From: Oz Erickson <oz@emeraldfund.com>Date: Sat, Aug 15, 2015 at 4:00 PM

Dear Friends and Fellow Real Estate Professionals,

When the Mission Moratorium was originally proposed, I didn't really care. Two non-San Francisco developers were getting hit hard, but my projects weren't in the Mission, and neither developer was a friend of mine. I didn't wish them harm, but I simply didn't care. I was focusing all my efforts initially on designing the $310 million housing bond (at least 60 negotiating meetings- ugh!) and subsequently raising money to get it passed. Most of you have been asked to contribute to this effort. The return of Prop. K, a complete disaster for the City, will stop development in the City as we know it, and that return has been promised if we don't get the bond passed. Hence, my focus on the bond, and hence, the need for all of our money.

So why has the Mission Moratorium been lately affecting my sleep? In real life, it is not the MISSION Moratorium that is affecting me at all. Rather, it is the incipient movements in the Fillmore, in Potrero Hill, and in SOMA. Like a cancer the moratorium movement is spreading. Just yesterday I talked with a major local politician. I asked him what he thought of the moratorium. He said he hadn't really thought about it, but suddenly he paused and basically said, "Hmmm, if that concept were applied to the west side of town, it would certainly stop development and we wouldn't have all these individual fights." Mind you, he wasn't supporting a moratorium, he was just noting how easy it would make life.

In regard to our big Mission developers, while they aren't friends of mine, I am starting to feel a little like Pastor Niemoller in Nazi Germany. You are all probably familiar with his famous words. "First they came for the Socialists, and I did not speak out- because I was not a Socialist. Then they came for the Trade Unionists, and I did not speak out- because I was not a Trade Unionist. Then, they came for the Jews, and I did not speak out- because I was not a Jew. Then, they came for me and there was no one left to speak for me."

Hyperbolic for me to bring up Niemoller, but if we let Maximus and Podell go down in flames even if they were in part responsible for the mess, we jeopardize development throughout the city. Never forget 8 Washington and the subsequent down-zoning disaster that was imposed on all Port properties. The mood against construction is getting hysterical. Basic supply and demand laws are being thrown out the window. The logic of how a moratorium provides more affordable housing is beyond me, but that position is being seriously advanced by important politicians. You drive around town now, and the construction delays are deadly. Try going down Fremont past Jay Paul and Salesforce. Everybody (including my own wife) hates the traffic and would do almost anything to stop it, including throwing out basic economics.

When all of us support the passage of Prop. A, we are on the side of the angels. Prop. A has to win. That bond money truly provides homes for those that need it most, and we in

the real estate community made a formal commitment to get the bond passed to avoid the horrors of Prop. K as originally designed. But now, compounding our problems, this Mission moratorium is rearing its ugly head. If it wins, there is no question that other neighborhoods will push hard to enact their own moratoria. We all know that the solution to the affordable housing crisis is not to stop housing but to build more housing. Moratoria will simply exacerbate the existing rental situation which in turn will lead to higher rents which will ultimately cause the move-out of San Francisco companies, and the definite possibility of the extension of rent-control to post-1978 buildings. A very, very smart politician, Aaron Peskin, indeed is formally advocating such a policy. I enclose a recent interview with him.

So, folks, what are we to do? No one likes giving money to correct a mess that they had no responsibility in creating, but if we don't help and don't help on a uniform, industry-wide basis, we could get seriously injured. For starters as each of our individual projects go through the regulatory approval grinder, there will be passionate cries for 33% affordability. Sounds great, doesn't it? Just one small problem exists: 33% affordability at 56% of AMI is economically impossible to build. Affordability requirements which pick us off individually are just one way to stop the provision of housing. New moratoria are even better. "We'll study the problem, come up with a good solution." (Meanwhile all construction ends, and there is no new housing at all). Without re-development and without in-lieu fees paid to MOH as market-rate projects grind to a halt, how does even affordable housing get built?

So, folks, I am feeling a little bit like Benjamin Franklin when he signed the Declaration of Independence. "If we do not hang together, then we shall surely hang separately." We at Emerald don't like the way things are going and feel strongly that a unified message should go out openly and publicly from our industry. "We support affordable housing, and we are backing Prop. A to the best of our ability. At the same time, we strongly oppose moratoria that stop the delivery of new market-rate housing and indeed cripple the provision of affordable housing."Let me know what you think and what you want to do. My personal feeling is each of us should contribute something to fight Prop. I. If individually we threw in $10k to $20k, and if Maximus and Podell each threw in $500,000 (after all it is their fat that is actually in the fire; we are simply marinating), those funds, combined with funding from the realtors, could perhaps re-message the moratorium and show it in its true colors, as a shelter-killing measure.

My best to all of you and do please get back to Mary Jung about Prop. I, and, doubly please, do take my calls about Prop. A. If you think I enjoy calling you, think again. MY projects are all approved and either fully leased, built, or under construction with long-term fixed rate financing. I am 66 and am just fine if Prop. A loses, but this is not about me. If Prop. A fails, if Prop. I wins, construction slows down, future development becomes extraordinarily risky, Richmond-style rent control appears on the scene, and overall the City, which I adore, gets unmercifully savaged.

My best to all of you,

Oz

PS: Please don't pass this on. It would be sad breach of confidentiality if this ends up in the papers somewhere.

S. Osborn EricksonEmerald Fund, Inc.235 Montgomery Street, 27th FloorSan Francisco, CA. 94104

(Please note new address.)