Third Amendment to Ground Lease
with Duke’s Chowderhouse, LLC.
June 23, 2020
Item No. 6h supp
Date of Meeting June 23, 2020
Maritime/EDD Tenant Relief Program
• Terms approved by Commission/ED and within our Delegation of Authority
– Defer all rent and other charges for four months (April-July) without interest.
» Tenant required to make commercially reasonable efforts to remain in operation
and/or reopen consistent with public health orders.
» Tenant certifies it has been significantly impacted by COVID-19
– Deferred payment plan commencing on 10/1/20 with payback in 12 months – but also
negotiate payment plans to fit unique circumstances.
» Offer lease extension if tenant lease term is too short to payoff reasonably
• Proposed relief consistent with what done across the Port
– Extended terms
– Deferred rent
– Waiver of MAG (percentage rent only)
2
Background
• All restaurants closed by Governor’s first order, March 23
– Duke’s 7 locations – Seattle, Bellevue, Kent, Southcenter, Tacoma
• Long-term lease (20+ years remaining)
• Seriously affected by COVID-19 and escalating construction
costs
• Participating in deferral program with hope of lease
amendment
Duke’s Current Ground Lease (as amended)
• Full Service Restaurant (9200 SF ground lease)
– Amended twice to enlarge development pad as design evolved
• Rising construction costs and COVID-19 impacted feasibility
– Construction costs than doubled over two+ years of design
• $4.3 million to $8.3 million
• COVID-19 closed all restaurants, working with 8 landlords
• Committed to developing a smaller, more flexible facility
4
Revised Proposal for Duke’s Chowderhouse
• Revise business model and proposed development concept
– COVID-19 is accelerating changes to restaurant industry
– Smaller, contemporary “multi-modal” service (table served, mobile,
and takeout)
– Have requested three years+ for redesign, permitting, and
construction plus some buffer for uncertainties due to COVID-19
Revised Terms for Ground Lease
• Proposed terms
– Reduce square footage – 9200 SF to +-4500 SF
– Defer construction rent for three years and pay back over lease term
(effective 4/1/20), Post-construction rent will start no later than
4/1/23 or Substantial completion, whichever is earlier.
– Same base terms: Rent per square foot, expiration, etc.
Risks and Benefits
• Risks
• Continued economic downturn may prevent Duke’s from
completing
• Benefits
• Likely the only viable restaurant option at Shilshole
• Highly desired amenity for Shilshole customers and will bring new
visitors to SBM
• Essentially no financial risk to Port since Duke’s is financing
• Retains revenue stream for this property
7
