MEMORANDUM October 18, 2006 TO: MEMBERS, PORT COMMISSION Hon. Ann - PDF document

MEMORANDUM October 18, 2006 TO: MEMBERS, PORT COMMISSION Hon. Ann Lazarus, President Hon. Kimberly Brandon, Vice President Hon. Michael Hardeman Hon. Wilfred Hsu FROM: Monique Moyer Executive Director SUBJECT : Informational Presentation on Proposed Lease with the San Francisco Bay Bar Pilots for Pier 9 located at Embarcadero and Broadway DIRECTOR’S RECOMMENDATION : INFORMATIONAL PRESENTATION; NO ACTION REQUIRED Background The San Francisco Bar Pilots (“SFBP”) have been ensuring safe and efficient movement of the large vessels that sail in San Francisco Bay and its tributaries for over 165 years. Approximately 60 pilots share ownership in the San Francisco Bar Pilots Association. They move more than 8,500 vessels per year working closely with shipping agencies, tug companies and the U.S. Coast Guard to deliver cargo safely and on time. Their area of responsibility encompasses the entire Bay Area as far east as Stockton and Sacramento and as far south as Monterey Bay. The SFBP currently lease 45,074 sq. ft. of real property at the end of Pier 9 consisting of 32,405 sq. ft. of pier shed and 12,669 sq. ft. of apron space. The Port and the SFBP entered into a 20- year Lease (No. L-11515) in 1989 extending to 2009. In 1989, the SFBP leased unimproved warehouse space at the end of Pier 9 and made significant investment to the premises by constructing office, dispatch and member accommodations. The terms of Lease No. L-11515 reflect the fact that the Port leased to SFBP unimproved space. The SFBP currently pays the Port $26,999 monthly for these premises. With only three years remaining on their current lease, the SFBP wish to enter into a new lease with the Port to secure their headquarters location in San Francisco. The SFBP have approximately three years remaining on their current lease. However for matters of planning and continuity, the Port entered into negotiations last year with the goal of executing another long-term lease with this important maritime tenant. Staff is pleased to inform the Port Commission that both parties have agreed upon the following lease terms for a new lease at Pier 9: This Print Covers Calendar Item No. 5A

Lease Terms CITY AND COUNTY OF SAN FRANCISCO, a municipal corporation, Landlord: operating by and through the SAN FRANCISCO PORT COMMISSION Tenant: San Francisco Bar Pilots Pier 9 - Premises: 19,718 s.f. of office space; 20,088 s.f. of shed and storage space 14,342 s.f. of apron space January 1, 2010 Lease Amendment Commencement Date: December 31, 2024 Lease Expiration Date: Fifteen years for total lease term of thirty-five years Additional Lease Term: Monthly Base Office Space: $74,930 Rent: Shed and Storage Space: $18,802 Apron Space: $ 3,327 Total Monthly Base Rent: $97,059 Base Rent shall be adjusted by 3% annually; The above rates reflect a 20% discount from estimated January 1, 2010 market rates for comparable space to acknowledge Tenant’s excellent history of maritime tenancy at the Port; Base Rent shall be adjusted to market rates at 5-year intervals, however Port commits that the first such 5-year market adjustment to be effective January 1, 2015 will again reflect a 20% discount from market rates for comparable space. Thereafter, the final 5-year market rate adjustment would be without this explicit obligation. Use: Offices, locker room, meeting rooms, exercise areas, dining and sleeping facilities for the San Francisco Bar Pilots, vessel berthing, maintenance facility and parking, as currently utilized under Lease No. L-11515. Tenant shall provide a Security Deposit equal to two (2) month’s rent. Security Deposit: Tenant and Port shall share apron repair costs equally and shall Apron Repair: endeavor to execute a Settlement Agreement to memorialize same. Insurance: Tenant shall provide insurance coverage acceptable to Port. The lease shall include provisions requiring that Tenant comply with all City Requirements: applicable city laws (including, but not limited to, Non-discrimination, First Source Hiring, Health Benefits Coverage, Limitation on Contributions, Prevailing Wages and other applicable laws). -2-

Apron Repairs In 1992, the SFBP and the Port entered into a settlement agreement to resolve a dispute with regard to repair of the apron and fenders at Pier 9. After Lease No. L-11515 was consummated, it was deemed that the condition of the Pier 9 apron was such that the SFBP couldn’t utilize the apron for their operations. The 1992 agreement was a cost sharing arrangement between the Port and the SFBP to make the necessary repairs. The Port provided the labor and some materials and the SFBP provided cash contribution for the repairs. As part of the current negotiations, the previously repaired apron has been deemed in need of further repair. It is unclear from the current condition survey why the 1992 repairs were not sufficient and as part of this new agreement, the Port and the SFBP agree to split the costs of the repairs to the apron and fendering system. Upon completion of these repairs, both parties will sign a new settlement agreement with each party signing off on the effectiveness of the new apron/fender repairs. The SFBP will then retain full maintenance responsibilities for the repaired fender and apron for the duration of the lease. Next Steps The Port staff and the SFBP are in the process of preparing the documentation for this proposed lease. We expect to return to the Port Commission for formal action by the end of this year. Prepared by: Peter Dailey Deputy Director, Maritime -3-