Template revised September 22, 2016.
COMMISSION
AGENDA MEMORANDUM
Item No.
6g
ACTION ITEM
Date of Meeting
February 27, 2018
DATE: February 1, 2018
TO: Executive Director Stephen P. Metruck
FROM: James Schone, Director, Aviation Commercial Management
Dawn Hunter, Senior Manager, Airport Dining and Retail
SUBJECT: Airport Dining and Retail (ADR) Lease Group 4 Amendment
Amount of this request:
$NA
Total estimated project cost:
$NA
ACTION REQUESTED
Request Commission authorization for the Executive Director to cancel the authorization for
Single Food Unit 1 and Small Food Package 7 as part of the Airport Dining and Retail Lease
Group 3 and to amend the authorization to conduct competitive solicitations and execute lease
and concession agreements for the Airport Dining and Retail Lease Group 4 by adding an RFP
Food - 8 (F-8) and a CEP Food – 9 (F-9).
EXECUTIVE SUMMARY
Two dining opportunities (Single Food Unit 1: CT-1/CT-MZ) and (Small Food Package 7: CT-
24/CT-24MZ and NS-2) in Airport Dining and Retail Lease Group 3 (LG 3) were suspended in the
Fall of 2016 due to the high bids received on the Central Terminal (CT) Elevator project and the
Heating, Ventilation and Air Conditioning (HVAC) System project. These infrastructure projects
are necessary for the operation of these dining units in the CT. NS-2 was ultimately removed
from Small Food Package 7 and authorized by the Commission for competitive solicitations in
Lease Group 4 (LG 4) in order to have that unit ready for the completion of Phase 1 of the North
Satellite Project in 2019.
Staff is now ready to move forward with advertising these two opportunities in the CT, and seek
authorization to apply LG 4 criteria instead of LG 3 criteria. LG 4 criteria were developed based
on lessons learned from the LG 3 proposal solicitation and evaluation process.
Following a successful bid process for the CT Infrastructure Upgrade Project (combined elevator
and HVAC) and notice of award of the contract in November 2017, Port staff recommends re-
starting the competitive solicitation process for these two leasing opportunities in the CT. The
rationale for re-starting the solicitation process now is the need to create additional dining
capacity in the main terminal as quickly as possible to improve customer service, create new
COMMISSION AGENDA – Action Item No. 6g Page 2 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
jobs and increase revenue to the Port. Every month of delay in publishing these opportunities
beyond March 2018 would result in reduced dining opportunities for travelers in the most-
frequented area of the Airport, as well as lost sales per month of nearly $2.0 million and lost
monthly rent to the Port of over $200k.
JUSTIFICATION
This request for Commission authorization now is based on several reasons:
Customer Service: These units, the two largest dining units in the airport, will provide
significant additional dining capacity needed to meet the demand from the rapid passenger
growth over the past five years. Further delay in soliciting proposals for these opportunities will
impact the ability to open this new capacity as close as possible to the completion of the
infrastructure projects.
Jobs: These units will create new jobs, a key goal of the Commission.
Non-aeronautical Revenue: Increasing non-aeronautical revenue is key to funding airport
infrastructure projects.
DETAILS
Description of Opportunities
The two opportunities proposed for competitive solicitation are:
Food & Beverage LG 4 RFP F-8
CT-1 and CT-1MZ: a casual dining two-level restaurant with an open concept (no
restrictions). This is an approximate 10,900 square foot space in the Central Terminal. The
mezzanine level will be accessed by a Port-constructed elevator and stairs. The current
lease on this unit is held by Anton Airfoods/Host International and operated as an
Anthony’s Restaurant, a local concept.
The lease terms and projected schedule are contained in Appendix A.
Food & Beverage LG 4 CEP F-9
CT-24 and CT-24 MZ: a casual dining restaurant on the mezzanine level with a market
and/or bar component on the main level with an open concept (no restrictions). This is an
approximate 6,500 square foot space in the Central Terminal. The mezzanine level will be
accessed by a Port-constructed elevator and stairs. The current lease for the main level
space is held by LaTrelle’s and was operated as a Wendy’s prior to its closure on February 8,
2018.
The lease terms and projected schedule are contained in Appendix B.
COMMISSION AGENDA – Action Item No. 6g Page 3 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
Authorization Approach
The F-8 opportunity will be competed via the Request for Proposals (RFP) process. The F-9
opportunity will be competed using the Port’s Competitive Evaluation Process (CEP). The
primary differences between the RFP and the CEP are:
(1) The RFP requires more experience to meet the minimum qualifications;
(2) RFP proposers must submit a proposal guarantee along with their proposal;
(3) Documentation must be provided in the RFP for the proposing organization (Articles of
Incorporation, Joint Venture Agreement, etc.); and
(4) Additional and more detailed information is required in the RFP proposal.
Summary of Evaluation Criteria
The seven evaluation criteria proposed for scoring proposals, the proposed total point
allowance of 150 points and the proposed point allocation for each criteria, are the same as
approved by Commission for use in evaluating all other proposals for LG 4. The descriptions
below of each criterion summarize the areas that will be evaluated (detailed submittal
requirements will be included in the RFP and CEP documents).
Company Profile, Experience and Financial Capability 20 points
The company must demonstrate stability, experience and expertise in operating a similar
business as proposed, in a challenging environment. The proposer must demonstrate that the
company has the financial capacity to fulfill the commitments of an agreement with the Port.
Concept Development 25 points
The proposed concept (or concepts) will be evaluated based on its (their) ability to meet or
exceed the expectations described for the unit or units. The airport is a competitive
environment for the customer’s spending, therefore the ability to attract business hinges on
developing a concept with broad and lasting customer appeal. Ten (10) points of the 25 total
points for this criterion will be awarded based on the evaluation of the concept as it pertains to
creating a Pacific Northwest sense of place within the Airport.
Unit Design, Materials and Capital Investment 25 points
The proposal will be evaluated based on the quality of unit design, efficient use of space,
selection of appealing and durable materials (including sustainable materials) and its reflection
of the Pacific Northwest sense of place, as well as the reasonableness of the proposed capital
investment in the unit(s).
Financial Projections and Rent Proposal 20 points
Financial projections and rent proposals will be evaluated based on the reasonableness of the
financial projections and the proposed percentage rent fee.
Management/Staffing, Operations, Customer Service and Environmental 20 points
Sustainability
COMMISSION AGENDA – Action Item No. 6g Page 4 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
The company must demonstrate its ability to effectively manage all units and operations, which
includes quality leadership and adequate levels of staffing. The company must also
demonstrate its commitment to reliable, safe, clean and well-merchandised operations, as well
as a proactive and consistent approach to preserving the units (including equipment). The
company must also demonstrate its commitment to providing a high level of customer service
at its operations at Sea-Tac. Environmental sustainability measures that the company currently
practices or will practice in the operation of the business, including (where applicable)
separation of waste, recycle, and compost, and the use of durable or Cedar-Grove approved
compostable or recyclable food service-ware should be documented.
Job Quality, Workforce Training, Employment and Service Continuity 20 points
The company must provide information regarding its commitment to employment continuity,
provision of quality jobs, sustainable wages, benefits and Paid Time Off. If the company
anticipates operating four or more units, it also must describe the company’s efforts to have
discussions regarding service continuity with labor organizations. Greater emphasis will be
placed on proposed wages and medical/retirement benefits and a quantitative-formula-based
methodology for scoring wages and medical/retirement benefits will be utilized.
All solicitations will make clear that the Port staff interpretation of the Commission’s
expectations regarding quality jobs (as articulated in the November 11, 2015 memo from CEO
Fick to Commission co-presidents - Attachment A) requires respondents to communicate their
commitment to the following:
(1) For 2018, wages shall be paid at the minimum rate of $15.64 per hour. The wage rate
shall be adjusted on January 1 of each year by the rate of inflation. The increase shall be
calculated to the nearest cent using the CPI (Consumer Price Index) for urban wage
earners and clerical workers, CPI-W, or a successor index, for 12 months prior to each
September 1 as calculated by the US Department of Labor.
(2) Payment of sick and safe time, which shall be accrued at the rate of one hour for every
40 hours worked.
(3) Provide health insurance to full-time employees, consistent with the Affordable Care
Act.
Small Business Participation 20 points
The company must indicate whether it is a small business consistent with the requirements of
the U.S. Small Business Administration (SBA).
(1) A company that qualifies as a small business relative to the standards adopted by the
U. S. Small Business Administration and proposes directly (whether via CEP or RFP), will
automatically receive ten (10) points.
(2) For units competed via CEP, only small businesses that propose directly can receive the
full 20 points for this criterion.
COMMISSION AGENDA – Action Item No. 6g Page 5 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
(3) For units competed via RFP, all companies regardless of size are eligible to receive the
full 20 points for this criterion.
(4) Large businesses that propose a joint venture with a small business (whether via CEP or
RFP), and that agreement meets the FAA guidelines for joint ventures and includes a
minimum of 20% share of capital investment, will automatically receive 5 points.
(5) All companies, regardless of size, may receive up to ten (10) points, depending on the
degree of commitment, for each of the four small business participation opportunities
(i.e., sourcing, mentoring, product placement, and design/construction).
(6) No proposer, though, may earn more than twenty (20) total points for the criterion.
Minimum Qualifications
Firms who are not fully compliant with Proposition 1 back wages and benefits will be
disqualified from participation.
The Port has a significant proprietary interest in the success of the ADR Program and so it is in
the Port’s best interest to try and eliminate disruptions to our tenants’ operations due to labor
disputes that can also negatively impact customers using the Airport as well as airline
operations. As such:
(1)
All non-exempt respondents must submit a labor peace agreement with their proposal
that includes signatures from a senior officer of the respondent’s organization and a
labor union that is capable of representing the workers of the respondent in collective
bargaining or already has a collective bargaining agreement with the respondent.
(2)
The Port will have no role in reviewing or establishing the terms of these agreements.
(3)
Small businesses (as determined by U.S. Small Business Administration criteria), which
have 35 or fewer badged airport employees, will be exempted.
Lease Parameters
Lease terms determined by the Port for each opportunity are based upon sales and investment
assumptions, and are presumed to allow a future tenant the ability to amortize the investment
over the life of the lease. The lease terms for these two opportunities are 10 years, the same as
other food and beverage opportunities presented to the Commission in Lease Groups 2, 3 and
4.
For these two opportunities, the Port will establish the minimum guaranteed rent for the first
year of the agreement. The purpose of this is to protect the Port’s financial interest as well as
to eliminate the minimum guaranteed rent as a factor in the selection process. This is
particularly important for businesses new to the airport that may not have any experience in
proposing minimum guaranteed rents. For the second and subsequent years, the tenant will be
required to pay either 85% of the previous year’s actual rent payment, or percentage rent
based on gross sales achieved during the year, whichever is greater.
COMMISSION AGENDA – Action Item No. 6g Page 6 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
Interested businesses will propose percentage rent to the Port. Proposers may propose this
either as a flat rent or tiered rent. Each proposer must provide the Port with a pro forma
analysis that can substantiate the sales projections, rent offer, costs to operate the business
(including goods, labor, debt service, etc.) as well as the anticipated profit margin.
SCHEDULE
The schedule for this competitive process is noted in the table below. The exhibit for each LG 4
opportunity shows the anticipated timeline for solicitation, award and opening of the units
associated with that opportunity. Upon execution of a lease agreement, the design review and
permitting process can take up to six months followed by three to four months for construction
before the commencement of business.
Projected Date
Action
February 27, 2018
Request Commission authorization to solicit proposals
for these two opportunities.
March 2, 2018
Advertise opportunities (ADR leasing website and
through various local and national media).
March 21, 2018
Tours and training sessions for interested businesses.
March 2 through May 31, 2018
90 days for proposal preparation.
May 31, 2018
Responses due.
July/August 2018
Port Evaluation Panels complete their evaluations.
August/September 2018
Notification to preferred respondents.
Update Commission on results.
September/October 2018
Lease negotiations and executions.
STRATEGIES AND OBJECTIVES
The approval of the proposed leasing opportunities supports the 25-year vision of the Port’s
Century Agenda to create 100,000 new jobs through economic growth led by the Port. These
opportunities also support a number of the strategies and objectives of the Port’s Century
Agenda over the next quarter century:
(1) Advance this region as a leading tourism and business gateway;
(2) Promote small business growth and workforce development; and
(3) Be the greenest and most energy efficient port in North America.
Commission Guidance and Goals for the ADR Program Redevelopment
The Commission provided specific guidance and goals for the redevelopment of the ADR
Program in motions that they approved on February 14, 2012 and November 25, 2014:
Guidance for the ADR Program Redevelopment
(1) Encourage broad business participation;
(2) Use flexible competitive leasing processes to accommodate all types of business;
COMMISSION AGENDA – Action Item No. 6g Page 7 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
(3) Create new opportunities for small, disadvantaged and local businesses;
(4) Maximize employment continuity for qualified employees;
(5) Continue ‘street pricing’ of products and services;
(6) Improve efficiency and affordability in the unit build out process;
(7) Establish job quality expectations in competitive processes;
(8) Strengthen the Pacific Northwest sense of place.
Goals for the ADR program to be achieved by 2025:
(1) Grow sales per enplanement by at least 40 percent;
(2) Reach and remain within the top 10 North American airports as ranked by sales per
enplanement;
(3) Grow gross revenues to the Port by 50 percent;
(4) Grow employment by 40 percent;
(5) Grow the share of sales generated by small, disadvantaged, and/or local businesses to
40 percent;
(6) Create an aspirational objective of increasing ACDBE gross sales to 25 percent of total
sales.
ALTERNATIVES and IMPLICATIONS CONSIDERED
Alternative 1 – Re-start the competitive solicitation process for the two LG 3 opportunities
under the evaluation criteria approved by Commission for LG 3.
Pros:
(1) As Commission has already approved the solicitation of proposals for the two CT lease
opportunities, this would allow the competitive process to re-start immediately.
Con:
(1) This is not consistent with Commission decisions regarding evaluation criteria for use in
LG 4.
This is not the recommended alternative.
Alternative 2 – Seek Commission authorization to re-start the solicitation process for these two
LG 3 opportunities using the LG 4 evaluation criteria.
Pros:
(1) This is consistent with recent Commission decisions regarding evaluation criteria for use
in LG 4.
Cons:
(1) This requires additional time to seek Commission approval.
This is the recommended alternative.
COMMISSION AGENDA – Action Item No. 6g Page 8 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
Economic Implications:
Based on the current schedule for the Central Terminal elevator and HVAC projects, the F-9
location (CT-24/CT-24MZ: new mezzanine restaurant on the south-side of the CT) should open
in March 2019 when Phase 1 of the CT Infrastructure Upgrade Project is completed. However,
the delay in receiving proposals for these opportunities compared to the other opportunities in
Lease Group 3 means that this unit will not be ready to open when Phase 1 of the Central
Terminal infrastructure work is completed in March 2019.
Assuming a March 2, 2018 date for advertising these opportunities, the earliest that this unit
can be open is Q4 of 2019, a potential vacancy of three (3) quarters. For every month that this
unit is dark beyond the completion of Phase 1 of the infrastructure project, the lost sales per
month is projected at $600k with monthly lost revenue to the Port projected at $60k. Every
month of delay in publishing the solicitation of proposals for this unit beyond March 2018 just
adds to this lost sales and revenue.
The current schedule for completion of Phase 2 of the CT Infrastructure Upgrade Project is Q1
2020. In order for the current location occupied by Anthony’s (F-8: CT-1/CT-1MZ) to be ready
to open when Phase 2 of the CT infrastructure projects is completed, this opportunity needs to
be advertised for solicitation of proposals by the beginning of March 2018. Every month of
delay in publishing this opportunity beyond that would result in lost sales per month of $1.3
million and lost monthly rent to the Port of $155k.
In both cases, some portion of these sales (and revenue to the Port) could be made up by other
ADR tenants but certainly not all. The impacts on customer service would be significant. And
there is also the significant impact of a delay in creating new jobs and associated tax revenues.
ATTACHMENTS TO THIS REQUEST
(1) PowerPoint presentation
(2) Attachment A: November 11, 2015, memo from CEO Fick to Commission co-
presidents regarding Quality Job expectations
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
June 27, 2017 – Commission authorized the solicitation of proposals for the Airport Dining
and Retail Lease Group 4 opportunities
June 13, 2017 – The Commission was briefed on outcomes of the Lease Group 3 competitive
solicitation process with a preview of leasing opportunities and recommendations on
key policy issues for use in Lease Group 4
August 23, 2016 – Commission authorized the Airport Dining and Retail (ADR) Lease Group
3, Large Food Package 3 Addendum
June 14, 2016 – Commission authorized the solicitation of proposals for the Airport Dining
and Retail Lease Group 3 opportunities
COMMISSION AGENDA – Action Item No. 6g Page 9 of 9
Meeting Date: February 27, 2018
Template revised September 22, 2016; format updates October 19, 2016.
May 24, 2016 – Commission was briefed on the lessons learned from the competitive
evaluation process for Airport Dining and Retail Lease Group 2 and the proposed
leasing opportunities for Airport Dining and Retail Lease Group 3
December 8, 2015 – Commission authorized the solicitation of proposals for Airport Dining
and Retail Group Lease Group 2
November 24, 2015 – A request was made of Commission to authorize the solicitation of
proposals for Airport Dining and Retail Group Lease Group 2
August 4, 2015 – A request was made of Commission to authorize the solicitation of
proposals for Airport Dining and Retail Group Lease Group 2
February 24, 2015 – Commission was briefed on the Airport Dining and Retail Program
Outreach and Leasing Plans
December 9, 2014 – Commission authorized Leases and Lease Modifications for HMS Host
December 9, 2014 – Commission authorized Leases and Lease Modifications for Hudson
Group
December 9, 2014 – Commission authorized an Amendment to the Lease and Concession
Agreement with Anton Airfoods (dba Anthony’s Restaurant)
November 25, 2014 – Commission approved a Motion Regarding Job Quality
September 30, 2014 – Commission was briefed on the Drivers for Airport Dining and
Redevelopment Phasing Decisions
May 27, 2014 –Commission was briefed on the Airport Dining and Retail Master Plan
September 11, 2012 – Commission was briefed on the Airport Concessions Master Plan
February 14, 2012 – Commission approved a Motion regarding Concessions Program
Guidelines
