Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8d
ACTION ITEM
Date of Meeting
July 9, 2024
DATE: July 9, 2024
TO: Stephen P. Metruck, Executive Director
FROM: Kyra Lise, Director Real Estate Development
Dave McFadden, Managing Director, Economic Development Division
SUBJECT: Tract C Purchase and Des Moines Creek West Ground Lease Amendment
Amount of this request:
$700,000
Total estimated project cost:
$700,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to take all necessary steps and
execute all purchase and sale documents, including the ground lease amendment. The Port of
Seattle has negotiated, at fair market value, a purchase of a 19,881 Square Foot, underutilized and
adjacent parcel from the City of Des Moines. This purchase will enhance accessibility and the
overall developability of the Des Moines Creek West project.
EXECUTIVE SUMMARY
The property in question is made up of 1 parcel totaling 19,881 SF. The Parcel (“Parcel”) is located
at the intersection of South 216
th
Street and 20
th
Avenue South, just west of International
Boulevard in the City of Des Moines. The Parcel was originally deeded over to the City of Des
Moines as part of the Interlocal Agreement in 2014 which included several other land swaps due
to the development of the Des Moines Creek Business Park immediately to the east of the Parcel.
Now the Port of Seattle requires this parcel due to its strategic location for safe and easy access
for commercial cargo trucks that will be entering and exiting the Des Moines Creek West
development site. This site is being developed by the Port’s ground lease tenant, The Panattoni
Development Company, executing the ground lease between Panattoni and The Port of Seattle
in August of 2022.
The Tract C site is currently vacant.
The Parcel was appraised by Kidder Mathews, using a highest and best use standard. The
appraised value = $690,000. A sales agreement was negotiated between the parties (the Port
of Seattle and the City of Des Moines) based on this price. We are now requesting authorization
COMMISSION AGENDA – Action Item No. 8d Page 2 of 4
Meeting Date: July 9, 2024
Template revised June 27, 2019 (Diversity in Contracting).
from Commission to permit the Executive Director to execute the Purchase and Sale Agreement
(PSA).
Development analyses show no financially viable scenarios for the Port to develop this Parcel
(Tract C) as a standalone development, rather, its value is tied to the larger and adjacent Des
Moines Creek West site.
Due to this purchase, the ground lease will need to be amended due to an increase in square
footage, which in turn, equals an increase in lease revenues to the Port. Timelines for the
developer are also clearly cited to guide a clear path to substantial completion for the developer
to complete this light industrial, aviation supportive project on Port of Seattle owned land.
Panattoni was founded in 1986 in Sacramento, California by Carl Panattoni. His son Adon serves
as the CEO for Panattoni Development Company.
Panattoni is currently going through the SEPA process, has submitted all documentation and is in
conversations with the City of Des Moines regarding the short platting of Tract C to meet
development requirements.
JUSTIFICATION
The Port has procured and reviewed the appraisal and agrees that the valuation is consistent
with fair market value.
The 2024 SEA Real Estate Strategic Plan directed port staff to purchase real property if the
property adheres to the criteria derived from the strategic plan. The Port determined through
this process that the Tract C Parcel is needed for development, and without it, the larger Des
Moines Creek West development would not be possible.
Panattoni will abide by the City of Des Moines’ tree-replacement regulations in the commercial
zone. If a significant tree was identified to be retained on approved plans, but removed during
construction, then three trees will be planted in its place. There are currently no trees on the
Tract C parcel.
Diversity in Contracting
Not Applicable as this is a property purchase.
DETAILS
Scope of Work
Execute conveyance documents and Lease Amendment.
COMMISSION AGENDA – Action Item No. 8d Page 3 of 4
Meeting Date: July 9, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Schedule
Q3 2024
Activity
Sign Purchase and Sale Agreement and close on Tract C parcel
Amend Lease due to increase in square footage and lease revenue due
to purchase of Tract C
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Do Nothing – Do not purchase Tract C.
Cost Implications: none / Save $690,000
Pros:
(1) The City of Des Moines quitclaims Tract C back to the Port in an effort to allow for the private
drive, then the Port leases this parcel to Panattoni.
(2) The City of Des Moines retains ownership and grants an easement to the Port so the Port can
legally lease this parcel to Panattoni.
(3) The City of Des Moines grants an easement directly to Panattoni and charges Panattoni for the
use of Tract C.
Cons:
(1) Missed opportunity to purchase property that aligns with SEA Strategic Real Estate Plan.
(2) Missed opportunity for buying in a high demand market with no competition.
(3) Missed opportunity to engage with seller that is ready to sell a property that we need.
(4) Missed opportunity to maximize highest and best use as a developer in buying adjacent
parcel.
This is not the recommended alternative.
Alternative 2 – Buy parcel Tract C
Cost Implications: $690,000
Pros:
(1) Preserves highest and best use as it is purchased by the adjacent property owner
(Port of Seattle) which maximizes the site’s footprint value.
(2) Provides additional lease revenue from purchase of property that is otherwise non
usable for Port purposes.
(3) Tract C purchase remains contingent upon Panattoni receiving permits.
Cons:
(1) Requires Port to buy existing property back that it once owned prior to the interlocal
agreement with the City of Des Moines.
COMMISSION AGENDA – Action Item No. 8d Page 4 of 4
Meeting Date: July 9, 2024
Template revised June 27, 2019 (Diversity in Contracting).
(2) Subsequent leasing will require a reduction of existing port owned real estate
available for on-site open storage
(3) Requires reduction of existing land available for lay down area for various port
projects in the vicinity.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
The Port will pay market value for the property purchase.
Site Area
Total Developable Site Area 19.8 acres
Building Area 402,380 SF
Des Moines Creek West Stabilized Annual Income $3,575,048
NPV $60,025,605
Cost Basis
Street improvement payment to Des Moines (2018)
$1,500,000
14-acre WSDOT Property Acquisition (July 2021) $2,900,000
Predevelopment costs $250,000
Tract C purchase (July 2024) $690,000
Total Cost Basis
$5,340,000
IRR w/out Tract C 7.80%
IRR with Tract C 10.50%
Tract C Isolated Yield on Cost 11.30%
Total payback period (From stabilization) 18 months
ATTACHMENTS TO THIS REQUEST
(1) Lease Amendment 1
(2) Purchase and Sale Agreement
(3) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
July 12, 2022 – Approval of Ground Lease for Port Property in Des Moines, WA: Des Moines
Creek West