supervisors breed, kim and yee and met us in shanghai along with the mayor who was late in arriving because of the bart situation, there were two port tenants (inaudible) from the fleet and also, jennifer mats, head of the port water front project was there and i was hoping that she would be here today to add a few words about the trip. the bay area, council, led by mayor juan was also in beijing at the same time as our delegation and so we crossed paths many times and there was just, so many people from the bay area, that time you felt like you were at home, which was wonderful. >> and the trip had a packed schedule, which included a warriors game and i have to say that i was impress with td organization and they brought the inspire organization from china from the owners to the investors to the players and the wives and the cheer girls

and the office and the flying dubs, and i was extremely impressed that they brought the entire organization to it be able to be a part of the trip. and (inaudible) participated in the forum at the university along with the mayor lee, and quan and i was happy to hear that when he spoke about the proposed project he not only spoke about the open space and public amenities and the jobs of the projects going to san francisco but he also spoke about the importance of working collectively with the community and the regulators to make sure that the project becomes a reality. and i had a information with the nba commissioner who told me how excited everyone in the league across the country, is excited about the warriors getting a new arena, i think that everybody is just tired of

oakland, the existing arena. and we visited the university and attended a ribbon cutting ceremony of the building, she donated an academic university to the school of chinese as a second language and it was a great fear with a lot of dignitaries and it was just a beautiful vacation and the u.s. ambassador, hosted us a reception before we boarded the high speed rail to shanghai, it was quite an experience, it was going over 200 miles an hour and we arrived in four hours and we did for the feel one bump. it was smooth sailing all the way, which is really nice. and there was an investment and development form, where delegates and privates expressed the opportunities involving both san francisco and shanghai. jennifer mats was on the panel and did a great job discussing the water front projects

development projects and opportunities. and chinaship and company and (inaudible) executives hosted a nice dinner for the delegation and since merely had not arrived yet, i had the opportunity to give it on his behave and promote our wonderful water front and i think that everybody wants to come and visit. >> and the mayor and the delegation, met with shanghai metro executives between bart and shanghai metro, committing to a new era of engagement and their metro systems carries 8 million passengers a day so we can learn the best practices and they don't believe in striking. we have several meetings with private and public officials to discuss investment opportunities in san francisco. including a private lunch with myself and the mayor, and supervisors breed and yee with the highest ranking women in the government.

and the women of the people's congress and we discussed education, healthcare, transportation and of course, investment opportunities. and so believe it or not, just giving you the highlights of the trip and i can go on and on but i know that we have an agenda, it was a great trip and at the end of the trip. we left sunday morning, and we were leaving the hotel on sunday morning and that is when we heard about the bart workers. and so it was kind of a somber into a great week. and so, i would hope that we can close the meeting in their honor today. thank you. >> thank you, commissioner, that was a fantastic report and it sounds like a lot got accomplished and i am glad that you were there to represent the board. as well as with the various stake holders and the representative in china, so thank you.

>> item 7 a, request of authorization to offer through competitive bids, one five-year, lease for five surface parking lots,seawall lot 301 commonly known as the triangle parking lot, bounded by taylor street, jefferson street, and powell street; swl 314 bounded by the embarcadero, bay street, and kearny street; seawall lot 321, bounded by the embarcadero, front street and green street; seawall lot 322-1 bounded by broadway street, front street and vallejo street; and seawall lot 323/324 bounded by the embarcadero, broadway street and davis street. (resolution no. 13-42)

>> my name is shai edwards and i am the senior property manager for the water front and i want to let you know that i am here today to request authorization to offer a competitive bid, on the five-year lease for the following five sea wall lots. 301, 314, 321, 322-1, 323/324. all located in the northern water front. i am going to provide a brief background of the lots. and discuss the rationale for consolidating the lots into one operator. and i will outline objectives of the project and provide the overview of the financial of the lease and discuss the bid process and qualification and hopefully with your approval and input, move forward on issuing the bid.

so, as background, we have two current operators, central parking and priority parking. they are operating, the five lots, plus one expansion lot. and central parking, is operating sea wall lot, 301 which is known as the triangle lot and that is primarily the fisherman's wharf community and then 314 serves as a lot for cruise operations, visitors in the northern water front and 301 is a very management intensive lot that requires a lot of staffing and customer service and 314 is a lot that is more in the self-park arrangement. as you can see on the overview, we have got the starting 301 is up at the top and the northern end, 314 is down across from

pier 35 and in 321, 322-1, 323/324 and those are operated by priority parking. and in the one instance for 321, that could be the future site for the entrance, if that comes back to pass, but i want to explain that, that is not being addressed here in this report. it is something for the future consideration, 314 primarily serves as a south park operating lot, and it functions as a lot to primarily the office workers and visitors from pier 9 through pier 23, for instance. and 322 i, is primarily, a valet operation and that services some of our port tenants like kgo and some of

the surrounded businesses whose employees park there and 323/324 is primarily the exploritorimu., and that has gone to a heavy valet operation, and they differ in the amount of management and oversight that they need. and so the idea is to consolidate those lots, with one operator. and, the rationale for that is based on really four years of my experience, managing all five of these lots and both of these operators. i believe, in the port staff believes that by consolidating this, we will have an opportunity to maximize the revenue to the port, and it will also provide for the operator to be able to staff these lots as-needed and it could be more flexible, and they could staff, up for special events, and give that everybody a little more flexibility, in addition, we believe that it should improve the customer service, as you

will have one operator there, responsible for all of these lots, instead of the two operators now and then the final component of it is that, it also, will hopefully attract, operators that have the financial resources to really carry these lots in non-peak season and so you have two pretty distinct seasons for these lots and so we feel that with one operator, we will be able to achieve these objectives. the project objective is a little more clear picture of the lots. the project objectives would to off of these lots after the authorization from the port commission through the competitive bidding process on a sealed price basis and anyone who represents the highest base and meets the bid

qualifications will be awarded the opportunity to enter into a lease. >> so to put these lots in perspective, i wanted to provide a pie chart on the parking operation as compared to the entire portfolio, as you can see there is 21 million square feet of port property. and our lots, operated by independent operators, represent roughly 1 million square feet of that. so, that is approximately, five percent. of our total over all portfolio. and the next part, the next pie chart represents the revenue associated with the various different uses that we have on the port property. so, out of the 77 million. shown is the total fiscal year

2012, 13, revenue, roughly, 17 million is brought in by parking. and of that 17 million, approximately, 10 million is directly associated with the parking lot operations. and so, ten million that is roughly 13 percent of the revenue from the parking lot operations and the other 7 million on comes in through our meters, and fine and whatnot. and so it is an extremely important component, financially to the port and the election of the operator is critical to us as an organization, and staying financially, viable. well, while the numbers are important, what also is extremely important, is the inner dependance and to the visitor experience and to have an operator that is totally focused on the financial

component of it, we do need to have someone that has the operational know how and skills, and customer service skills that allow us to have a good, posive relationship with our existing tenants and plus the visitors who come, and visit the port every day. and so, it is an example, we have the fisherman's wharf restaurant and the tenants and the exporatorium and the cruise operations and the events and the tenant and just the people coming down to visit. so, as a basis for this proposal, we have come up with a minimum bid amount and this will be the bid required by the operator to ad least, meet this minimum bid, and this is for the minimum monthly base rent and so i have broken these down into five different lots, you can see on the sheet here. and we have got a total, and we

have prorated them if you will per lot and we have a total of 363,000. is what we are recommending as a minimum bid. and to put that into perspective for you, during the last three years, fiscal three years, the revenue associated with the lot operations and the five lot operations, and it was 4.2 million in 2010, 11, and it increased to 4.485 million at 11, 12, and was 4.756 in 12 and 13. so, what this done for us, is this provides, a minimum base rents of 4.356 million and on top of that, the way that the bid is set up is that it is the minimum percentage of rent and the minimum monthly rent, plus the greater of 66 percent of

the gross sales net, city tax. and so we were able to generate an additional 534 million in percentage rent for the last reporting period. and so, this hopefully gives you an idea of the financial expectations that we are having, on this opportunity. and i know that i am going through these numbers quickly, if anybody, wants to stop and ask questions, or feel free to >> clarification, i wish it were true when you said that we have an additional 534 million. >> pardon me. >> me too. >> strike that, 534,000. >> and then, you said, it is you said base plus or, or, is it... >> so the way that the bid is going to be set up, it is the greater of, the rent will be it greater of the monthly, minimum rent, or 66 percent or possibly

higher, of the gross sales for the lot. >> now you had a plus in there when you said it, so i got confused. >> so it is one or the other. >> one or the other. >> yes. and in the past, what has been the driver? >> in terms of... >> has it been the 66 percent, or has it been the minimum? >> this gets to the peak season, in certain areas like the wharf where you have a distinct, season, during the months of may through september, the drivers is a percentage of rent. and you see that it is higher and exceeding the minimum rent and in the off season, typically the gross sales do not meet the minimum rent as a percentage of the rent. >> and how do these compare to

other parking structures and similar vicinity? have we done a analysis of the rates and how that will impact these numbers? >> we do, every year we corner the operators to provide us a market study or survey of the adjacent lots and we go to make sure that our rates are competitive with the market place in light of also trying to serve the greater mission too, of providing, support, parking for our percentage rent and tenants as well and our existing tenants. and >> and so does this represent, status quo increase? how would we compare? to the market? >> to the market? so i think that our rents are extremely competitive in the market place and we have on a hourly, daily, and we don't do a lot of monthly parking. but in the hourly and daily basis, for service lot

operation. we feel that we are within, well, depending on who you talk to, i think that we are very competitive. and so, i think that there is... >> and what knowledge do we have, whether, there is going to be more space, less space, generally not more space, but there will be less parking in this general area? just in terms of other developments going on not that we control? >> the parking operation, the competitive parking, well, of course, it has been the market place, is now, the surface lots are now being replaced with the development projects. and so to the extent that those surface lots go away and there is not additional parking being provided in those projects then our parking should increase in value. >> so, but specifically do we know right now, just in terms of whether the space is or under this or these lots, in the immediate vicinity more demand because of the

developments going on? or status quo, in terms of the amount of parking available? you know, the market is a supply and demand and the price is a function of that and so just trying to understand. >> i would say that it is looking opportunityistic for the port in demands for its parking. >> you mean more demand? >> yes, more demand. what is sort of tempers that is our developments that are planned for these lots, 322-1 is a project that you are going to hear about shortly. and so, but there may be a replacement in the parking told, and i believe that brad is going to jonathan is going to give that presentation. >> and the duration of this will be if there is future development would be remind me of the duration of the upper leases. >> proposing a 5-year contract >> if these developments start sooner the lease will provide

for early termination. that is correct. >> and the developments will be the affordable housing at 322-1 and the proposed operations? that 323. >> that is correct. >> so, could i ask, i am not quite sure, how if we have minimum rent for why we need to consolidate all five? and why we are consolidating from, i heard what you said about the rationale for consolidating, but are there complaints about the current operators? >> we have had our challenges, yes. >> but what is going to stop them from bidding again? >> it is... >> and if we have challenge and we are stuck with one, verses two? and i guess that my point is that commissioner adams and i have been, talking with the staff to try to figure out how to come up with more opportunities for lbes, and if we keep consolidating, there will be no opportunities. and i know that at one point,

most of these lots were independently run. and i think, when you do it, i mean, i am just not, clear, on how to lump them altogether, you are going to make more money. >> so, if we have minimums. >> and so there is seems to be two parts to that question, should i... >> okay. >> yes. >> so commissioner brandon, we have specifically inserted in this proposal if you will, is a lbe requirement, that the operator will be required to have a lbe participant in facet of managing and the operating, and security for the lots to provide those opportunities, is as we recognize that it should be provided. and so that will be a bid requirement. and then in terms of the i go to the second part of the question, from my perspective or from the port staff's perspective, consolidating the

lots gives the operator an opportunity to first of all, consolidate and have a more sufficient staffing plan and also with these lots, but one of these lots, potentially coming out of play, we could have an operator and we had two and we not one of the lots, we will have an operator just operating one lot and which will not be economically very efficient and so our hope is that it would allow them to drive the bid higher. >> okay. >> and so, back to the lbe conversation and if you have and are bidding on one lot verses five lots, i think that there will be more people that have the resource to go after that contract and then the total contract. and, then my other point was why are we going from 3 to 5 years? when it seems like every time that we go out to bid for the parking lots we get more money,

why are we increasing the term? >> so, that is a good question, there is a couple of thoughts on this. again this is our rationale and we are just trying to share this with you, the idea on the fao*if-year five-year is that the lots do require capitol investment and for the firms to make that investment whether it is revenue equipment and whether it is resurfacing the lots and doing the perimeter and the signage and all of these things cost a significant amount of money and to the extent that they can do it over five years and will allow us to get a higher bid in terms of the monthly bid, and then, the other piece of it is on a three-year basis, we have already exceeded our three year contract now and here we are in the fourth year if you will and we thought that the five year lease will allow us to have the stability in the lot management and provide the incentive to make the investment in the lots and also give us we do have

escalators in the lease because of the percentage of rent clause and there is an annual escalation of the minimum base rents for proposing as well. >> so, go ahead. >> no, i can understand, a little bit of the rationale of the five-year, but i guess that i am a little bit, support what commissioner brandon is saying, because the lbe component here is not operating the lot as the operator but providing a service to the operator. which is not the same, and i think that you are vying to help the lbs in terms of trying to over all to generate a business enterprise, and then they are just an extension to the security service or something maintenance, services or something. but it is not the same. there is a difference, i think, and so what i guess in what i heard is that these have all have their own very customized

reasons of who they serve in terms of possible customers. and the customer service requests that we would like and because it is not like they are just all servicing the office tenants and that is it. and i think that, yeah, i guess that i am also, wondering why we would consolidate now, and as i read here, you say that, we get 66 percent of receipts after property taxes and the way that they operate the costs is not our concern, we are based on receipts after the parking tax. >> and i understand that we want to help to be efficient and just looking in the port perspective, you are looking at gross receipts. am i not correct. >> we are, and there is not, a real wide margin operating in the parking lots and we found that out when we have had the operators that could not make the minimum rent payments and we have had go back in and we

are, you know, we are going into the other forms to have the lease enforced and so, there is, just not a huge amount of spread between these, and we think of financially viable operator would be the best way to go, and part of this, the way to consolidate the lots we thought that will attract a higher level of... >> i totally agree that you want to have a financially viable operator and i think that is important and we have to layout security because of the security department and everything what exactly we mean by the financially viable operator regardless if they are an lbe or not. >> this is a beautifully prepared whatever you want to call it. and i do think that you are pretty much covered everything

here. you are making the vendor responsible for getting the parking lots to pay you rent. how much up front cost to the port? do you think that is going? how much do you think that it will be over all? >> that is where we are assessing right now, commissioner. we are looking at, i am meeting with our deputy director of maintenance and the port investment will be in the infrastructure, the 1 sea wall lot does not have electricity to even power the lights. that need to be on the lot. so we are, i think, that the port could, make an investment and in these lots will be the investment that will be beyond the typical tenant responsibility and so, anything up into the lot, is what we hope to have and i don't think that it is a huge sum of money, but it is, some investment but there will be a return on it, we feel. >> and yeah, and ran don, and the concern, and of the lbes,

and what, but the vendors, that are in interviewed and are going to bring in a proposal, and they have already been vetted by the human resources and than any other city contract, they have to prove that they will have an lbe, right? >> that is part of the minimum bid of qualifications, right. >> thank you. >> this is outside of 14 b and so it is a port requirement that the response ants come with an lbe partner and so it will go through the same process of a professional services contract or a construction contract where the contracts monitoring division will review that they have met the percentage as part of a minimum qualification to review the proposal. >> that is what i thought.

>> and on the five year contract that makes a lot of sense. >> and it does worry me a little bit about the amount of security that the vendor has to put down, and in the form of cash, or a cashier's check, non-refundable. that takes the small guy or the small business guy out of it? and i think that i am talking about one year's rent or something? it is significant, and i think that warrants a closer look to see if we can reduce that. >> what are the requirements of the city parking contract as well as in the private sector? >> currently, they vary widely, but what our current arrangement is the rent either in cash or as a letter of credit. >> i think that maybe six months will be. >> it is six and what we have talked about is six months. >> i thought it was one year. >> no six months, and i think that what the qualifications

other than putting down the six months and that may be something that have you know the over all financial condition of whoever is bidding, and i am wondering, if we have giving out the questions of whether we should have consolidation or whether we should. and i am wondering whether we should look to see not to open it up in terms of not saying that we would insist on one operator. but let it be more open in terms of the response from the market and then, try to decide, if, you know, we are going to satisfy some of the conditions that we need. to make this viable for the court, in other words, to be more flexible, rather than insist upon consolidation, with one operator. >> in terms of flexibility the current lease is restrictive and is difficult to be flexible. in terms of