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SAN FRANCISCO-The Port of San Francisco and locally based Shorenstein Realty Services are discussing a partnership in order to develop a mixed-use development on 20 acres that includes unstable piers at the foot of Telegraph Hill. Preliminary plans call for the Port to put up $60 million of the estimated $145 million cost to repair Piers 27-31. The Port would sell bonds to generate the funds and then repay bondholders with the increased property tax revenue from the new development.

“This is a mixed-use development designed to provide various recreational uses for the citizens of San Francisco and in which the office component is the economic engine for the entire project,” Tom Hart of Shorenstein tells GlobeSt.com.The private side of the proposed office, retail and entertainment development is a joint venture of Shorenstein and Farrallon Capital Management. In August, Shorenstein officials told Port Commissioners that the site would need to hold 400,000 sf of office space–double a previous estimate–in order to be financially feasible. Under the proposal, Shorenstein and San Francisco-based Farrallon would relocate their headquarters to the development.

Shorenstein and Farrallon acquired the development rights for the site in March from Virginia-based shopping mall developer Mills Corp. The deal reportedly includes several million dollars in future payments to Mills as certain development milestones are achieved. Mills reportedly spent $30 million in feasibility studies and marketing before abandoning its plans for the site.

Under the agreement with Shorenstein and Farrallon, the Port would receive $42 million in the first 20 years and $417 million over the 66-year life of the agreement, with further contingent income in participation rent a possibility. The Port is expected to endorse the deal in mid-November and the San Francisco Board of Supervisors is expected to do the same in January. The development is slated for completion in phases in 2010 and 2011.

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