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Kilroy commits to new $80 million S.F. Flower Mart for vendors, but opposition persists

Kilroy Realty Corp. ended its silence about Flower Mart plans Wednesday by promising a new underground market for vendors, who likely won't have to move away while it builds towers for technology companies.

The developers and the California Flower Market, which will operate the new Flower Mart, announced that all flower tenants will be offered five-year leases at current rents. The "goal" is to keep current tenants on site or next door as construction occurs, likely from 2016 to 2018, according to a list of commitments to the Flower Mart tenants.

"We're going to work with the tenants to figure out the best way to do that. The important thing we want to get across is we want to make sure the tenants have the minimum amount of disruption. Kilroy will pay for moving costs on or off-site during construction," Mike Grisso, senior vice president at Kilroy, told the Business Times.

But despite Kilroy's pledges, opposition to the project, led by former Supervisor Aaron Peskin and former Mayor Art Agnos, remained Wednesday. Both have said they will try to block the project at the ballot box.

"The vendors of this institution don't want to be shoved into the basement," Peskin said Wednesday, and vowed to keep battling the project. He crashed the California Flower Market's press conference, and said he will press Kilroy officials to make its commitments legally binding.

The announcement comes as Kilroy closes on the California Flower Market's piece of the site. Kilroy already bought the portion owned by the San Francisco Flower Growers' Association for $27 million in October. There is one other loose end to watch: Kilroy is in talks with SKS to use its adjacent site to hold flower vendors during construction, said Steve Oku, president of the California Flower Market.

Kilroy's commitments will come at a hefty cost. Grisso said the developer is planning to pay $80 million to build the new Flower Mart alone. (That's not counting hundreds of millions more it will pay to build the towers, which will gain tremendous value once the site is zoned for tall office buildings.)

The new Flower Mart will be slightly downsized, going from 135,000 square feet to 115,000 square feet, with 10,000 square feet of retail. The underground Flower Mart will have a 24-foot-high ceiling, roof skylight and mezzanine offices. A retail space at a plaza below the towers will also have room for retail flower vendors, according to renderings released Wednesday. Bob Otsuka, executive vice president and general manager of the California Flower Mart, said the upgrades are much-needed.

"With an updated, more efficient facility, we will be able to stay competitive in our conveniently-located market and service our customer base," he said.

Oku said Wednesday that the rent guarantees were crucial, and that a new site would give flower sellers a much-needed loading dock and extra parking. "Believe me, our rents are very cheap. To guarantee our tenants those rents is unbelievable," he said.

The wholesale flower vendors within the broader Flower Mart, who sell everything from orchids to garland and wreaths, haven't all been on board since Kilroy got involved.

Some have said they are worried that higher rents or temporary displacement during construction will shove them out of business.

Jeff Iwamasa, who has sold flowers at J&M Wholesale Florists for more than 30 years, said he has mixed feelings about Kilroy's commitments.

"There aren't guarantees on anything. That's the scary part. A month out of business and a lot of us are out of here. I'll have to look for another job," Iwamasa said. "But what's going to happen you never know. The pictures of the new market actually look really nice. If we got new leases it'd help me a lot."

Grisso said the developer will continue to work with flower vendors as construction nears. Kilroy will need to make sure vendors are on board with plans for loading, refrigeration, parking design.

"I think we're doing everything the critics have been asking us to do," Grisso said. "The commitments we've made should give everyone confidence the Flower Mart will be at 6th and Brannan. It'll be an updated facility, which is what the Flower Mart needs to stay competitive."

The fight is also dripping with politics, with Agnos and Peskin going after Kilroy's ties to Mayor Ed Lee. An SF Weekly story that showed the city and the developer working together on a release didn't help ease things for Kilroy. Agnos called Kilroy (accurately, but with contempt) a "Los Angeles-based, publicly-traded developer" in an interview with the Business Times.

A ballot measure could succeed, of course, in blocking the development. More than three-quarters of people in a The Tenants and Owners Development Co.-commissioned poll said saving the Flower Mart was "very important" or "somewhat important."

Kilroy expects to close the purchase of the rest of the Flower Mart site this week, but can't go forward with plans until the city finishes the Central SoMa rezoning process to allow office usage and looser height limits on the property.

That rezoning will also remake that part of SoMa known more for warehouses and tech hubs. Mike Sanford, Kilroy Realty's executive vice president for Northern California, said in a release the two uses — office and industrial — don't have to be at odds.

The Kilroy-owned site can be a '"a real destination ... where flower vendors, retail tenants, office users and visitors mingle together," he said.

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