afternoon. welcome back to the board of supervisors meeting of tuesday, november 6, 2012. madam clerk, could you call our 3 pm special item, item 8 through 11. >> clerk calvillo: the board of supervisors has agreed to sit as a committee of the whole, as they approved file 121080, item 18 on today's agenda to sit for a public hearing for persons interested in adopting resolutions associated with various real property leases located at 110 12th street, stevenson street, and market street. >> president chiu: let's open up this hearing. let me ask first supervisor kim, do you have initial comments you would like to make as the district supervisor or shall we go to the presentations?

>> supervisor kim: there is a presentation by john updike and mr. barnes is here from the city administrator's office but we are on a tight timeline to approve these leases for relocation for several of our department offices from 875 stevenson with an early termination and i believe that the city's administrative office worked really hard to ensure that this didn't have impact on our budget cycle and i appreciate those efforts. >> president chiu: supervisor chu. >> supervisor chu: they explained this to me previously, but in our committee we do have it as a weekly meeting, generally items do get scheduled pretty easily in those committees so i want the department to address the reason it did not go through committee. >> president chiu: why don't we hear from the department of real estate. >> thank you, president chiu. good afternoon. john updike, director of real estate.

members of the board, first i want to thank you for holding this hearing on this matter, three items. one is an exit agreement from our current property we occupy to our entry agreements to new properties to replace the property from which we're leaving. so i'll give you first the basic terms of what is before you and then i'll speak to the issue of timing and why this is before you today in the fashion that its before you. currently, we occupy space at 875 stevenson street. we've been there since approximately 1994, as a temporary location. at one point, leasing 158,000 square feet at 875 stevenson street. we've made concerted effort over the years to move from that location into preferably owned spaces to create a much more tenable expense stream for us, and stabilize our expenses of occupancy. so we have reduced that amount

in 2009, we were down to 116,000 square feet and now we're at 81,400 square feet at 875 stevenson street. that property is right behind what's called 1355 market street, or what's been rebranded as market square, where trirt an --twitter and others have mod into. that resurgence has lit a fuse to move forward with new improvements by the ownership of both buildings, which is forcing the item before you today of an early exit from 875 stevenson. our current lease agreement allows us to remain on the premises until may of 2015. so the one agreement, that has us exiting, would call for an early exit by no later than february 4, 2013. in consideration for that early exit, we've negotiated a payment

to cover the cost of the move itself, as well as the increased cost of occupancy because rental rates have increased since we struck the agreement at 875 stevenson. so that's sort of where we're at, and why we're leaving. the other question is where we're going. so we have, at 875 stevenson street our repromail operations, treasurer tax collector, assessor, recorder, business property division, department of public works, bureau of street use and mapping, human resources, department of public works and general services agency, as well as city attorney's office claims division. all within the footprint of 875 stevenson. the majority of those folks would move to one location, 1155 market street where we have negotiated a new lease.

1155 market street was the headquarters location of the sf puc. so you may recall they occupied both that building and the building next door at 1145 market street. so there's no confusion i'll refer to 1155 as the headquarters location. that building is owned by the lors corporation although you see the agreement is with a limited liability company that is a subsidiary of lors corporation recently purchased within the last two years. we've negotiated what we think is a favorable agreement that is of a term of 10 years at 1155 market street. we do have the right to exit after five years, or after 92 months. so we have two opportunities to decide if there is a better location, or part of a greater plan to consolidate services, we have those exit opportunities from 1155 market street. the initial lease rate is $31.67

a square feet. that jumps in the second year to 39.14 a square foot and then 3% increases per year. the reason for the big jump between year one and year two is that year one is included a few months of what's considered free rent, and the ownership preferred to simply blend that benefit over the term of the first year. included with that rate is a tenant improvement allowance of $25 a square foot and then ability to amortize or pay for over time a 35 dollar square foot tenant improvement allowance over the initial 10 year term. the second entry agreement to cover the relocation of repromail which was sought to be an inappropriate use at the office building of is 155 market

we were fortunate enough to find a location at the intersection of 12th street and south van ness, 110 12th street also has an address of van ness. it would be single use, a little over 10,000 square feet in size. we believe it's ideally situated to service our repromail operations, has a small parking area/yard and ability for adequate loading and very approximate access to the civic center which is the main client base for repromail operations. that particular lease is a 10 year lease as well, with an exit any time after five years. so we have a continual right to exit the property after the fifth year. the initial rate there is $30.95 a square foot per year. that increases 4% per year. the last one let me speak to

briefly the exit from 875 stevenson street, the terms of that agreement are that the city completely vacate the premises by no later than february 4, 2013. which we are primed to do. if we accomplish that successfully, we will receive payment, over all, two different payments but a sum of 3,250,000. so that's the consideration for the early exit. there is some fairly intense calculations in your board package that shows that that compensation adequately covers our physical cost to move. it covers cubicle refinishing, new cubicle acquisitions were necessary although we're pretty much moving around our exiting furniture. we're trying to make this a green efficient relocation. and covers most importantly the differential in the rent. for the rest of this fiscal year and the full term of next fiscal

year. so the budget impact of this move is deferred to fiscal year 14-15. that's somewhat consistent with what we would have faced if we hadn't done this agreement. so but for this agreement we would remain at 875 stevenson street, where we do not have a renewal option, and in mai of 2015 we would have had to have found a location to move to. so we knew this day was coming. this accelerates that day but it brings to the table a fiscal partner to help ease the fiscal impact of the move. we speak to timing. so the reason this is before you, the nature that it is, as opposed to the normal course of a budget analyst review, budget and finance committee hearing, and then to the full board which frankly would have been my preference, is that we were squeezed, really, on both ends.

so we had the ownership of 875 stevenson being very clear to us that that exit date of february 4 was firm, there was no negotiating that. once we negotiated the date we had, there was no extension possible. and there is a fiscal penalty for every day delay of our exit in this agreement. we will receive less money from shornstein for every day of delay. so if we leave on february 5, that will cost the city $10,000 in reduced revenue from that $3.25 million. it's $10,000 a day for the first week, $20,000 a day for every week thereafter. so clearly there is motivation for us to be timely in our exit. secondly, on the entry, there's only so many days between now and february 4, plus we have -- the worst time of the year to put this all together, during

the holiday season. so when the construction schedule was coming together, many of these things working in parallel, we found that, because of the one week window next week, where we do not have a board meeting, that one week was absolutely critical from a standpoint of ordering furniture and other expenses that the landlord will front as is typical in a landlord-tenant agreement. the landlord will front money on an executed lease, but not on a non-executed lease. so reasonably so, we needed to get this item to this board to see the lease approved before further expenditures would be made by the landlord on our behalf, or really on their behalf in order to secure us as a tenant. so i hope that helps give a little perspective as to the timing. certainly happy to answer any questions you may have about any one of these three agreements. thank you for your time in allowing this process to go as

it has. >> president chiu: colleagues, any questions to department staff? supervisor kim. >> supervisor kim: thank you. i had one quick question. this is the second time i've seen, in the lease, us using kind of a landlord advances to front the tenant improvements at an 8% enterrate. being that we're seeing this over and over again i think several of my colleagues has said this is very high if we do choose to participate, and this came up with the department of environment. i was wondering if the department of real estate is thinking in the future, if there are other ways that we can borrow money for these tenant improvements at a lower interest rate. >> well, that's a very good question, and it's timely. because we are seeing this more and more frequently. and the reason we're seeing it more frequently is that the market is changing and there is less of an allowance provided by landlord than there was when the market was softer. so as this market continues to

heat up there is less advantage to a tenant. and because of that, then we have to amortize our improvement costs. the challenge we have is each one of these individual deals is have fairly small so we're not talking about a large sum of money which we would normally think of in terms of a certificate of participation, or other fiscal mechanism we might have to borrow funds at very competitive rates. so we're in a market just like any other tenant is in the market. and what landlords will charge is in this 8% range. we do our best to negotiate something lower but that's where the market stands. i've talked to -- about this concept of could we find a different mechanism to self-finance improvements. we have found where new york city did accomplish that, but it's on a much grander scale. so if there is the possibility perhaps to bundle properties, that might get us enough heft of

what we want in debt, and perhaps get a decent return but for small agreements it's very difficult to do anything other than what we're presenting to you at this 8% rate. we are -- i do want to make mention though that our rough order of magnitude budget at this point has us considerably below what our availability of funds is at 35 a square foot, we're probably 80% of that and we're seeing already value engineering opportunities where that number will only go lower. but in abundance of caution we're providing you numbers that assume full amortization of the entire 35 a square foot. >> president chiu: supervisor campos. >> supervisor campos: thank you, mr. president. thank you for your presentation. just a quick question, just an informational question. there is a way to keep track of how much the city is spending on these kinds of improvements,

collectively? i don't know how many of these deals we have, where we're actually, you know, paying or borrowing the money at this interest rate. but to the extent that the individual agreement, you know, is de minimus in terms of the amount, it might be useful to just keep track so that we at least can consider different ways of dealing with them collectively. >> that's an excellent idea. i'm sure we can work with the controller's office to put together a working matrix as we go forward. >> president chiu: any additional question to city staff? thank you very much. let me ask if there are members of the public that wish to speak on this item. seeing none, public comment on this item is closed. and colleagues, unless there is further discussion, this hearing has been held, and i will close it and file it. and we have in front of us items

9, 10, 11. why don't we -- unless there are additional comments, let's take the items in order. madam clerk, could you call the roll on item 9. >> the clerk: supervisor cohen, aye. supervisor elsbernd, aye. supervisor ferrell, aye. supervisor kim, aye. supervisor mar, aye. supervisor olague, aye. supervisor wiener, aye. supervisor avalos, aye. supervisor campos, aye. president chiu, aye. supervisor chu, aye. there are 11 ayes. >> president chiu: the resolution is adopted. item 10. >> clerk calvillo: item 10, supervisor cohen -- >> president chiu: why don't we do this same house, same call. without objection this resolution is adopted. item 11, same house, same call. without objection this item is adopted. madam clerk, could you please read the in memories. >> clerk calvillo: today's meeting will be adjourned in

memory of the following individual, on behalf of supervisor carmen chu for the late esther -- >> president chiu: any more business in front of the body? >> clerk calvillo: that concludes our business for today. >> president chiu: thank you, ladies and gentlemen. this meath i -- meeting is adjourned.

>> feel like it really is a community. they are not the same thing, but it really does feel like there's that kind of a five. everybody is there to enjoy a literary reading. >> the best lit in san francisco. friendly, free, and you might get fed. ♪

[applause] >> this san francisco ryther created the radar reading series in 2003. she was inspired when she first moved to this city in the early 1990's and discover the wild west atmosphere of open mi it's ic in the mission. >> although there were these open mics every night of the week, they were super macho. people writing poems about being jerks. beatty their chest onstage. >> she was energized by the scene and proved up with other girls who wanted their voices to be heard. touring the country and sharing gen-x 7 as a.

her mainstream reputation grew with her novel. theses san francisco public library took notice and asked her if she would begin carrying a monthly reading series based on her community. >> a lot of the raiders that i work with our like underground writers. they're just coming at publishing and at being a writer from this underground way. coming in to the library is awesome. very good for the library to show this writing community that they are welcome. at first, people were like, you want me to read at the library, really? things like that. >> as a documentary, there are interviews -- [inaudible] >> radar readings are focused on

clear culture. strayed all others might write about gay authors. gay authors might write about universal experiences. the host creates a welcoming environment for everybody. there is no cultural barrier to entry. >> the demographic of people who come will match the demographic of the reader. it is very simple. if we want more people of color, you book more people of color. you want more women, your book more women. kind of like that. it gets mixed up a little bit. in general, we kind of have a core group of people who come every month. their ages and very. we definitely have some folks who are straight. >> the loyal audience has allowed michelle to take more chances with the monthly lineup.

established authors bring in an older audience. younker authors bring in their friends from the community who might be bringing in an older author. >> raider has provided a stage for more than 400 writers. it ranges from fiction to academics stories to academic stories this service the underground of queer fell, history, or culture. >> and there are so many different literary circles in san francisco. i have been programming this reading series for nine years. and i still have a huge list on my computer of people i need to carry into this. >> the supportive audience has allowed michele to try new experiment this year, the radar book club. a deep explorationer of a single work.

after the talk, she bounces on stage to jump-start the q&a. less charlie rose and more carson daly. >> san francisco is consistently ranked as one of the most literate cities in the united states. multiple reading events are happening every night of the year, competing against a big names like city arts and lectures. radar was voted the winner of these san francisco contest. after two decades of working for free, michelle is able to make radar her full-time job. >> i am a right to myself, but i feel like my work in this world is eagerly to bring writers together and to produce literary events. if i was only doing my own work, i would not be happy.

it is, like throwing a party or a dinner party. i can match that person with that person. it is really fun for me. it is nerve wracking during the actual readings. i hope everyone is good. i hope the audience likes them. i hope everybody shows up. but everything works out. at the end of the reading, everyone is happy. ♪