realize the value at this asset and this prime location, at this as mike mentioned as the hindge point to the working southern water front and our negotiations as you will hear later, we believe that we have accomplished that and we have more work to do through the dda and next in the transaction documents but we bring you today, i think a very well thought out term sheet that looks at risks and has answers for risks and provides a framework for moving this project. not only through the entitlement process but also to construction, completing and generation of port revenues. of course, the whole time, going back many, many years we have a very healthy robust public out reach program that we have been following. these are some of the groups that we have met with not all of the groups but many of them including the maritime commerce

of the port which was a refreshing discussion highlighting for us issues that we have already been tracking but it is always good to hear from the users of the port, their viewpoints about adjacent development especially the maritime users. and we see this as complimentary to the working water front and what is happening in pier 50 and south. and we are working with the marry time group and others to listen to concerns and shape the project accordingly going forward. >> the land use summary shows that we have a plan to create a mixed use neighborhood that links mission bay to the city and to the working water front. changes for mission bay as we will get into it a little later, this site takes advantage of what we have learned from mission bay, which

as many of you know it is consisted of fairly large blocks of commercial development for the most part that are very efficient but not necessarily extremely friendly to pedestrian and people trying to navigate through the site and especially through the water front and so this site learns from that and breaks the blocks, pretty much in half to create a smaller scale experience for the pedestrian and ways to see the water and ways to get to the water and we believe that also adds value to the property. >> the land use plan employs flexible zoning and we will talk about that again in more detail shortly and that takes advantage of the market conditions to insure vital mix of use and users and the thinking here is to have some what of a flexible approach with maximums, and so we insure a mixture of uses and also to

respond to the market with the appropriate supply of residential and commercial uses. >> it tells a good story, especially the upper bar, the top bar highlights today what we are contemplating. you will see, going back to 2007 on this slide, we really began the process to figure out how to use this site to generate the revenue and the port's public trust mission. and six years later, we came before you with a term sheet for your review and it really marks, i think that the water in this project culminating the public meetings that i mentioned a few minutes ago, countless meetings with the team that that i described and countless meeting as well. but we believe that today we are at a juncture that really

catapults the project into the entitlement process. and reading to the bottom part of the slide which outlines how the site could be built out with market projections of today's forecasters. starting in 2015, again, highlighting the just in time infrastructure approach, a building would be leased and a design would be drawn up and approved, and it will be constructed all of that happening before any infrastructure work is done so that when the building is complete, on a construction schedule that is typically two years, the infrastructure is complete at the same time. and that repeats itself, for each phase through the project build out and approximately, 2021, 2022. >> the site is currently zoned a legacy zoning, if you will from an old mission bay plan, lot is zoned as open space and pier 48 is zoned m2, heavy

industrial and going to ward and one of the tasks of the project is to rezone the site and through a special use district. and that has to occur after the environmental review, but that is the approach that we have outlined and chiefable way to accomplish the land use site. >> as far as project mapping, since the rfp of this project we have heard and we have recognized that this site with this location, and its kind of proximity to mission bay has the opportunity to differentiate itself from mission bay and also compliment mission bay. and we think that doing that with the height on the site is a keyway to do that to not only differentiate but to add the densecy that makes the site vital and vibrant and our

studies so far, are leaning towards up to 2 small, and too tall, signature residential powers. the height limits ranging from 90 feet at the low end to 380 feet at the high end. and the fud, would also require, amending the water front land ute plan and a feature of the projects along the water front that recognize the land use plan is a great tool. but its vision in 1997 needs to be amended to reflect the reality of today's development market. >> this slide is interesting, in that it kind of shows you where the height on this site is contemplated. this is not exactly what we think will happen. it is an idea and it is a concept of what could happen on the site as far as where and the density and the mass of the project could end up. we are meeting with the

community and the city regulators to figure out the best place for height and the most sensible heights to approach the neighborhood to again, ensure that the density that we desire for activation purposes is achieved and the blocks are numbered a through h. and the height right now in this proposal would be concentrated on block a, block f, and block c. the height on the remaining parcels are very similar to what you see in mission bay with the maximum high of 160 feet. it will involve working with the regulatory partners among them the state lands and they are are others as well you are very well aware.

but these are the two prime regulatory partners that we are with and have a healthy die long with and work to accomplish these tasks. as you saw in the first slide and as you know from experience, the lot is currently a surface parking lot that accommodates roughly 2,000 striped spaces. going forward. the project proposes a parking structure in the south west corner of the project site we call that parcel d, the parking structure currently is being designed to accommodate approximately 2300 cars. there are additional parking spaces and other buildings on the site. and in the timing of the garage itself, is thought to occur early in the project as the parcels are taken down for

development. surface parking goes away and so having a garage available to meet that demand will lessen the impacts on the neighborhood as fars the visitors that need to park for the ballpark and as the project is built out the users need the parking. getting the garage done early is seen as a key construction goal. >> the project team is working with mta. and they are interested and are looking at this garage as a project of their own to finance, and manage. we do not have a definitive response or a definitive answer to that yet. but we are in the healthy dialogue. the demand is obviously there, we believe. to warrant investment. we look forward to updating you on that progress as we go forward. >> we also want to point out that the port does not expect to provide any public financing

except cfd financing for the garage that is to be paid by special taxes on the parcels on the site. or taxable parcels off the site that benefit from the parking structure. >> the project, of course, will meet its affordable housing requirements and in the discussion and with the mayor's office of housing, to best meet the needs of the housing and mayor's office of housing. right now, as you know, by law, the inclusion requirement is 50 percent of the units and 55 percent of the area income that is a goal that we will achieve and we are also working to look at other mixes of mean incomes that might address workforce housing needs and things of that nature and are open to working with the mayor's office of housing to come up with the best use of this site to meet his department's needs.

the affordable housing is important to note will be delivered in a balanced manner throughout the project and not all at once or at the beginning or end. but have a phased approach and deliver it throughout the build out period. the project is very pleased to have been recognized by the city's planning department as one of three potential eco district sites in san francisco and that is a recent announcement that you may have heard about a few weeks ago and we have been even prior to that actively looking at different sustainability measures that will conform the eco district including centralized waste collection and things of that nature and the think that the recognition of the planning is encouraging. and so we are exploring as many options as we can to make this

site a model for the city and a model for other developments. >> of course, the project will be built with a comprehensive traffic demand management plan. i think that we as mike mentioned we benefit from peter albert's work on the water front assessment which is helping to inform the traffic thinking for the site. and the other sites along the water front. and this has been a key issue we found with the adjacent neighborhoods that transit through this part of the city could be improved from their perspective. both in terms of scheduling, operations, and ongoing operational maintenances of the infrastructure. so we think that this project in concert with the other projects as detailed in the water front transportation assessment will point the way to real and significant transit improvements for this part of

the water front. including the potential of allow a turn back for the e-line cars that will be coming to this part of the water front and an early turn back increases the ridership capacity of that line and makes it more viability. it is exciting potential uses of this. you may remember that it shows sketched of what that might look like and that idea is coming back full circle to do something that could be viable and it will keep you apprised of that as you fwoe forward. the project promises many, many jobs at the project phase and full build out, and 9600 jobs are estimated to be on site over the construction over the

build out period and upon build out, this site is estimated support of 11,000 jobs, both in the office sector retail sector primarily, obviously there are a few jobs associated with the anchor brewing company as well. the developer is committed to fos thank youeringing local job opportunities and developing an over all framework that addresses the funding sources with private and public. to assure that the jobs and contracting opportunities are directed to the extent possible to the local, small and economically disadvantaged companies. and looks forward to continuing those discussions. >> and not leaving really what has been an overview of the

project land use program and the project structure getting to the deal instruct you are and i want to switch gears a little bit and give a high level conceptual overview and this is something that you may have seen before and the first item that i want to highlight is the partialization of the site and the development phasing. the ski to making this site work and key to creating value in these partials but the value will be verified through the market value appraisals and so we realize that is a moment in time where we will have to assess the value of a given parcel and to do that in your agreement. the deal involves the efficient delivery of the public infrastructure and the mechanism to reimburse and acquire that infrastructure. and again, as mentioned the over all goals of our negotiations has been to increase the land value to the port. to generate higher revenues

over time. through the xhom nation of base and ongoing participation rent. and we also believe that we have created an environment going forward where we are sharing the risks and the upside risks as well as the down side risks as we will talk about shortly. and an overview of the financial terms. well, with the dda approval, the developer, the giants mission rock, team, master leases and fuel out of 237, much along the terms of the lease that we currently have in place for the parking lot. the developers is and may continue to pay all predevelopment costs and it will be repaid with the market base rate of return and the developer will pay all of the costs to install the infrastructure and be allowed to market all of the leaseses with the reserve price and no less than the allocated share

of the $3.5 million base rent. the port has agreed to one or two prepaid leases up front as a way to generate revenues quickly to pay down predevelopment costs. and therefore, reduce the amount of carry on those costs. and each individual parcel will include annual participation in the management events and resets. so, as mentioned one of the first tasks that we will accomplish upon getting approval is executing a master lease, very similar to the terms that are there today and that allows horizontal development to begin, the developer building infrastructure parcelizing and marketing the site, port and

the city creating an ifd as mike talked about and options to develop the parcels going forward. it is important to note that each of the parcel leases will be a certain lease between the port and that vertical developer that we will have a long-term interest in these leases going forward and direct relationship with the vertical developers. this what the master lease for control of the site. and infrastructure development in a little more detail and privately funded and we have come up with a mechanism of reimbursing the developer and their costs and returns on the costs. and to do that, we would assess each parcel's development rates

value and that will be a cost that the vertical developer will pay. we will also reimburse through proceeds through any trust parcels, this site has the potential for creating a parcel taking it out of the trust completely with the state commission approval and selling that on the open market. that will generate early revenues to return the high costs. also to use special taxs in that increment and potentially public bond proceeds from public financing mechanisms. i mention the returns for the costs and this slide goes into detail about those returns. the return will be the greater of 20 percent of annual return on their unreimbursed equity and the highest balance of the development costs that are outstanding at that time.

we have created a mechanism to incentivize the developer to complete the build out and achieve the maximum rents for the port and should those rents reach 4.5 million, we have created them again, in incentive where the developer will share in that rent, when it reaches that threshold. >> the returns do have a cap on them so that the port is not exposed on the back end. and the controlling risk lying here talk about how that cap works or should we have a shortfall in our predevelopment right sales. a slide on the public financing mechanisms that we have been talking about. it is a valuable tool and it helps us to reduce the project

risks. it accelerates the public benefits to the site and increases the port rents. and the sources for public financing reimbursed the developers horizontal costs as we discussed and there is a detailed financing plan set forth to describe the mechanisms and the phasing of the public financing mechanisms. one of the sources that i mentioned a few minutes ago for reimbursing the developers predevelopment and horizontal costs with the development rights payment and this is a sort for which the port reimbursing the developer and the vertical developer of each developed pad or parcel is required to make this. it is in addition to the rent that the parcel will deliver to the port and it is a payment that is determined by the amount of horizontal costs that

have been spent and need to be retired and so there is a process to determine that will involve real estate professional and brokers to make sure that again, the high costs, the high return costs of horizontal infrastructure are paid down as quickly as possible. >> so, again, the master leases between the port and the developer for the entire site as each pad is readied each will be leasing under a partial lease and what those parcel leases look like and one of our tasks between now and the dda and the master lease execution is to come up with a form of partial lease, it is larly mirrored on the leases to date

and it will be customized to fit the site and the uses that are contemplated for each parcel. the reserve rent is a minimum of 3.5 million for eight of the development partials which excludes the lead parcels that will be discussed to be used to generate the revenues to generate the fashion and excludes the lead partials and the parking structure and pier 48. $3.5 million is attributed to the remaining. the base rents and the annual rent will be determined based on a fair market appraisal for the rights pavement and the lead parcels are transferred to retire those expensive costs as soon as possible. >> there are mechanisms in the

parcel lease that we have contemplated of increasing the base rent every ten years and also allow for a percentage rent structure to benefit the port over the long term life of these assets. the leases have provisions for, again, generating at dishal revenues to the port and provisions for participating in capital event as in this slide. for instance, a condo going forward. initially about the water mark condo with the branch and also on another project in the northern water front. it is really a way to per spet youally benefit from these properties going forward if

there is a condo built on the site and also in the commercials, 1.5 percent of net proceeds going forward. >> and should one of the buildings being refinanced the port is entitled of a transfer fee of 1.5 percent, excluding the proceeds designated for investment that come back to the site and invest in the property to keep it in a productive mode. this slide discusses and describes the developer's options for the parcel leases. i mentioned earlier that there will be eight development parcels in addition to the two lead parcels and the developer will have the option to lease those directly. and be the vertical developer that the port executes a separate lease with. and in the process here, describes how that will happen. we would meet and confer with the assistance of a real estate

professional to decide when the market supports a vertical development on a given parcel and once we have decided to proceed with the development we would issue joint ininstructions to an appraiser to value the site so that we have a known, fair market value. and after all of that happens, if the port still believes that there is an economic justification for the lease and developer believes otherwise, and we have the right to put a parcel to them. and requiring them to exercise the option or lose it. >> certain parcels may be offered by an rfb to establish a value to meet and hire an appraiser to assess the value. this is another tool ta we have to use the rfp process the

process that they are familiar with to conduct an rff and a bid if you will, an option to determine the fair market value. in the beginning of the meeting we were pleased and very excited to be moving forward with the first tenant for the project at pier 48 anchor brewing company and we have been meeting with them off and on for some months now and believe that the site holds promise for the expansion and brand and it is a good way to activity a historic structure with the historic use in the city it is a good marriage of the uses and the property locations and we also believe that it will help to accurate the remainder of the projects across the street at lot 337. the lease terms for the anchor

brewing company, use of pier 48 will be similar to other warehouse leases that we have done along the water front and the shed. and there is a shed use and a office space and of course a retail component that is the large majority of the space, so the 200,000 square feet will be production storage and leases that we are familiar at executing and managing. we want to look forward to having that relationship directly with anchor. >> and the current proposal, that we have been studying is part of the deal had anticipated that pier 48 investments will not come until phase four and so quite a bit down the road. this proposal or use that we are looking at with anchor brewing could easily or definitely accelerate those expenditures earlier in the process. and that could change the over all project financials in which we will be reporting to you

going forward. >> at this point i would like to thank you for your time and introduce jonathan sterns who will walk you through the analysis of the deal from a financial perspective. >> jonathan stern, so phil has talked about the project and the term sheet which was the various agreements that we have in place to move forward through entitlements and binding dda and agreements. and we thought that it was important to tell what we think, or what we are trying to accomplish at the staff under the commission's direction and what we think that the financial results will be. so i think that there are two parts or two stories that we need to tell about the capitol needs of the project and the site that you just saw and how much that is going to cost and how we are going to fund it. an