SAN FRANCISCO (Reuters) - A company owned by billionaire Larry Ellison that is hosting the 2013 America’s Cup sailing race has cut back plans for developing the San Francisco waterfront, citing financial risks.
Catamarans 40 meters (131 feet) high will dash across San Francisco Bay next year in the 34th America’s Cup event, although city hall has not signed off on final terms of the deal with the group led by Ellison. The team run by the chief executive of Oracle Corp, the world’s No. 3 software maker, won the last race four years ago and now is defending the Cup, first awarded in 1851.
Ellison’s America’s Cup Event Authority decided over the weekend to drop plans worth about $90 million to renovate and develop a large pier on the bay within walking distance of the race launch.
Racing teams instead will set up shop at a pier four miles from the starting line.
The decision came after a February city analyst report estimated hosting the event would cost $111 million, double initial projections. The city would pay back costs to Ellison’s group over decades and give up property for development.
Although both sides expected San Francisco supervisors would approve the deal in a vote originally set for Tuesday, the details of the pier development had raised opposition, as well as risks for Ellison’s group, and construction was behind schedule.
“It became quite sobering, really. We were going to spend upwards of $80 million pre-event and $30 million after the event, and really we were starting with our backs to the wall regarding time, as well,” said Stephen Barclay, a director of the America’s Cup Event Authority, Ellison’s company. He and the city decided, “Let’s look for our Plan B,” he said.
That plan will only cost $16 million to $18 million, he estimated.
The city was taken by surprise by the decision. Mayor Ed Lee had planned a Monday event to show off the now-scrapped project. Instead he announced the end of the development of the pier and said he hoped to “entice private investors to come in and make sure that we can repair some very valuable parts of our pier.”
A chief critic of the deal, former San Francisco Board of Supervisors President Aaron Peskin, hailed the decision, though. “They ended up with something that is quite good for both parties - a boat race which is not a real estate deal.”
San Francisco has greeted the America’s Cup enthusiastically, anticipating hundreds of millions of tourist dollars splashing around the city, but there has been robust debate about whether the Ellison race will be the magnet for jobs and tourists planners had predicted.
Only four teams, building two boats each, including Ellison’s Team Oracle, have so far signed up to race next year.
The deadline is June 1 and Barclay said that teams that built only one boat likely would take the strategy of waiting until the last minute to enter. He predicted two to four more teams, including one from Asia, would join the American defender and challengers from Sweden, New Zealand and Italy.
Ellison’s group aims to broaden America’s Cup’s profile with more races and more access to the boats. The main event will be held near shore in San Francisco in 2013 and television will bring viewers close in, capturing the drama of races which is lost from afar, they hope.
Reporting By Peter Henderson; Editing by Eric Walsh