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]