Spurred by a 1999 ballot initiative to find new revenue sources, San Francisco's Municipal Transportation Agency is examining some of its real estate holdings with an eye toward development opportunities. Muni has a development agreement with a hotel builder for one piece of prime property near the Ferry Building. Other properties could be developed with housing, stores and offices � possibly above ground-level transit facilities. In 2001, the Muni Board of Director approved an updated Short-Range Transit Plan, which includes a section on asset development. The plan identifies six sites ranging from less than 1 acre to 11 acres for potential development. Implementation has been too slow for some of Muni's critics. But most people acknowledge the process requires new thinking by Muni staff members and leaders, who have never before tried to capitalize on the transit system's real estate assets. "We decided to go ahead when we received more leeway with Proposition E," said Kerstin Magary, Muni senior project manager. The proposition made Muni a more independent agency by changing the Board of Directors selection process and mandating a number of performance standards for the new transit agency. "We need to seek new sources of revenue," Magary said "Land values and land uses in certain neighborhoods have changed over time," she said. So the agency is taking "a citywide look at how Muni should operate in the 21st century." And that means Muni's reliance on 100-year-old facilities that have been repeatedly retrofitted as transit technology evolved may need to change. The project farthest along is a proposed 200-room hotel at the foot of Mission Street. The 0.72-acre site has served as a terminal and layover site for buses and trolleys. Muni plans to relocate the buses and trolleys one to four blocks away and develop the prime Mission Street real estate, which is only one block from the waterfront and Justin Herman Plaza. Muni has signed a development and lease agreement with Emerald Fund Inc., a San Francisco developer. Construction, now scheduled to begin later this year, was delayed by the post-9/11 downturn in the San Francisco hotel trade, Magary said. The hotel will serve as a demonstration project and could prove a great deal about Muni's capabilities, said James Chappell, president of San Francisco Planning and Urban Research Association (SPUR) and co-author of Measure E. Advancing the hotel project "took a lot of work to convince some people at Muni to do business a different way, and to convince the public, which in San Francisco tends to be very anti-development," Chappell said. Muni expects to receive about $300 million during the 65-year lease with Emerald Fund and a hotel operator. After the lease expires, Muni will own the hotel outright. Another Muni site with obvious potential is at Geary Boulevard and Presidio Avenue, near the University of San Francisco campus. According to the Short-Range Transit Plan, the 5.4-acre site "commands a stunning view of downtown to the east; affords a short, convenient downtown commute along Geary Boulevard; and is surrounded by stable, and to a large extent highly desirable, residential neighborhoods, and considerable retail uses, as well." Muni uses the site to store, maintain and dispatch about 170 trolleys, so it cannot give up the land. (Muni does plan to move out of an office building there in a few years.) Muni is conducting a site needs assessment and will issue a request for qualifications from developers, Magary said. Development could involve building residential units on a platform above the trolley facilities. The Muni office building could be refurbished or replaced with a larger office or apartment building. While developers salivate over the Presidio Division site, Muni might have to work harder to drum up interest in property in the south part of town, near City College of San Francisco. One site is the 1.4-acre Phelan Loop, an off-street terminal for trolleys and buses that serve City College. Interstate 280 separates the Phelan Loop from the other site � 11 acres next to a BART station where Muni has its light rail yard and keeps a fleet of historic streetcars. Exactly what the sites might become is partly tied up in a city planning effort called Better Neighborhoods 2002, which involves preparation of community plans for three neighborhoods. The Muni properties are in the Balboa Park Station Area Plan, a draft of which is due within two months. "Transit-based housing is absolutely the reason we are doing this," said Ken Rich, an associate planner in charge of the Balboa Park plan. Besides Muni, BART, Caltrans and the city's Water Department own property in the neighborhood, including nearly all of the "opportunity sites," Rich said. He foresees development of about 500 housing units on several sites within one-half mile of the BART station. The community plan, however, will not address in detail the 25-acre site of the long-proposed Balboa Reservoir � which might be the largest chunk of undeveloped real estate in the city � because fights over use of the reservoir site could bog down the community planning effort, Rich said. Muni is considering development on two-thirds of the Phelan Loop, leaving the rest as a green space and grand entrance to the neighborhood, said Jim Nelson, of Muni's real estate office. "The Phelan Loop is ugly, it's windswept, it's barren," Nelson said. "We're not in this one to make a huge profit. We're in it to be a good neighbor and to make a transit hub that works." Nelson sees tremendous redevelopment potential for parts of the rail yard site. "What it is now is a freeway offramp, and a bunch of people getting on and off buses and trains. � There clearly is a market for some level of retail activity, bolstered by residential above the retail area," he said. Chappell, of SPUR, said the Balboa Park plan is really a long-range proposal because it will require substantial public investment. He would like to see the city more strongly consider "platform" development above those transit facilities. But the city's Rich is not convinced. "The land values would have to be a lot higher than they are now, or we would need a lot more density, like a 20-story structure, before it would be worth it," he said. Elsewhere in the city, Muni officials are reviewing potential uses for a 2.6-acre bus yard near Fisherman's Wharf that Muni plans to vacate in 2004. However, preliminary plans for a parking garage and housing development at a trolley yard in the Potrero District have been abandoned for now because the dot-com crash changed the neighborhood's dynamics, Muni's Magary said. Contacts: Kerstin Magary, San Francisco Municipal Transit Agency, (415) 554-1789. Jim Nelson, San Francisco Muni, (415) 934-3934. Ken Rich, San Francisco Planning Department, (415) 558-6345. James Chappell, San Francisco Planning and Urban Research Association, (415) 781-8726.