant delay, that was as one example of a significant problem that this project could face. as was said, not all projects deploy capital at a market rate and that no project can be built, whether it is a public- private project, treasure island, which is a project i worked on, that this board is familiar with, very much a public-private partnership, where the city was buying property from the navy and was being purchased with

developers' up-front capital and the developers buying it from the city. that is one example, but another example is that this is a public-private partnership, and the public parts of this will be before the board, but the point i was trying to make is that the conditional use authorization is geared towards developing the project in this consideration. -- configuration. that is what we have. if we were to make significant changes, i think it is absolutely true that it would not only are the project adds some of the more desirable units that we expect would sell at a higher price, for example, the ones that would have abuse, of course that would hurt the economic viability, and a delay would hurt it as well. i was trying to make the point that it could erode the economic viability. supervisor cohen: i have a few more questions. tonight, we have had significant discussion about the proposed

height increase, and i want to know from your position as the project sponsor that you feel that the height exception is needed and it the same number of units can be completed within the allowed zoning approved >> thank you for that questions, supervisor. initially, there were two 84-bit buildings, many years ago at this point, and there was a request at least some members, i am not sure exactly, but to have a study to see what would be the more appropriate way to deal with this side, and this led to this east north embarcaderos study, so it delayed the project further, and the recommendations that came out of that where along the lines of what was described today. when you think about the context, you have very, very tall buildings, the 550-foot tall buildings of the embarcadero. they are really quite tall. golden gateway center, immediately adjacent to this

site, and then you do step down as you get towards the golden gate, , down to the 40-foot height limits, such as was said, it slows down. it was very much the thought of the planning department in terms of urban design, not only is this side but citywide. you see it in the transit plan and other initiatives, to slip this, to respect this love of the city down towards the water, and so the thought was this is a graceful transition to go at that height and transition it down and to step down across the site. we think that is an appropriate treatment. we thought, we believe, not only did we think it was the right way to go, it was the recommendation of the study, so we did a quite dramatic thing, which was to respond to the steady and to take its recommendations and to redesign the project in accordance with that study, and we do believe that the department of thinking on this was quite accurate,