MEMORANDUM. April 25, Request for Approval of Rent Credits to Central Parking System, Inc. under Lease No. L-12664

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1 MEMORANDUM TO: FROM: SUBJECT: MEMBERS, PORT COMMISSION Hon. Ann Lazarus, President Hon. Kimberly Brandon, Vice President Hon. Sue Bierman, Commissioner Hon. Michael Hardeman, Commissioner Hon. Wilfred Hsu, Commissioner Monique Moyer Executive Director Request for Approval of Rent Credits to Central Parking System, Inc. under Lease No. L DIRECTOR'S RECOMMENDATION: APPROVE RESOLUTION AUTHORIZING RENT CREDITS TO CENTRAL PARKING SYSTEM, INC. UNDER LEASE NO. L BACKGROUND On March 16, 1999, the Port Commission approved Lease No. L (hereinafter referred to as the Lease ) with Allright Cal, Inc. (predecessor in interest to current Port Tenant, Central Parking System, Inc.) for Premises located at Seawall Lots 321, 323 and 324, for use as surface parking lots. This parking lot lease opportunity was originally offered through the Port s competitive bid process. In addition to the Premises defined in the Lease, the Lease includes an option for the Port to expand the Premises locations if space north of the Ferry Building becomes available for surface parking operations. This option has been exercised by the Port on several occasions, including Piers ½, 15/17 and 27/29, and Seawall Lot (hereinafter referred to as SWL ) 351. When the Port moved out of the Ferry Building and into Pier 1, there was a need to replace the employee parking that had originally been offered to Port employees in spaces around the Ferry Building. At that time, Port Real Estate contacted Central Parking System, Inc. (hereinafter referred to as Central Parking ), to seek their approval to use sixty parking spaces for the Port s employee and vehicle parking at SWL 351 (The Embarcadero at Washington) for the agreed amount of $2, per month for what was anticipated to be Central Parking s actual projected net income after payment of Parking Taxes and Percentage Rent. This amount was to be repaid THIS PRINT COVERS CALENDAR ITEM NO. 6C

2 Item 6C Approve Rent Credits for Central Parking No. L12664 Page 2 of 5 to Central Parking via a Rent Credit against their Monthly Base and Percentage Rent obligations. This arrangement was done without the benefit of a written agreement. The Port recouped the credit by charging back its costs (the Rent Credit) to the employees utilizing these spaces. The Port also used a portion of SWL 351 for Port vehicles that could not be accommodated in the twenty-five spaces rented from Hornblower Yachts, Inc. under Lease Number L at Pier 3. This arrangement was made with the approval and knowledge of Executive Director, Douglas Wong. Subsequently, the Ferry Building developers requested the Port to provide retail parking for the Ferry Building Marketplace. The Port agreed to lease to Ferry Building Investors all of the parking at Pier ½ and SWL 351 (The Embarcadero at Washington Street). Under the agreement with Ferry Building Investors, the Port retained three designated parking spaces to be used by the executive director and Port commissioners at Pier ½ and up to ten (at any one time) visitor parking spaces at SWL 351. This resulted in the loss of all the employee and Port vehicle spaces at Pier ½ and SWL 351. As discussed below, on April 1, 2003 the Port s vehicles were moved to SWL 324 (The Embarcadero at Broadway). In October 2004, a routine, retrospective audit of the Central Parking Leases at Pier ½ and SWL 351 by the City Auditor questioned the legality of the Rent Credits for Port employee and vehicle parking at these locations as there was no written agreement or apparent Port Commission authority to issue the Rent Credits. Accordingly, the Port Commission retroactively approved these Rent Credits in March 22, 2005 (Port Commission Resolution No ). RENT CREDIT FOR SIXTY PARKING SPACES AT SWL 324: Due to the loss of all Port employee and vehicle parking spaces at Pier ½ and SWL 351, the Port Real Estate Division was asked again by senior management to relocate its employee and vehicle parking. Senior management considered Piers 15/17, SWL 321 (The Embarcadero at Green Street) and SWL 324 (The Embarcadero at Broadway). Since SWL 324 was closer in proximity to Pier 1, senior management felt this area to be the preferred location. Central Parking again agreed to accommodate the Port s vehicles and employee parking needs using the same Rent Credit arrangement that the Port and Central Parking used at Pier ½ and SWL 351. The Rent Credit amount agreed to by both Port and Central Parking for use of the sixty parking spaces was $2, per month, commencing on April 1, This monthly Rent Credit arrangement will remain in effect until the Port leases SWL 324 under a new Request for Proposal process that is expected to be completed by January To date, there has been no City Auditor review of the Central Parking Lease at SWL 324. However, in recognition of the ongoing unauthorized Rent Credits as described above, Port staff is seeking Port Commission approval to retroactively ratify the Rent Credit agreement with Central Parking regarding the Port s employee and vehicle parking at SWL 324. RENT CREDIT FOR PIERS 27/29: Since 1999 Central Parking has been the parking operator of five hundred and sixty-eight parking spaces at Piers 27/29. In October 2005 the Port and SF Piers 27-31, LLC entered into a six month lease for the amount of $14, per month to facilitate a soccer field at Piers 27/29. The soccer field resulted in a net loss to Central Parking of one hundred and ten parking spaces

3 Item 6C Approve Rent Credits for Central Parking No. L12664 Page 3 of 5 for a period of six months. At current monthly rates, Central Parking states its economic loss is in excess of $9, However, Central Parking has agreed to cap its loss at $3, per month for three months totaling $9, As a result, Port staff request the Port Commission s approval of a retroactive Rent Credit to Central Parking in the amount of $9, RECOMMENDATION Port staff recommends that the Port Commission approve retroactive Rent Credits to Central Parking System, Inc. in the amount of $113, for the loss of sixty spaces at SWL 324 (The Embarcadero at Broadway) and the loss of 110 spaces at Piers 27/29 as follows: SWL 324: $2, x 37 months (April 2003 to April 2006) = $104, Piers 27/29 $3, x 3 months (September 2005 to November 2005) = 9, TOTAL RENT CREDIT UNDER LEASE L $113, Prepared by: Mirian Saez, Deputy Director

4 PORT COMMISSION CITY AND COUNTY OF SAN FRANCISCO RESOLUTION NO RESOLVED, Charter Section B3.581 empowers the Port Commission with the authority and duty to use, conduct, operate, maintain, manage, regulate and control the lands within the Port jurisdiction; and by Port Lease No. L (the Lease ) the Port leased to Allright Cal, Inc. (predecessor in interest to current Port Tenant, Central Parking System, Inc.) Seawall Lots 321, 323 and 324 in the City and County of San Francisco as surface parking lots; and the Lease includes an expansion option for surface parking North of the Ferry Building that the Port has exercised with Central Parking System, Inc. to include Piers ½, 15/17 and 27/29, and Seawall Lot 351; and Central Parking System, Inc. agreed to accommodate the Port s request to use sixty parking spaces for the Port s employee and vehicle parking at Seawall Lot 324 for the amount of $2, per month commencing on April 1, 2003 and continuing until the Port leases Seawall Lot 324 under a new Request for Proposal; and the Port staff is seeking Port Commission retroactive approval of a Rent Credit to Central Parking System, Inc. in the amount of $104, for the loss of 60 spaces at Seawall Lot 324 from April 2003 through April 2006; and the Port leased a portion of Central Parking System, Inc. s Expansion Premises to SF Piers 27/31, LLC for use as an outdoor soccer field from October 15, 2005 to March 14, 2006 resulting in a loss of 110 parking spaces; and the Port staff is seeking Port Commission retroactive approval of a Rent Credit to Central Parking System, Inc. in the aggregate amount of $9, for the loss of 110 parking spaces to accommodate the lease with SF Piers 27-31, LLC for a soccer field at Piers 27/29; NOW THEREFORE BE IT that the San Francisco Port Commission hereby ratifies and approves retroactive rent credits in the amount of $104, for the loss of sixty parking spaces at Seawall Lot 324 and $9, for the loss of one hundred and ten parking spaces at Piers 27/29, on the terms and conditions outlined in the memorandum to the Port Commission for Agenda Item 6C of the Port Commission Meeting on,

5 and the Port Commission authorizes the Port Executive Director, or her designee, to execute an amendment to Lease No. L with Central Parking System, Inc. effectuating the same in such form as approved by the City Attorney; and, be it FURTHER RESOLVED, that the Port Commission authorizes the Executive Director or her designee to execute and enter into any additional documents as she deems necessary or appropriate, in consultation with the City Attorney, to consummate the transactions contemplated hereby or to otherwise effectuate the purpose and intent of this Resolution, such determination to be conclusively evidenced by the execution and delivery by the Executive Director or her designee of any such documents. I hereby certify that the foregoing resolution was adopted by the Port Commission at its meeting of. Secretary