Committee recommends SFPUC buy industrial property at Third and Evans for $15 million

The Budget & Finance Committee recommended the Board of Supervisors approve the San Francisco Public Utilities Commission's purchase of two parcels at 1550 Evans Avenue and 330 Newhall Street for $15,000,000.

John Updike, Director of Real Estate, told the committee the property consists of about 4.68 acres and a combined building area of roughly 50,593 square feet, with approximately 32,000 square feet of office space and about 19,000 square feet of secure warehouse space. He said the seller is Third and Evans LLC, controlled by the Morgan family, and that "the negotiated purchase price in the agreement before you today is $15,000,000. The appraised value is $16,000,000," adding the appraisal assumes most value is in the land.

Lydia Ely (sic) and other PUC officials and Michael Carlin, Deputy General Manager for the PUC, said the site would let the SFPUC consolidate collection-system staff, equipment and some project-management functions near the Southeast Water Pollution Control Plant. Carlin said consolidating operations into one complex would increase efficiency and support long-term staffing needs tied to Southeast plant reconstruction.

Budget analyst Mr. Rose presented the financial analysis. He reported the purchase price plus estimated closing costs of $18,179 yields a total estimated outlay of about $15,018,179 and noted the 2012 appraisal at $16,000,000, describing the purchase price as roughly $981,821 below appraisal. The analyst contrasted the estimated net present value (NPV) of continuing current leases (about $8.2 million) with the NPV of purchase and relocation/financing over 30 years (about $18.1 million) and the NPV of central leases over 30 years (about $23.1 million). He concluded the question of buy versus lease is a policy decision but said the purchase appears favorable if the city intends to centralize.

Supervisor discussion focused on the assumptions behind the lease NPV projections and on reusing PUC-vacated sites. Mr. Rose said the NPV comparisons are projections combining leased and city-owned properties and not guarantees of fixed rents for 30 years. Supervisor Jane Kim asked whether sites PUC will vacate (including a Gerald site tied to DPW/fire operations) might be repurposed or generate revenue; staff said reuse options are being discussed with DPW and capital-planning staff and that proposals will be brought to the committee when ready.

There was no public comment on the item. The committee moved the resolution forward as a committee report to the Board of Supervisors' next meeting (taken without objection).