last 18, 20 months, they have gone up some cases 30% to 40%. >> the gena drive-in, is that also under jurisdiction of the state? >> i think it is part of the same parcel but i'm not sure. i gave up years ago chasing it. it was impossible. >> i wonder if i can follow up. >> maybe we can let them finish answering first. >> okay? >> yes. >> i want to give a little background on myself, so you understand who i am. i'm a brokerage with cassidy turley, i work out of the burlingame office. i've been working with -- working on industrial deals on the peninsula and san francisco for 30 years, so i have a long history with the area. i think some of the things important for everyone to

understand is lack of availability to find ten, 15 acres this the san francisco or peninsula area. it really is almost impossible to find. as james and sfmta have been looking for sites, you could pull out a parcel map and partially identify 10, 15, 20 sites that exist. they are that size. to accommodate the uses you are looking to replace. from a big picture standpoint you are dealing with a small supply of properties that could work. whether they are available or not. then an incredibly large demand for sites like that. from a land perspective, you know, sites -- there's a higher and better use for most of the sites. you look at the rehabilitation that's gone on in san francisco and all

the new development, most are redeveloped for offices, research and development, biotech, you know, housing. there is a higher value than storing towed cars. you know, it is used as incredibly difficult to find. when you find an opportunity you will be one of multiple users, owners, developers who are interested in the site. one of the things that kirsten was talking about was the time frame. i was involved in the prologis site for the property. had they not reacted immediately, they would not have been in that position. unfortunately, the way city governments work, if the money is not there and you can't close with very short time frame of due diligence, it is not going

to happen. even as you get down the peninsula there are multiple users who would jump at the opportunity to find, one, a building of this size. 250,000 square feet building. two, a building that size on two acres. most will sit on eight acres. so the extra land * ten is driving some of the values up. the transaction james is talking about with dbi was formerly amb building on spruce. they moved into a 177,000 foot portion of an industrial building the sfo -- you know, san francisco's airport operation had leased prior to. their rent is significant more than the rent on this deal is. so the value in the market is there.

that deal was negotiated three, four years ago. that lack of supply is what drives value. that is anything in the world. whether it is a commodity, food, precious gems, whatever it is. that is what is driving the value. i understand the concept of let's take more time to find another site. it doesn't exist, that is the problem. that is the problem sfmta had with prologis, other attractive parties wanted this site. you could spend five more years and be in the same situation where you don't have the alternative. >> i know supervisor avalos is next but if you could reiterate that again. are you on the record saying there is no other site that the sfmta can use in daly city or the peninsula but this one? this is the only site that we can do this type of

lease with. >> i would say at this point probably yes. >> at this point but not over the next two years. can you say that over the next two years? >> no one can guarantee what properties will come available down the road. as a broker for 30 years i can tell you if a property did become available in the next couple years, it would not be priced less. there would be -- there would probably be a ten to one ratio of people who want to buy it. if it is a land site there's a higher and better use than industrial. if it really an industrial site -- >> i'm assuming that this is zoned industrial, why it is not use ford higher value. you know the pdr in san francisco, i'm sure they would love for us to rezone it * for mixed use. this is where planning

comes in, in terms of not every property owner can build to their highest value because we have a planning code. >> true. i understand. zoning is usually the lowest level on the map. so to upzone is usually a lot easier than to -- you are not going to put this in an industrial area. you can put retail offices in industrial zoned so there is a higher use typically to the land value. >> okay. thank you. supervisor avalos. >> thank you, chair chu. i already asked one of my questions. most of all, trying to see how the actually transaction had occurred. when they went on the market, who was the previous own other, how the mta worked towards pursuing the property, how it was

that -- we have a longer process to buy property in terms of moving quickly but trying to see how they start this whole process of jockeying to actually own the property now that we lost out. would that be the real estate prices from the mta? so who was the previous owner of the property when it initially went on. >> a local small developer called d.r. stevens. >> what was the previous use before vacated in 2011. >> the u.s. postal service operated out there. >> how did the mta first hear about it? the broker contact the mta or the mta did the work -- >> we were looking and, like i say, brokers contact

me every day. brokers contacted me before it was sold and after it was sold. >> what was your initial -- who was the brokerage who contacted you? >> james swarz regarding after it was sold. >> the broker works for the mta or a private -- >> their commission is paid through the seller. >> okay. and just wondering if the broker had contacted other groups to purchase as well, including prologis. >> i had done a deal with prologis, a dbi deal in south san francisco. in fact, when we were looking at so many different sites, to answer your question directly, the only person i called was sfmta because i felt a loyalty. i had worked with them before. i knew the process. supervisors campos'

comment, yes, you have an intrinsic issue with responding to the marketplace. it is not just sfmta. it is the city and county. i think you are all away of that. i have been working with the city and county 20 years. you can't compete in a marketplace that is hot. you have people with money that want to close in 60, 90 days. nobody wants to wait. >> got to love the high seas of global capitalism. >> my suggestion would be -- there seems to be a vacuum in terms of i'm happy or we can look at the marketplace so everybody is aware of what you are looking at. this is one of the finest pieces of property here. the industrial base and why dbi moved is they can't afford -- can't find what they want and moving when possible to east bay because that is where the better deals are. >> just a question for the gentleman from prologis, how did you first come

across this property was going to be available. >> it was literally knocking on doors. this property, as we have discussed so much today, is very unique. when you look at it from an aerial, simple things like google earth. i will say i need to own that building. the process took -- again, this started in 2008. and a series of letters that i wrote to the owner, showing up at his office to talk to him, telling him i knew his lease was coming vacant and we have a lot of customers so we will give you a lot of money for the building,ly take the risk of the vacant building and put one of our customers in it. so it was a long process. then as anything does in this market, as soon as we started negotiating, the word got out and the seller

called me up and said if you want to buy this, you have to start your due diligence and close -- i think we closed in 45 days. it was aggressive and risky to do that. so it was that nimbleness was how we were able to do that. had that seller gone and provided a big marketing effort, they would have attracted a lot more users. probably a lot higher price. >> can you talk about your work of your company in the bay area. do you actually have leases with other government entities. >> so in the bay area, to be clear, prologis, we were founded as amb in san francisco about 29 years ago. our founder is still the ceo of our company. we combined. we merged with our biggest

rival actually about 18 months ago and took their name. so it was a merger of equals. two big companies combining. we owned 22 million square feet in the bay area. we owned one building in the city of san francisco. that is how tough it is to buy property in san francisco. that is a ground lease we had with the port of san francisco at pier one. we moved our headquarters there about ten years ago. the port operators out of the embarkadero side and we are on the water side. we own 1.4 million square feet on the peninsula in south san francisco. and, again, very challenging to find properties in that market. then the east bay and central value and south bay we own a lot of properties as well. sorry, to answer your question. on the government -- >> you lease from the port

for headquarters. >> lease this from the port. put the money in, work with the port and port then leases back the office space from us. >> any other arrangements where you own the property and are leasing to other government entities within the bay area to expand other places, like this lease we have before us with the mta. >> i can't answer that question right now. there's no -- i could answer it this way. i would be bold enough to say, yes, we have leases with other government entities just because we have so much property. but i can't think of anything in the bay off the top of my head. we have other people on staff that focus on the 20 million square feet we already own. they would know the in's and out's of that better than i would. >> okay. thank you. >> thank you. supervisor campos. >> thank you. i was wondering if i could ask the gentleman or the brokerage, if you don't

mind coming up, please. thank you. i was wondering if you could walk us through exactly when it was that you first learned about this property. just to clarify was it before it was sold or after? >> no, i have been aware of the property because it is one of the prominent properties on the peninsula. in fact, when the u.s. postal service was there for the national division, this san aside, they put over 20 million into that property to make it specific for their uses. we all knew that at some point that lease might come up, so everybody in the business calls and says, hey, what is going on. would you sell or lease? everybody is asking those questions of owners. and in july of 2011, which is when pro logic acquired the property, i talked to them in august and in september i was talking to sfmta saying, look. here is an opportunity. i know you'd like to own it

but that was not something possible before. it was not openly marketed as a for sale property. when they closed on it i went to prologis and said, hey, i think i have a possibility. if you are family with land on pier 70. correct me if i'm wrong but as i understand it that land use is not allowed on pier property. that is one of the reasons we couldn't get portland to do it somewhere else. in september we started a dialogue. >> i guess my question is before that. did you approach the owner of the property before prologis acquired it about selling it to the city? >> no. years ago i talked to them about would they sell it. there wasn't interest. they had a lease with u.s. postal service on it. >> when was the last time they sold it to prologis you spoke to them? >> probably been three years. >> that is kind of my point

in a way, right. that we had not approached them in three years about possibly selling this property to the city. the only instance that the city -- the mta gets involved again is three years later when it's already been sold. >> three years earlier -- to correct you, it was not available. there was no interest on the part. i think what drove the interest on ownership is they lost their lease with the postal service. so the property's been vacant better part of two years. >> did we approach them once we knew that lease was going to be lost. did we approach them then? >> i don't know. i can't answer that question. >> well, again, my point is, how do we know that there aren't properties out there that are not on the market, the way this property wasn't on the market, that could be purchased by the city.

how do you know? >> here is one of the reasons. i will take south san francisco. south san francisco has rezoned everything east of 101 for biotech. you cannot have that use. they have squeezed what little industrial property is left, users, into the west side of the freeway. i'm completing a deal right now on two acres with about 17,000 feet of building in south san francisco. south san francisco wants everything to be biotech. we are shrinking the pool of uses. both in san francisco and the peninsula. >> let me just ask this question. have you done an inventory of every single property that could fit the needs of the mta, whether they are on the market for sale or not? have you done that inventory? >> on market property that is either for lease or available, there is a

commercial -- call that a listing service called cold star and loop net we all use looking for property. if we identify a property we are interested in, we go and talk to the ownership to see if there is an interest. >> that wasn't my question. have you done an inventory of every single -- it is not for prologis but broker. >> the answer is have i done an inventory of every property. no, i of course not. but i have done inventory of all the propertis that meet requirements that sfmta has and it doesn't exist. >> you can guarantee this committee that if -- >> as much as you can guarantee that you can close on a transaction. that is a very harsh use of the word guarantee. >> if i -- hold on one second. >> let me ask the question first. >> if we can have the question asked, then the answer follow. >> thank you. let me ask you the question first. let's say we go down the road and actually approve this lease, right.

can you guarantee us that in a year, two years, three years, four years that there isn't going to be a property that is sold that could have met the needs of the cities that we have -- that we did not know about if we could have approached that property owner about purchasing it. >> of course not. i don't think anyone can do that for you. >> final question for the broker. you said earlier the city can always get out because you can sublease, right? but the difference there is that if the market goes down, right, the sublease could be potentially for a lot less money than what the city is guaranteed to pay prologis, right? >> there is always that possibility in any lease. given the contraction of available space for that

kind of use, the chances are little to none that you are going to see that. in fact, today if the property was openly marketed it would bring more rent and certainly a lot more money than what was paid for it. just look at what is happening in our city on mid market street and what people are paying for buildings that sat vacant in ten years. we are in a whole new marketplace we haven't seen in ten years. >> thank you. i have a final question for the budget and legislative analyst, if i may, through the chair. mr. rose, you are here to advise the board of supervisors. we always appreciate your good work. you have listened to this discussion around whether or not there are alternatives out there. you know, you have seen the representation from the mta. we have heard the representation of the various brokers here. i mean, what is your sense? are you convinced that, in fact, this is the only alternative we have, that there isn't anything we

haven't surveyed and looked at that could end up being a better deal for the city? >> madam chair, members of the committee, supervisor campos, do i not represent ourselves to be real estate experts. however, i have heard nothing about properties -- survey question about. i don't know. does this property have to be that close to san francisco. for example, could there be properties in the east bay that would be suitable for this operation. as i understand it, this is not just for short-term towing. so i don't understand the need that this has to be very close to san francisco. i have heard nothing about properties outside of that area, other than daly city and the peninsula. or are there other properties that might be available. to answer your question specifically, i can't

conclude that this is the only available piece of property. >> thank you. >> thank you very much. why don't we open this for public comment if there are no questions at this time. are there any members of the publics who wish to speak on this item? item number 6. >> good afternoon, budget and finance. well, the budget exploded with a mighty crash as we fell into the sun. and the town was searching for some more land for the land that's on the run. land on the run. ♪ land on the run ♪ and the city budget man does the best he can ♪ and i know you'll find some land ♪ for the land on the run ♪ city land on the run ♪ and woe-woe-woe what a

budget. woe-woe-woe what a budget ♪ ♪ do you know the way to san jose. they got a lot of space. there's be a place ♪ and the bay shore is a great big freeway ♪ put on you'll get 100 down and get your car ♪ and there you are. you've got the money in a jar ♪ i know you'll go far ♪ you can really breathe in san jose ♪ you're going to find some time and give em the dime ♪ >> thank you. next speaker, please. >> that's a tough act to follow. my name is john wicker. i'm the ceo of auto return. i'm here to speak on one topic only, the working conditions down there. we strive to create world classworking facilities for our workers. our other facilities are

world-class, frankly. independent of all the budget considerations here today the working additions were unable to be up to the standards you expect. the primary reasons are two: one is the lack of running water and plumbing, which requires the use of, you know, port potties, for lack of a better term for workers and citizens that attend public auctions at that facility. number two, the facility is designated as a historical landmark, which prevents us from making improvements. i know folks have already spoken about this. but it creates basically outdoor conditions even in the buildings. so from an operational standpoint, the site is less than idea. >> thank you. next speaker. >> afternoon, my name is david rodriguez, teamsters

local 665. i'm one of the representatives that represent members at auto concern. as he said it is the working conditions of members. conditions with plumbing, conditions outside. it's raised concerns in the past. that is why we would support this -- the decision to move to another property, thank you. >> thank you. any other speakers who wish to comment on this item number 6. >> just want to take one more minute to address some of the comments that were made earlier. when you talk about virtually guaranteing that there's no this or no that in the future, you can't guarantee this billing is not going to fall down tomorrow either. just as a point of reference, prologis -- what i do for a living is talk to owners, so i could almost guarantee -- not 100% guarantee but maybe

99% guarantee that there are no other sites that fit as well as this property does. i work with a lot of the companies looking for properties as well as developers, owners and investors. i talk to property owners every day, asking if they would sell their property. when we approached the owner of 2650 bay shore initially it was no. we approached a couple months later. it was no. we approached them again. it was no. one of the reasons we were able to get prologis was able to convince the seller to sale, he also offered them a trade property. so when you are a seller of real estate, if you don't have something to trade i want, typically owners don't sell their property because they will pay a large tax on the gain. one of the ways we structured the deal to help make the sale occur, because he did not want to sell the property, was by offering him some trade

properties as an alternative to paying the taxes. that kind of sped up the whole process to allow him to consider the sale. ultimately he did trade in mot one of prologis's property but another. the timing is essential, where you have to have the cash up-front to do it. prologis picks up a lot of non-refundable moneys, ready to close on a five-day period. they brought the property all-cash, $21 million. >> thank you. thank you. are there other members of the publics who wish to speak on item number six? >> just a comment on mr. rosen's comment about east bay or other areas, one of the main revenue sources is the car division. to move to the east bay,

whether it be oakland, hayward, san lorenzo, to have towed vehicles back and forth over the bay bridge or peninsula would decimate their ability to make any money. >> thank you. any other speaker who's wish to comment on item number six? seeing none, public comment is closed. colleagues, we have the item before us. we have heard and held public comment. any thought, comments? supervisor campos. >> thank you. i don't want to belabor the point here. i think a lot of points have been made. i don't question that everyone here is trying to do what is right for the city, what's right for the workers. i want to thank the representative of workers and talked about the conditions. no one is questioning the fact that we need to move.

it is really about making the best deal we can for the city. or at least the deal that, at least on its face, doesn't look as bad as this one does. you know, i want to work with the mta. i'm just -- i'm just not there. part of the challenge -- i don't mean disrespect to the individual who's spoke, they are trying to do their job, but the question whether or not we have done our due diligence in looking at all the options available, i think that there is a role for brokers to play in these deals. i don't necessarily think that the brokerage is the best person to make that case, you know. i think there has to be an independent third party analysis on that. again, no