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June 27, 2014

Port looks for wins after ballot defeats

San Francisco Business Times

Eric Young

For the Port of San Francisco, which makes most of its money from leasing buildings and land along the waterfront, the last six months have been tough going.

Two major development projects fell through, scuttling plans that would have reshaped the waterfront and landed major new port tenants.

Last November, a luxury waterfront condo proposed for Washington Street was rejected in a voter referendum after being OK'd by city planning officials and receiving all the other needed approvals. Then in April, in a surprise move, the Golden State Warriors dropped plans to build an arena on port-owned Piers 30-32, opting instead to buy a plot of land in the nearby Mission Bay neighborhood.

The twin disappointments pointed up the complex challenges the port grapples with for any large development proposed along the 7.5 miles of coastline it controls.

Now there's a new wrinkle: In the June 3 election, Proposition B won by a wide margin. The ballot measure gives voters a say over waterfront development. Any project that would exceed current height limits must now get voter approval.

The port's success or failure in pushing through big-ticket projects on the waterfront hold major implications for its future. Successful developments are seen as a vital source of money to help the port meet huge bills for repairing its infrastructure. The port estimates it needs about $2 billion for deferred maintenance and seismic strengthening on some of its piers, most of which are a century old. The port has identified about $1.14 billion for the work, leaving a shortfall of about $860 million. Already the port has roped off some piers that are too weak to support vehicles or people. More closures will follow if the port can't bring in more money.

Politics, infrastructure costs and neighborhood concerns are all factors that port leaders must balance as they seek to attract developers and renters to its property.

Port officials maintain that despite the recent high-profile setbacks - and even the new voter controls - their system for planning and outreach continue to be successful. They point to high-profile successes in recent years, including AT&T Park, the Ferry Building rebuild, the Exploratorium, Pier 1 renovation and the Brannan Street Wharf, as just a few.

"A lot of what we're looking at going forward is using that same process and building on those relationships and connections" to forge agreements on new projects, said Byron Rhett, deputy director of planning and development for the port.

The port is not running out of potential development deals in the pipeline, they said. There are proposed leases and development deals that could help reshape the waterfront and positively impact the port's finances as well.

Pier 27

What is planned: San Francisco will start using its new cruise ship terminal by early October. What has been done: The city built a $90 million glass and aluminum structure on Pier 27 to replace the existing cruise ship terminal at Pier 35, a converted freight shed built in 1914 that lacks many amenities, including heat. What is next: Construction crews are finishing up the last touches to the building as well as constructing a small park called Cruise Terminal Plaza between The Embarcadero and the cruise terminal. World Trade Club

What is planned: Strike a deal with a restaurant in a waterfront building consisting of 11,500 square feet of dining, bar and patio space and 2,300 square feet of kitchen space. There is also a valet parking area in front of the building that is exclusive to One Ferry Plaza.

What has been done: Owners of the site, the Tom family, hired Kidder Mathews to market the property. Brokers are working to line up a deal and have spoken with several possible clients.

What is next: Brokers need to sign a contract with a restaurant operator. Port officials hope to line up a deal within the coming months.

For the full story, go to San Francisco Business Times.

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