of rent. just starting over all, this has always been used to that long time that phil showed you earlier in 2007, this is in view of the revenue opportunity site this is no longer directly needed for port maritime purposes it is just lucrative in the form of the parking lot as we can see the mission bay has grown up around us and a great opportunity to bring more and more certain revenues to the port for a long, long term and then, also benefit the city and port, the water front edge through public benefits, to the public. so, really the principal here is to maximize the port revenue opportunities of the site, this really in the development process means taking on certain rifbs which i will talk about in a little bit but trying to create a structure where we are sharing that risk in such a way that we do get those opportunities. first i want to point out that one of the main ways that we are doing this is taking a little bit of the development risk, and but also trying to

reap the maximum benefit is that we are prizing the lapped and the finished parcels after the entitlement and infrastructure and that is a ready to go parcel and create the maximum value and subject to market timing risks which is something that we need to consider and we are not trying to set the value now or to speculate to the spakt value we are trying to create a maximum opportunity for the port to get that value. the normal and deal very normally would involve an early sale, or option, that is not the structure that we have put forward. other principles are for the port to continue to have participation. these are long terms, the current use makes a lot of money and will grow over time but it does not have this time to create large, new, economic

opportunities for the private community through the development and share as a city agency and so that is one of the main reasons that we are trying to do this. before i move on to port rent, i want to talk about the numbers behind what we think that the infrastructure and costs will be and the source of the funds, if you will. >> to get this month ject done right now when we look at the project per form a analysis, it looks like there will be 100 million of the developer that will be needed to get the project done, this is a lot of at risk money, $15 million of that will be happened in the predevelopment phase and that is very risky money and we have as phil as pointed out and negotiated what we believe to be a market rate of return on that development capitol. they will provide the up front money and there will be other sources to funding that will partially pay directly some of

the infrastructure into that development costs and reimburse their equity... and return on the equity. we are talking about $125 to $154 million. with this announcement of anchor, before we peged the total infrastructure price of $154 million that involved quite a bit of developer money or public bond money that will go into fixing up pier 48, one of the reasons that the anchor is very exciting and they are desire to both accelerate the process and use it as a long-term industrial use that could lower the over all price of reusing pier 48, potentially and also bring other sources of an end user sources to doing any of the work that does need to happen. that is why we are showing 154

on the perform a analysis and on the staff report we talked about 125 to 126 million is what we considered the project infrainstruct stur and so this is the over all capitol sided idea is that will unlock the value of the parcel, and the development rights pavements are up front lease payments and also help to reimburse and pay for infrastructure we are showing that around $54 million and the rest of that money will go into port rents. we are viewing this as an opportunity site is that we are taking there are developers that the market rate of return and we are offering them a form of participation, once we have reached what we see is a fair, and lofty bench mark of $4.5 million for the site and we want them to have incentives for us to get that amount of money and more.

but after that really almost all, all of the value of the site will come through or back to the port in forms of base and participation rents on those created parcels. and we have very important to how we are strieg to structure this. currently as phil mentioned we earn about $3.5 million on the site and only about 2.4 million is guaranteed but the parking is reliable and that is one of the driving factors that led us to the $3.5 million reserve rent and that is a do no harm sort of reverse case and on proform a we look at what we think, we look at the valuations of the current development opportunities that are created, we look at the rates of return that we have negotiated and we have looked at the timing that we expect and all of the other factors that go into development. we believe that we can by 2022, have 4.5 million dollars of base rent to the port in the 8

parcels that we will collect rent. and we think that is a good out come. and we think that we also believe that those rent structures will grow with the participation rent and those resets. this is roughly, the numbers that we, you know, in the graphic form over the 75 plus years of the project, where we think those rents will be arrayed. i think that we are only showing the first 35 on this graph but this gives you a sense how the blue lines where the interim parking will decrease as the parcels are taken down and the base rent will come back in its place, by 2020 that we will have a level of 4.5 million dollars and at some point, shortly there after, participation rents will start growing behind them and will trend upwards. and periodically every ten years, the participation rents will largely be concerted to the base rent and so that is

where the red lines start going up. what does this all mean? on a net present value basis which is not necessarily the best metric to a 75 year lease ongoing participation and we are looking at approximately 130 to 135 million of net present value for this proform a analysis that exceeds $106 net value of the current parking uses. i think that this ongoing leases and participation of those leases will provide through the length of the leases a very good continuing revenue source to the port and it will grow in a way that parking will grow in the long run. the other thing to point out and sorry to the jumping around and a lot of concepts here altogether. there are port rents which i just discussed and one of the other important points and they mentioned is that there are tax increments through an ifd

district that can be afforded through the project and we are talking about over a billion dollars of taxes that will be generated over the life of this project and in the front end that will be used to support the public infrastructure and we will explore the mechanisms using both the ifd increments and backed up by special taxes in the cfd district and that is important that we described and these will specifically are used to develop the public portions of the project both infrastructure and public amenities and parks. >> finally we talked about money and revenue and i want to talk about the risks and the staff report goes into the details of that and he is good at pointing out the risks and how we mitigated them throughout. one is entitlement risk and that is an important one and that ends up getting approved for development here will effect both what can be built

here obviously but also the residual land value to the port and the development costs of $125 to $150 million that will not go down dramatically even if the heights and uses do go down, the port is general to this entitlement risk process and that is why we have been urging the development partners and we have been good at going to the public to get a broad consensus of what could be built here. we are offering them a market rate of return, if the timing does not go high or the costs are higher there is risk that we will be in a position that money will be out there for a longer period of time. that 20 percent market rate of return that is a lot of risk for the port that is one of the reasons that we are recommendinging the core structure with the lead parcels that are transferred early and negotiated a cap in the over all returns that the developer

can go for. i just mentioned cost risk, we have had and we have inspected closely the infrastructure numbers here and i told you a little color about what the pier 48 numbers verses infrastructure numbers and the planning and the costing verified by the third party and there is cost risks but we have done our best to this point to bracket that risk. we have talked about market risk and we were willing to take market risk and recommending taking the market risk in this case to the development of the revenue 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