Committee backs lease amendment for 350 Rhode Island that swaps Prop 13 protection for $2.85 million credit

The San Francisco Budget & Finance Committee on Oct. 16 recommended that the Board of Supervisors approve a first amendment to the city’s lease for 350 Rhode Island Street, the site to which the district attorney’s office was relocated under an earlier lease.

Andrico Penick, director of real estate, told the committee the landlord is seeking to “buy out” the city’s Prop 13 pass‑through protection. Under the proposed amendment the landlord would provide a fixed rent credit of $2,850,000 to the city in exchange for removing a lease clause that would otherwise protect the city from property tax pass‑throughs if the property were reassessed after a sale. Penick said the $2,850,000 figure was negotiated based on an estimated sale price of about $134,000,000 and an anticipated tax pass‑through of roughly $55,302 per month; the credit would be provided to the city over the next two fiscal years.

Nick Menard of the Budget and Legislative Analyst’s office reviewed the updated figure and said the revised legislation makes the $2,850,000 payment fixed “regardless of what the property tax increase actually is.” The BLA report (as explained in committee) compared the amendment to the original $2,600,000 figure and continued to recommend approval given the increased amount.

No members of the public offered comment. Chair Sandra Lee Feuer moved to accept an amendment presented by Nouriel and to forward the resolution to the full Board with a positive recommendation; the committee approved the motion without objection.

Next steps: The item will appear on the Oct. 22 Board of Supervisors agenda for final consideration.