Questions are flying about the San Francisco Municipal Transportation Agency’s costly proposed lease of a 13-acre site for auto towing.
Curious timing and questionable terms and costs surrounding a proposed 20-year contract between the agency and the real estate firm Prologis prompted the Board of Supervisors Budget and Finance Committee on Wednesday to put the brakes on the deal, which took 14 months to negotiate.
“I don’t believe that we should move and move into something that is essentially a bad deal,” Supervisor David Campos said.
Planned redevelopment is forcing the SFMTA to move its existing tow operation on Pier 70, operated under contract by AutoReturn. Agency officials say their best option is a 13-acre Prologis parcel at 2650 Bayshore Blvd. in Daly City. The company purchased the site for $21 million in July 2011.
Supervisors were not happy to learn from Budget Analyst Harvey Rose that while the agency had been looking for an alternative site for several years and had considered the Daly City site, Prologis was able to swoop in and buy the parcel out from underneath it, forcing The City into this more costly deal.
The 20-year lease would cost the agency $71 million. Terms include two five-year options, 3 percent cost-of-living adjustments and 4 percent increases every five years. The annual base rent of $2.4 million is $690,070 more than the agency’s current rent at Pier 70 and will come out of its operating expenses.
“Prologis is going to make a lot of money on this deal,” said Rose, who questioned its soundness.
SFMTA Transportation Director Ed Reiskin defended the deal and said the agency needs the site to meet its real estate vision and operational needs.
“I do believe it is a good deal, at least a reasonable deal for the SFMTA,” Reiskin said.
Campos said he could not support the proposal and suggested Prologis renegotiate certain terms, such as having a termination option earlier than the proposed 10th year.
“We’re not interested in renegotiating this lease,” Prologis Vice President of Investments Dan Letter responded. Letter said the property was never on the market, but that he “talked this owner into selling to us.”
Prologis might be little-known to most San Franciscans, but records show that it has become an active campaign contributor since its purchase. Contributions filed with the Ethics Commission show that Prologis CEO Hamid Moghadam contributed $5,000 in November 2011 to San Franciscans for Jobs and Good Government, an independent expenditure committee in support of Ed Lee’s mayoral bid and backed by Silicon Valley investor Ron Conway. Moghadam also gave $500 to Lee’s mayoral campaign. A Prologis employee also contributed $250 to Lee’s campaign.