Transcripts For SFGTV Transbay Joint Powers Authority 32417 20170404

Present you do have a quorum. Ill call you next item yes public comment. Members of the public may adjust the authority on matters that are on the authoritys jurisdiction and weve not any indication members of the public want to address you see none we can link your special calendar okay. Item for authorizing the executive director to enter into an Asset Management agreement for the transbay trended center with the Lincoln Property of any for a term and certain financial considerations. Good afternoon directors. Im pleased to be here today to present this Asset Management agreement with Lincoln Property management. For your consideration to imagine of this agreement as a result of many months of work to develop an effective rfp produce a strong number of respondents, and you can shake an agreement that maximizes revenues for operations of the Transit Center and also the [inaudible] with Visionary Programs that reflect local character and context that ensures a high quality user experience. The rfp was developed working with our Retail Consultants [inaudible] advisors who designedit was done to give maximum flex ability to potential respondents because we recognize the unique nature of this opportunity to enter a transit orientated neighborhood emerging around the Transit Center. By entering the [inaudible] to consider any deal structure we were able to get a very clear picture of the market for this opportunity including the best opportunities for Revenue Generation. Todays presentation hra advisors will describe the extensive outreach done to ensure strong response to the rfp which resulted in a tjpa receiving three saul proposals when we enter negotiations. Negotiations focus on the ability of response to effectively deliver the services outlined in the rp including their ability to maximize revenues from the Transit Centers retail leasing event programming and [[inaudible] we are recommending today with consistent with the recognitions from the Evaluation Committee formed to review the proposals. We believe this deal at Lincoln Property Management Company with just over the strongest possible results for the tjpa and the public. The lincoln team composes Collier International developing ventures andmedia demonstrates a Proven Ability through the negotiation process to run the Transit Center efficiently develop visionary retail plan unique to the Transit Center activate the part to its full potential and provide a robust work promotional platform unique to the transbay Transit Center. With that, id like to invite olivia moss and [inaudible] to provide you with a quick presentation. Thank you mark. Good afternoon directors. As mark mentioned in his introduction, i represent hra advisors. Hr a is a Real Estate Advisory Firm working with at the discretion of the public and private sector. We have offices in new york la, dc, dallas and raleigh north carolina. One of our sort of major expertise areas is working on transit facilities and transit area plans. We worked at the home depot in minneapolis at the [inaudible] center in new york working on both those cases to secure private operators for those facilities. In terms of station planning, we are currently working in Union Station in washington dc as well as [inaudible] amtrak station in philadelphia. In addition to hr a advisors the Consultant Team included two other firms. We have sensory interactive which was assisting us with the digital platform and we had Sheppard Mullin, who was tasked with drafting the asset manager agreement that is in front of you. My name isa partnering hr a advisors based of new york. Im joined over here with olivia moss principal at hra advisors and the project manager on this assignment. Olivia and i will do a presentation in parts and then, as you have questions, we willwe can respond and bring in jeanne story, from Sheppard Mullin to answer some of the questions as well. We started this process nearly 3 years back in may of 2015. We were sort of test with five different sort of tasks. The first task was evaluating Partnership Structures that would bei would work for the tjpa and the facility. The second task was to conduct market our reach. Ether was to actually draft the rfp. The fourth task was in evaluation of response to the rfp and the fifth was to negotiate and select a designated partner. You will see in the slide in front of you, how these five tasks laid out. We will go into each with these in a little bit more detail later in the presentation. The Transit Center presents a unique opportunity for private sector partner. We sort of believe there are three major Value Propositions for the transit facility. The first one is a creation of a thriving Retail Center with a rapidly growing office and residential neighborhood. As we provided in the rfp, looking at sort of new office and commercial development in the south of market district as well as existing and new Residential Development in the district was a significant amount of Critical Mass thats already here and going to come online in the next five years. The second Value Proposition was the operation of the nations newest multimodal transit station, what is been called a Grand Central of the west, and finally, it one of the specific amenities including the 5. 4 acre rooftop park. The management of these civic amenities with something which we felt was a clear Value Proposition that would attract the private sector. There were four distinct scope elements that we saw as sort of in terms of management and operation of this facility. For phase 1. We asked for these for specific elements in phase 1 and we asked respondents to propose interim programming for the lower Court Concourse and the train platform private space twoif they wanted to. So in terms of the four distinct scope elements, the first one is the fit out leasing and management of the facility retail space, about 100,000 ft. 2 of retail. The second is the development and operation of the highquality promotional platform which includes Digital Advertising, sponsorship and naming rights and events. The third is a management and production of private and Public Events in the rooftop park at about the facility. Finally, the silly operations maintaining some Capital Improvements for the facility once it starts operating. As you will see from the four distinct scope elements, this required a team with a very strong market experience. We obviously needed retail developer and manager to manage and maximize the revenues from the retail space. We then in open space manager who could manage the rooftop park and make that a compelling asset for the entire facility. We needed a facility manager would take care of the o m the entire facility and capital maintains. And finally a promotional platform manager who could leverage the significant Revenue Opportunities from both [inaudible] advertising screens as was naming and sponsorship rights. As mark mentioned in his introductory remarks, and as i showed in the initial sort of schedule, hr a spent a considerable period of time in the second half of 2015 marketing the rfp widely to all these four different types of potential partners. Retail, operators managers, facility managers, rooftop open space manager, and promotional platform entities. In total, we reached out to more than 40 firms across the spectrum of disciplines. As i said, it included both local firms, National Firms and regional firms in all the four different categories of expertise. We developed marketing materials. We had in person presentations and telephone and video presentations here we organize site doors for some other firms interested in taking a look at the neighborhood surrounding the neighborhood. I think one of the things thats really important here is as we market this operation we made it very clear to them that we were looking for Financial Arrangements and structures that werethat they were comfortable with and that the delivery value to the tjpa. You will see in the next sort of slides we also did and ask range of different Partnership Options for the tjpa. As you can see on the left and the dislike about which is not very clear in thison the tvstarting from partnerships opportunities, which are 100 public, wherein its a direct management Transit Center but the tjpa to complete private Public Partnership with the tjpa might consider the disposition of the center to a private party. We looked at everything sort of from public to private and in between. There are sort of generally speaking four different models under these Partnership Options that we analyze. The direct option is where the tjpa would manage the Transit Center on their own, a great example is San Francisco airport where its already the authority runs the airport on its own. Kings cross in the uk where british rail are responsible for running the bonuses. Asset manager and we will talk more about thisduring the presentation, is a publicis a Partnership Structure that management of the Transit Center is done by a [inaudible] with oversight from tjpa. Grand Central Station in new york is a great example of that where the mta engages with an asset manager to run the facility on their behalf with their oversight. The card option was the [inaudible] lease with tjpa would master lease the Transit Center to a private third party who then would take all the risks and rewards of running the Transit Center. With very limited oversight from the tjpa. For some center which i mentioned which is a project that i worked on in securing a private operator for that for the mta is an example of a master lease. They entered a massport master lease with westfield Union Station dc is another example master lease. All the way to the right, is the most private of these options where the tjpa could potentially sell portions of the facility to a thirdparty which the Port Authority did for the shops of the World Trade Center in new york. We looked at each of these Partnership Options and evaluated them based on tjpas priorities and the risks and rewards inherent for each of these options. The three priorities that we looked at was tjpa control, the revenue shared with the amount of revenue tjpa would receive and the cost and the risk of the tjpa been able to to bear on the operations and maintaining the site. After reviewing all of these options, we felt that the master lease option was probably the most relevant and appropriate for the tjpa for this facility. But as i mentioned, as part of this process when youre drafting the rfp, we made sure in the draft of the rfp we were open and the preference from master lease option but we were open to other kinds of options as long as they were in the best interest of the tjpa. Per the boards guidance, we impaneled a group of local experts and subject Matter Experts to review the draft rfp, including its structure and contents and provided a street they provide us feedback the panels members included john updike director of real estate for the city and county of San Francisco, todd will vote the director of the San Francisco office of economic and workforce development, cheryl nasher from sfo, briandirector of Planning Board of San Francisco bob moser, commander sfpd, and peterdesign principal at Perkins Eastman architects. Based on the feedback we got from the market our reach as was the feedback we got from the payroll experts, we outlined four goals for private Sector Partnership for the management of Transit Center. The first goal was to operate a clean safe and wellmaintained Transit Center the fitting a worldclass transit facility. With the idea the selected part or would ensure High Standards of operation and maintain maintenance the benefit of the Transit Center visitors and [inaudible] the second goal is to deliver a Visionary Program the reflects local caliber character and context. We selected partner would have to have an ambitious vision for retail digital and Events Program with within the Transit Center and would be experienced [inaudible] lead a team to execute the concept of death article was to ensure a highquality user extends in this facility. We believe that this facility will be used by four different groups of people. Obviously the commuters were going to use this on a daily basis but also office workers, residents of the area as well as visitors who come to the south of market district from any sort of cultural and other kinds of [inaudible] finally, the fourth goal was to maximize the economic value of the Transit Center. The selected partner would have to maximize the value of facility but by executing a premier commercial program that generates revenues to the tjpa. So those with a four goals that we which are enshrined in the rfp that was released in march of 2016. In terms of the terms that were laid out in the rf peak, there were six key terms. The first is the deal structure as i mentioned previously. It was a preference for a master lease in the rfp but the flexibility to except alternative Partnership Structures as long as they were in the best interest of the tjpa. We had outlined an initial term and renewals and a way to project revenues and operating costs. Under the master lease structure, for the respondents to provide both fixed rent and participation in back of the tjpa. Shared and reimbursed the costs both for operating expenses, capital expenses of those cost overruns, and finally Management Fees. Im going to turn this over to olivia to speak about sort of the responses we got back in our evaluation process we set up. So before we get into the responses received all talk a little about how the tjpa set up a processed to evaluate each of the proposals could the evaluation criteria was laid out in the rfp and included three major categories. Qualifications and experience, others on the team, including their experience managing a large mixeduse facilities, transit facilities, retail testing, managing open spaces, and managing the promotional platform. Their concept for the major components of the facility aligned with the scope including the Retail Concept promotional platform content and open space. Then there are economic proposal. The Overall Economic offered to the tjpa as was their financial ability to execute the scope laid out here. Was it totaled 270 points allocated to those three criteria and for qualified respondents to find those with over two and 20 points in the initial evaluation will be onto interviews worth 30 points for totaled three and points out of which all teams were scored. To evaluate these proposals, hr a help to put together a committee of local experts to facilitate a committee of local experts including public and private sector expertise in real estate and around the transbay Transit Center project. These experts reviewed and evaluated proposals conducted interviews and provided scoring based on the criteria that i just reviewed. The Evaluation Committee members included keisha bailey, member of the Transbay Joint Powers Authority citizens advisory committee, an executive consultant sheppertonhr a, anthony birds a, also cac member and a senior director at tishman and spire a member of the board of directors of the [inaudible] Health Committee benefit district and scottfrom the tjpa lois rollins [inaudible] ben sigman executive Vice President with consulting from economic and planning systems, john updike, director of real estate from the city and county of San Francisco. Additionally, understanding the retail component and concept is a major part of the activating the Transit Center, the team also worked with a committee of retail experts to review and comment specifically on the Retail Concept put forward by each proposer. This Evaluation Committee included public and private sector participants with retail expertise and local retail expertise including jefffrom [inaudible] Susan Reynolds also from the port of San Francisco and two members of her hr a team Cape Cockburn regional Practice Leader and Justin Schulz director with our firm. Upon receipt of proposals the tjpa received received three proposals that are summarized here. A team led by cushman and wakefield propose an Asset Management structure with some consultants providing expertise in retail rooftop Park Management promotional platform and advisory consulting. A team led by Lincoln Property company also propose an Asset Management structure and similarly, includes [inaudible] to provide the rest of the scope and the team led byand associates propose we called here a hybrid master lease. This included a master lease for the commercial portion of the facility focused on the retail component and then Asset Management of the facility Management Agreement for the remaining portion of the facility along with some consultants to manage each portion of the scope. I will go over brief overview of each of the firms were part of these three teams and their experience and then their evaluation. The Cushman Wakefield Team Included cushman and wakefield both Asset Management services and retail leasing and Management Team. Mj am Management Group to manage the rooftop park and activation through events within the facility. Network rail and [inaudible] consulting provides an overall station operations, and a team led byincluding upfront media to manage the promotional platform. The teams Asset Management team on National Experience managing largescale mixeduse facilities and significant inhouse capacity and industry relationships to executables go of Asset Management Facility Management services. The retail lease and Management Team brings strong local capacity and market understanding coupled with an existing network of potential tenant relationships based on the relationships in San Francisco market. Their open space Management Team member brought strong local experience executing open Space Management and a programming vision that was particularly focused on activating the park for local Community Groups. The promotional platform managers brought all required functions through a set of subcontractors with significant Technical Expertise and Revenue Generation strategy i merely focused on the Digital Advertising component. Each team member brought experience in their core area of expertise is with Cushman Lakeman asset servers are providing Asset Services expense for the bay area headquarters. The Retail Leasing Team has retail lease number projects in San Francisco including the four seasons retail mj am management manages union square here in San Francisco. Upfront needed is programming of Digital Advertising for the mta and in new york and vickilead a team from [inaudible] on the technical side of the promotional platform helped to set up the content Management System for the Digital Advertising program at sfo. The proposed retail approach focused on highquality dining and Everyday Service amenities particularly with an emphasis on food and those who focus tenants would concentrate on groundfloor spaces and Services Located more on the second floor. They also innovation activating the rooftop restaurant as was the rooftop cafe as destination spaces. Their local Retail Program was donnelly across their categories without commitment to a specific portion of local retail though Technology Note porn part of the program theyve included in the proposal the sample potential tenants like those shown here including [inaudible] by right, to service uses like [inaudible] as well as potential restaurant opportunities. The lincoln Team Includes Lincoln Property company as the team lead and asset manager. Peterman made him and managers of the rooftop park manager. Colliers international to manage retail leasing and management, perl media to management Digital Content and [inaudible] marketing. Asset im sorry their Asset Management lincoln brings local and national 20s manageable the largescale mixeduse real estate as was transit. In the necessary inhouse capacity industry conduct acceptable scope of services shown. The Retail Leasing Team things a strong local market understanding with proven relationships in leasing and management capabilities throughout San Francisco and really some really innovative projects and open space Management Team plan for the rooftop park really emphasized both a High Standard of maintenance and management as well as a Robust Program strategy link to robust revenues. The promotional platform Management Team offered a robust concert for coordinating all aspects of the promotional platform. Again Digital Advertising, sponsorship and naming rights components while incorporating those throughout the facility to really drive revenues which i will show you in a moment. As i mentioned, the lincoln Team Brings Expertise managing transit facilities including our tech the charlotte transportation center, colliers brings extensive leasing and creating Retail Vision for spaces such as Market Square in San Francisco. Peterman Development Ventures brings national turns activating and managing open space from [inaudible] in dallas texas to [inaudible] park in new york and perl media beings rakes and extends operating the [inaudible] and chelsea market. The Lincoln Property company Retail Vision recommended a wide mix of potential tenants from fullservice food and beverage to pharmacy and fitness apparel and sundry stands creating retail merchandising plan that lays out simple sample demonstrates face innovation that included local regional and National Tenant serving all aspects of the firm and market. Their local Retail Vision also contemplated a locally 10 programs visibly concentrated food and beverage tenants. You will see some examples of those here like [inaudible] organic food [inaudible] as well as larger National Tenants. Then their vision for the park also included activating those rooftop park restaurant and buildout of the rooftop park cafe. The third proposal received was from [inaudible] associates based in new york. They are team lead with top part management at which is provide by from called town square. Retail Strategy Consulting provided by denzel or. Promotional platform management bite big outdoor and Facility Management by. A larger mix of retail tenants or potential bejeweled sensor put to perform to anchors Martha Stewart americanmade market and life which is a fitness and lifestyle concept. Their Asset Management team brought expertise manage the facility could go the nature of their teams hybrid proposal was really that the master lease structure for only a small portion of the total o m cost and responsibility leaving the rest to a separate piece of the scope. The retail leasing Management Team brought an innovative Retail Concept and design expertise for gensler but little to no little local experience. Their open Space Management plan was to supervise [inaudible] event driven rooftop park with multiple Event Partners are used to activate that space in the promotional platform Management Team throughout the capacity to manage the Digital Advertising portion of the facility nuclear approach developing a cms but not necessarily from the other elements of the program. [inaudible] experience from new york now developing pier 57 historic pier on in your city waterfront into a mixeduse retail and office space with open space on the roof during town square brought experience activating and managing the commons in open space in minneapolis. Genslers Retail Design Group brought experience designing some local retail spaces here like [inaudible] in the ferry building. Big outdoor brings Digital Advertising experience was recently from city point in brooklyn andbrings management Facilities Management expense in public spaces like the Oakland International airport. All the respondents as mentioned were asked to provide projections for revenues and cost of the facility of operation. The projections that you see here are for the tenant is between the first stabilized year. The tjpa fiscal year 2021 after facility opening rampup has occurred. What i will point out here is that the proposal that we got had fairly similar revenue projections for retail space based on fairly similar retail rents per square foot between about 55 65 a square foot. The advertising projection were similar between the lincoln and cushman and wakefield. Slightly lower for the [inaudible] team. Promotional rents and Event Rentals so both events that are sponsored and also events activation specifically for the community to draw activity into the Transit Center again, we are fairly similar between the cushman and wakefield and lincoln team witha little bit lower. Then youll see a naming rights and sponsorship or significant variation between the cushman and Wakefield Team and young lieutenant which were closer together and the lincoln team brought a much more robust approach to activating Sponsorship Opportunities and potential human rights opportunities within the facility and on the rooftop park. Promedia beat him and greeted him and ventures felt their significant assets with the Transit Center is a significant aspect that can draw Significant Interest in sponsorship and activation and sale of naming rights. So in total revenues, the cushman and Wakefield Team proposed about 16. 14 million. Lincoln, 20. 65 and10. 8 the stabilized year. I want to pause and note here, the next slide they sent her to spin rate does not apply to all the respondents because two of these proposals are Asset Managers cushman and wakefield and lincoln as i mentioned, will not pay a fixed rent. They will pass revenues on directly to the tjpa. Proposed us fixed base rent and some participation rent resulting in the stabilized year of about. 4 3 million were 430,000 flowing to the tjpa. Superteam mentioned earlier that rfp had allow for flexibility in structure as long as proposers to demonstrate was advantageous to the tjpa and their rationale for proposing so. I think as we examined the responses and the projected revenues and cost overflow to the tjpa, the young proposal quickly revealed itself to be less advantageous than the Asset Management structures being proposed are moving to expenses, the o m cost proposed by the respondents were based on o m guidelines and reporting from the tjpa that they had construction plans and information about the scope. We anticipate these will be refined as Asset Managers brought on by to start, and cushman and wakefield the proposed about 9. 8 million. Lincoln approximately 13. 2 men and young loop about 1. 4 million. As i mentioned, i think well talk about in a moment as we get to the agreement, this is a place where the detail these estimates will be sharpened and [inaudible] as the pistol begins operating. Respondents [inaudible] fees and administrative costs you will see are fairly similar and i would note lincoln is higher cost here is also linked to their higher revenues. Were talking a moment about how these are related to the revenues as a final agreement, but one of the things that tjpas were done with all response over the course of the clarification. In most recent with lincoln in negotiations, is making sure that these fees and revenue sharing are appropriately incentivizing the team to perform well and produce higher revenues for the tjpa. Then tjpa assumption for administrative and insurance costs paid by the authority as was a sturdy which we severally pictured from this agreement. There will even estimate your from going tenant improvements which are funds saved to support tenant improvements if theres turnover in the future. So getting to our towards the bottom line, the estimated net income for tjpa, based solely on respondent projected costs and revenues, under cushman and wakefield sinner is about 12. 45 million lincoln is about 11. 969 andcoming back to the point that the masterly structure as propose was not advantageous approximately 27. 699. I would just note that initial tenant improvement is typical under an Asset Management structure would be paid by the tjpa under the cushman and wakefield and lincoln Asset Management structure proselyte 27th when he 79 dollars whilewouldve made that upfront investment on their own. Its so not awaiting the larger annual gap. As we go on to the next slide, as tjpa has examined these projected revenues and expenses, theyve also been thinking about the source of public funding used to close this gap. Right now, the sources contemplate contribution from the cbd Community Benefits district, which we specifically used to sport management and operations that the rooftop park is estimated to be about 1. 79 in the first stabilized year. The mtc consistent with what is currently contributed to operations of the temporary terminal which is about 5. 38 million and then leases to other occupants or transit operators will be in the Transit Center and a son rent them about 4. 3 million. So this brings the gap down quite a bit to about between 4. 9 million, 4. 3 million from lincoln to 20. 6 million underproposal. Weve also contemplate a contribution to the Facility Operating reserves to enter the Transit Center in good functioning order is needed in the future which brings us to about 4. 920. 6 my dollars in annual gap. This is all taken into consideration by the Evaluation Committee throughout their evaluation process they issue the highest average score at the end of the evaluation process to lincoln the score of 261 300 points. Lincoln square was based on their complete strong proposal and compelling team with invalid to executable scope which we will describe further as we move for. Following250 points with compelling retail and Activation Program but significant need to clarify their Team Structure and economic offer followed by cushman and wakefield demonstrate local expertise and ability to execute facility and Asset Management scope. The requiring further class edition of the promotional team. All respondents were advanced initially to negotiation stage. After which the team entered a period of evaluation and clarification is really seeking clever addition of those things Evaluation Committee had identified as outstanding or needing further thought or clarification. This one for about june 2016 rentals september of 2016. After that point, we moved into term sheet negotiations the term sheet was offered to both lincoln and cushman and wakefield. Young lou was notified in december 2015 they would not be offered a term sheet in their negotiations the tjpa had concluded. Then in early 2017 the tjpa start exclusive contract negotiations with lincoln to find cushman and wakefield tjpa was entering these the gauche nations in moving forward with discussion of an agreement. The tjpa accepted these axles of negotiations with lincoln based on the quality of their proposal as i mentioned before the highestquality proposal that address. Of mixed services and all that all the records laid out in the rfp. Lincoln consistently worked to provide requested Additional Information and strengthen their team and approach to generating revenue throughout this period. It seems capability and experience which included their private expense managing not only large mixeduse facilities but also transit facilities, and their high degree of professionalism and cooperative approach in doing so. Their significant local experience in San Francisco and the area including Management Experience and market understanding. The tickly, colliers expands leasing complex and innovative spaces in San Francisco and lincoln bar experience managing approximately 26,000,000 ft. 2 of space in california. The decision is also based on their deal structure and economic offer which was presented the most competitive offer based on the strongest approach to driving revenues and then tjpa perceived as an o m cost that we anticipated to be similar other two respondents mostly because this is dictated by the scope lb consent control by tjpa and [inaudible] that provide the services similarly relative to the teams management. I will turn back toto talk about the Asset Management agreement has been under negotiation. Thank you olivia. So in the next section what i will do is flush out the deal structure and economic offer a little more detail. But before i jump into that, lets just talk quickly about what lincoln responsible his will be under this naming structure and what is the compensation generally speaking that they would lincoln team would receive. So running down first with the responsibilities, lincoln will manage a team of multidisciplinary experts will be passed to activate and operate the Transit Center including building a bv out Facility Maintenance retail leasing and management rooftop park activation and maintenance, promotional platform activation management and other facility activations and programming as needed. They will be tasked with optimizing revenues, generated through the commercial Program Elements which will flow directly back to the tjpa could they will manage construct Contractor Service provider scopes and contracts including managing the cost of services procured on behalf of the tjpa. They will courtney with the tjpa security provider to ensure that facilities operating a safe and secure manner and they will coordinate with transit agencies and Community Groups to make sure this indeed, works as a transit facility in public facility. In exchange for providing all the services, lincoln will receive fees for Asset Management Construction Management, rooftop Park Management, and commissions and center base commissions are shared revenue from retail leasing and promotional platform activation. I will spendi will take you through what those different fees are. The key terms of the Asset Management agreement we have an initial term for six years with an optional extension for five years. With an agreement for both tjpa and lincoln. Lincoln has provided a performance type ofi think lincoln has provided a performance guarantee loan to fees paid to date with a floor of 500,000 to start with which will essentially guarantee the tjpa against certain acts for lincoln. In terms of termination, tjpa has the right to terminate the agreement and lincoln is not performing adequately and does not cure default within a specified period of time. Getting into revenues, office of the revenues will flow to the tjpa with the teams performance encourage by guarantee revenues and incentive fees. The promotional platform revenues those of the revenues which come from advertising naming and sponsorship will be guaranteed or the greater of 1. 25 million are 80 of the prior years Digital Advertising net revenue of tjpa. Continuing with the key sort of Asset Management agreement terms, the tjpa will reimburse lincoln, the lincoln team, for three different sort of different portionsdifferent pieces. The first is Management Fees and commissions and revenue sharing. As i said when the lincoln team will collect fees and commissions and revenues or their services and some of those fees will be based on performance. Operating expenses, the lincoln team will oversee o m of the facility including directly providing some services in procuring some services to Service Contracts. Finally, staffing costs in terms of management staff which will bewhich will talk about in terms of something of the tjpa will have the ability to work with lincoln and refine based on the operating of the facility. So in the next few slides, i will talk about each of these three buckets over here. In a little bit more detail. In terms of the Management Fees, lincoln team will receive fixed and incentive fees. There fixed fees Asset Management fees will be 200,000 for the first two years followed by three and 1000 in the following four years. Years 46. Plus, 15 of Retail Revenues that they can achieve oversight threshold. The set threshold writenow are 3 million in the initial years and five point 3,000,001s the project is stabilized. They make about that though get a 50 revenue participation. For the rooftop park, theres a fixed annual fee of about 800,000 which includes approximately 574,000 in managementin staffing fees and about 20,000 in fees. Construction management, 5 of costs up to 500,000 and 3. 5 of hard costs of about 500,000. In terms of retail commissions, 5 directly lease longterm leases 10 for shortterm prop up these is to activate the visit which i think is can be really important and initially. He revenue sharing for the promotional platform, 75 of the revenues from advertising and sponsorship will come to tjpa 25 will go back to perl. As i mentioned before, the previous slide, pearls lincoln is guaranteeing a base of 1. 25 million every year, or 80 of the previous years revenues which ever is higher. And 15 of the naming rights or 85 of the naming rights revenues would flow from the promotional platform managers back to the tjpa. So if you add up all these Management Fees and commissions and revenue sharing, over the course of the initial sixyear term, february included things like construction Management Fees the fixed Asset Management fee, and the fixed fee associate with the top part. As you can see from the pie chart, significant portion of the incentivize payments nearly half is for the promotional platform. We feel this structure is one which is uniquely incentivizing lincoln team to go and leverage the assets of the facility to make sure we maximize revenues. Moving onto our second market, which is the cost control mechanisms, i think its really key that tjpa will prove lincoln staffing and administrative plan on an annual basis. With consultation with the lincoln. Lincoln will competitively bid a scope of services for janitorial and repairs and maintaining services to the market. The agreement calls for three goods. So that tjpa is assured that once a scope of services is agreed upon with the lincoln for some of these Service Contracts, the tjpa receives the most competitive bid that the market can provide. There will be annual budgeting procedures where we will set both annual operating budgets as well as a Capital Budget with tgv oversight of cost. Tjpa will obviously review and approve the capital expenses with lincoln each year. In terms of sort of review and reporting, lincoln will provide monthly reports and expenditures to tjpa preparing expenses. Tjpa are required for any nonrecurring expenses such as onetime repairs. Any cost incurred over the approved budget will require approval by tjpa prior to lincoln engaging in the worker signing on a contract to engage your contractor to do the work. So the significant amount of control mechanisms and reporting mechanisms for this deal. To give you a sense of what the operating costs recount is likely to be, we will show you another pie chart over here. Where come if you look at the greenpeace of the pie chart, and this is for stabilizedfor the first stabilized year, again, more than two thirds, 68 , of the operating costs will have to be competitively bid whether its janitorial contract repairs and maintaining contract or rooftop m. Only 32 is going to be what we call for lack of a better word ago she did costs which will include staff administration. The rooftop park ambassadors, the Digital Media 01m and utilities [inaudible] the grocery cost but will vary depending on how may stores are open and how many stores are lease. So that in a summary is the deal terms and some of the major sort of economic terms that are enshrined in the agreement. Some of the controls that are in there in the agreement. You have in front of you a draft agreement, which is mark mentioned is substantially complete in terms of our agreement with lincoln. For next steps, assuming we have approval from the board, for [inaudible] theres a number of tasks that the tjpa will have to engage with with the lincoln team over the Second Quarter of this year. Starting with sort of training of lincoln employees, maintaining some security, creating protocols for budget that checks for tracking and even programming calendars to begin the planning process for the design of tenant improvements and base building improvements. Start the determinants of vendors and Service Contracts in terms of setting their scopes. Developing and present to you Retail Market merchandising plan and commencement Retail Marketing and leasing soon after. And start trading the messaging and content for digital screens. As part of the rampup of activities that tjpa will on board both facility manager is was a chief Security Officer it will be very important in coordinating with the asset manager Going Forward. So at this moment, im going to turn to scott will speak a little bit of the funding i have one question on the last slide. When will lincoln execute the agreement . Lincoln will execute the agreement am assuming mark will be helping out, if the board approves the resolution today, we have a few small minor sort of amendment adjustments to make in the language. Theres a few exhibits would need to be finalized. My anticipation is that within a weektwo weeks time lincoln should be able to execute the agreement. If i could him provide on that, my aniston is the language has now been agreed to and the agreement and that what we need to still do is to finalize all the exhibits. The number them our drawings of the premises that have to be converted into a form we can attach them to the exhibits and there are some of the guidelines Design Guidelines, we think those kinds of things, that have to be finished up. Thats what prompted my question to you for a 30 exhibits here that we are looking at. Some of thosenumber those exhibits are pretty much sketch of the property and things. But a lot of them are what they say in response whats our concept, what is our design stuff all that. I dont knowi dont know what those could not have been prepared long ago for us to look at and which of them lincoln is saying, look, we are ready one not to do these things. Thats what we have almost nothing in terms of exhibits. I dont know if you want to comment. A number them are in box and they are in final form. They just havent been appended to the document you have. The leasing guidelines themselvesthat includes designer standard, and maybe the team can help me out, the Design Guidelines the when i talk about o m guidelines, those are final. The ones that are not is the leasing guidelines and the agreement specifically states that will be agreed to by the parties during the transition period and appended as an exhibit to the lease so its not contemplated that it would be finished before the lease is signed what about the initial budget . That is exhibit f which is anticipated to be created during the transition period but surely a possible after if sufficiently agreement so is anticipated can be called women is very executed by that without a budget by both sides . Been executed based on the projections we have the agreement with business terms and would get some revenue over tennessee i just want tothis board has the agreement says, arrived to agree upon the budget each year. So i we doing something that is a preapproved budget in it or not . No. Lincoln will provide a budget and we will continue then there should be anything or an exhibit of an initial budget does i read that as the first as it 1617 budget. 1718 budget no. Lincoln will once theyre on board the agreement link will appear budget for the transition years. Every year an annual basis though come to the budget to work with the tjpa to approve the budget to come to the board for approval of the budget so whats the point of putting an initial budget in the agreement . I think its there as a placeholder with the thought that like the leasing guidelines would be appended after the fact. I agree an initial budget is a oneyear partial year that are and so if your preference is that we simply eliminated it is an exhibit where we have the full description of how one gets to approval of initial budget we can easily do that i just wantedbased document and the exhibits to correlate. If its to be prepared later within the base documents says itll be prepared later or whatever. If they want it at all. Just an inconsistency. The other one is the that particularly as i was reading, the form of performance guarantee because ive heardi dont open store notlincoln we wont even be doing with lincoln itself. That is a final document at this point. If it wasnt circulated to you, we all apologize that you should have that. Yes because i want to know how much lincoln is really behind this agreement. So that was an important document to me. The performance guarantee is of the indemnification provisions in the agreement which included indemnification for gross negligence, willful misconduct or fraud by the manager or the managers agent. It is limited init has a cap dollar amount that starts out at 500,000 and is increased by these actually earned, Asset Management fees, rooftop Management Fees, construction Management Fees as those fees are earned. It is not a security guarantee. Yes. Id like to find out its a limitation of liability. In other words we wont be liable beyond this or beyond that. Youre calling it a performance guarantee and so on trying to see well how do the limitation of liabilities become a performance guarantee. Is it true that lincoln is not to be executing this . Theyre going to grade some organizations a mother corporation, brandnew, that is now the people we are dealing with . Yes they will create a singlepurpose entity that will not have other assets that is why we insisted on a guarantee from a parent organization. That we are not looking at . Well, again, we apologize if you dont have that confronted as you should. Thats why i want to know that tom would be meeting and another two weeks. Three weeks, maybe. Something like that. Then i have a right to the meeting in april . No. We were going towe want to execute discriminant next week director harper. I know. I know. Im missing 22 exhibits and not knowingto me youve got a ticket lincoln, lincoln, lincoln, lincoln and the basically saying work in a form xyz. Maybe a California Corporation may be a Delaware Corporation birds can be brandnew and then we are going to stand behind it to a certain limited extent via our performance guarantee so this whole idea of whos want to be there and what theyre going to be doing this kind of up in the air. No. Good you are understanding correctly that it is a singlepurpose entity and that its bad acts are guaranteed by a creditworthy parents up to cap of the amount theyve actually get paid under the contract. Okay. As long as we know that there are even is there not a tenant and theyre not assuming all the liability. A tenant would as a master tenant. They are a manager of the property. Yes. So this whole thing what theyre doing and everything, [inaudible] if lincoln is can be a guarantor or performance, i dont care if they set up a singlepurpose entity that they want to avoid getting into massive court suits and thats all good. But to not say that were coming on as lincoln and were going to be lincoln and them deal with lincoln and the not guaranteed the performance under the contract to the post extended whatever it may be unmasking myself, well what is going on. Im not asking that they dont compare xyz to limit their tort liabilities. Fine. Thats not out of the course of scope. But usually they come in and say, as were contract, we are fully behind. Thats where we started this negotiation. We were unsuccessful in reaching that result. So it is a board decision whether you are satisfied that you have an off wherewithal standing behind performance including the reputation to justify the contract. Well, at this point without seeing a performance guarantee and evaluating it on the basis of just how far are they behind this contract is [inaudible] [inaudible] they provide a net worth of 4 million . A minimum net worth of 19 i took no. 1. 2 5 million net and among . No. Thats the revenue guarantee that separate. Thats the digital revenue and its not ashley guarantee. That is a letter of credit. So that is essentially [inaudible] their performance to 4 million is about what they are saying . No. They are saying of the indemnification provisions of the agreement. Well, the indemnification yesterday for their insurance and we will be indemnified. You pay for commercial general liability and the excess liability. You do not pay for the other coverages that include coverages that cover you against bad acts that include crimes, insurance, fidelity insurance, professional you know interns did they pay for those. Yes they pay for their own little internal subject im not so much worried about indemnification. But i think that why cant they say theres an amount of money we will guarantee performance on. I dont know. I understand why he started out that way. And could not getbut i can understand because that is standard. Thats the way these things usually work. Well, i think the argument that they have madeand it has credibilitywhether we agree with it or not, is that if they were active as a master tenant, yes, there should be more standing behind it there simply acting as a manager they are earning a fixed fee within an incentive but theyre earning fees only and they dont share in any of the profits and therefore, they should share in the greater portion of the risk. Thats the argument. Sharing the profits thats what they did good they got 25 of that. That the minor incentive the participation fee, yes. Okay. I think were jumping ahead here. I dont mean giving him a conceptual agreement here, but with 4 30 exhibits and some of these things not being done they do in fact exist. And they were not informed that we could actually append them to the document. But they can be provided to you every one of them okay. All right. We have three more sides to talk about the funding plan. Scott. Good afternoon directors if we just do have a few slides to wrap up to talk about operating funds Going Forward. You see come on the slide in front of you, a summary of the cost sharing revenue estimates because she did with the lincoln. The reason you see four years is because that timeframe represents three rampup years during which operations are up and running better Revenue Streams are still reaching maturity in the fourth year is what we refer to as the stabilized year when the Revenue Streams have reached maturity. I would know all of this raises three years because operations will be beginning in the latter portion of fiscal year 1718 this represents just over two calendar years. So below those revenue and expense totals, you see some of the numbers that olivia described earlier which was talking to the lincoln proposal include a small amount for ongoing tenant improvements a contribution beginning in the stabilized year to an operating reserve and then below that in terms of Income Authority committed we have the Community Benefit district which is committed to paying 80 towards the operations and Maintenance Cost of the rooftop part. Just below that is the amount were already receiving from mtc. This is funny that used to go to the old terminal it was transferable to the tramp when i began operation business going on that each year and i will be available for the new Transit Center. Then small amount of income from greyhound and amtrak leases meeting to the totals at the bottom of the screen. You see the first years just burst your operation. The second year is the most challenging year because thats when we have a full year of operations that are Revenue Streams have not reached maturity and then in the first stabilized year we have an operating shortfall of 4. 9 3 million. I would note these do not include the upfront tenant improvement costs were described earlier were posing those would come out of program reserves. So these next two slides from our last two slides just show how were proposing to address these operating needs. The shortfall. This shows each of those first four years with the constant divided among our operators based on their exclusive use percentage of Square Footage within the bus operations portion of the bus deck and the bus plaza. In the second year, the portion in green, that represents an initial upfront funds we had from distributed and tenant systems contract. Those are upfront payments that would be made. Depending on how quickly carriers come on board, that range from 2. 2 5 million up to 4 million and then weve got some amount about 5. 5 million ac transit has been paying into an operating reserve so when you combine those two amounts, we have the total amount available of 7. 7 5,000,000 to 9. 5 million. So we are proposing some of that could be used to offset thosethat operating shortfall in the second year. Thats represented by the green. The first two years are significant because they are before we would be able to go to mtc and request funds fromstarted conversations with mtc about her interest in seeking some are m3 funds for operations. Farm three were passed mtc is looking at the 2018 ballot. Beck be either june or november. So those funds would not be available until the third of the three rampup years. But we would be requesting to mtc to help us with operating needs Going Forward beyond the point of potentially 12 backfill that initial operating reserve the portion in green you see on the slide. This final slide shows that with those exclusive use percentages i described a moment ago and using about 6. 6 million that initial operating reserve in year two, this is how those annual costs would be distributed among the operators we been up to fiscal year 2721 which is our first stabilized year. That is our final slide. Happy to take additional questions. Okay. Directors on sure you have questions. Thank youin some ways this is been challenging but in a way equally as important and i think my general thought on this is that first i want to commend the staff and team for getting us to this point. I think i spent a lot of time up front in this presentation process productivity is a very thorough prospect like to think the board added some value by requiring some peerreviewed steps in the process that you walked through and i feel kind of comfortable with where we are based in part on the fact that a lot of different eyes looking at this. For the most part, this realm is not the expertise of the lease some of us up here so having the thirdparty vetting of this as well as the expertise, the consultants, i think was helpful. I think the fact that it was as thorough as it was to me, makes it a defensible process so i think the process has been outstanding and i just want to commend the staff and the team on it. I think we are and maybe hear some of it coming out in director harpers comments which i very much appreciate that the end result is not quite what we were hoping for, at least in some of the terms of the agreements. It seems like we have a very strong team and a good approach. I think we have generally a good to the extent possible management of risk and alignment of incentives but i think the fact is, this building is not going to in its first phase, is not going to be money generator or even selfsufficient which i think is where we started this process hoping that it would be i think we are finding some of the terms that we would like and again ill thank director harper for raising the issue of things like performance guarantees, it seems like were not able to negotiate what we ideally would like to have the may be the case for some of the other terms. But i think because we had a very i think on prensa process in a competitive process, what we have is with the market believes is affordable for the facility that we have peered i certainly hope that changes once the trains come with our full facility. I would hope at that point the economics will flip a little bit and maybe in and be in a better position to negotiate different set of terms with the successor to whomever we award here now but i feel comfortable that for the most part were probably at the place that we need to be thats reflective of the reality of the market. I do share director harpers concern to some extent but the performance guarantee. Im not sure i fully understand that i get where it starts. Im not sure i understandit seems like the cap on the liability grows over time. Some interpretation on that would be helpful for me. I guess im comforted well be started from where a radio was recognizing that we got something that was negotiated out outcome. So thats one question i would like to have a better understanding of. The second question has to do with the option. It looks like its a sixyear contract which i think given the ramp up time i think thats a good length of time in terms of the initial term is my question on the option is in terms of being a fiveyear option, is it justis it five years, or nothing . Can be done in increments . I be much more comfortable with incremental approach because i think any process that we are going to undertake for successor is probably a twoyear process. If we decidei dont think well know another probably by your five how comfortable we are with the performance here. But if our only change choices are five more years were none, that puts us in a difficult position. So i would like to understand the language of the option. So thats my second question third question is, and i apologize if you said and i missed itwhat is our solution with regard to naming rights . Because i saw some of the charts promotion and naming rights. Are we assuming thati guess ill leave it at that. What is the assumption the guard to naming rights . Then i simply have questions on funding but maybe since the funding is not part of what were being asked to approve maybe ill pause there and you can help with those parts of the agreements come i would appreciate it okay. Julian, you might want toi need a lifeline. On the performance guarantee, its 500,000 minimum. Then whatever revenues they earn. It sounds like its initially 500 maximum . No. It is a guarantee in the aggregate. So if you had multiple claims that was using portions of it he would reduce the total amount. Again, once we got to a cap on the guarantee we asked for it to be per claim and they also declined to do that. They said their Corporate Management would not agree to that. But it starts at 500,000 and then it grows each year as they are paid more fees assuming no claims. Now can you provide numbers were proximate numbers about how many dollars . So the fees, the fees that would apply to the this director reiskin are the fees that lincoln receives both from their Asset Management as well as from their Construction Management. Sorted based on some the projections that we have for construction buildout, our projections are that in the first year itself the cap just on the pieces want to start somewhere between 700 and 800,000 and its going to go up by about 30004000 in year two and then three or thousand heavier once construction is complete and they dont have any more fees maybe three or thousand every year more on the keynote of basis for the Asset Management but i think were talking a total 1. 5 million have dollars over six years is more than 1. 5. It [inaudible] to it or thousand dollars for the first two years and three or thousand for four years and then remember, they earn they earn 1 million the right than the Construction Management fee on top of that they actually own some of their Asset Management fees which is 50 in revenue on top of that so without the 15 were talking a 12 million . Correct. So that money, in case they mess up, we can guarantee for us. I know its notits kimball took, but realistically, if we run into issues when going to keep the contract anyway. Any issues we have to use that money. Sweep a couple Million Dollars we can go tap into basically thats basically the fees they have the 20,000 the 3000 and 1 million loss they get from the 3. 5 . I think we are probably different opinions on the board about the adequacy of that and that relative to what we would like to have. To me, that seems pretty low. But i appreciate just understanding factually what that is good i understand its gross negligent negligence or other pathways. So it starts at 500 and up goes up over time to the low millions. Great. Effectively in the first year its actually going to be somewhere we think based on construction schedule, summer of 700800,000. The second question director reiskin on the options it can you clarify is it fiveyear . It is a fiveyear option to renew. So the first is six years. At the end of your five you are correct. The decision tjpa initiates the option if they want to. Lincoln has to agree to accept the option but it would be than for an additional fiveyear on the same terms. That of course doesnt preclude you from saying we dont want to exercise the option. We want to renegotiate terms if you chose to. Okay. Again i get you can always renegotiate it to me, just a fiveyear kind of quantum step is not ideal. So the question is, given where we are, and asking the board to approve it today, do we think theres willing to negotiate that into two smaller options . To, to your options, three to your options add to your and three or so we could break up and not have that one step function under these terms . We cannot easily go back and try. If the board approves yes interestingly enough, lincoln initially proposed options for one year for five options for one year each. We felt as consultants that would open up a lot of uncertainty and unpredictability for the tjpa because in a givenyoure not just acquiring a facility manager. You are acquiring a whole number of different sort of disciplines under one roof but that would sort of actually create more problems for the tjpa and thats why was sort of our recommendation that he would be a longerterm deal because you would be hard for us [inaudible] we can always do that who you are not satisfied with lincolns and you dont want to extend their agreement, but you would be hard to do this on a oneyear basis because it would open us up to a lot of [inaudible] i think to me one is short. They be threeyear extension two threeyear extensions. To me, again im speaking for myself, but i think dont be much more favorable. Im involved in another procurement were contemplating an extension right now, where where this exact situation and because the contact option term is only five years and we really dont need five years, the kind of at the short end of the negotiating stick and i would not want us to be hopefully this will be n and would be happy to resign for whatever the contract provides for but we need to plan for all eventualities. You had one more . The naming rights, give sponsorship and naming rights but at 6 million so thats assumed in these numbers . Yes. Yes. That assumes naming rights are secured by the lincoln. Of course, we have the right to change our mind per contract okay. If i could, just moving to the funding i wasntand again if you said this i missed it i apologizecan you tell me with the assumption is for the tenant improvements . There in the first chart there is 27 million worth of initial tenant improvements and i couldnt follow it through to the latter slides to what the assumption is . Yes the tenant agreements are not included in this spread across here. They are treated separately. We are seeking some of the program reserves and other funds to Fund Financing improvement so they are not shown in the first three years or three years in the gap the 7 million, 49 that is not including proven costs. The thank you. Then, i guess this is commentary that were not voting on this funding strategy right . Its not referencing the resolution. And even more the case for ac transit than for mta or the others, given the size of the dollar amounts, but this terminalthis joint Powers Authority is called transbay. This terminal is called transbay. When the main benefits that we get in this first phase is improved transbay bus service. Ac transit buses will be able to go directly from the bridge to the facility without having to wait or increasingly congested streets. So that means ac transit while better transbay bus service. Which, we hope means well have more riders. The economics of Public Transit are such that more riders given that every writer subsidize means more cost. So ac transit will benefit from this facility by having more costs in terms of more riders but thats what we want as a region we want more people crossing the bay on transit than not. So it almost feels like a little insult to injury and then slap them with additional [inaudible] with a party committed i would say this to a lesser extent to the other operators, kind of assign additional costs of this facility to the agencies that are helping to take cars off the street. Meanwhile, seems like some of the folks who benefits from this facility when it opensbecause more people can come across the bridge towards a better option for people to come across the bridge and ac transit bus, or the people left driving. They pay bridge tolls. So i would have preferred to see,i get this is notional. I wouldve preferred to see a notional funding strategy that would have shown the toll payers came the balance of this, not the transit agencies who will be both blast but fiscally burdened by the additional ridership. Thats really just commentary but from a policy standpoint, we want to encourage ac transit to be able to bring more people across the bridge because thats good for the region. Its good for the city its good for the region. I dont want them or the mta or other operators to essentially be penalized for picking up more ridership which we hope the whole purpose of this terminal inserting is the Grand Central of the west is not just the transbay but all the chronic connectivity. Make solve our Services Better which means more ridership which means more cost. We are doing this to benefit the region so if i could offer one thing directors did i hear you loud and clout and hearing director harper louder and clearer previous. Cargill regional measures passes in june of 2018. Weve had discussions with mtc discussions have been favorable that they would pick up the cost of moving forward. So im asking [inaudible] for the first two years and hopefully after that maybe we can ask mpc to pick up a balance. I think thats a very fair asked to the point that youve made and also mtc is currently injured bidding 5 million to a top rate terminal. While the new Transit Center is much bigger and much more robust and to ask them to contribute double that amount is not unfair. So if they were to double their their contribution we could [inaudible] moving forward after the rfp passes. [crosstalking off mic] then the operating budgets of the transit agencies and i guess my point is the optics and symbolism, thats what we should be assuming it. Worsening some other more kind of policy optimal approach than just assuming we will head up the operators. Thank you. Director gee. Well, control the trains get here,[laughing] no. I would still like to say im the new kid here on the board so i dont have as studied history as many of you do. From the dialogue databank hearing the assumption this would be a selfsustaining facility with no additional funds from an operators are partners i cant figure out how that fallacy came to fruition but im assuming thats how it all started because when i look at 100,000 ft. 2 of retail space and listen to the discussion about security, homelessness, how to be a worldclass facility i can get the math to adult. And have people rent the facility. I just struggle with trying to put everything together and say, this is going to be a net zero the tenant is to pay for all. It may be Wishful Thinking maybe Wishful Thinking but its were like me when im working on budget i hope i can make project with a low bid on big day and that rarely ever happens. Maybe it doesnt San Francisco but it rarely ever happens. To pick up on director reiskins comment about terms, but i look at the last slide about funding strategy i struggle i think i said this previously with the base fiveyear term. If we are looking at three years to get to a stabilized year and it took us two years to get to this point, we are not going to have enough runway to know of lincoln or wherever we choose their doing well. Because love to make the call to start anew are key all of a sudden. Im sort of in the same place you are where i would like to see media base year of six with two, three year options. I think my threeyear options so they really does take us two years to the pick a new incumbent love the little contingency and potentially an overlap or handoff because i dont think our organization with the organization we have today can step into a gap i dont care for the master lessee or asset manager who says i am done i am out of here. Im just more pragmatism when i look at if its two years doing rfp selection and where we are now and it takes three years maybe to get the stabilized were not going to know enough if link is doing a good job or a bad job and if we have to do it all over, were out of time already. So i just would ask for a little bit more study about how that might work because when i look at the calendar just is not at all enough for us to protect this organization. I think the bases proposed to be set [inaudible] six is good but i think two, three years is better. All be making some phone calls tonight, director. The five when your option does not work. Not at all. Itll be too threeyear option. B was i apologize i knew there would be [inaudible] the other side is, we need to move on and the best we can given where we are. I agree with the process i saw peerreviewed Panel Members this morning we are where we are and we can undo the history. I just did the math and i know ron is here, were about 70 complete of construction, if not 75 . From mymy preferences of the Building Maintenance people involved at 50 completion of construction. Every single month we put this off the more difficult it is going to become the operators to step in to maintain and manage the facility. While the last months presentation was 77 complete, i think ron, you said were putting about 1 million worth of work a day. So we by the time we meet again will probably be over 80 complete. It just makes it even more difficult to have an operator command, maintain the facility, secure the facility, and we are going to incur costs. Though matter what whether we have the asset manager on board or not. Its probably going to even more for us to fill the gap. So i think its imperative that we look at where we are, move forward, and manage the heck out of what were going tobut we can control by looking at the budget, the bids, and german for security needs and operations all the parts that we do have a say in and so i think its important. I respect from my role as it represented we dont have a lot of skin in the game get until the trains get here we have to move forward because this is just going tothe larger gap we have the more exposure we have terms of risk of the facility and cost for maintaining operating and securing the facility. Erector harper dir. Harper i appreciate sass responsiveness to my comments on earlier drafts. That was appreciated and appreciate the chairmans support their because ac transit does have a lot at stake in the good functioning of this contract and i also do this for a living so between the two of those things, ac was really saying get into the weeds of that one. You are going to be responsible. So i appreciatei appreciate the responsiveness that i have received in the last month on some of the nittygritty. I doin response to some of the things that have been said so far, one of the things that tree shaded in here was owners rights to terminate without cause. Thats actually very generous. I think that the main reason this is taken so long is because these people have any idea what would be happening here. Not only with all the big stuff in terms of when is the real coming in house the rail coming in, all that, on top of a big operation like this, was very difficult to get to the meeting of the minds but after a few years, we are going to know a lot about what it takes to operate this terminal. We are going to know a lot more about what the market thinks of our terminal. So i am actually looking at this like, 34 years from now lets look at this and see whether or not we like this because i think we can do termination clauses very good for us and i think we can basically go to xyz or lincoln or whoever it is and say, this is the situation that needs some improvement if we are going toif we are going to renew this into years, we are going to have to have an understanding now. Lets start negotiating. We cant get anywhere in six months were going to go out and anticipation thats one of the good things. I really appreciated the fact that were into an Agency Situation out fairly clearly. That is going to get us a greatthats what i was a lot if we get into any litigation on this contract. From what it was which is just an ordinary contract to Property Owner situation. We do have a higher level now the standards. I think the biggestmy biggest problem with this right now is that we dont have a direct deal with colliers and were greatly dependent upon them. They are true agents and im not sure from this deal whose agent they even are. Because we are going through lincoln to get to our Real Estate Agent and we have a direct conflict of interest with lincoln and disrespect. Theres a direct inverse theres an inverse relation to bring tenant improvement allowance and rents. If you look at how that relationship works from lincolns perspective, to how it works from our perspective, you see that theyre not the same protected so if interior of two potential tenants coming up one of them wants lowrent whose went to putting a lot of the finance a lot of the tenant improvements versus someone who is willing to do high rents but doesnt want to finance any the tenant improvements. Well see how they reward us very differentially. So i really thinki dont know if they would object to this but they been saying collier is can it do all this. Why dont we go directly with colliers on her relationship with the people who are to bring us some tenants . The concept from the outset was not set up that way. So we never pursued it that way. But, i will say that we added language that said basically that they are a subcontractor to lincoln but they are acting as the agent of the owner and of course, its not the way you want to do business but you dont have to approve any lease that the tjpa thinks has sacrificed rent in order to increase tenant improvement allowance or do the amount of tenant improvements the tenant pays for, that kind of thing could presumably, at the end of the day, it is a question of whether its lower rent and tenant pay for improvements or whether it is higher rent and landlords pay for improvements, but we set the rates at which the landlord is willing to pay for improvements. Yes i just hope lincoln has were counting on lincolns integrity to protect that or reject them both equally. I dont think we can get an agent principal relationship of collier to us unless we are approving the contract. In some sense there is a requirement that all the subcontractors that would include colliers, that the contacts indicate, state expressly that we are intended thirdparty beneficiary and we can also make sure that one also states expressly that we are thirdparty beneficiary and that in performing their duties under that sub contractor there acting as agent or of the owner. Okay. Maybe that will work. One came quick thing director harper interest your comments of the negative relationship between contribution versus runs. Yes, colliers is getting commissions based on the rents they drive but lincoln is as well incentivize to get incentive payments based on retail rents. So we aretheres a sudden base threshold in initial years of 3 million in the first stabilize your its 5. 3 million increasing by inflation but anything in the rent thats beyond those numbers, they get 15 out of that. So they are also incentivized to sort of do the right thing. Not just because of the reputation but also their incentives in place in the businesses to do the right thing as well they only get 25 . They did for rock amount of the Construction Management fee during construction . A little bit of change off there. They get 3. 5 of construction yes anyway i dont want to dwell on that but im just more focused on legally getting colliers wrapped around costs the right way yes and its one permutation on it and i dont know it became through the presentation is that if it is a landlordif landlord pays for the buildout or if tenant pays the landlord does the buildout they get the full 3. 5 . If, instead, its a tenant pay tenant buildout tenant uses his own contractors, then its 1. 5 because their role is essentially to be an owners representative, not a full construction manager whether running the project. That wouldve been in the exhibit that were missing. No. Its in the text of the document. Okay. I just realized it got glossed over a little bit, yes all right. Lets see, that was taken care of. Thank you very much. Having the lincoln policy be primary on coverage and towards situations is great so we dont have to get into every single slip and fall that occurs in the terminal. That is much better. I think the 16. 2. 1 is confusing on insurance because basically we have discretion over the budget and when it comes to insurance and says owner requires manager printer is so cost expense unless otherwise provided in the budget. Policies of insurance to be enforced. I dont know if we are fully agreeing to exactly what insurance were going to provide but you might look at that to see if theres any conflict we added in another provision and it would take me thumbing through here to find what it isbut a provision that said that managerscommercial general liability and excess Liability Insurance arent operating cost. The rest of them are intended to be there cost. Because is managers cost unless otherwise approved budget we do have a provision that says those two coverages will be approved yes okay that would clarify that. If in fact we got that. Yes, think the whole insurance situation is one we will learn from. Because its a situation in which there so much overlap tween us in the asset manager that i really doit would be nice if there was a paragraph in here and basically said that the whole insurance thing as long as we can provide them with the coverage in this agreement of insurance that if we can renegotiate that the terms of a wrapped into the insurance we get or Something Like that and maybe we can. Maybe theyll be that reasonable but the insurance is going to be expensive on this one could i do know how extensive but theres a lot of insurance here. So i would just have a clause that basically says it sort of like a reopener and if weve got some deals in which we can provide insurance in other ways cheaper you got to listen to us and be reasonable. Something like that. It was great manager does not have Signature Authority over those cbd funds and should not have. I thought that was much improved. These are just what we need, exhibits. Yes so those are my comments but i do appreciate having early looks at this and having some response. That was good. Okay. Thank you. So i would start by just thinking the staff are working very hard. I think for me who came after director gee is been quite an experience going through the process, but weve asked a lot of questions. We tried to go through every piece of this contract negotiations are difficult but we are in a position where i wish we had an asset manager earlier than we do now. As you heard from the director, we do need to move on and in good faith i think the team has selected and worth of stuff good dialogue and as Board Members of this body, we have to look closely to ensure that things are working that we have negotiated them and it seems all the different aspects whether its insurance or the buildout or whether what youre doing for rampup that we are watching closely. It is a huge facility and is construction is moving good so december is a reality. We will start operating some parts of the station and gradually building to that and maybe that gives us an opportunity to see things a little bit more clearly. So the way the deal is being worked out having the options to back out if we want to i think its great for us. I just feel were at a place where we do need to just follow the recommendations that we have and where a very healthy discussion and keep on moving forward. Get the station up and running as fast as we can and work with all partners. Directors, i do have appreciate your patience. This is been a long process. Its been educational to me. [inaudible] probably the newest person on the block. So but i think we do have a good deal though we have a good team and i think yes, theres no guarantees on the revenues but i think we were very good capable team that can meet the projected revenues. As we move forward really looking for efficiencies as far as operations and so forth so we can reduce that gap that we are projecting here and we will be seeking funding from mpc to also fund the gap. So just for clarification, what are the next steps or milestones that we need to be aware of the grid after approval of the contract will be sitting down with the lincoln team to start looking at Staffing Levels that we need for transition year and after years. We need to get them acquainted with the building, how the building operates. Therell be shadowing ron basically look at the commissioners building and so forth were ready to operate the building. And looking at leasing constitute a leasing plan. Whats the retail land and we will bring that to you later in the next 34 months. So they can share with us and share with the board what is the mixed retail mix. So we have quite a bit of things to do the retail mix i think would be very important because marty getting calls from restaurants and businesses and they want to be in there. So the sooner we can make some of those four processes those would be, how would i think make sure the local participation really has been given an opportunity to work with us and management and your team to get things up and running. Yes michael director nuru in june we bring the board some kind of a draft to make sure that were going in the right direction to the board. Okay. We do have one member of the public dont want to address two on the item mr. Jim patrick. Are there any others . All right. Good afternoon Board Directors Jim Patrick Patrick and the money in San Francisco here. I want to talk about this agreement. This agreement you have a poor policy 001 im sorry 011. It talks about card checks for union people in terms of bringing in the union. I suggest by having this paragraph in there you will have a union on day one and you are going to have a consultant a new consulting, on the job on day one. But you know nothing about. I believe its a lot smarter to build your Team Employee or team, and if the employees would like to formally and have the right to do that. Let them do that and bargain with the union but build your team first. Bart shows will bring them in and Work Together and i believe it was a disaster for bart workflow paying for today i think its about policy have in there. Number two, security policies. I do with german harper theres nothing in there about security policies. The biggest problem with this thing has his homelessness. Unless we take a very hard strong top Public Policy about how were they to do with homelessness organ have a problem. That was the feeling part of predecessor of the old terminal. So im really looking is he a that flows out. We must be talking to give the homeless. I have to do with him every day in front of our store every day. Its a big big problem. If a part gets a great sunbathing place for the homeless. Number three, theres a section in there i forget which one it is talks about the kind of stores that can be there. We can have a sex shop. I agree with that began up dry cleaners. I agree with that. That is okay. I like to add that a marijuana grower or sell shop. I believe you see them once while in the streets that doesnt add to this and it ought to be prohibited. Number four, ive argued strongly the board needs to move along in this thing because we have to get in the market on this. We have to be leasing this material. The salesman need to be on the street talking to the customer saying, hey i want to in years we can get the revenue flowing. Please number one board policy 011 i think is a mistake number two, we need to it aggressive security policies. Number three, i dont want line of marijuana stores. Number four, lets get going. Thank you. Okay. That includes members of the public dont want to address you on that item. Something im supposed to ask that Lewis Rollins asked me to ask which was on our review was is anybody going to be at eye ccs or icrc could she says to ms. That may convention is to miss a huge opportunity and i was supposed to ask it and i forgot. [inaudible off mic] with the huge model she says. [inaudible off mic] all right. On that note i move approval of the resolution with the additional direction to staff to follow up on the item that we discussed for negotiation for the final negotiation and i think theres probably bounds within which the director can negotiate with disapproval that would require us having to come back to us. Extending the option from five to six years oh i dont know if that would triggerto come back and if so i would say just whatever the rule, i would say the direction should be to negotiate within the authority of the resolution so that you dont have to come back so we dont want to delay this any further. So, dir. Reiskin of the suggest then certainly for the option i think i heard clearly that something the board would like to condition their approval on . Is that correct . The board is condition and the approval of this agreement condition on negotiations and run new option 22, threeyear terms . Yes well having not been part of the negotiations i dont want us to be specifying terms of negotiation. I think the spirit of what the board was seeking was there. It sounds like since they themselves proposed short options that is probably not a problem. I dont want to condition it to find out we cant get to a deal and were back here month later. So i was not thinking of conditioning the approval but just directing staff to advance few things director harper mentioned as well as part of the final negotiations. And that the executive director is authorized to execute the contract is conclusion of that effort correct. Okay. P demo shall understand thats the motion. Do we have a is there a second . Second. I will second. Okay. With the first and second no other members the public wanted to comment on them harper aye reiskin aye gee aye that is forced the one item 4 is approved. Thank you directors. That concludes the agenda. That includes the agenda . Thats it for today thank you all for coming and we are adjourned. [gavel] [adjournment] ever wonder about programs the city it working think to make San Francisco the best place to work and will we bring shine to the programs and the people making them happen join us inside that edition of whats next sf sprech of Market Street between 6th is having a Cinderella Movement with the office of Economic Workforce Development is its fairy godmother Telegraph Hill engaged in the program and providing the reason to pass through the corridor and better reason to stay office of Economic Workforce Development work to support the economic vital of all of San Francisco we have 3 distinctions workforce and neighborhood investment i work in the tenderloin that has been the focus resulting in tax chgsz and 9 arts group totally around 2 hundred thousand square feet of office space as fits great as its moved forward it is some of the place businesses engaged for the people that have living there for a long time and people that are coming into to work in the the item you have before you companies and the Affordable Housing in general people want a safe and Clean Community they see did changed coming is excited for every. Oewd proits provides permits progress resulting in the growth of mid businesses hocking beggar has doubled in size. When we were just Getting Started we were a new Business People never saturday a Small Business owner and been in the bike industry a long needed help in finding at space and sxug the that is a oewd and others agencies were a huge helped walked us through the process we couldnt have done it without you this is sloped to be your grand boulevard if so typically a way to get one way to the other it is supposed to be a beautiful boulevard and fellowship it is started to look like that. We have one goal that was the night to the neighborhood while the bigger project of developments as underway and also to bring bring a sense of Community Back to the neighborhood. We wanted to use the says that a a gathering space for people to have experience whether watching movies or a yoga or coming to lecture. That sb caliber shift on the street is awarding walking down the street and seeing people sitting outside address this building has been vacate and seeing this change is inspiringing. Weve created a space where people walk in and have fun and it is great that as changed the neighborhood. Oewd is oak on aortas a driver for San Francisco. Weve got to 23ri7b9 market and sun setting piano and it was on the street weve seen companies we say used to have to accompanying come out and recruit now theyre coming to us. Today, we learned about the office of Economic Workforce Development and its effort to Foster Community and make the buyer Market Street corridor something that be proud of thanks to much for watching and tune in next time for