October 15, 2010

Setting The Record Straight

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 I must apologize to anyone who may have read my last post.

In that post, I said the free 75-year leases being offered to Larry Ellison by the city of San Francisco in return for bringing America's Cup 34 to the city were on a few acres of waterfront property.

I was wrong. The size of the free land grab being offered to Larry is nothing like a few acres.

A quick consultation with Google maps showed me that my guess was so far off that I must set the record straight. The properties are actually much closer to 25 acres.

Now, that may not seem very big if you're in the middle of Wyoming, but in San Francisco, most people don't lease their waterfront property by the acre, or by the 25 acres. They're usually racking their brains figuring out how to pay for a few hundred square feet.

I was trying to get my head around just what 25 acres might look like in an urban setting and how much an enterprising fellow like Larry might stand to make from such nifty plots of land.

Here's an aerial photo of piers 30-32, one of three properties included in the lease:



With nothing to establish scale, it's hard to get a feel for the size of this tidy parcel. So here, at the same scale, is a similarly-sized plot occupied by one of Larry's prospective neighbors:



The roundish thing with the green middle part is where a local ball club hosts regularly scheduled parties with other members of the National League. Larry would be just two doors away, so that might add something to the value of his modest lot. He needs to consider that, because the only other thing adjoining his lot, on three sides, is San Francisco Bay. And you know how tiresome it can get having to look at water all day long. And you can see that if Larry wanted to buy a ball club of his own, he'd have plenty of room to build them one of those roundish things with the green middle. He's got about as much space as his neighbor.

And if he wants to invite some friends over for the day, there's a convenient two-acre parking lot across the street that's also included in the deal. You know how some offstreet parking can improve a property's value.

Of course the pier 30-32 site is the smaller of the two main parcels.

Here is the more comfortably-sized pier 50:


Again, from this aerial shot, it's hard to judge scale, so here's a helpful hint. Those two long gray things on the right are container ships. See:



This would be a great spot for Larry to tie up a few of his boats. There's even enough space so that he could leave his dinghy in the water, too. You know what a pain it can be to have to haul your dinghy up on deck after every sail.

As I hinted, I was starting to wonder just what Larry might collect in rent on these parcels if he decided to sublet. He already has a ramshackle place with a view of the ocean in Newport, Rhode Island. He might want to just stay there.

I figured Larry is a pretty busy guy. He may not want to bother building anything on the piers. After the Cup is over, he might just want to rent out the space for parking. This would probably be the very least amount of income he could get out of these piers.

I checked around and it turns out that people are paying around $250 per month for someplace to park their cars near the water. In San Francisco, it must be a prestige thing to have a parking space near the water. Here's a place in the snooty Marina district where you can park your car near the water for $250 per month:



And then, I had to do some math. A typical parking place is about 10 feet by 20 feet, or 200 square feet. Since there are 43,560 square feet in an acre, you could park about 200 cars in an acre, leaving some spare room to maneuver. In 25 acres, you could park 5000 cars. And at $250 per car, that's $1,250,000 per month, or $15 million per year. After 66 years, that comes out to $990 million, assuming the price of parking in San Francisco doesn't go up.

But, it always does.

And Larry is a pretty smart guy. He could probably figure out some use for his real estate windfall that would bring in more than a bunch of parking lots would.

So, I think it's pretty safe to say that this little deal will be worth over $1 billion to Larry if he plays his cards right.

And he usually does.

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15 comments:

  1. Look on the bright side. Maybe some city in Europe will offer Larry an even sweeter deal and he will decide to host the America's Cup there. Then San Francisco can keep their decaying, decrepit piers as a permanent memorial to what might have been.

    ReplyDelete
  2. Interesting: I was hoping someone would do that sort of math.

    Its beginning to sound as if the America's Cup is ending up like the Eurovision Song contest: fixed result and no country wants to win as it costs so much to host.

    ReplyDelete
  3. It does sound like the America's cup is not about sailing any more. In Auckland New Zealand in 1998 or 9 you should have seen the mad rush on real estate!

    ReplyDelete
  4. We're not giving up yet.

    We just need to come up with a quick $170 million to fix up the piers so that they're sound enough for Larry to build on.

    What we need is a good poster that we can plaster on telephone poles throughout the bay area to help drum up contributions. I think a sad-eyed, weepy photo of Larry in a dirty tee shirt, staring into the camera, looking kinda forlorn would work.

    The copy could say something like:

    Won't you please help Larry?



    ReplyDelete
  5. With all the things wrong in the world your argument here is pretty lame. You complain that LE is receiving more benefit than he should for bringing the AC to SF by throwing around bizarre numbers regarding parking space revenue. I rather doubt that parking on a large pier South of the Bay Bridge has the same value as parking in the middle of the Marina district, but really this is beside the point. If you want to be liberally minded, good! But let's come up with a better argument. How about: Why doesn't the deal SF is striking with LE mandate that LE creates a hundred sailing scholarships for disadvantaged city youth, so they can experience the benefits and good life lessons sports can give them? Why not mandate that LE assist in creating HS sailing teams for rough inner city high schools? The costs involved in providing a few F.J.s for kids and some coaching pales in comparison with the dollar amounts required to create an Americas Cup village on crumbling piers... and heck, he's got the water access!

    ReplyDelete
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  8. Andrew, I basically agree with you.

    Once again, a feeble attempt at irony may have failed to make my point.

    Basically, I'm too lazy to do enough serious research to find out what the city's offer may actually be worth to a smart investor like Larry. I chose to use one of the most ridiculous arguments I could think of to show just how much money was potentially involved here.

    I think many people may not realize that these crumbling piers, once repaired, will be worth hundreds of millions of dollars over a long period and that that's the kind of money that seems to be necessary today to attract an event like the America's Cup.

    I think San Francisco realized how the game is now played and that love of the sport of sailing and pride in one's home town no longer count for much in that game (if they ever did).

    I can appreciate how a smart businessman like Larry would want to recover some of the prodigious expenses involved in funding a modern America's Cup campaign. But this particular 'sweetening' of the pot seems absurd by any standard I can imagine.

    Larry's camp has made some noise about incorporating a 'Youth America’s Cup' into the plan 'to provide young sailors a pathway to the America’s Cup' but I can't find too much detail about that and, as that series would be sailed on 45-foot boats, I can't see it doing too much to encourage kids in Optimists and FJ's.

    I guess the America's Cup has never had much to do with grass roots sailing.

    ReplyDelete
  9. prahalad, thanks for stopping by and joining our discussion of AC 34.

    I sure am fed up with the recession, but am encouraged that it doesn't seem to be having much effect on the folks who sail in the America's Cup.

    I'll be sure to e-mail you so that you can inundate me with tons of spam like this in the weeks and months ahead.

    And, thanks for posting twice.

    ReplyDelete
  10. Fine point: Of course, you would need to make a moderate adjustment in your parking lot calculation since the number of cars parkable per acre is not the total square footage divided by the square footage per space, but rather you have to include all the space for driveways, extra space for requisite handicap spots, fencing, fire hydrants, safety barriers, etc. Probably you'd have to allow something more like 500 sq. ft. per vehicle.

    I'm sure the supervisors have their eye enough on the ball to have some rough idea of what San Francisco can get on its end of the deal.

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