Template revised April 12, 2018.

DATE: December 4, 2018

TO: Stephen P. Metruck, Executive Director

FROM: James Schone, Director, Aviation Commercial Management

ACTION REQUESTED

Request Commission authorization for the Port to reimburse Seattle-Tacoma International Airport

tenant SP-LW LLC (Sub Pop-Li’l Woody’s) up to an amount not to exceed $360,095.72 for costs

incurred in the design of the CC-06 unit awarded to this firm in the Airport Dining and Retail Lease

Group 3 and for the Executive Director to execute a lease amendment with this firm that includes

a change in premises, construction build-out, and lease termination dates, as well as a mutual

release of any potential claims relating to the unavailability of unit CC-06.

EXECUTIVE SUMMARY

Food and beverage operations require significantly more utilities, specifically: water, gas, sewer

and a grease waste line, than a retail business does. Following award of the lease for the CC-06

space to SP-LW in June 2017 for construction of Poppa Woody’s, a gourmet burger restaurant with

a bar, Port staff undertook the work necessary to bring the required utilities to the leasehold line

for use of this space by the tenant as a full-service restaurant. During this work, it was determined

that the required grease waste line could not be installed per current building codes. Port staff

and the design team from SP-LW worked diligently together in the subsequent months in an

attempt to find a solution that met the building code requirements and was cost effective for all

parties involved. After extensive discussions evaluating all possible options, it was determined

Template revised September 22, 2016; format updates October 19, 2016.

Given this determination, the most cost-effective solution is to reimburse SP-LW for their verified

costs incurred to-date for design of the CC-06 space through a tenant reimbursement agreement

totaling $360,095.72 and to amend their lease for use of a comparable space elsewhere in the

terminal, specifically NS-23 (Exhibit B), for the same period of time as was intended for the lease

of the CC-06 space.

JUSTIFICATION

The Airport Dining and Retail Master Plan was developed in 2013-2014 to guide the

redevelopment of the Airport’s dining and retail program as leases for 90% of the ADR units were

expiring between 2015 and 2017. This master plan identified the need for significantly more space

This space, Single Unit Package #5, was one of a number of leasing opportunities included in ADR

LG3 which was approved by the Commission for competitive solicitation on June 14, 2016. SP-LW,

a joint venture between Sub Pop and Little Woody’s; two small, locally-owned businesses,

submitted a bid for this space and were awarded a Lease and Concession Agreement (Agreement)

in June 2017 for operation of Poppa Woody’s, a gourmet burger restaurant with a bar. Following

award of the Agreement, Port staff commenced with the work to convert the vacant CC-06 space

to a food and beverage unit. This work included the reconfiguration of utility lines to bring all

required utility points of connection to the leasehold line for final connection by the tenant. As

this space had previously been used for a retail business, the only existing utility service available

at the location was electricity.

necessary to best serve the layout of their space. Because this location was particularly challenging

due to its remoteness from the main grease waste lines and the amount of intervening other

utilities, all agreed that a single effort would yield the best results.

Based on the tenant’s design work, it became apparent that the grease line could not be

connected to the unit without major disruption to the surrounding terminal building as well as

exorbitant costs that would prove too onerous for SP-LW, a local small business. Port staff and the

tenant’s design team then engaged in extensive discussions over several months to identify

options to resolve this issue. Ultimately, it was determined that the grease line could not be built

in a manner that would meet applicable building code requirements and the operational needs of

Template revised September 22, 2016; format updates October 19, 2016.

Based on these factors, coupled with a desire to alleviate further time and financial burden to SP-

LW, Port staff determined that the best option was to reimburse SP-LW for all verified design costs

expended to date on the CC-06 space and to offer the firm a comparable space elsewhere in the

Airport. The comparable space is NS-23 located in the North Satellite. SP-LW has agreed to this

proposal. This change in premises along with other changes necessitated by this action including

build-out dates and the lease termination date along with a release of all claims between both

parties are included in the attached lease amendment (Exhibit C). There are no changes to the

as part of the North Satellite Phase 2 work.

This situation has illuminated the need of additional planning for implementation of the ADR

Master Plan regarding utility hook-ups for spaces being converted from retail to food and

beverage locations. Port staff has now put in place the appropriate protocols to ensure that the

necessary planning for the utility infrastructure for each proposed unit has been completed and

the associated costs are fully understood and that each proposed space is viable for the chosen

concept.

Cons:

Template revised September 22, 2016; format updates October 19, 2016.

This is not the recommended alternative.

Alternative 2 – Reimburse the tenant for their verified design costs expended to date on the CC-06

space and offer the tenant an alternate space (NS-23) in the Airport

Cost Implications: $360,095.72

Pros:

Cons:

funding for this expense will come from the Airport Development Fund.

ATTACHMENTS TO THIS REQUEST

PREVIOUS COMMISSION ACTIONS OR BRIEFINGS

June 14, 2016 – The Commission authorized Airport Dining and Retail Least Group 3.