Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
6b
ACTION ITEM
Date of Meeting
October 22, 2019
DATE: September 23, 2019
TO: Stephen P. Metruck, Executive Director
FROM: James Schone, Director Aviation Commercial Management
Dawn Hunter, Sr. Manager Airport Dining and Retail
SUBJECT: Airport Dining and Retail (ADR) Tenant Reimbursement Request
Amount of this request:
$796,000
Total estimated project cost:
$796,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to
(1) reimburse Airport Dining and Retail tenants Seattle Air Ventures, JV (not to exceed $10,000);
Airport Concessions, LLC (not to exceed $212,000); Bambuza Sea-Tac Ventures (not to exceed
$61,000); SSP America, LLC (not to exceed $170,000); Sub Pop Records (not to exceed
$143,000); and Planeware LLC (not to exceed $200,000) for costs incurred in the design of
Lease Group 3 and 4 units which designs are no longer suitable due to required changes to or
relocation of the tenant’s lease premises; and
(2) for the Executive Director to prepare and execute lease amendments with each of these
tenants, respectively, to memorialize payment of the proposed reimbursement, required
modification or relocation of their lease premises and, as applicable, extension of construction
build-out and lease expiration dates.
EXECUTIVE SUMMARY
Several ADR units, awarded in recent lease groups, are in locations that are likely no longer
financially viable, are needed for operational purposes in the next several years or do not have
sufficient infrastructure for normal operation of the unit. As such, staff believes it is in the best
interests of the Airport and the tenants to compensate these tenants for costs expended to
date in the design of their units and then to move them, if they so choose, to comparable
locations in the North Satellite (NSAT), the one part of the Airport where there are vacant units
available. The total cost of reimbursements to the 6 tenants is $796,000. These funds would
come from the Airport Development Fund.
Staff is aware of several other ADR units from recent lease groups that are in the design stage
of development now that also have issues with insufficient infrastructure. However, resolution
of these issues is still in process. In order to not delay payment to those ADR tenants where
COMMISSION AGENDA – Action Item No. 6b Page 2 of 6
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
agreement has been reached regarding appropriate compensation, staff is proposing a two-
step process: reimbursement to those tenants identified in this memo now and then an
additional request to Commission in the first quarter of 2020 once all the other issues
associated with insufficient infrastructure are resolved.
JUSTIFICATION
Diversity in Contracting
ADR is working with the Port’s Diversity in Contracting team to identify opportunities that
would include Women and Minority-owned Business Enterprise (WMBE) firms. Several of the
businesses involved in this matter are either small, local, and Airport Concessions
Disadvantaged Business Enterprise (ACDBE) firms with direct leases or are in joint venture
partnerships. This proposal to reimburse the tenants for costs incurred to date and to move
them to other locations will preserve the presence of these small, local and disadvantaged
businesses in the Airport.
DETAILS
This request is for funds to reimburse certain ADR tenants (Seattle Air Ventures, JV; Airport
Concessions, LLC; Bambuza Sea-Tac Ventures; SSP America, LLC; Sub Pop Records; and
Planeware LLC) for costs incurred in designing units that have been negatively impacted by the
Airport’s ongoing challenge of responding to the rapid growth in enplaning passengers during
the past 5 years. These units were included in the ADR Master Plan, developed in 2013-2014,
to improve customer service and maximize non-aeronautical revenues. They were awarded to
firms during the competitive solicitation processes for ADR Lease Groups 3 (2016) and 4 (2017).
Since the development of the ADR Master Plan, enplaning passengers at the airport have grown
by nearly 40%. To accommodate this rapid growth, Airport staff has had to make short-term
operational and facility changes as well as initiate planning for long-term facility changes.
These changes will negatively impact several ADR units awarded in previous lease groups. Staff
believes that it is in the best interest of the Port to reimburse these tenants for their costs
incurred to date in designing units that will likely either struggle to achieve financial success or
that the Port will need for operational purposes well before the end of their leases and to
relocate these tenants to comparable locations in the new North Satellite (NSAT Phase 2), if
they so desire. In addition, Airport staff has determined that one unit does not have sufficient
infrastructure (specifically, air capacity) to support its operation. Thus, staff recommends that
this tenant also be reimbursed for their design costs incurred to date.
Seattle Air Ventures JV
The 2014 ADR Master Plan included plans to increase retail offerings in the Central Terminal. In
Lease Group 4, Seattle Air Ventures JV (Seattle Air Ventures), comprised of Hudson Group
COMMISSION AGENDA – Action Item No. 6b Page 3 of 6
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
MBSB, Inc. and Warren’s News & Gifts, was awarded a lease to operate a retail unit featuring
the Filson brand, a local clothing company. However, in response to increasing congestion at
security checkpoints, Airport staff recently conducted a study to evaluate the best way to
minimize this congestion. A key finding of that study is a need for expanded security
checkpoints and specifically, in the areas where this unit is located. Thus, Airport staff believes
that the Filson location will likely be needed for expanded checkpoints in the next several years
and it is in the best interest of the Port to reimburse Seattle Air Ventures for costs incurred to
date and to relocate this tenant to a comparable location in the new North Satellite.
Seattle Air Ventures was offered and accepted relocation to unit NS-15.
Accordingly, Port staff proposes to reimburse Seattle Air Ventures for its design costs (in an
amount not to exceed $10,000), and to execute a lease amendment to memorialize its
relocated lease premises and revised construction build-out and lease expiration dates.
Sub Pop Records
Also, in Lease Group 4, Sub Pop Records (Sub Pop), a local record company, was awarded a
lease to operate a retail unit featuring music and associated merchandise. This lease is for the
same space that Sub Pop currently occupies in the Central Terminal. As with the space for
Seattle Air Ventures mentioned above, Sub Pop’s space is also needed for expanded
checkpoints. Thus, Airport staff believes that it is in the best interest of the Port to reimburse
Sub Pop for costs incurred to date and to relocate this tenant to a comparable location in the
North Satellite.
Sub Pop was offered relocation to the NSAT Phase 2 but declined the offer and will leave the
Airport once their current space is needed for operational purposes. However, the tenant has
requested that it be allowed to continue operations until its lease premises are required for the
checkpoint expansion.
Accordingly, Port staff proposes to reimburse Sub Pop for its design costs (in an amount not to
exceed $143,000), to execute a lease termination agreement with Sub Pop cancelling its lease
agreement awarded as part of Lease Group 4, and to execute a lease amendment with respect
to Sub Pop’s current lease to extend this lease for a mutually agreed fixed term followed by
conversion to a month-to-month lease.
Airport Concessions, LLC and Bambuza Sea-Tac Ventures
In the 2014 ADR Master Plan, several units were proposed for the South Esplanade (the pre-
security area behind the airline ticket counters that includes the security checkpoints) to
provide more food and beverage options for meeters and greeters. Airport Concessions LLC
(Airport Concessions) was awarded a unit in ADR Lease Group 3 to operate a Village Pub
concept. Bambuza Sea-Tac Ventures (Bambuza) was awarded a unit in ADR Lease Group 4 to
COMMISSION AGENDA – Action Item No. 6b Page 4 of 6
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
operate a 9th & Pike Artisan Sandwiches & Salad concept. However, given the rapid growth in
enplaning passengers since the development of the ADR Master Plan, lines of passengers
waiting to go through Security Checkpoints 3 and 4, routinely stretch in front of these proposed
ADR units, making access to these locations challenging at best, if not impossible, for anyone
who would want to enter.
Staff believes that continuing with the plan to put food and beverage units in these locations
would likely result in businesses that would not be financially successful. Given the higher cost
of relocating these ADR tenants after their unit build-outs are completed, staff recommends
relocating these tenants now to comparable spaces in the NSAT Phase 2 and reimbursing them
for their expenditures to date, primarily for unit design. Airport Concessions was offered and
accepted relocation to unit NS-19. Bambuza was offered and accepted relocation to unit NS-22.
Accordingly, Port staff proposes to reimburse Airport Concessions for its design costs (in an
amount not to exceed $212,000) and Bambuza for its design costs (in an amount not to exceed
$61,000), and to execute a lease amendment with each of these tenants, respectively, to
memorialize their relocated lease premises and revised construction build-out and lease
expiration dates.
SSP America, LLC
The ADR Master Plan also included plans to install a new food and beverage unit in the Gina
Marie Lindsey Arrivals Hall in order to improve customer service in this part of the Airport. SSP
America, LLC (SSP) was awarded this space in Lease Group 3 for development of Café Ladro, a
local coffee concept. However, this location is now needed for checkpoint expansion. SSP was
offered and accepted relocation to unit NS-08 with the understanding that they would need to
change their concept as the new unit is in the food court across from a large Starbucks unit.
Staff does not believe it prudent to have two coffee concepts so close to one another. SSP is
working with ADR staff regarding an alternative concept for this location.
Accordingly, Port staff proposes to reimburse SSP for its design costs (in an amount not to
exceed $170,000), and to execute a lease amendment to memorialize its relocated lease
premises, approval of an alternative concept for the unit, and revised construction build-out
and lease expiration dates.
Planeware LLC
Finally, this request also includes funds to reimburse Planeware LLC (Planeware), an ADR tenant
awarded a specialty retail unit in Lease Group 4 that is located at the entrance to Concourse D.
After award, limitations in the building’s air capacity were identified which means Planeware is
unable to build its unit as awarded. The tenant expressed a desire to stay in this location but
understands that it cannot build out the unit as planned.
COMMISSION AGENDA – Action Item No. 6b Page 5 of 6
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
Airport staff also believes that it is in the best interest of the Port to reimburse Planewear for its
costs incurred for the buildout of the unit it was awarded. Planewear has agreed to stay in this
space but will not build it out. Accordingly, Port staff proposes to reimburse Planeware for its
design costs (in an amount not to exceed $200,000), to execute a lease amendment with
Planeware to memorialize the discontinuation of its planned build-out in the lease premises.
There are other ADR tenants who were awarded units in Lease Groups 3 and 4 who have also
encountered issues with inadequate infrastructure for their buildouts but with whom Airport
staff has not yet been able to reach agreement on how to proceed. As such, staff recommends
reimbursing these six tenants with whom tentative agreements have been reached now while
continuing to pursue resolution of the other issues with an expectation to be reporting the
results of those efforts to Commission in the first quarter of 2020.
Staff continues to learn about the limitations of aging infrastructure in the main terminal
building and to plan appropriate investments to reduce the risk of these situations. For
example, a capital project is included in the 5-year Capital Improvement Program to address the
insufficient air capacity in the terminal. This is the Concourse C and D Heating, Ventilation and
Air Conditioning Upgrade Project. The project is currently scheduled for 2023.
The total reimbursement amount for the locations listed above is $796,000.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Do not reimburse tenants for design cost.
Cost Implications: No cost implications for the Port.
Pros:
(1) There would be no cost incurred by the Port.
Cons:
(1) This would negatively impact the tenants financially.
(2) This would cause a hardship for small businesses that do not have the capital to
absorb the current expenditures.
(3) This alternative could lead to potential claims by the tenants due to their inability to
complete build-out of their spaces or to negative impacts from Port operations.
This is not the recommended alternative.
Alternative 2 – Reimburse tenants for the verified design costs expended to date.
Cost Implications: $796,000
Pros:
(1) This reduces the financial burden on the tenants especially our small local businesses.
(2) This would resolve any potential claims by the tenants against the Port.
COMMISSION AGENDA – Action Item No. 6b Page 6 of 6
Meeting Date: October 22, 2019
Template revised June 27, 2019 (Diversity in Contracting).
Cons:
(1) There is a substantial cost to the Port.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
This is not a budgeted expense and will result in an unfavorable variance in 2019. This
unbudgeted expense can be absorbed by the Aviation Division within the non-aeronautical net
operating income budget due to non-aeronautical revenues in excess of the 2019 budget. The
funding for this expense will come from the Airport Development Fund.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
December 11, 2018 – The Commission authorized reimbursement for SP-LW LLC
June 27, 2017 – The Commission authorized Airport Dining and Retail Lease Group 4
June 14, 2016 – The Commission authorized Airport Dining and Retail Lease Group 3
