on the investment. colleagues, if you remember the lennar-hunters point project, the numbers we received suggested that project was about a 22% rate of return. this is a project that has an awful lot of money in it that we are all a bit mystified about and i still have questions about, but i wanted to ask our budget analyst -- do you know if they port ever did it there- party analysis to determine whether the developer was receiving a fair rate of return with any kind of credible and reasonable standards? and mr. president, members of the board, supervisor chiu, we do not know. we have not been provided with that and permission. supervisor chiu: thank you. let me mention a couple of other things. first of all, the agenda item we have has hundreds of pages of documents, and i suspect that

not a single one of us here have an opportunity to go through every single one of those pages, but if you did, you would realize we have not been provided all the documents that i think are relevant for analysis here. literally, many of these documents are simply the first page of documents that the port should have provided us in total. on page 57, we just have the cover page. on page 58, we just have the cover page. on page 59, the first page of a memo to the port commission. on page 61, we have the cover page of the purchasing sales agreement. there are countless free- floating documents in the filed today, and i would suggest, colleagues, in order for us to make a truly informed decision, we ought to have all those documents. i want to ask our city attorney -- is it orthodox for us not to receive all the documents we

should have in the file? i would just know that if you want to go through the file, you will see the we do not have all of your documents in the file. i want to know that for the record, we have a court reporter here, to make it clear that we do not have all the documents that we should in front of us. i do have a couple of questions for the port. there has been a change in the number of parking spots related to the project by 50. could you explain the rationale? and how will this project be redesigned based on that? i assume the size of the parking garage may change, but there has been no indication to us as to

how the change will impact the project. >> thank you. jonathan stern from the port of san francisco. director would like to be here at this stage, but he is unable, given the fact that the commission is meeting right now. on a reduced basis, the port had been seeking waterfront for the very building waterfront area for a long time. the 255 spaces proposed by the developer we thought was a reasonable amount of parking. we have contractual obligations in the order of 175 spaces. there is additional parking demand needs created on site by users. we thought that, given the fact that the supervisor was seeking a reduction in parking, that 200 parking spaces was sufficient to meet those obligations and sufficient to serve the ferry building waterfront area. the question is -- do you?

faster design, the 255-based -- 255-space garage was something that as the developer went from contextual design to design and development, was proving that those -- that level parking would only be achievable through a pretty compact scheme, so it is not clear whether at this point it is necessary, or if it will at this point be achievable and permissible. given that the developer has redesigned at this point, that is something we will endeavor to do with the construction. supervisor chiu: one of the questions people have is whether you will simply restripe the garage to have fewer spaces, and how we know the we are talking about a garage that will

house fewer cars? >> it was not clear -- 255 spaces became quite thin. it was not clear and would operate well on that basis. i think the 200-parking-space garage will be in assets of people can pull cars in and get them out quickly. add to will be only permitted to use 200 spaces under the plan could. supervisor chiu: did the port ever get a third-party analysis on this deal of what the appropriate profit margin of to be for the developer? >> respectfully, we did not. in the sense that we have been negotiating this deal on a land comp basis or a land sale basis. i thought it would be held but on the comparisons and showed the amounts you alluded to -- i

thought it would be helpful to put down the comparisons and show the amounts you alluded to. the 2/3 an acre parcel that is currently own. approximately 7000 square feet. so i think that even that there are some policy questions about this two different numbers, i think that is still pretty major compensation the port has negotiated. therefore, since we are negotiating this on a land bases, we believe we have exceeded the $7.5 million of value. i think that was the basis of our analysis. that said, it is not that we have ignored the developers as their part of the negotiation. they did submit a pro forma of their project in 2008. we reviewed that. a number things have changed since that time.

one is additional cost. primarily on the soft cost basis. some of those costs you just alluded to that become city benefits, including additional affordable housing fees. there are also -- the numbers -- hard cost numbers of originally submitted we have had the opportunity to review, and i have to say that they are relatively in line with those 2008 estimates, which is good news, given the fact that four or five years have gone by since that time. usually, there will be some construction of a patient. however, at that time, revenues just from the residential sales, which are the main sales that would have in immediately, and we reversed the developer for their money -- card costs, soft costs, and risks and i to update the project -- those numbers have gone down -- card costs,

soft costs, and -- hard costs, soft costs, and risks put in to update the project here the $470 million -- that is the correct number. that is the value of the entire project. or, not all of the other commercial uses will be sold right away. it is not like cash that will be coming into the developer in the timeframe of construction, development of sales. those will be value-created. supervisor chiu: again, i just want to clarify -- the port did not do an independent analysis. you just look at the land part of the deal. >> that is correct. we had a $7 million appraised value on a land asset, and we parlayed it into a public benefits package, and that was

our goal in this project. supervisor chiu: thank you very much. one thing i will note is that i know the developer shop around -- shopped around some pro formas, and i discovered in the last 24 hours that there are some mistakes in the math, which is why i wanted to lay this out. colleagues, obviously, no surprise that i have had issues with this project. i have a number of amendments i would like us to consider. because this is a complicated project, i suspect it might be easier to consider the amendments one at a time. i have circulated them to you. first i would like to propose hast to deal with the $5 million that would be paid from the city to the developer in order to create the public improvements that are supposed to be a benefit to the city. mr. rose and his team in the budget analyst report pointed

this out as a bit of an anomaly because typically when a developer says to us, "we will provided the benefit of open space" they pay for that. in this case, the city is paying the developer $5 million in order for us to receive that. i did not think you can get credit for a community benefit if the city is going to pay for it. i have proposed an amendment to item 20, which says -- refers to that fact and states that our approval of this resolution is contingent on a revision that removes the public reimbursement of $5 million. you have the language in front of you. colleagues, at this time, i would like to move that amendment. that is there any comment on the amendment? supervisor kim? supervisor kim: i had a question regarding the city's general practice regarding with the developer friends that cost.

i do know what happens in district 6, and i know that with several of the open space parcels that the developer has spread to the financing for, i just want a sense of consistency. it would be great to get a sense of what it looks like and when it happened. i know with rincon hill, in that case, the open space that is built out there, we are reversing the developers their 50% for the open space they are building in that area, so -- and in mission bay, which is a redevelopment area, which also have repaid -- i think up to 100% of the streets keeping an open space where the developers have fronted in the costs in those plans.

>> i believe the examples you are siding are accurate and timely examples where tax increments have been used to reimburse developers for public open spaces. i think specifically at ring contel, certainly the hard costs that 50% were being paid -- i think specifically at rincon hill. essentially, the public was openly paying for approximately 100% of the hard costs in the case, in - standing of both the hunters point, mission bay, and treasurer of the cases -- in my understanding. the commitment is that those proceeds will pay back as much of the public improvements as they are able to pay back. i believe in treasure island, it is in the order of 2/3 is projected to be paid back. supervisor kim: 3 of these is

where we have asked the developer to pay 100%. >> off the top of my head, i am not aware. supervisor kim: i do not want to argue what i think should be policy decisions for the board. certainly in terms of the benefits that will extract, i certainly do not ever had issues with us asking for more than is the precedent, but i want to make clear that, you know, we have in cases where we do prepay a portion if not all of the open space infrastructure that developers build up front. supervisor avalos: i will be supporting president chiu was emotion and the other motions as well. i do not believe we have gotten the strong level of information we have gotten, and i believe others in the past have shown a greater amount, and rincon hill

i believe is greater than what is being stated. we should have a more affordable level of housing coming out of this project. i truly believe that with the profit margin that the president has indicated, it is not a lot to ask that we could mitigate the impact of developments happening and help them make sure that we could do more to construct affordable housing in san francisco, so i will be voting in favor of president chiu's motion. supervisor kim: actually, i do want to respond to supervisor avalos' comments about the apparent benefits to -- and not just market results, but comparing solely to luxury projects we have had here in san francisco. i think we have looked a lot at real-estate development because it occurs a lot in our district, and in a lot of cases, we approve and support development that we often do not need.

i think we all agree here that we do not need more luxury condos in san francisco. we already know we are building over that, but oftentimes that this is a way for us to be able to partner with developments on the profits we have achieved to return community benefits. if we want to compare how the stands up to other projects, our office did our own research in terms of what that looked like, and we determined we do not have the staffing capacity the other departments have, but we looked at the millennium towers, and in every case, what we found -- with the watermark and millennium, on the watermark, we had on-site that was built in. with the millennium, they built exactly 20% off site to provide housing. with one rincon hill, which was one of the projects that receive

the most community attention in terms of negotiating benefits for communities and stabilization, giving -- given the market development, we looked at what the developer had promised and what was viewed as a victory for the community in terms of community benefits. in that case, the developer contributed $12.2 million to our inflationary housing fund. they built 376 units. in the long term, they plan on building 2200. in this case, we have 134 units built, and in the case, the developer is contributing to a 11 million, roughly 1.2 million less. what made 1 rincon hill innovative was a way to give more benefits to communities that did other sorts of stabilization, not just community housing. we priced out how much that would raise the city, and the

total brought in $5.7 million, so when we divide that by the number of units, it came to $46,000 per unit for phase one. if rincon hill was able to build that to thousand 200 units, we found that the total per unit is 47,947. with eight washington, 134 units that they are building. they are giving us $82,000 -- $82,089 per unit. we could talk about whether we want more benefits from the developer. i certainly never argued that. supervisor campos: i just had a question to staff through the chair.

we received some numbers in terms of the total revenue to the developer for this project, and then looking at the total cost and the profit -- do you have any questions or concerns or disagreement with the numbers that have been put forth? and i have not seen the numbers supervisor chiu provided, so i cannot comment on them. i do know that the numbers i have seen from the developer, other than the variations i have seen before, are in line with the original performance that we analyze it 2008-2009. the one addition, which i think is important, is that the money has been at risk for approximately an additional three to four years, so that

kind of time increase of a project of this magnitude, which is a relatively small project, can really mean the difference between making a project that is making a good profit or making a project that is fairlyrevenues n slightly. in general. the project has decrees in its financial analysis since that time. supervisor mar: the numbers show that there has been a profit, $196 million, which is a pretty significant amount. do you have a dispute with that number? >> we have talked about the

revenue numbers. i am not aware of what the cost numbers are in that case, so i cannot verify that one way or another. supervisor mar: going back to this question, there has been a lot of debate about whether this is a good deal or a bad deal, and there has been a lot of information from folks about how this compares, but how did you decide in this project, with respect to this project, that you were getting enough? what went in to that analysis? at what point did you say, you know, this is a good deal for us. anything below this would make it a bad deal? can you talk a little bit more through that? >> supervisor, through the chair. there are several things that we looked at, and one was a proprietary basis, and i think

the analysis that you have spoken today, there is a public benefit package. as a land under of approximately $14.30 million, it is provided, so i think on a proprietary basis, we are pleased with that, as a land owner, how we are doing in that transaction. on the public benefit packages, the pork projects or the city projects, we have some benchmarks, but i think we always defer on the board of supervisors do as far as the entitlement and approval process. i think supervisor kim's analysis about what is done, what is implicated.

>> does the problem for the developer come into this process at all? >> is one of the issues. certainly as a land owner, that is something we analyzed in its own rights, and we differ on both an analytical and a policy basis to the board of supervisors on what the ultimate packages that this proved. >> and in making that consideration, if i may, what is the problem margin that you anticipate for the developer in this case? >> so the original profit margin that was proposed or implied in the development feasibility analysis that was done, that was provided to the court was an ir

analysis, and a proximate return of about 20%. i think that is a relatively common rate of return, in a think it is lower than the rates of return that are required for the city shares and hunters point project, which i believe is 22% preferred return, so we do not think it was unreasonable for the developer to be aiming at that, and there is also the very real possibility that a project of that level in this economic climate, where the level of feasibility threshold is is a real question of what equity partners are demanding in terms of their return. commissioner: the big difference is what you are talking about and what is shown in this document that was given to us by

president choo -- chiu, so it is difficult to know what is the actual number. >> just to clarify, i am not privy to what the supervisor has distributed, but when the project's developer is seeking money is to complete their projects, they are looking at an ir type of return, an annual return based on when the money goes in and when it can come out, so the delays of the original pro-forma of three to four years are very substantial when you come to determine that rate of return, so the initial rate of return unmentioned, the 2008 to 2009 document, it is probably lower. commissioner: may i have a final question, through the chair --

do you have any job -- any thoughts on this? >> mr. president and members of the board, a supervisor campos, we did not analyze the rate of return. we cannot tell you what it is because we have not done that analysis. supervisor campos: did you get any information from anyone on whether or not that analysis was done by them? >> no, we have not gotten any information from the port regarding that analysis. supervisor campos: i would think and hope that that kind of analysis would be done when you have this type of a magnitude of a project coming before us. thank you. president chiu: colleagues, a couple of closing comments.

the port, which was supposed to be analyzing this deal, has no ability to tell us whether the profit margin in this project is inappropriate, and that is a basic analysis that is part of our analysis of, i think, when we are about to provide literally hundreds of millions of dollars of value to a developer, it is important to us to know what profits they will get back from that. supervisor kim had raised a number of questions are randy winn, -- rincon project. they did not receive 400% parking bonuses and other things. they also had a stabilization fund of close to $30 million, and i think it is just important to note as we consider all of these numbers, again, for a developer to say they're going to be providing recreation and open space and do that by taking $5 million of our

dollars, it just strikes me as a bit odd, as the budget analyst pointed out, and that is why i offered the amendment that i did. commissioner: seeing no further comment, could you call the roll? secretary: [reading roll] president chiu, supervisor chu, supervisor cohen, supervisor elsbernd, supervisor farrell, supervisor kim, supervisor mar. mar aye. there were five ayes and six nos. secretary: that is defeated.

president chiu: i know you want to see some change. i know that many of you are ok with some amount of projects. this only represents 2.3% of the overall deal, the affordable a dozen, and as i've said before, i am frankly surprised that no one here seems to be that shocked the fact that our budget and this, is recommendations we support when it comes to the budget, the fact that we're $50 million apart from the port i think is quite significant. that is $50 million of community benefits that we are not receiving. i would like to propose that we increase the affordable housing by some level. i frankly was having some trouble figuring out what the right number would be, because the office the cannot have a conversation with the majority of you. what i have in the amendment that i have circulated is that we increase it to $14 million. that represents 5% of the

overall value of the deal and, frankly, i think is a very modest increase with what we are talking about. part of why i think we are comparing apples to oranges is that the affordable housing fees we are receiving are exactly the same level of fees we would get for the $500,000 condominiums when they are $5 million conners. he helps them to be the most expensive condominiums in the city and county of san francisco. we were not asking for additional fees. one thing i am asking in suggesting that we increase our affordable housing to this level is really a community benefit. it is not about our inclusionary fees. this is not an as of right projects. this is for providing extraordinary additional bonuses to the developer, and so, colleagues, i would like to offer my amendment, and what i would