opportunities that is specifically about pricing it as a fully entitled parcel opportunity's leader. we don't know what that leader market is going to look like. we are taking the market risk between here and entitlement. finally, counter party risk and operating risk that are closely related. these are long term grouped leases we have to know that we have a good partner on the other side of the deal and that can change over a full 75-year period and that inherent in our leasing model but i would say on the counter party risk we have been working with this developer for a number of years since 2008 and 2009 and as mike alluded they are a good corporate citizen and a partner to come to this deal structure. that is my brief analysis of this complicated deal and with that i want to hand it back to phil to talk more about what we are doing going forward.

thank you. thank you jonathan. to sum up a unique opportunity at this wonderful location and we believe that we have the right project before you today. it is going to improve over the next several months and years, as we go through the entitlement process it has improved since it was proposed in the rfp er a and we have a great partner and a good team and we are very excited to move forward. again the location, we could not ask for a better location, we think that is going to take advantage of the market and the market is going to reflect the value that the site has given the location and given truly it is the first piece of large development land now as you head out from the city's financial center. and the public benefits it is going to bring as mentioned the land use program is diverse and it is robust and a lot of great

thinking has gone into how to make this site work, what is the right mix of uses of retail, open space, how all of this interrelates and the work that we have done is amazing and again, i think that it is going to even get better as we get closer to actually building something here. but, i think that the progress to date is very heartening. push >> and then, as the next steps, as mentioned earlier, our next item would be to come back to you with a request for endorsement of the term sheet that you have seen today. following that, we would proceed to the budget analyst for the board and the board to seek their endorsement as well. and to see that happening in april. with the improved term sheet with an endorsed term sheet we will formally end phase one of the ena and we will begin phase two the entitlement phase, eir scoping will commence with the

discussions with our partners will ensue and we will start to check the box and going through the entitlement process to get to a development agreement and the least transaction documents that i mentioned earlier. >> that concludes our presentation, we want to thank you for your time and we are available if you have any questions, the developer is here as well. mission is represented by jack and weld and north. >> thank you, phil that was a very comprehensive presentation and we also thank you mike and jonathan. we do have public comment. and cameron camric? >> commissioners, i am

fortunate to be a that have spent the entire lifetime here. i hope that my children will enjoy similar opportunities to live in the greatest city in the world. san francisco has the housing supply crisis which has driven the majority of my friends to the subsubers and other states. my wife and i live in the dog patch neighborhood where we support the efforts of san francisco giants and swl 337 associates to improve the quality of life to create significant open space and increasing the housing in our neighborhood. the normal hesitation is that it will not provide parking for bikes and vehicles. to propose for the city and make life bet foreall of us. >> corine, woods. >> and if anybody else would like to make public comment, go

up to the second, quesada and fill out a speaker's card. >> good afternoon, commissioners, i am the co-chair of the water front advisory group. and we have been working with the giants and on this project for a long time. but it is not nearly as long as the time that i spent working on the mission bay development i have been working on that for 20 year now and i think that there are a lot of lessons learned in mission bay that we can apply to this project and i hope that we do. i have been asked by my co-chair who could not be here today to talk about three major issues, one of which is the staff report and the term sheet called out and creating a vibrant and uniqued mixed use,

urban neighborhood focused on a new major public open space at the water's edge. but the phasing diagram shows that that park does not get built in the project. we think that it is very important to move up the creation of at least a portion of china basin park. you kept my name. because i think that it is important to have not just adjacentcy as a criteria for open space but also going along with the vertical development i think that it makes a much more attractive project if we could get at least a portion of that bay front park which really is the focus of this development build early, the second issue is the height. there has been a lot of

discussion about how mission bay is squat and really ugly. with a maximum 160 foot high level. i am not saying that we should go back to the mission bay height because i agree it is squat. but the maximum range of 220 and 280 feet would be more acceptable and more in or more appropriate next to mission bay than the 320 to 380-foot levels. particularly on parcels a, and f. >> the third thing that we wanted to talk about is the original plan for pier 48 included quite a bit of publicly oriented space. public assembly space that was very much focused toward the water. and you know, 30 million dollars is a lot to spend on

seismic up grades for public assemblies and i totally get why having anchor as a tenant is a good thing. because we don't have to spend that seismic money. but i think that it is important to replace that public assembly space somewhere in the development and create a public orientation not just in the parks. this is going to be a big, big project and coordination of infrastructure, nothing gets done just in time in san francisco. we have been waiting a year for one intersection to open it has been done that long. nothing back up. make sure that you have got your money spent and allocated. and please, a solid design for development is very important. thank you.

>> thank you. >> commissioners? comments? >> i think that it is exciting to see this project move forward and i want to thank all of you for a wonderful presentation and the tremendous amount of time that has gone into getting us to this point. and i am also excited by the focus on a much more diverse and vibrant neighborhood. i too am a little not concerned, but i would like to see something that is not as boxy as we may have seen come through in mission bay, so i am pleased that there has been thought put into that as well. also, i want to thank the giants for their commitment to the city and i know this will be in their backyard. but it really does reflect a commitment to being more than just one tenant here but having a long term relationship with the city and so we thank them for that. it had one question and i

didn't quite understand on the presentation, page 21. on the developer return, perhaps if you could, if you would not mind explaining how that calculation might look after 20 percent annual return verses the one and a half times peak equity is that a one payment or how does that work? >> a certain amount of expenditure maxed would be 1.5 times that amount or 20 percent so it is the greater of those two as kind of an outside point or an outside amount. and as mentioned below that, there is a potential that the revenue sources that we have identified to perform that task might be insufficient. and if that is the case, we have a shortfall which is discussed at the bottom of this page, and we have come up with

an aappropriate to that shortfall which i think is reasonable and protects the port on the outside and provides additional return over an additional period of time up to twice the..., the multiple if you will verses the 1.5. >> and... pardon me. elaborate on that answer. want to point out especially about this multiple when you are negotiating what is a market rate of wurn we found a couple of things the risk and award is priced more steeply, it used to be flat before the financial crisis. and that is number one, and number two is that an iir or a 20 percent of return partially depends not just on the rate and the other iir and financial engineering metrics and how much money are you going to get out of an investment. and one of the things that we are hearing from the financial

markets is that we don't want to be in a percentage rate of return but we want to know if we invest a dollar how much we are going to get back and the certain promises if you invest one million, you will get back million and a half, and so they are using this dual metric system, i should say 1.5 percent really means that you get your money out in four to five years, so it matches the relatively short development cycles if there is any, in some ways we did not think that this measure was a burden, if it happens slower than that they will get a 1.5 multiple in the course of getting this market rate of return this 20 percent and if we do end up paying or have shorter development cycles that is a benefit and a hot market and more money to go around and if we pay a premium

for a developer that is performing we thought that was an acceptable system and the same way that we are trying to maximize the revenues and take and change the risk profile we felt that we had to offer the incentives to do that. >> thank you. >> i can't believe that i'm happy that we are at this point and i really can't believe that it has taken 6 years to get here. but it is right here in front of us. i think that and i want to thank everyone who has worked on this project, because you know it has been a long way in coming and i think that it is a very exciting project. and i can't wait for, you know, the ground breaking. i think that corine made good points and i don't think that we did a good job on discussing the open spacing on slide six in the conceptual schedule it is not clear where the open space is phased into the

project and maybe we could spend a couple of minutes on open space because i think that is a huge part of this project. thank you, commissioner. there is another slide that i would like to show you, i would like to show it more graphically and i think that we put it in here or maybe we didn't. no i guess that we didn't. there is a slide that i don't have handed nit is part of the term sheet, if you look at the term sheet there is exhibit c, and it shows those four phases of development and over lays those on the drawing and you can see very clearly that the large park china basin park is in phase two. i believe mission rock square park is in phase three, those

are the two prime parks, of course you know that there is already a park and of course it will be much better but there is already a park on the shore line there that serves a purpose but you know it is going to be improved greatly, and i think that corinne's point about seeing what could be done to enhance that experience before the full build out of china basin park is worth looking at for sure. >> definitely. if there is any way that we can get the open space going earlier it will be wonderful because it is so beautiful, you know, who wants to wait another six to ten years for it. >> and i really want to congratulate the port, the city, and the mission rock development for working together, i think that this mail be one of our first projects where this city has also invested with using in this project and i think that it is absolutely great and so all of the projects are coming after this one, i think that it is wonderful that we have city staff working alongside with

the port staff to pull thets projects off. so i really want to congratulate everybody on that. will there be legals assigned to this? >> yes, the team has been meeting with hrc, dating back a couple of years now at least. three years if i had to guess. we have had very productive discussions with hrc and work td with the staff and we have staff at the port that we have been able to enter face with on a project and we also had communication with the hrc on a letter that kind of states some of the goals that we are trying to achieve. so we look forward to continuing that discussion as property ject really takes shape and there is meat on the bones. but we would already be on a healthy dialogue with hrc. >> just to interject as we heard the fabulous numbers that we have been cutting this morning, perhaps that is what the commissioner brandon mighting alluding to not just

the goals but exceeding them like we did at the cruise terminal. >> during what part of this, or of the project will those goals be established? >> you know, again, with hrc we do have a letter that we have exchanged with them, approximately a year ago, which we can provide to you. the number escapes me right now, and there is an agreed upon target in that letter. but i just don't want to mistake it. >> i am sure that you will have it before the next meeting. >> i would like to echo my fellow commissioners and i will not say the same thing but i think that they have said a lot of important things as to how much work has gone into this and how excited we are and happy with the partners that we do have and i do have a couple of questions and clarifications i guess to just ask and not to be that but just in case, you know, part of what we try to do here was as we are guaranteeing

a return to the developer, we are also trying to figure out ways to pay off that equity as fast as possible because that say tremendous it is great for the giants but it is a tremendous cost to the port as we said the 20 percent, so my question is relating to financing risk. number one the cbd and while we are sort of assuming that that is going to happen, i just want to know what the back up is if we have trouble raising the $140 million what is the back up plan? >> thank you. >> ifd. >> yeah. >> the ifd policy is currently taking shape and you have seen the informational presentation in october. >> i understand it. i am just saying what if? >> i will help to turn that over to the ifd expert mr. brad benson. >> thanks, brad. >> brad benson, special projects manager, the ifd

policy that the port staff presented to the commission, went through the capitol planning committee in december and it was endorsed by the capitol planning committee with a recommendation to the board of supervisors and they have been coordinating with the mayor's office to get the board of supervisors resolution endorsing that policy, introduced with some co-sponsors among the board, we are hoping that that will happen in the coming weeks. and that the board will be able to consider that ifd policy prior to the term sheet going up for board consideration. the project really does, or is and the project finances the entire negotiation is predicated on the ability of the project to capture 65 cents of every dollar of pretax that is generated, which is really the entire local share.

and so, without that, financing tool, we are not going to be able to fund the infrastructure required for the project. so it really is a predicate of the project. >> and i understand that entirely but i am just saying that sometimes as we have seen in the last few years, not because of us, but because of markets and the other conditions, that we can't predict sometimes if there are problems, i am just asking... >> what the back up plan? >> correct. >> okay. >> it is a good question. the other tool that is a component of the project is the melaruse community district financing tool. it allows the establishment of special taxes that would be leveed on each of the parcels in the development. and that can add some incremental value to be able to fund infrastructure. the effect of that, however, is that if you levee special taxes

on the development parcels you will have a corresponding decrease in the long term value of the parcels. so there will be an impact on the finances of the project. but that would be the most obvious back up plan to the ifd. >> okay, we just always have to consider what the down side risks not that i would like to see it happen but he knows what i haven't but i am just, it is just something that we have to worry about. >> but the commissioner this is mike mar again, i wanted to amplify that a little bit. part of what we saw in the past years has been for example the public finance markets seizing up and so we have the funding mechanisms where we have a tax stream or an increment stream and don't have the way to stop the clock from ticking what we have crafted is that we with the developer look ahead and say how are we going to finance the development of these two or

three leases? if at that point it looks like the markets will not be there we can adjust so that there is more up front money coming in so we use that cash payment to pay off or when we have also reserved the discretion to find other public financing sources. if there are other types of issuances that are well established than a port revenue bond or a cop and not that we have to do any of those things, but we can have that conversation. by having this phase process where at each phase we look around to say how is this going to work? that is how we address part of the risks but we have to be managing this on a day-to-day basis going forward through the build out to make sure that that works. >> thank you. >> that is helpful. >> and also, i wanted to understand jonathan, you know, in that chart that has the 15 or whatever the period.

i believe that pier 48 is not in that rental stream; is that correct?? >> we are talking about lot 337,; is that correct?? >> that is correct. >> so we are not seeing in the other revenue stream that i am not sure is captured is the transfer fees, the developer fees are not captured. so i think that for the final presentation we would like to see how you capture all of the revenues that we will see throughout the life of this project so that we have a better understanding. because when i looked at it this is not all that we are going to get. >> thank you for that point, and that catch. we were trying to isolate 337 in this graphic. the one point is so far, to be conservative we are not showing a definite income stream from those refinance or sales because they are uncertain events that we don't control them but we said, what or when they do happen, we say that they have estimated that they will bring in on the order of a half million to a million dollars per event. >> per event, per parcel.

>> so, 8 parcels times... >> depending on how much they turnover. and that is... >> well, we are offering your best estimate in general. >> i understand that it is a guest and it is a forecast of we are not holding you to it but we had to get the full picture and i understand that on pier 48 we have not actually negotiated anything specific. but again if we sort of use what we normally use within the parameters if we could get a feel for the entire revenue picture because this is just the rent picture this would help us understand what because we are saying that we are unlocking land value etc. etc. and help us to understand that. i know that this is my favorite question again, we are not selling the land but increasing the land value. how is it going to be reflected on the balance sheet? >> i will refer to elaine on

that question. >> elaine forbes, deputy director of finance and administration. we will be working together the fiscal officer and i will be working on it, but in general, private investment that we don't control the rates or the rents charges etc., do not appear on the balance sheet. however the investment in the infrastructure will. and that is an an shall response but we will be analyzing this in more detail for its implication on the balance sheet. >> so at least 150 million dollars worth of infrastructure costs will be added. we would like to push for more but that is the minimum. >> i believe that is correct. yes. >> two other questions, i am not sure that i fully understand this correctly. we have talked about it so much. of each possible comes up and

we have a different vertical developer that comes in, and obviously the master leases with the giants for 75 years. you might have you know the giants may corporate with the vertical develop and her may be a totally separate vertical developer and the relationship at that point as far as the lease is concerned, is more with the giants or would you explain that more to me again? >> commissioner, phil williamson. so the master lease as you correctly state is between the port and the giants mission rock, 327, llc. going forward each individual parcel could be between the port and the giants or an entity of the giants and not the same llc but a separate more than likely, should they not exercise the option to take one of those parcels then we will go up and seek a third party vertical developer for a

direct relationship with the port. so the port would have direct leases with each developer whether that is the variation of the giants or a third party, separate entity altogether. >> and then, for instance, it could be the case of pier 48 could be a direct lease between the port and the anchor steam for that long term lease. >> okay. >> and my last question relates to i guess in the final presentation of this, you do mention, obviously the great, the jobs and everything else, and everything else that is created, but it will be great for us to see the benefit for the city entirely of the property tax revenue and all of the things that we would see in terms of the big picture and the port and the financial picture and that gives us a better sense of what this is doing for the neighborhood and the city over all and not coming into the harbor fund that we should know what we are doing for the entire city. so if we could see all of the other i just mentioned the property tax and there are other things that you can come up with in terms of what we

expect to see in terms of the benefits for the city. >> exactly, what you will see at your next meeting if not before is the copy of the fiscal feasible report and it is a great deal and the different costs to the city and the benefits to the city on jobs and you know, costs for policing the site and all of the issues recovered in that report. >> thank you. >> any other questions? >> commissioners? >> well, as commissioner brown has already said i was not here for the entire six years. i have had a very accelerated course with this but i have to say that it has been a marvelous sort of process in development. i know that it has been slow for our stake holders and partners but i think that we have arrived and we are going to move forward and i think that it is very exciting so on behalf of the commission we commend you all for the hard work and i also want to say that we know that the model that we have put together for the project is new, different, than what the number is for. and i think that it is

precedent setting and it is a model that may not apply exactly the same to all of the other future projects but i think that it is very important that we set this project on the right for the foundation so that as we go forward, the other projects that are coming down the road that we have a really good guide post on how we are thinking about the development >> in the short term and the long term and we want to thank the giants for working on this as well as the port staff and i think that the relationship with the mayor's office has turned out. i think very well, and i think that we are very pleased to see that. thank you. >> thank you very much and thank you for your continued guidance on this project. >> item 12 a. informational presentation on the port's five-year financial plan for the fiscal years 2013-14 through 2017-18. >> good evening, commissioners, elaine forbes, executive directfi