OCII conditionally approves Transbay option amendment to enable $171 million bridge loan for Transbay Transit Center

The Office of Community Investment and Infrastructure on Wednesday conditionally authorized a first amendment to the Transbay option agreement and related subordination agreements to facilitate a $171,000,000 bridge loan between the Transbay Joint Powers Authority and Goldman Sachs Bank USA. The vote passed 3–0 with one commissioner absent; staff and presenters said the amendment is subject to later approvals by the Board of Supervisors, the Oversight Board and the California Department of Finance.

Courtney Pash, acting project manager for the Transbay Redevelopment Project Area, briefed commissioners on the project background and financing need. Pash said the Transbay plan covers roughly 40 acres of downtown San Francisco, with development goals that include about 3,400 new residential units (1,200 affordable) and roughly 3,000,000 square feet of commercial space. To complete the Transbay Transit Center, the TJPA took a Transportation Infrastructure Finance and Innovation Act (TIFIA) loan; Pash said the TJPA has not yet satisfied all TIFIA disbursement conditions, which include generating approximately $429,000,000 in gross sales revenues and forming a Transbay Community Facilities District.

Because TIFIA conditions will not be met before construction requires interim cash, the TJPA competitively sought interim financing. Brent Jenkins, financial advisor to the TJPA, said Goldman Sachs— direct loan was selected as the most certain financing option after a procurement that considered direct loans, capital markets and private placements. Jenkins described the bridge loan as a four-year facility with lump-sum repayment at maturity that would be taken out by TIFIA proceeds when those conditions are met. He said interest will be set using three-month LIBOR plus a credit spread (the first-year spread presented was 225 basis points), and that interest will be capitalized initially; a hedging agreement or interest-rate cap will be required as part of the structure.

Pash and TJPA counsel explained additional security and protections built into the amendment: a deed of trust on Parcel F, recordable negative covenants on parcels O, O' and O'' (the temporary terminal site), a lien-release price to permit OCII to exercise its option while the bridge loan remains outstanding, and a subordination provision that would bind any future acquirer of Block 4 to OCII—s 35% affordable housing requirement for the Transbay project area. Pash emphasized that under redevelopment dissolution law the option agreement is an enforceable obligation and that any amendment must be reviewed by the Oversight Board and Department of Finance and approved by the Board of Supervisors.

Deborah Miller, TJPA general counsel, said the negotiated terms balance the TJPA—s need for interim financing with protections for OCII—s affordable housing objectives. "I think that we've struck a balance that allows the TJPA to move forward with financing and an interim basis, as needed in order to allow construction to move forward as planned while protecting the agency's interest in affordable housing and the future development of Parcel F And Block 4," Miller said. Commissioners asked whether OCII and the City Attorney—s office had participated in due diligence; staff said interim OCII general counsel and the City Attorney's office (represented by Carol Wong on the City side) had been closely involved and that the documents had undergone a detailed review.

The commission approved the first amendment by voice and roll-call: Commissioner Mondehar voted yes, Commissioner Singh voted yes, Commissioner Bustos was absent, and Chair Rosales voted yes. Staff said final execution remains contingent on the other required governmental approvals and the completion of any final edits to the transaction documents.

The resolution was adopted conditionally; staff said the subordinations will be released when the bridge loan is repaid and that the amendment also specifies that any party acquiring Block 4 through a deed of trust will be subject to OCII—s Block 4 affordable housing requirement (35%).