Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8n
ACTION ITEM
Date of Meeting
November 14, 2023
DATE :
TO: Stephen P. Metruck, Executive Director
FROM: Susie Archuleta, Senior Real Estate Manager, Central Harbor
SUBJECT: Mad Anthony’s Pier 66 Third 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 Third Amendment
to Lease with Mad Anthony’s Pier 66 (“Anthony’s”), substantially the same as the attached draft
amendment. The previous Amendment temporarily restructured the method for calculating
Base Rent from July 2022 through April 2023 (the start of cruise season). The Third Amendment
would extend the Second Amendment terms until the reopening of two-way traffic on Alaskan
Way.
EXECUTIVE SUMMARY
In 2022, Anthony’s business volumes were negatively impacted by 1) the aftermath of the COVID-
19 pandemic; 2) the construction along the Seattle Waterfront; and 3) labor shortages. Together,
the negative impact to Anthony’s Pier 66 business volumes was significant and led to the Second
Amendment, which temporarily restructured the base rent calculation to provide Anthony’s with
some financial relief for the period July 2022 through April 2023 (the beginning of cruise season).
In 2023, the continuation of construction along the Seattle Waterfront extends the negative
impact to Alaskan Way traffic and pedestrian volumes. There is a related negative impact to
Anthony’s Pier 66 business volumes. Staff now recommends a Third Amendment to Lease, which
extends the temporary Base Rent structure previously established in the Second Amendment to
the period beginning May 2023 to the earlier of the date when two-way traffic resumes on
Alaskan Way (contingent upon the Overlook Walk and Seattle Aquarium construction projects)
or December 31, 2024. It is estimated that the Alaskan Way connector road will be opened in
April of 2024 resuming the two-way traffic.
COMMISSION AGENDA – Action Item No. 8n Page 2 of 5
Meeting Date: November 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
JUSTIFICATION
Anthony’s is a family-owned, local company that was established in 1969 and currently operates
restaurants known for their excellent seafood in 27 locations in Washington, Oregon and Idaho,
including Anthony’s Pier 66 and Chinook’s Restaurant at Fishermen’s Terminal. The Port 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.
Anthony’s Pier 66 suffered serious financial hardship during COVID-19 pandemic, and ultimately
Commission approved the 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 reinstated the minimum base rent and increased the percentage rent
rate from 6.0% to 6.25%.
In 2022, Anthony’s sales improved modestly but were still well behind pre-pandemic levels and
not yet covering all operating costs. The well-publicized hiring challenges that restaurants in this
region suffered from led to shortening of the restaurant operating hours due to staffing
shortages. The reduced hours also negatively impacted Anthony’s revenues and ability to cover
their costs.
In 2023, the Overlook Walk and Seattle Aquarium construction projects have created
intermittent partial and full road closures on Alaskan Way. These closures limit waterfront
visitation and foot traffic, with visitors generally uncertain about traffic patterns, parking
availability and which businesses are impacted. Revenues for the 2022 calendar year were 36%
less than in 2018 (the year before the viaduct demolition).
To ensure the long-term success of this key Pier 66 retail tenant, staff recommends providing
additional support to Anthony’s via a Third Amendment to their lease. The Third Amendment
would simply extend the length of time that Anthony’s pays percentage-only rent as initiated by
the First Amendment. The timing of the Third Amendment would be tied to the construction
projects and would expire at the earlier of the date when two-way traffic resumes on Alaskan
Way or December 31, 2024.
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. 8n Page 3 of 5
Meeting Date: November 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
DETAILS
Staff proposes the following Third Amendment temporary base rent calculation:
First
Amendment
Second
Amendment
Third
Amendment
After Third
Amendment
Minimum Rent
None
None
None
$30,670/mo
Percentage Rent
Rate
6.50%
6.50%
6.50%
6.25%
Effective period
Amendment
June 1, 2020 –
May 31, 2022
June 1, 2022 –
April 30, 2023
May 1, 2023 –
earlier of 2-way
traffic on
Alaskan Way or
December 31,
2024
Through lease
expiration of
December 31,
2041
Since the percentage rent consistently exceeds the minimum base rent during the cruise season
months, this is anticipated to only affect the non-cruise season months (when the percentage
rent typically falls below the minimum base rent). Two-way traffic on Alaskan Way is anticipated
to resume April 2024 at the commencement of the 2024 Cruise season.
Additionally, the Third Amendment provides reinstatement of the minimum base rent and a
Percentage Rent Rate of 6.25% after the effective period of the temporary base rent restructuring
(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 rent relief after the Second
Amendment expiration on April 30, 2023.
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 Third 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.
COMMISSION AGENDA – Action Item No. 8n Page 4 of 5
Meeting Date: November 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Alternative 2 – Shorten the Third Amendment effective period, using an expiration date of
April 30, 2024 (instead of December 31, 2024).
Cost Implications: None
Pros:
(1) Limits the extension of the Second Amendment terms to 12 additional months
(May 2023-April 2024), which could be long enough to keep Anthony’s afloat.
(2) Rent structure reverts to the original calculation earlier than in the recommended
alternative, accelerating the Port’s collection of potentially higher monthly rents.
Cons:
(1) Potentially reverts to the original, higher rent structure before Alaskan Way fully
reopens to two-way traffic and while Anthony’s volumes are still depressed.
This is not the recommended alternative.
Alternative 3 – Agree to extend the Second Amendment terms until the earlier of the reopening
of Alaskan Way to two-way traffic or December 31, 2024.
Cost Implications: None
Pros:
(1) Extends financial assistance to Anthony’s until the expiration of their primary business
challenge, reduced Alaskan Way traffic.
(2) Strengthens the relationship between the Port and its’ sole Pier 66 retail tenant.
(3) Ensures that the time period of the Alaskan roadway closure is covered without an
additional future amendment.
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
Project cost for analysis
No incremental costs to the Port for this request
Business Unit (BU)
Portfolio Management
Effect on business performance
(NOI after depreciation)
This third amended lease agreement will generate the
Total Cash Flow of $10,829,419 for the reminder of the
lease term until December 31, 2041.
IRR/NPV (if relevant)
Total Effective Rent: $10,829,419, a decrease of $39K as
compared to the second amendment. Marginal NPV of
($28K) as compared to the second amendment.
CPE Impact
N/A
COMMISSION AGENDA – Action Item No. 8n Page 5 of 5
Meeting Date: November 14, 2023
Template revised June 27, 2019 (Diversity in Contracting).
Future Revenues and Expenses (Total cost of ownership)
Future revenues will be generated based on lease rates and terms stated above in the Third
Amendment.
ATTACHMENTS TO THIS REQUEST
(1) Draft Third Amendment to Lease
(2) Presentation
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
February 14, 1995 - Commission approved the Lease Agreement
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.
August 9, 2022 – Commission approved the Second Amendment to Lease.