To come into pier 39 . Yes. The water taxi is a tenant in our marina. He docks the boat all day and drops people off all day long. The answer is yes. Is the restaurant still there . No. I built that restaurant 1978. Wow. Thats a new bit of history. Yeah, for sure. Thank you, tyler for that presentation. Its good to get update on whats happening in pier 39. I remember when we first visited. It was a major attraction in the 80s and when it opened in 1978 and certainly my children have enjoyed it. I havent about there in a while, but i think its a Great Attraction and the first thing that people think of as far as fisherman. Warf. When troy was up with his presentation i guess we have to keep really pushing forward with the rest of the relevant departments and agencies of the city to figure out what we can do with traffic and also to help both those who work on the water front as well as the sros to the water front because i think thats one of the issues. It will be some out of the box thinking because i think unless we just think sitting in traffic is going to be the answer in the future. Because i reported in one of our other Commission Meetings that on a cruise ship terminal day when we had two cruise ship it took 45 minutes to go from the folsom street to cruise ship terminal. We have to think of keep diverting traffic. I agree with you 100 . I dont know the solutions, but i just hope we can keep putting focus on it. Thank you for your comments. I agree. Thank you for your presentation. I really appreciated that you laid out about the loyalty of your staff and the people that work for you and sounds like you have a very very Cohesive Team and i really like what im hearing and i know the commissioners are worried about congestion. I think all the agencies have to Work Together to figure out a solution. It will work itself out. The popularity will keep growing. I think we will continue to invest and clearly you believe in that and i like your passion and vision. Thank you. I echo my thanks for all you do with the presentation today and for all the work thats done to keep pier 39 so vibrant and lively. It is a double edge sword that it is so crowded and tough to get down there but that beats the alternative and thats to the successes. As i said earlier, its one of those destinations in San Francisco that people come to and think about. I know when i was a kid it was a treat to come to pier 39 and more so as a teenager when we got to do it ourselves. It was a fun place and one of those locations that the emblem attic in San Francisco and a destination in and of itself. I would like to thank you for the years to keeping it thriving and adjusting to new demographics and interest including the sea lions. I remember when they 1st arrived, i could start hearing them when the wind was just right. It brought a whole new wave of folks. Thank you for all of your efforts and everything in what you do. Thank you very much. Thank you, taylor, thanks for doing this on short notice. City clerk item 11 a request approval of lease no. L 15875 with bae systems San Francisco ship repair inc. California corporation approximately 14. 7 acres of land improvement with 19 buildings. 17. 4 acres of submerged land. Peter daily director of maritime. They are going to give a presentation. One of the strength of the port is wide variety of meritime businesses involved. We may not be a huge container port like l. A. Or oakland, we are the Market Leader on the commission ship repair on the west coast. Its in operation since the civil war. Its an important maritime industry of ours that we are very proud to be involved with. This item in front of you today will solidify our commission on the repair center in the west coast. It will ensure that another generation of city san franciscans can live on the water front. These jobs at the shipyard pay enough and provide enough that workers can afford to live in San Francisco. Last year just with personnel itself there were almost 500,000 man hours, on top of that there were another close to 500,000 hours from man hours from northern california. On top of that spent 10 million with local purchases that have San Francisco on their address. Obviously its a huge economic benefit. Its a legacy industry for San Francisco and for the port. This agreement that the team, i just want to recognize ricky, joy royball, the manager and who worked very hard to put this package together. We have built with the general manager thank you for the promotion. Dunbar, he was his boss who just retired. Oh gosh. [ laughter ] there is a lot of miss names going on around here today. In any event, bill dunbar, i apologize. Now im really embarrassed. Rick is going to make a presentation on the nuts and bolts of this deal. Thank you, peter. My name is ricky, with the planning and Development Division of the port. Im just going to point out the location and fixtures of this site before i get into the details of the terms and conditions. This is the location of the shipyard which is in deciding what is upfront close to lynnoy street. There is an a dash around the premises of this lease. This is dried up no. 2 with a cruise ship dock. Then there is dry dock which is slightly to the left of the cruise ship. My presentation is just going to quickly touch upon the background regarding bae as being over 20 years at a shipyard. Its in Good Standing. Im going to indicate the number of buildings and the ship repair history that the shipyard is a major infrastructure that provide critical Maritime Service to the port and to the city of San Francisco and the ship provides support. Im going to touch base on the current lease that is currently existing and projecting or is better to expire on december 16, 2017, and then talk about the new terms. As peter indicated ship repair has been a major component of pier 70. A vital economic area to the city and to the ports and allows ships to make commitments to San Francisco. The premises include 14. 7 acres of land and 17. 4 acres of land and equipment. Those equipment includes dry dock and dry dock no. 2 which is the Main Attraction or the main key component of the shipyard along with the 17 buildings. Recently the dry dock no. 2 is considered to be the largest dry dock in northern california. It has the capacity of 54,000 tons, but currently our new dry dock in portland, oregon is pushing a challenge because that dry dock has the capacity of 80,000 tons. The tenant as i have indicated before is in Good Standing and providing very Relevant Services to the maritime industry in the field that it provides the pier, alteration, maintenance for those that come and to the bay waters. Currently the tenant generated 54 million and provided employment for over 250 craft persons. Im going to talk on some of the fishers fixtures of shipyard. In the picture in the front of the shipyard you have the crane, the heavy equipment, there are workers on the right i believe providing chips at the dry dock and the cruise ship. That is another picture of a cruise ship on dry dock no. 2. This is a picture of another dry dock. The shipyard currently is facing a number of challenges. We started the conversation about 2 years ago in the sense that on the current lease there is a provision that bae from the port 2 years before the lease was expired to indicate interest in extending the lease. Out of that was the discussion of the challenges facing the shipyard. As indicated before the competition from vigorous to the new dry dock as well as indicating the aging dry dock no. 2. One of the solutions to these challenges was requesting bae when we do go into the new lease to look at bringing on a professional company that will evaluate the condition of the dry dock and make recommendations as to maintain and repair to continue to sustain this leasing capacity because back in 2007, similar it was made through cruises where by 6 million was installed to upgrade the capacity of that dry dock. So we discussed that. Because of if these challenges are not facing before you is a graph of the predicted revenue of bae from operating this chief ship which is indicating that if these measures are not addressed in terms of improving the capacity of this dry dock that bae will be doing that revenue may dip to the point to impact the percentage rent that the port is currently receiving. On the other hand if we are able to intervene, then the revenue will continue its upward trend. In beginning the negotiation with bae since the list is currently is going to expire in 2 years from now in 2017, bae indicated interest in wanting some of the beneficial terms primarily the interest from the port bae and Princess Cruises that is the on going for another 2 years. We discussing this rent as well as the percentages and the need to bring that into the current market condition in the sense that this lease was sent a long time ago and back in 2007 when the fifths amendment was made to the lease at that point. As i have indicated bae is requesting to be able to recoupe the Capital Investment. The proposed Capital Investment is required to allow the shipyard to remain competitive. We are not meeting this lease opportunity for a number of reasons in terms of renewing the lease with bae. One of those reasons is there are a small number of ship yards out there. So we thought there might not be enough shipyard operators for this lease opportunity. We equally do not want to interrupter entertain the interruption that will call in the marketplace in light of competition. Then there is issue of bae successful rejuvination of the shipyard because the previous operator as to my understanding of the shipyard has some difficulty when the business dip because of the take over not too long ago and they have been able to rejuvenate the shipyard and make it more competitive. The port is continuing to have an agreement with princess cruise that is bringing their cruise ship to the shipyard. Those are the reasons we decided that we are recommending to bring forward the bae. The existing beneficial term of the lease include the following. Bae currently has 1. 2 million left in the rent credit that was provided as part of the deal that we have with Princess Cruises. And they have been investing Additional Capital into shipyard that they would like to recoupe. So the indication is that the remaining two 2 years would not be enough for them to recoup what has been invested in addition to that 1. 2 million rent credit. In our presentation to the Port Commission back in november of last year, we indicated that bae is to terminate indicated that it would like to terminate the lease within 5 years of entering into it. In that report to the commission we indicated that in the way for bae to stay within 1012 years. Since the last time we were before the commission we spent roughly 1 month trying to negotiate with bae to convince them to give us that additional 5 years so that we are able to get, to stay for a minimum of 10 years on the premises. The lease currently is for 20 years, however, we are expecting bae to stay for a minimum of 10 years. I will get into details as to the program that we put in to get them to stay for 10 years. The point that im trying to make here is that even though the lease says 20 years because bae is looking for an opportunity to terminate the lease earlier to be able to achieve another 5 years. Instead of 5 years, extend to 10 years. The proposed key terms for the new lease is as follows. The lease is for 20 years with two 25year extension options. Im going to briefly talk about the extent options before the extension could be granted. With a 20year term, which is the basic component of the term, the lease would expire in december of 2035. The base rent is now 1. 2 million. Currently the base rent on that current lease is roughly 1 million and 50,000. This is an increase over the current lease. As i indicated this is terminated in 2025. We have a resident credit which the capped at 200,000 a year. And the portion of the rent credit would expire at the end of the term. Just to provide a little bit of detail of the projected rent, currently under the old lease or the lease that will expire in 2017 is just a base rent with no escalation. The new rent is higher by 14 and includes escalation. In the escalation there is a recess for the existing rent as the existing base rent which on that table we are indicating in year 2010. In the staff report is a detailed table no. 2 that provides details in this financial protection. Other terms of the lease include cost sharing for central dredging, the water portion of the bay that allows the bigger ships to access the shipyard. We are expecting that engineer which is currently going through the Grant Application looking for 10 million in federal grant. After that they will be paying 7. 5 million of that and 2. 5 million will be coming from the port. That 2. 5 million from the port will be shared 50 50 with bae and the port. The provision for the replacement of dry dock no. 2 as i have indicated before, one of the competitive issues for the shipyard was the presence of dry dock no. 2 which is lifting capacity at 54,000 term. Now you have the competitor in the name of vigorous with an 80,000 ton lifting capacity this issue is becoming important to get what i indicated before which may cause the revenue to dip. We put in the lease that between now and the next 10 years both the port and b ae are going to collaborate the funding to replace that dry dock if possible. With the in intention when the lease goes into effect weve the possible solution of the existing dry dock. We equally addresses the issue of the existing side of power assistance. I believe a couple of Commission Meetings there was a discussion about the benefit of the shoreside assistance in terms of reduce pollution and making the air cleaner. In the new lease from the last time we came here in november we missed some Additional Information by requiring that bae would increase utilization of that shoreside system. The reason they have not been able to use the system to the rate we prefer was because the vessels that come have a different hooking mechanism. We encouraged and bae they will invest in looking at more connections to allow other vessels. We presented to you last time because we are trying to recapture what the port and city invested in the system which was i believe 5 million, and at that time, the projection was that if bae is able to charge by each kilowatt hours of power used by the vessels that have worked at the shipyard. That rate will help us recapture that investment. But because the utilization rate is not the level of it used to be, that level of power. The next business term that we are recommending in the lease is that more guarantee for utility cap for all utilities, that includes sewer, gas, Water Utilities including electrical power. Because as you know pier 70 is going through redevelopment and there is a need to upgrade the existing utilities and the utilities that are there until they are upgraded will have to be shared by the tenants. Because of udi in beginning to renovate the historic buildings, we need to move out of building one and two the current electrical power source that powers the shipyard. That power source that is capacity of 12 mega watts. So weve negotiated with bae that we are limiting them to the historic peak utilization that is 6. 5 mega watts. With 5. 5 available of that 6. 5 to the power system and the one mega watts would be for the rest of the shipyard. The remaining 5. 5 would be allocated to odi to allow them to continue to ramp up and put this historic into higher and better use. We equally put in the new lease what we are calling this line require repair and equipment. This extends to go to the existing building which are Port Properties as well as the equipment, the equipment of dry dock, the crane and transformers and all that make the shipyard run. The reason we are putting this line is we want to document the existing conditions of those building and equipment so we have a way to monitor the maintenance and repair that we are asking bae to be doing. So we