PORT OF SEATTLE

MEMORANDUM

COMMISSION AGENDA

Item No.

Date of Meeting

April 14, 2009

DATE: March 25, 2009

TO: Tay Yoshitani, Chief Executive Officer

FROM: Michael Burke, Senior Manager, Container Leasing and Operations

Michael Campagnaro, Manager, Container Leasing and Operations

SUBJECT: Second Amendment to lease with SSA Terminals (Seattle), LLC for

Terminal 25/30.

ACTION REQUESTED:

Request for Port Commission authorization to authorize the Chief Executive Officer to

execute a second amendment to lease with SSA Terminals (Seattle), LLC (“SSAT

Seattle”) for Terminal 25/30 to make modification to the Leased Premises and Premises

Rent paragraphs.

BACKGROUND:

On April 11, 2006, the Port Commission authorized the First Amendment to the Terminal

25/30 (“T25/30”) lease, committing the Port to relocating the cruise terminal and

developing the remainder of Terminal 30 back into a container terminal. The original

T25/30 lease had approximately 1.86 acres of limited use area in the southern section of

Terminal 25. The use of this area was limited to longshore parking or similar limited

operations due to the expected development of the chill facility at Terminal 25 South and

the construction of the monorail. This area is rented at 50% of the blended rate due to the

expected limitations. SSAT Seattle has requested the Port remove this area from the

lease and replace it with approximately 0.93 acres of full use container yard by moving

the southern boundary south by approximately 71.59 feet. This replacement area would

be rented to SSAT Seattle at the full blended rate, making this land swap revenue-neutral

for the Port. This arrangement also creates a more effective area for both the Port and

SSAT Seattle.

In addition, several minor modifications need to be made to the lease. Per the provisions

of SSAT Seattle’s Terminal 25/30 lease, certain billing changes occurred as result of the

completion of the connector bridge that connects Terminal 25 to Terminal 30 (formerly

Terminal 28), and the development of a certain expansion area at Terminal 25. A recent

survey of the areas was completed and revealed a discrepancy in area size as stated in the

lease.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

March 25, 2009

Page 2 of 4

Additionally, Port staff discovered that the Terminal 30 limited load area designated in

the original lease as rented at 75% of the blended rate was incorrectly increased to 100%

of the blended rate. This limited use area is the old dock at the south end of Terminal 30

and the loads are restricted by the strength of that dock. Such load-restricted areas are

typically rented at 75% of the blended rate at other container terminals. The proposed

Second Amendment to SSAT Seattle’s lease will outline the correct premises and rent

changes at Terminal 25/30. The billing changes outlined in this proposed amendment

have been implemented.

MAJOR ELEMENTS OF THE PROPOSED SECOND AMENDMENT TO

LEASE:

Listed below are the major elements of the proposed T25/30 second amendment to lease

with SSAT Seattle:

 Premises: The premises paragraph is amended to document the addition of certain

expansion area as provided for in the Base Lease and Restated First Amendment, and

to convert certain property areas to Container Yard area. The currently leased 1.86

acres, Limited Use Auxiliary area, at Terminal 25 that is currently at 50% of the

Eagle Rate, will be removed in its entirety and replaced with 0.93 acres of Container

Yard, which is adjacent to the Terminal 25 Container Yard area.

The proposed second amendment also provides for the formal addition of 43,876

square feet of container yard expansion area at Terminal 25 together with the addition

of the 10,613 square foot bridge connecting Terminal 25 and Terminal 30, effective

November 1, 2007 as was provided for in the lease. Lastly, the proposed second

amendment documents that the removal of the former land bridge area containing

5,668 square feet from the lease.

 Rent: The rent for the new Container Yard area shall be equal to the Port’s blended

rate for container yard land. The new 0.93 acres, (exchanged for the 1.86 acres

Limited Use Auxiliary area at Terminal 25 that is currently at 50% of the Eagle Rate)

will be billed at 100% of the Eagle Rate.

ALTERNATIVES CONSIDERED/RECOMMENDED ACTION:

Amend the Lease Alternative. – Amend the existing T25/30 lease with SSAT Seattle to

reflect changes in Premises and Rent. This alternative will make the south end of

Terminal 25, which is currently vacant, more accessible and will allow the Port to lease

Terminal 25 South. This is the recommended alternative.

Do nothing alternative. – This alternative does not allow the Port to maximize container

land or achieve the related economic benefits of leasing Terminal 25 South.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

March 25, 2009

Page 3 of 4

FINANCIAL ANALYSIS:

Source of Funds

No funds needed.

Financial Analysis Summary

Business Unit (BU)

Container Operations

Effect on business

performance

This lease amendment will have no effect on business

performance.

All components of this lease amendment which impact rental

income have already been implemented, based on a letter to the

tenant dated 2/18/09, as explained in the Background section of

this Commission Memo.

ENVIRONMENTAL BENEFITS:

None

ADDITIONAL INFORMATION:

The lease was assigned from SSA Terminals, LLC to SSA Terminals (Seattle), LLC on

April 18, 2008. SSA Terminals (Seattle), LLC is a partnership between SSA Seattle,

LLC, Matson Seattle, LLC and China Shipping Terminals (USA), LLC.

PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:

 April 11, 2006 – Authorization to execute First Amendment (revised to “Restated

First Amendment” effective August 8, 2007) to the lease with SSAT Seattle at

Terminal 25/30.

 February 14, 2006 – Authorization for final design of the Terminal 30 container

terminal and the relocated Pier 91 Cruise Terminal.

 October 25, 2005 – Project-wide Authorization to expand the Terminal 25 container

yard northward and construct a bridge to connect Terminal 25 and Terminal 30 in the

amount of $13,787,000.

 January 11, 2005 – Project-wide authorization to Terminal 25 and Terminal 28

container terminal development for $17,725,000.

COMMISSION AGENDA

Tay Yoshitani, Chief Executive Officer

March 25, 2009

Page 4 of 4

 December 14, 2004 – Authorization to execute a lease with SSAT Seattle for

Terminal 25 and associated land at Terminal 30 and funding for design and permits in

the amount of $2,275,000 to make future improvements to Terminal 25 and Terminal

28 in support of the new lease agreement.