The cost line the Port now carries
The Port of San Francisco put the Teatro ZinZanni hotel's construction cost at $182 million in a staff report dated 10 July 2026. The figure stood at $164 million when the commission approved the development. The report attributes the $18 million difference to labour, construction materials and financing. The difference equals 11 per cent of the earlier figure.
The updated capital stack totals $182.4 million. The report splits the money across five sources.
Five lines make the stack
Helix provides $90.0 million of debt. Commercial Property Assessed Clean Energy financing provides $60.4 million. Limited partner equity provides $16.6 million. Sponsor equity provides $9.9 million. EB-5 private equity through the general partner provides $5.5 million. Debt and C-PACE carry 82.5 per cent of the total. Equity carries the remaining 17.5 per cent.
The lender raised its loan from $60 million to $90 million, an increase of 50 per cent. The report states the increase covers the construction funding gap.
The conditions on the larger loan
The report lists six conditions. Port rents must fall in early lease years and large rent payments must shift to later years. Incentive payments must raise cash flow. Hilton Hotels must guarantee repayment of a portion of the loan. Rent may be deferred when annual hotel gross revenues fall below $60 million, and when cash flow falls short of the senior lender's annual debt service. TZK must add equity.
Hilton has committed to manage and operate the hotel under the NoMad brand. The Port caps at $80 million the tenant equity it will recognise when it calculates the developer's return.
What the room tax pays back
The Hotel Development Incentive Agreement commits up to $38 million in net present value across 20 years. The Port calculates each payment for measurement purposes only, as a percentage of the transient occupancy tax the City actually receives from guest rooms at the new hotel. The $38 million cap equals 20.8 per cent of the $182.4 million in sources.
The source of the money is the City general fund. The report states the Port will seek appropriation each year for the estimated amount, and that it will release a payment only once the appropriation reaches the Port budget. The report excludes the Port's Harbor Fund as a source for any payment.
The design ties the payment to rooms sold. A hotel that fills fewer nights sends the City less tax, so the City pays less.
The rent the hotel must carry
The revised lease lowers early minimum rent. Lease years 1 through 4 carry $0.5 million a year. Year 5 carries $0.6 million. Years 6 and 7 carry $0.7 million. Years 8 through 15 carry a $1 million floor.
Percentage rent falls from a range of 3.5 to 6.5 per cent to a range of 2.0 to 4.5 per cent. Total nominal rent across the term falls from $433 million to $367 million, a reduction of $66 million. At a 6 per cent discount the net present value falls from $54 million to $39 million.
Two deferral triggers open in lease years 8 through 15. A year with annual hotel gross revenues below $60 million lets the tenant defer part of the following year's rent, and the tenant may request that deferral in up to two separate lease years. Cash flow short of the senior lender's annual debt service opens a deferral in up to three separate lease years. Deferred rent accrues simple interest at 5 per cent. Annual minimum rent cannot fall below $700,000 at the commencement date, indexed by CPI.
What the 164 keys have to earn
The hotel will carry 164 rooms, down from the 192 in the earlier plan. The building runs four stories. The project adds a rooftop bar, a ground-level cafe and a public park of about 14,000 square feet.
San Francisco's average nightly rate reads $165 across 3.1 million public rate observations from May 2024 to April 2026, per Engine's market table. The month range runs from $129 in December to $197 in March, a spread of 35 per cent. The city ranks 18 of 50 markets and sits 11 per cent above the $148 median. Engine measures par rates, the cheapest publicly available price at the time of each search.
The construction window
The Port project page carries a five-row schedule. Entitlements and transaction documents ran from 2019 to 2025. The search for financing ran from 2021 to 2026. Construction runs from 2027 to 2028. The grand opening is 2029.
Beyond that window the Port publishes no construction start date and no completion guarantee. The Fourth Amendment requires an updated schedule of performance, and the report names a date to close escrow and a construction start date among its benchmarks. A factsheet updated on 3 August 2026 records the extension of the close of escrow to June 2027.
Where the approvals stand
The Port Commission adopted Resolution 26-39 at its meeting of 14 July 2026. The resolution approves the Fourth Amendment to the Lease Disposition and Development Agreement, the revised lease terms and the Incentive Agreement. It directs staff to forward the lease and the incentive agreement to the Board of Supervisors.
The Board approved the underlying lease on 14 January 2020 under Clerk of the Board File No. 191182. That date sits 2,373 days before the commission vote. The factsheet lists Board approval of the revised terms and the incentive agreement as an outstanding 2026 milestone.
The Fourth Amendment extends the LDDA term by up to nine months in three-month increments. Each increment carries a $25,000 fee. TZK may defer about $471,395 now owed to the Port until the close of escrow or the end of the term.