Committee backs amended lease changes to help San Francisco Wholesale Produce Market secure financing

The Budget & Finance Committee on Sept. 13 voted to forward an amended resolution that restates and modifies the 2013 lease for the San Francisco Wholesale Produce Market in Bayview Hunters Point to help the market obtain conventional mortgage financing and to adjust construction and roadway improvement milestones.

City staff from the Office of Economic and Workforce Development and the Real Estate Division described the produce market as a 23-acre campus that houses almost 30 small businesses and supports roughly 700 jobs. John Lau (OEWD) told the committee the market operates as a nonprofit lessee under a reinvestment plan that depends on net revenues deposited into a development fund; the 2013 lease structure, he said, constrains the market's ability to obtain private loans because the campus is a single leasehold and lenders need parcel-specific collateral.

The amendments before the committee do two principal things: they move back and rework scheduled performance deadlines tied to surrounding roadway improvements (BLA estimated the price tag of some roadway work at roughly $18M) so the market is not forced to build tens of millions of dollars in off-site infrastructure before securing financing; and they permit the market to create separate parcel leases for individual buildings so lenders could take collateral on discrete parcels instead of the entire campus.

Real estate staff and market representatives said the changes are intended to enable the market to finance the next warehouse (estimated under $60M for the first phase) and continue the incremental reinvestment plan. Andrico Penick, Director of Real Estate, described safeguards to preserve oversight: the director must consult the Controller and City Attorney before administratively approving any separate parcel lease, provide 30 days'prior written notice to the Board, and any supervisor may request a hearing within 30 days; leases that materially deviate from the pre-approved form would still return to the Board.

Budget and Legislative Analyst (BLA) testimony emphasized caution. The BLA recommended that separate parcel leases should come before the Board because the project's financing plan remains uncertain, costs have escalated (a paper estimate cited growth from roughly $100M to $400M), and the project has broad community impacts. Several supervisors echoed oversight concerns and noted the shift of off-site roadway costs to the city’s capital program.

Community commenters and market stakeholders urged support. Michael Janus, the market's general manager, merchants and community nonprofits described the market's role in food recovery and neighborhood employment and urged timely action to enable financing. Deputy City Attorney Anne Pearson offered a non-substantive amendment to the resolution that clarifies separate parcel leases are subject to prior Board approval where required by law; the committee adopted that amendment and voted to forward the amended resolution to the full Board with a positive recommendation.

Next steps: Staff said the market will return to the Board next year with final map and parcelization actions and that the city will continue to seek state and regional funds to help pay for roadway work. The committee's action allows the market to pursue financing options while preserving specified notice and consultation procedures.