The agreement calls for Hines to pay $160 million within 90 days of the tower being approved by the San Francisco Board of Supervisors–which is slated to occur in late 2009–and the remainder in $3 million annual installments over the ensuing five-year- period. Under the original offer, Hines was going to pay its $350 million only after it achieved 50% preleasing, the typical hurdle for construction financing.
In addition to the $235 million, Hines would pay the TJPA 0.5% of the building's NOI for 66 years, which is expected to total $10 million. Beyond that, the agreement calls for Hines to pay the an additional $50 million to build a park next door, atop the new mass transit terminal for which the TJPA hopes to break ground in 2010.
Hines SVP Paul Paradis tells GlobeSt.com that the TJPA originally wanted the highest possible price for the development site, which meant not selling it to the developer until after the projected was approved, the preleasing hurdle had been met and financing had been secured.
"When they realized that the preleasing and financing might take five years, that timeframe didn't work for them and they needed to be paid sooner," Paradis says. "We agreed to pay sooner, but said the agreement needed to come with a lower price because paying sooner meant we could be taking on greater risk because the project may not be preleased or financed by that point."Ultimately the city decided that having two-thirds of the original offer several years earlier was more or less equal to being paid the larger number in 2015 or later. That decision was based on an analysis by Keyser Marston Associates. The TJPA board still must approve the terms. The terms will be introduced publicly to the board at its Sept. 29 meeting.
In 2007, Hines beat out teams led by Forest City and the Rockefeller Group with its proposal, in part because it offered to pay more than double what the others offered for the tower site but also because its design for the adjacent transit terminal. Hines' team includes Pelli Clarke Pelli Architects as the designer and MetLife as the equity partner.
Earlier this year, the TJPA board approved a $105-million contract with Pelli Clarke Pelli Architects for the transit terminal, which will centralize the region's transportation network by accommodating nine transportation systems under one roof: AC Transit, Caltrain, MUNI, Golden Gate Transit, SamTrans, Greyhound, BART, WestCAT and future California High-Speed Rail. The area surrounding the Transit Center will be redeveloped to include the office tower and 3,500 new housing units along with associated retail.
Pelli-Hines' design and development proposal calls for a 1.8-million-sf, 1,300-foot LEED-Gold tower alongside a new transit terminal topped by a public park. Two defining components of the Pelli-Hines proposal were the price it offered to pay for the Tower property and the elevated 5.4-acre park it designed atop the transit center.
In its proposal, Hines envisioned the tower containing exclusively office space–and annual gross office rents of $83 per sf–while the two other tower proposals had significant residential and hospitality components. The Pelli design also includes "Mission Square," a grand public plaza covered by a billowing glass-and-steel canopy, and public art space.
PCPA's "City Park" design was scored a 90 by the jury, a panel of design, planning, engineering, transit and real estate development professionals. The jury said it was superior in all respects -- aesthetically, functionally and financially -- to the two other proposals, neither of which scored higher than 72.
Groundbreaking on the Temporary Terminal will begin in November 2008. Construction of the new transit center will begin in 2010 and be completed in 2014. The timing for construction of the office tower is unknown. It could begin as soon as 2010 but the necessary preleasing is expected to take much longer, possibly until 2015.
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