Pelli Clarke Pelli's Transbay Terminal and Tower ('City Park')
The winning $350 million bid by the Hines/Pelli Clarke Pelli team to develop San Francisco’s new Transbay terminal and tower has been cut to $235 million “but would require the real estate developers to pay the money sooner and assume greater risk and carrying costs.” From J.K. Dineen at the San Francisco Business Times:

Under the new exclusive negotiations agreement, hammered out between the [Transbay Joint Powers Authority] and developer Hines and equity partner MetLife over the past year, Hines would pay $160 million within 90 days of the project’s entitlement. Hines would then pay $15 million in five $3 million installments, as well as $50 million for the construction for the rooftop park. In addition, the developers would pay the TJPA half a percent of net operating income over 66 years, estimated to be about $10 million.

The reduced purchase price is being driven by timing the TJPA needs to meet certain deadlines. During talks for the exclusive negotiating agreement, Hines indicated that it could not obtain financing for the $350 million until it was able to prelease at least 50 percent of the 1.6 million square feet of office space in the tower, which the developer said would take five years after it received entitlements, which is unlikely to happen before 2010. But under the TJPA’s mandate, the 2015 payoff date would be a problem because the TJPA’s mandate requires it to start construction of the transit center by 2010, and revenue generated from the land sale will partially pay for the transit center.

Paul Paradis, Hines senior vice president, said the revised scenario was not affected by the current credit crisis or Wall Street turmoil. He said the term sheet the TJPA gave developers during the competition always required that the developer and the Transit Authority would need to negotiate an amount of pre-leasing. (Hines beat out Forest City and the Rockefeller Group during the competition, in part by offering a much higher purchase price than the other developers for the land. Forest City had offered $145 million and Rockefeller $129 million.)

Demolition of the current terminal is currently scheduled for 2009 with constuction on the Transit Center (and possibly tower) to begin in 2010, and the first phase to be completed in 2014.
Deal cuts price developer will pay for Transbay land by $115 million [Business Times]
Hines And Pelli Clarke Pelli Bid The Most (And Get The Transbay Nod) [SocketSite]

9 thoughts on “Transbay Terminal Moves Forward, But Payments And Terms Change”
  1. Hmmm, still within a 6-year time-frame for phase I completion. Not too bad. I’d like to see it get built. The rooftop park looks pretty amazing– I hope they can keep it clean!

  2. That park is really quite nice. Imagine arriving in SF as a tourist, coming up out of the station and right into the park. Great introduction.
    It does make the competition seem a bit lame. Win by overpromising, then underdeliver? Can’t the TJPA borrow the $235m at 6% in 2010, then pay off the loan + interest of $315m in 2015 with the $350m and have money left over? Unless they think the developers won’t be able to come up with the money…

  3. I think the worry was about the possible long delay before the property was going to be constructed given the current financing environment. It will be difficult/impossible to finance the construction of such a large structure without significant pre-leasing which in turn is very difficult to do because not many people want to commit to a lease for space that will be delivered 3-5 years down the line.

  4. I think all bond issues would have to get 2/3 voter approval, so issuing bonds would likely be a road to avoid if the State has a 5 year deadline to get this thing up and running from start to finish

  5. i don’t think SOM would’ve been the right choice for this.. or any project in SF. That firm has built some of the ugliest/underdelivered buildings in this city. i.e., St. Regis. The renderings looked amazing and diaphanous.. and what we got was a strange clunky looking building.
    i don’t trust SOM. thank goodness Hines Pelli got this bid. The PARK will be amazing! The tower iconic and simple beauty.
    i’m happy to see things moving along for this. my only gripe is that the new tower will block some of the view of the beautiful new Millenium Tower.

  6. thats a big retrade.
    and its still probably the highest value available.
    its got everything to do with the credit crisis. but what doesnt in real estate?

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