between the port and forest city development california, incorporated for the pier 70 water front site boarded generally by 20th street, michigan street and 22nd street and the san francisco bay. >> good afternoon, president katz, and congratulations on your appointment. and good afternoon to fellow commissioners. my name is ricky tudani and i am a development project manager, with the planning, development and the division of the port. i would be, i will begin my quick overview of the presentation on the proposed amendment as follows. but first of all, just a quick

indication of the location of the water front site. before you, it was an area view of pier 70. and the area for the water front site is the one indicated in blue. and here is the water front site itself. >> and you generally by the 20th street and michigan street, 22nd street, and san francisco bay. my presentation that i am going to try to make it as brief as possible since all of the details are in the staff memorandum on this item. and a very quick product update, what is included in the proposed amendment to the exclusive negotiation agreement and in the steps. and since, the or since you have determined the sheet on these on the water front site

project, about i believe, in may of last year, staff and the developers are being working very, very hard in or on the terms of the items of the term sheet. and they have form. and in the previous, and project teams, and as you know as a very complex pro-next, both on the see side and the developer's site and they need to get it together and just this team consists of engineers, and architects and consultants for the developer, and for the port include for the port the city, and the mayor's office of economic and workforce development, and sfpuc and the planning department. public works, tony's office and because of the nature of the project. and many sections have been held, and this identical, working sections, to prepare to

negotiate the various items of the term sheet, including this amendment that we are bringing before you now and as we found the project we know that there are many issues that need to be addressed and this is expected and this is what is leading to the first amendment before you, and an out come of those ongoing due diligence, and working sections. and they are, it has been held in the anticipation of the request of permission. and also, there is the implementation of the phase zero, of the development phase zero consists of where the developer is looking at the marketing that site. and in producing it to the public, and a number of events are being held including the opening here market and the halloween ghost ship that you must have heard about.

and during this period also we the staff has examined and the opportunities for the site and because the new development is a first development, and meaning that it is going to take a number of years. and at the beginning, it was anticipated that the port would be handing over this fight to the developer, without tenants. and however, revenue to the port is very, very important, and there is ongoing need to continue to have internal leasing on to the developer is ready to move forward with the development. and as a result, the staff have continued to lease portions of the site, and most recently,

the sfmta, order the return on that site of the located and that created an opportunity, to release those portions of the site and that were being used for the auto return. and the internal leasing program as you know, is very, very important to the port. and so we need to maintain the ongoing revenue, necessitate some of these ongoing leasing activities. so the proposed lease on the proposed first amendment to the dne, is in recognition of the change in the ena from indicating that the site is going to be turnover to the developer without... on it to now where they need to craoe main on the site passed when the developer takes possession of some of the portions of the

site. the lease, or the first amendment also, it presents an opportunity to acknowledge this ongoing need to maximize the revenue to the port, and particularly, order, future listeners that we need to come into place. and one that we already have in mind is building 12 and the adjacent area to that building 12 and the forest city wants to use to continue to market the project and from what they are calling a place making opportunity in introducing the site to the general public. the first amendments to address the concerns and the reason that they wanted the site to be turned over to him, was to

avoid the issue of relocation, and delay moving forward with the development, and the opportunity to go into the site and conduct the due diligence prior to final closing and the so the first amendment is going to include the provisions for the right to terminate the lease >> and in this reason for the first amendment or one of the terms of the first amendment, were the issue of ena negotiation fees and the reimbursement and on that id, the original ena as indicated

in this table the developer >> they have provided on the court and there is a 100 though dollar passage that was made up front where it was negotiated and i know that is the ongoing negotiation fees to cover the staff cost and as well as the port cost. there is a provision in the ena to allow for half of that negotiation fees to be forgiven

subject to the sighting conditions to obtain the plane for the master plane and as we go into the he is inclusive negotiations and working on the terms of the time sheets and scoping the project, the staff realized that the complexity of the project necessitate the developer providing funding because of the amount of work that is involved. and as a result, the staff has discussions with forest city and indicated that we and i just may need to be made in cancel the amount that was set aside, to cover staff costs, and other known post staff

costs during the he is inclusive negotiation period i believe that the developer paid $700,000 to the tune of. and for the second phase in times of the realization that the additional funds will need to be provided to cover the staff cost, and but, both the staff and forest city came to the conclusion that the existing cap of 300,000 by year would not suffice and so in the table, right on the third row is indicating that this is the amount of recover, and the recovery book costs or the cost recovery that the port will obtain if the ena is not amended or on that original ena.

and so, the value lacing goes on and during the first phase of the negotiation period which is 24 months which is 8 quauters, 400,000 will be provided by the developer, in the second phase, which we are now getting into, that one is roughly 12 months and that will be 600,000, and that will go to 400 million, when you give the 50 percent discount or in sentive to incentivize the developer to entitle that area for the project out of the water front site, that amount to 200,000 and so 600,000, in the first phase, and 900,000 in the second phase in total, it will have been able to recover, and only a maximum of 1.5 million. and where we are currently proposing, i mean, i actually the total is $200 million, what

is currently proposing is to say that we understand that the amount that we or was anticipated is far less than anticipated costs now. and originally, the my understanding that the well powers are studying no more than 200 million dollars in the costs to be funded and now, given the adjustment that have been made, they are going to be providing roughly 4.5 million dollars. and that helped the developer and the staff is recommending that the portion of the negotiation fees that have been made and that have not been paid, which will be paid for phase two, will be allowed to accrue. and tract. and that staff cost which is in the operational budget will or should be funded for the port

operation. budget. because, that is a source that is identified. now, for the known port cost, which includes what actual departments and the city attorney, and the planning department, sfpuc, and wd, and the department of public works. those are funds that the portion of the funding because the port does not have the money for it and the developer will be responsible for that amount. and the compromises that the developer agrees for that to become a 3.5 million dollars. for the next 12 quauters, or the 36 months period of the phase two. if the cost, or if any of the costs were to that they may

meet and however, the provisions for the cost recovery, and for in turn,s the staff are being tracked will be reimbursed and by the hand of the project. and offering the project tax floor. and after the developer as recovered, if the initial investment and the 18 percent return on costs. regarding the non-port cost, there is a provision in the proposed first amendment that the port will not be responsible for any of those costs. and if the project were to now move forward for one reason or the other, up to that point where the project stops moving forward and the party will be responsible for reimbursing the port for those costs the other part that is amended is the

performance schedule. and these are the time line for completing the exclusive negotiation period fiveiers when considered in phase one when they were able to get the vinestment of the term sheets. the next phase is the major component of the major milestones to be addressed is a submission of the (inaudible) evaluation application summation and that entails the developer, to be able to provide a project description which is a key come poent nent of the application that they

have to submit. currently it is projecting that, and it is on march ten, 2014. and in the next major milestone, is the draft environmental report and that is going to be 15 from the submission of that. and of the super evaluation submission. this date, however, are subject to two provisions, one, the developer has a right, subject tofpaying an extension fee, to extend any of these dates for some reason. the second is... and (inaudible) usually these provisions to protect the developer, i guess that are things that are outside of their control like litigation or order disruptions that does not allow them to move forward.

we agree not to take me representations about the statements, actions and position, and in any medium, and in relation to ballot measures. and it related to the water front site without priority of the authorization of the content or the port to the director at the sole discretion. >> the next step is that you do approve the recommended first amendment to the ena. and negotiation will continue on the remaining items, on the

term sheet. and we will continue to move forward to what we just mentioned and staff will be providing the update to the commission to tell you, our progress on the project. and that concludes my presentation. but, (inaudible) is here to cover anything that i might have left out. and we recommend your approval. thank you. >> so moved. >> second. >> >> public comment? >> commissioners? >> any comments? or questions. >> i have some questions. >> i just want to clarify what you said and i think that i heard it but just to make sure, the port costs, the non-port costs over 3 and a half million is what would be paid at 18 percent return back to the developer? ; is that correct?. so the three and a half million

is subject to the 18 percent or not? >> the 3.5 is subject to the 18 percent. >> okay. so cash flow, you get paid $3 and a half million as you go but in the calculations down the road you have to calculate the 18 percent? >> that is correct. >> okay. and that is not subject to any particular time line? >> it is subject to the time line on when the cash flow will be coming into the developer. okay, if there are any delays in the project and the 3 and a half million has been spent, and the port is on the hook. >> and so there is cash flow calculations down the end to be paid, to repay the developer? >> yes. >> but, the port is not responsible for that repayment, if it is around from the attorney coming from the cash flow from the project.

and the developer would be quickly and ad and the appropriate time. and once the project starts, and the cash flowing, >> so in another way, if there is never a project, then it is the developer's risk. >> and if they are getting a large rate of return. and even if it is delayed, the interest started occurring on the date that the non-port costs were paid. >> that is correct and it is treated like any other predeveloper expense of the developer's team, that the architect and engineers and etc.s, that are developing the project right now and bringing it through sequa and those costs also earn an 18 percent return as of their expenditure date until the project can generate the proceeds to repay that expense. >> okay. >> but, the city's non-port costs are covered up front. >> okay. >> just a general question, how

you will be developing the projects. >> and non-port costs. >> so, in the... the city is not collecting this and not collecting this right now and there is that similarity with the wearer's agreement in 337, and the port is collecting in the negotiating fee. and i think that a portion of which can be deferred and is also recovering in the city costs. but, there are options to delay the reimbursement in the city costs in the 337 ena. >> and the correct. and so, there are slightly different approaches based on the different agreements. and, yes. okay. >> and now, at the moment, according to these costs and the costs according to a schedule in phase two. and if phase two should be

there is nothing tying to say, but certainly we will have to go out five years instead of two years and the cost of both the port as well as the city keep moving along, i understand that we talk about the excess but there is no sort of mar legal parallel to say that it is excess to a certain period and we have to say no asset for whatever reason, and things are delayed, that you know, that these would be operating expenses that just happened as part of the delay period and what i am trying to say, is how can you tie the timing of the schedule with the expenses that have been projected only out to a certain period and we have uncertainties still at this point to know exactly where this project is going to be and so how can we tie them close together? >> so, the one through good tracking of costs and planning and development have worked with finance and administration staff to come up with.

with the actual project budgets with each of the development projects that will be before you in the front of your budget consideration and coming up in february and i think that the city is going to have to stay on top of the expenditures relative to the budget and amounts. and i think that part of your question is going to, if it does not take two years, but it takes five years, what happens then? there are a couple of things that could happen. one, the ena the first amendment to the ena makes is clear that the port is not obligated to pay non-port costs above the cap that is in the ena and there is a provision to sit down with the developer and renegotiate the transaction cost budget and should we actually hit the cap and need to keep on spending city attorney dollars or dollars that we don't have a source in

the port's operating budget. and there is also, the ability pursuant to the term sheet that you are endorsed. and at any time, that the port wanted to step in, and pay early, some of praoet development sbenss, because there is a certain about accruing 18 percent returns, or to just start paying directly for costs on a going forward basis rather than face those 18 percent returns that the commission has that option at its discretion. >> okay, just my concern is that we object to the cost for a certain period of time. >> yes. >> and there is a time line that is just if these, do not mesh together that we somehow are taking care of. and that is my concern, because we don't know what is going to happen and there are a couple of things that could change this and in relation to that, what is the actual extension fee? that you mentioned that, and i don't know what the actual extension fee is? is that it is involved.

>> there is 100 k. it is 100,000 extension fee. >> per what period of time? >> 100,000 for six months. >> yeah. could we, take a look for that information and get back to you? that is not changing in this staff report kl is why we don't have a ready answer to that but we can get an answer to you before the end of the meeting. >> my last question. about measures considered forced... >> i don't think that the staff can answer that question, that will be a question that you know, in terms of the city attorney and i am sure that they will have to go through some level of consultation on that. and i don't know whether it meets the standard for a regulatory force measurer which is i think what your question is. but we can look into it and get an answer to you about that.

okay, the different categories of the forced measure under the ena and different definitions of the forced measure but we will look into it and get back to you. >> i just think that we should be clear since we are about to go into the agreement that we understand what this means and we don't have different interpretations later on, given some realitis that we are facing today. >> yes, and this... >> potential realities. >> yes. >> and so, i owe you an answer on the period of the extension, and it is 100,000 dollars and we think that there twoeer extensions and we need to confirm in the 6 month term of those extensions and get you an answer about whether the ballot measures impeding the project's time line, would qualify for a regulatory forced measure. >> okay. >> that answers my questions, thank you. >> okay, yes, i think that i can see it in the beginning of

the same thing and i was going to maybe ask it in a different way or just trying to clarify. and in terms of the 18 percent rate of return that is accruing, can you just go over again the incentives that keep the project moving forward, and given i am not sure whether we want to call it forced measure but rather than beating around the bush here, giving the potential ballot measure and we want to see and we don't want the project to be delayed while that may or may not move forward what happened with respect to the percentage that is made and does it continue to accrue? >> so, first of all, i think that i just want to say, that we have had a conversation with forest city, and i think that their intention is to move the project forward, you know, expeditionly and they have got a lot invested so far and they are committed to the project and i do want to say that.

i think that in terms of the incentives that you are talking about, it might be good it remind the public about the general frame of this deal structure. and so, in essence, the private partner is putting up private capitol to both entitle the project and edit through and get it through and get it approved through the port commission and the board of supervisors and also investing private capitol in infrastructure horizontal that the city will acquire from them. and in both cases, their private investment in the project earns an 18 percent preferred return and after that 18 percent prefeder return, any proceeds generated by the project in excess of that amount is split, 45 percent to forest city and 55 percent to the port and so, that essential deal structure alines our financial interest in the project and forest city is

highly motivated, to move the project as quickly as possible because they are not in this project to earn an 18 percent return, that is sort of what the market is looking for, for the risk capitol there, and in the project to make more than an 18 percent return to get their 45 percent split and that he have no financial incentive to wait or land bank in this deal. and i think that we, and that is why we have approved that the structure of the deal is so that we are both, and rewarded by moving quickly through the process. does that answer your questions? >> okay. >> a leading question as we sometimes say. >> yes. >> thank you. >> thank you. >> i don't have any questions. >> so, call the question. >> all in favor? >> aye. >> aye. >> opposed? >> abstaining? >> resolution, 10., i am sorry,

14-3. >> okay. >> item 8 b, informational presentation on flaming lotus girl's temporary public art installation of pier 14 plaza between the agricultural building on pier 14 on the embarcadero adjacent to mission street. >> i am a planner with the port of san francisco and i am here today to present a temporary public art piece for the pier 14 plaza and we will up load a map for you and creaters of the art piece and so as depicted in the graphic that you should see, it is along the embarcadero between the agriculture building and pier 14. and there it is now. and at the foot of mission street, this plaza has had three previous public art