Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8e
ACTION ITEM
Date of Meeting
July 26, 2022
DATE : July 10, 2022
TO: Stephen P. Metruck, Executive Director
FROM: Susie Archuleta, Real Estate Manager, Central Harbor
SUBJECT: Mad Anthony’s Pier 66 Second Amendment to Lease
Amount of this request:
$0
Total estimated project cost:
$0
ACTION REQUESTED
Request Commission authorization for the Executive Director to execute the Second Amendment
to Lease with Mad Anthony’s Pier 66 (“Anthony’s”), substantially similar to the attached draft
amendment. The First Amendment temporarily restructured the method for calculating Base
Rent from June 2020 to May 2022. The Second Amendment would extend the First Amendment
rent structure until April 2023 (the start of cruise season).
EXECUTIVE SUMMARY
Due to the significant economic impact of COVID-19 on the restaurant industry in general and
Anthony's at Pier 66 specifically, in June 2020, Commission approved a First Amendment to
Anthony’s lease. That amendment temporarily restructured the base rent calculation for the
period beginning June 1, 2020 and ending May 31, 2022 in order to provide financial relief to
Anthony’s.
Today, Anthony’s business volumes continue to be negatively impacted by 1) the aftermath of
the COVID-19 pandemic; 2) the ongoing construction along the Seattle Waterfront; and 3) labor
shortages. Together, the impact to Anthony’s business volumes is significant and has led to staff
recommending an extension of the First Amendment terms. The proposed Second Amendment
would set a new expiration date of April 30, 2023 (11 additional months) for the temporarily
restructured base rent calculation.
JUSTIFICATION
Anthony’s is a family-owned, local company that was established in 1969 and currently operates
restaurants known for their excellent seafood in nineteen locations in Washington, Oregon and
Idaho, including Anthony’s Pier 66 and Chinook’s Restaurant at Fishermen’s Terminal. The Port
COMMISSION AGENDA – Action Item No. 8e Page 2 of 5
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
of Seattle and Anthony’s have both made significant investments in the building and operations
of the Pier 66 restaurant. As an anchor tenant, the success of Anthony’s restaurant reflects on
the entire Pier 66 campus.
The COVID-19 pandemic wreaked havoc on retail tenants nationwide, requiring full shutdowns,
allowing partial reopenings, and changing the requirements for conducting business every few
months. Anthony’s suffered serious financial hardship during that period, and ultimately
Commission approved their First Amendment in June 2020 to help them weather the storm. The
First Amendment temporarily restructured the base rent calculation for the period beginning
June 1, 2020 and ending May 31, 2022 by: 1) temporarily removing the Minimum Rent
requirement; and 2) increasing the percentage rent rate from 6.0% to 6.5%. Furthermore, from
June 1, 2022 onward, it increased the percentage rent rate from 6.0% to 6.25%.
COVID-19-related restrictions on Washington’s restaurant industry is easing somewhat in 2022,
with the Governor ending vaccination requirements for entry into restaurants in February 2022
and then lifting indoor mask requirements in March 2022. Subsequently, Anthony’s sales
improved modestly but are still well behind pre-pandemic levels and not yet covering all
operating costs. The well-publicized hiring challenges that restaurants in this region are suffering
from unfortunately necessitates reducing the operating hours due to staffing shortages. This also
negatively impacts Anthony’s revenues and ability to cover their costs.
The ongoing construction along the Seattle waterfront continues to limit visitation and foot
traffic, with visitors generally uncertain about traffic patterns, parking availability and which
businesses are impacted. Finally, labor shortages have plagued all service industries, including
restaurants. Difficulty hiring staff has led to Anthony’s temporarily omitting its valet parking
service and hours of operation. Year-to-date through the month of June, 2022 revenue is 38%
less than it was in 2019.
To ensure the long-term success of this key Pier 66 tenant, staff recommends providing additional
time for Anthony’s to recover via a Second Amendment to their lease. The Second Amendment
would simply extend the length of time that Anthony’s pays percentage-only rent as initiated by
the First Amendment. This proposed 11-month extension would provide Anthony’s with
breathing room until April 30, 2023. This end date is tied to the beginning of the next cruise
season and spring weather, both of which bring more foot traffic to Pier 66 than is seen during
winter months.
Diversity in Contracting
There is no opportunity for WMBE participation as this is a request for an amendment to an
existing lease agreement.
COMMISSION AGENDA – Action Item No. 8e Page 3 of 5
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
DETAILS
Staff proposes the following Second Amendment temporary base rent calculation:
First Amendment
Second Amendment
Minimum Rent
None
None
Percentage Rent Rate
6.50%
6.50%
Effective period
June 1, 2020 – May 31, 2022
June 1, 2020 – April 30, 2023
Additionally, the Second Amendment provides a Percentage Rent Rate of 6.25% from May 1,
2023, onward (an increase compared to the 6.00% Percentage Rent Rate provided in the Basic
Lease).
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Reject Anthony’s request for additional temporary lease modification after the
First Amendment expiration on May 31, 2022.
Cost Implications: None, unless tenant vacates the Pier 66 restaurant
Pros:
(1) The Port receives more monthly rent in the short term
(2) Administrative effort of processing a Second Amendment is avoided
Cons:
(1) Increases the risk that Tenant fails financially
(2) Increases the risk that Tenant vacates the restaurant
(3) Increases the risk the Port will take legal action against a tenant who is still operating at
another Port location (Fishermen’s Terminal)
This is not the recommended alternative.
Alternative 2 – Shorten the Second Amendment effective period, using a December 31, 2022
expiration date (instead of April 30, 2023).
Cost Implications: None
Pros:
(1) Tenant receives 7 additional months (Jun-Dec 2022), which could be enough to keep
them afloat
(2) Rent structure reverts to the original calculation earlier than in the recommended
alternative, accelerating the Port’s collection of higher monthly rents
Cons:
(1) Reverts to the original, higher rent structure mid-winter which is the Tenant’s slowest
season and difficult for the Tenant to absorb
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. 8e Page 4 of 5
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
Alternative 3 – Agree to extend the First Amendment terms until April 30, 2023
Cost Implications: None
Pros:
(1) Provides a reasonable bridge to the next cruise season, since tenant receives 11
additional months of financial assistance (Jun 2022 – Apr 2023)
(2) Strengthens the relationship between the Port and one of its’ key Pier 66 tenants
Cons:
(1) Extends the period that the Port receives reduced rent
This is the recommended alternative.
FINANCIAL IMPLICATIONS There are no incremental costs to the Port for this request.
Financial Analysis and Summary
No incremental costs to the Port for this request
Portfolio Management
(NOI after depreciation)
This second amended lease agreement will generate the
Total Cash Flow of $10,870,280 for the remainder of the
lease term until December 31, 2041.
Total Effective Rent: $10,870,280, a decrease of $240K
and $166K as compared to the first amendment and the
current lease agreement respectively.
Discounted Effective Rent at 4.5%: $6,555,255, a
marginal NPV of ($221K) and ($301K) as compared to the
first amendment and the current lease agreement
respectively.
N/A
Future Revenues and Expenses (Total cost of ownership)
Future revenues will be generated based on lease rates and terms stated above in the Second
Amendment.
ATTACHMENTS TO THIS REQUEST
(1) Draft Second Amendment to Lease
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
February 14, 1995 - Commission approved the Lease Agreement
COMMISSION AGENDA – Action Item No. 8e Page 5 of 5
Meeting Date: July 26, 2022
Template revised June 27, 2019 (Diversity in Contracting).
January 12, 2016 – Commission authorized reimbursement of costs related to the installation
of heating and hot water systems necessitated by the termination of Seattle Steam
service to the facility.
June 23, 2020 – Commission approved the First Amendment to Lease.