Supervisors pause vote on SFMTA lease for 2650 Bayshore Boulevard after cost and buy‑vs‑lease concerns

The Board of Supervisors Budget & Finance Committee on Wednesday held action for one week on a proposed 20‑year lease of 2650 Bayshore Boulevard, a roughly 12.7‑acre, 255,000‑square‑foot site in Daly City that the San Francisco Municipal Transportation Agency plans to use for its towed vehicle operations, a video shop and training facilities.

Supervisor Kim moved to continue the item to allow SFMTA to supply the net present value of the lease, portions of the agency—s real estate master plan and additional lease comparables; the motion passed without objection. The SFMTA had asked the committee to approve initial annual base rent of $2,449,642 and two five‑year extension options.

SFMTA staff told the committee the lease is central to a larger real‑estate vision intended to address aging and dispersed facilities and to accommodate forecast growth in the fleet (about a 20% increase, from roughly 1,000 to 1,200 vehicles). Kirsten McGarry, senior manager for SFMTA real estate, said the agency negotiated the deal over 14 months and secured a right of first negotiation to buy the property before the 20‑year term ends.

The budget analyst said the new lease would raise rent and related costs by more than 39%, or about $690,070 in the first year, moving annual costs from roughly $1.8 million at Pier 70 to about $2.5 million at Daly City. The analyst also noted the proposed lease carries 3% annual increases plus an additional 4% step increase every five years and estimated a 20‑year rental cost of about $70.2 million. The analyst recommended that SFMTA report back publicly on the real‑estate vision plan and avoid financing Phase‑2 tenant improvements through landlord loans at high interest rates.

SFMTA acknowledged the higher lease cost but said Pier 70—s physical conditions (including flooding and inadequate employee facilities) make relocation necessary and that the lease was independently appraised as fair market value. Agency staff also said they have limited ability to move quickly enough to close purchases in competitive markets and argued that comparable alternative sites are scarce in the city and on the Peninsula.

Prologis, the property's buyer, declined to renegotiate the terms when asked by supervisors. Dan Letter of Prologis said the company moved quickly to acquire the property and incurred carrying costs; he urged the city to consider net present value comparisons rather than raw nominal totals.

Public commenters, including Auto Return representatives, emphasized employee and public health and safety concerns at Pier 70, noting a lack of running water and inadequate facilities for workers and citizens who retrieve vehicles.

The committee asked SFMTA to provide the NPV analysis, specific elements of the draft real‑estate master plan that assume inclusion of the Bayshore lease, and additional documentation about terminated or closed leases and sublease options. The item will return to the committee next week for further deliberation.

Final disposition: continued for one week; no final vote on the lease was taken.