November 7, 2012

Reviewed By The Mayor, The Warriors’ Guaranteed Return Remains

As we reported yesterday morning, while not highlighted in the publicized Fiscal Feasibility and Conceptual Framework for the proposed Piers 30-32 project, according to the detailed Findings of Fiscal Responsibility and Feasibility report, the Golden State Warriors (GSW) will receive a guaranteed 13 percent annual rate of return on the $120 million they spend, and for which they will be reimbursed by the City, to rehabilitate Piers 30-32 to prepare the piers for construction of the proposed Warriors arena.

Having been reviewed by the Mayor, a revised and redlined Conceptual Framework was introduced yesterday afternoon. The proposed 13 percent annual rate of return on the $120 million remains.

The exact terms for the reimbursement of the costs to rehabilitate the piers as proposed:

The parties recognize that the costs to rehabilitate Piers 30-32 will substantially exceed the appraised fair market rental value from the Waterfront Site and the fair market sale value of the Seawall Lot Site. GSW will be reimbursed for its actual and verifiable costs of seismically retrofitting and rehabilitating the piers to provide waterfront public access and support the other uses proposed for the Project, and of removing any fill in or about the Waterfront Site that is part of the Project (collectively, “Pier Substructure Costs”), up to $120,000,000 (the “Maximum Reimbursement Amount”), plus the Annual Cost Return described below.
Such reimbursement will be made through three sources of funds: (1) the Rent Credits due under the Waterfront Site Ground Lease as described in section 6 below; (2) the Seawall Lot Purchase Credit as described in section 7 below; and (3) proceeds of Net Available Property Tax Increment generated from the Site under an IFD as described in section 8 below. The reimbursement for Pier Substructure Costs will include a market return on cost of 13% per year (the “Annual Cost Return”), which reflects the timing and risk of GSW getting repaid for its recognized expenditures, net of the Seawall Lot Purchase Credit described in clause (2) above. The Annual Cost Return will begin when GSW incurs the recognized expenditure and will continue to apply to such expenditure until GSW is repaid as provided above. The Annual Cost Return will not count against the Maximum Reimbursement Amount.
GSW’s conceptual design for the work that is subject to such reimbursement will be subject to the Port’s prior approval generally consistent with other Port DDAs of commercial projects of similar scale, which approval will not be unreasonably withheld or delayed. If through such approval process the Port requests revisions to GSW’s conceptual design that would materially increase the Pier Substructure Costs, then the Maximum Reimbursable Amount stated above will be increased in connection with the negotiations of the Term Sheet and the Transaction Documents to reflect such increased costs.

Once again, with a tight timeline in play, the Port Commission has until to February 1, 2013 to endorse the proposed terms while the Board of Supervisors has until February 15.

All comments on our original term sheet report.

All The Devilish Details For The Development Of Piers 30-32 [SocketSite]
It's No Slam Dunk Nor Layup For A Warriors Arena In San Francisco [SocketSite]
The Design For The Warriors San Francisco Arena On Piers 30-32 [SocketSite]
Findings of Fiscal Responsibility and Feasibility: Piers 30-32 Arena Project [Box.net]
Timeline And Key Milestones For Building The Warriors Arena In SF [SocketSite]

First Published: November 7, 2012 3:30 PM

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