PORT OF SEATTLE
MEMORANDUM
COMMISSION AGENDA
Item No.
5e
Date of Meeting
April 12, 2011
DATE: April 6, 2011
TO: Tay Yoshitani, Chief Executive Officer
FROM: Melinda Miller, Director, Portfolio Management
Patricia Spangler, Real Estate Manager
SUBJECT: Term Lease with Golden Alaska Seafoods L.L.C. at the World Trade Center West
Building. (CIP #C800126)
Amount of this Request: $110,138 Source of Funds: Tax Levy and General Fund
Total Project Cost: $110,138
ACTIONS REQUESTED:
Request Commission authorization for the Chief Executive Officer to execute a five-year lease,
substantially as drafted in Attachment 1 and according to the terms laid out in this memorandum,
at a fair market rate, with Golden Alaska Seafoods L.L.C. at the World Trade Center West
Building.
SYNOPSIS:
Golden Alaska Seafoods, L.L.C. is a world leader in the production of high-quality white fish
products and frozen seafoods. The company is a long-time customer of the Port in good standing
and wishes to re-locate its administrative office to the World Trade Center West Building (WTC
West) when its current lease expires at the end of June. The twelve full-time employees who
work in the administrative office provide support to over 130 Golden Alaska employees at the
height of the fishing season. The lease term is for five years beginning on July 1, 2011, but
Golden Alaska wishes to enter the premises in advance to complete tenant improvements. The
Port determined the market rate of $21/per rentable square foot, or $84,063 for the annual base
rent, with annual increases of $0.50 per rentable square foot. This request includes $80,100 as a
Tenant Improvement Allowance and a $30,038 broker commission for a total request of
$110,138.
COMMISSION AGENDA
T. Yoshitani, Chief Executive Officer
April 6, 2011
Page 2 of 5
BACKGROUND:
The World Trade Center West Building is a four-story Class A commercial office building
developed in 1998 as part of the Central Waterfront Project. The building currently houses one
retail tenant, several non-profit organizations related to international trade, several private
businesses, and the World Trade Center Seattle Club which is operated for the Port by Columbia
Hospitality. The building is approximately sixty-eight percent (68%) occupied and a majority of
the remaining space has been vacant for over a year.
Golden Alaska Seafoods L.L.C operates a 305-foot processing vessel, the Golden Alaska, in
partnership with six catcher boats and has produced high-quality whitefish and frozen seafood
for more than twenty years. Golden Alaska Seafoods L.L.C. has been a long-time customer in
good standing of the Port with a preferential use agreement for moorage and a storage agreement
for approximately 10,000 square feet of warehouse at the north end of Terminal 46. Entering into
this new lease for their administrative offices in the World Trade Center West Building will
strengthen the partnership the Port has with the fishing community and with this long-time
excellent customer.
MARKET CONDITIONS:
The Real Estate Division staff consults several different resources to determine the appropriate
market rate for the World Trade Center West Building including reports on the real estate market
condition prepared by several brokerage firms and a market research report accessed through our
Costar subscription service, and a review of recent transactions for comparable buildings. The
most weight is given to the comparable rents within the Seattle Central Business District
including lower Queen Anne. These are provided to us by the Port’s listing broker for the World
Trade Center West Building, Kidder Mathews. These comparables are for lease transactions
executed within the last six months and include landlord concessions, such as tenant
improvement allowance, abated rent, and total lease term.
Based on the First Quarter 2011 market conditions, using information retrieved from the above
resources, staff negotiated a market rent that starts at $21.00 per rentable square foot and has
annual $.50 per square foot increases. Concessions include four months abated rent and $20 per
square foot allowance for tenant improvement.
TERMS OF THE PROPOSED LEASE:
The major elements of the proposed term lease are outlined below:
Term: Five years commencing July 1, 2011.
Use: Administrative office for support of Golden
Alaska processing vessel operations.
COMMISSION AGENDA
T. Yoshitani, Chief Executive Officer
April 6, 2011
Page 3 of 5
Premises: Premises consists of approximately 4,003 rentable square feet of
office.
Base Rent: 4,003 rentable square feet @ $21.00 per square foot = $84,063.00
annually.
Rent Increase: The Base Rent shall be adjusted on the anniversary of the rent
commencement date and annually thereafter through the term of
this lease increased by $.50 per rentable square feet per year.
Rent Abatement: Four (4) months abated rent for the period July through
October, 2011.
Operating Expenses: The Port is responsible for all the building repairs and maintenance
under this full service lease agreement.
Base Year: 2011 - Tenant is responsible for increases in the building operating
expenses above the Base Year.
Port Improvements: $20.00 per rentable square foot not to exceed $80,060.
Security: Lessee shall provide a cash deposit, corporate surety company
bond or irrevocable stand-by letter of credit in the amount of
$22,016.50, which is equal to the average of three months base rent
over the term of this lease.
Insurance/Liability: $1 million General Liability.
Assignment/Sublease: Conditioned on the Port’s prior written consent.
FINANCIAL ANALYSIS:
Budget/Authorization Summary:
Previous Authorizations
$0
Current request for authorization
$110,138
Total Authorizations, including this request
$110,138
Remaining budget to be authorized
$0
Project Cost Breakdown:
Tenant Improvement Allowance
$80,100
Leasing Broker Commission
$30,038
COMMISSION AGENDA
T. Yoshitani, Chief Executive Officer
April 6, 2011
Page 4 of 5
Other
$0
Total
$110,138
Source of Funds:
Funds for Real Estate Division capitalized tenant improvements are included in the 2011 Plan of
Finance under Committed CIP 800126 Tenant Improvements. The source of those funds for the
capitalized costs will be the Tax Levy. Amortized broker commission payments were included in
the Real Estate Division’s 2011 Operating Expense Budget. The source of funds for payment of
the broker fees will be the General Fund.
Financial Analysis Summary:
CIP Category
Revenue
Project Type
Tenant Improvements
Risk adjusted Discount
rate
9.0%
Key risk factors
• Risk of Tenant default partially mitigated by the following
factors:
- Security deposit from Golden Alaska Seafoods L.L.C. in
the amount of $21,207.
- Golden Alaska is a current tenant of the Port and in good
standing.
Project cost for
analysis
$110,138
Business Unit (BU)
Portfolio Management & Leasing, Real Estate Division
Effect on business
performance
Net Operating Income (NOI) and NOI After Depreciation for Year
1 through Year 5 of this lease are shown below.
(1) Revenue inclusive of rent abatement and estimated operating expense
reimbursements collected from the tenant.
(2) Expenses inclusive of amortized broker commissions in the amount of $6,008
per year.
(3) Depreciation expense is a result of capitalized tenant improvements in the
amount of $80,100, depreciated over the term of the lease.
NOI (in $000's) Year 1 Year 2 Year 3 Year 4 Year 5
Revenue
(1)
$57 $88 $90 $94 $97
Expenses
(2)
($6) ($6) ($6) ($6) ($6)
NOI $51 $82 $84 $87 $91
Depreciation
(3)
($16) ($16) ($16) ($16) ($16)
NOI After Depreciation $35 $65 $68 $71 $75
COMMISSION AGENDA
T. Yoshitani, Chief Executive Officer
April 6, 2011
Page 5 of 5
IRR/NPV
ALTERNATIVES CONSIDERED/RECOMMENDED ACTION:
Not Execute Lease Agreement: Not executing the proposed lease would mean 4,003
rentable square feet of office would remain vacant resulting in no new revenue
opportunity to the Port.
Execute Proposed Lease: Proceeding with the proposed lease agreement will increase the
revenue to the Port and would likely increase revenue for the Port Tenants (such as
Anthonys Restaurant, Starbucks, Bell Street Deli and the World Trade Center Seattle
Club) that provide services to support the employees. This is a long-term moorage
customer and tenant of the Port, in good standing, that provides services and jobs to the
maritime industry. This is the recommended action.
OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST:
None.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:
None.
NPV IRR Payback
(in $000's) (%) Years
$243 NA 2
