Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
8g
ACTION ITEM
Date of Meeting
November 19, 2024
DATE : October 24, 2024
TO: Stephen P. Metruck, Executive Director
FROM: Jennifer Maietta, Director Real Estate Asset Management
Jessica Carlson, Sr. Real Estate Manager
SUBJECT: Fishermen’s Terminal - Washington Maritime Blue Term Lease
ACTION REQUESTED
Request Commission authorization for the Executive Director to execute a term lease with
Washington Maritime Blue for approximately 15,700 gross square feet of space located within
at Fishermen’s Terminal within the Maritime Innovation Center (MInC) in the substantiative
form presented. The lease will be for a term of ten (10) years with two five (5) year options for
a total of twenty (20) years.
EXECUTIVE SUMMARY
WMB provides an accelerator program for innovation for a sustainable, equitable, and
competitive Washington maritime industries through maritime incubator programs, innovation
accelerators and other WMB initiatives. The Port has negotiated a term lease with an initial
term of ten (10) years with two five (5) year options for approximately 15,700 gross square feet
of space within the Maritime Innovation Center development located at Fishermen’s Terminal.
The mission of WMB is in alignment with the Port’s goal to invest in economic growth of the
region and all its communities through advancing maritime industries through innovation and
strategic investment.
JUSTIFICATION
Washington Maritime Blue is a 501 C(6) nonprofit organization that works to support
acceleration of technology innovation for a sustainable and competitive Washington maritime
industry. Washington Maritime Blue is a strategic alliance for maritime innovation and
sustainability and works as an independent cluster organization to implement Washington
State’s Strategy for the Blue Economy delivered by Governor Jay Inslee’s Maritime Innovation
Advisory Council. As a partnership between industry, public sector, research & training
institutions and community organizations the organization’s mission is to create a world-class,
thriving, and sustainable maritime industry through knowledge sharing, collaborative R&D,
commercialization, business and workforce development.
COMMISSION AGENDA – Action Item No. 8g Page 2 of 6
Meeting Date: November 19, 2024
Template revised June 27, 2019 (Diversity in Contracting).
WMB has committed to work with the Port of Seattle to identify joint goals, metrics, outcomes
and funding needed to successfully support maritime accelerator initiatives, workforce training
programs and a host of other Maritime Blue initiatives. The development of the Maritime
Innovation Center has been driven by the mission to support and help advance promising
maritime entrepreneurs and innovators. WMB as a tenant of the MInC will partner with the
Port in these efforts.
WMB’s programs are in alignment with the Port’s mission for innovation and economic
development within the maritime sector by incubating start-up businesses and innovations
related to the maritime industry and the Port’s mission to be the greenest and most energy-
efficient port in North America. The WMB ‘s program and initiatives purpose to advance data
sharing and digital platforms for increase efficiency, safety and health throughout the gateway;
support and enable innovation in modernization of the fishing and seafood industry; advance
operate greenhouse gas emissions and reduction strategies and technologies; develops a
diverse talented maritime workforce for the future; and advance regional and statewide efforts
for the Blue Economy.
The Port and WMB commenced a pilot accelerator program in 2020 to test the marketplace. It
has proven to be successful. WMB has been a tenant at Fishermen’s Terminal since May 2021
leasing temporary office space. During this timeframe WMB has successfully graduated over 60
maritime businesses through its pilot accelerator program to date. Some of its accelerator
graduates include Discovery Health MD, Silverback Marine, Photon Marine and Blue Dot
Kitchen. WMB will be able to utilize the new MInC space to continue to grow its programs,
sublease to small businesses for office and workspace, and program maritime educational and
training workshops.
Lease Terms: The Port has negotiated a term lease with WMB with the following terms and
conditions:
• Premises: Approx. 15,700 gross square feet of office workspace within the Maritime
Innovation Center (MInC) building located on Fishermen’s Terminal, Seattle, WA
• Use: For the purposes of (i) supporting Lessee’s acceleration of innovation for a
sustainable, equitable and competitive Washington maritime industry and related
support activities to include, but not limited to, maritime incubator programs,
innovation accelerators and other WA Maritime Blue initiatives as office workspace for
incubators, accelerators, and anchor tenants, (ii) hosting meetings conferences,
workshops or similar in support and/or promotion of the maritime industry and/or
innovation, provided that all of the foregoing are directly related to Lessee’s or a
COMMISSION AGENDA – Action Item No. 8g Page 3 of 6
Meeting Date: November 19, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Sublessee’s programming and/or mission and (iii) ancillary administrative and office
purposes.
• Term: 10-year term with two 5-year Options to be mutually exercised.
• Lease Commencement: Commencing upon ninety (90) days after both (i) the date of
substantial completion of the Port’s MInC redevelopment project and (ii) the Premises
has been delivered to Lessee.
• Early Termination & Penalty: Lessee to complete Tenant Improvements by the date
that is 275- days following the Commencement Date, if not in compliance, the Port may
terminate this Lease by providing 90-days prior written notice to Lessee, retain the
Security Deposit plus Lessee shall pay a penalty fee equal to six (6) month’s Base Rent.
• Rent Commencement: Rent to commence the earlier of (i) the date Lessee received the
Certificate of Occupancy for Lessee’s Tenant Improvements or (ii) 180-days after the
Commencement Date. May be extended by written mutual agreement due to reasons
beyond the reasonable control of Lessee, at the Port’s sole discretion.
• Base Rent: $30.00/sf/yr equal to $471,000/yr. = $39,250/mo. plus WA State Leasehold
Excise Tax (currently 12.84%).
• Escalation: Base Rent to increase 3% annually
• Security Deposit: $304,640 average of 6-month base rent plus LET for the term to be
adjusted each option period.
• Tenant Improvement Allowance: $63.00/sf ($989,100) towards Lessee’s design and
improvements as approved by Lessor.
• Tenant Improvements & Alterations:
o Tenant Improvements (TI) or improvements shall meet the Living Building
Challenge Imperatives for the purposes of LBC Certification. Lessee’s TI Plans
shall be reviewed and approved by Lessor prior to commencing work.
o Lessee shall, in connection with the labor associated with any Tenant
Improvements or Alterations under this Lease, comply with all prevailing wage
laws in the State of Washington.
• Insurance:
o General Liability: $5M per occurrence and $10M in the aggregate.
o Property Insurance: Coverage for Lessee’s personal property and Alterations to
be procured on a replacement cost basis.
• Operating Expense & Utilities:
o Lessor reserves the right to implement a pro rata Operating Expense charges at a
future date equitably implemented for all Tenants at Fishermen’s Terminal.
o Lessee is responsible for its utility expenses servicing the Premises (water, sewer,
waste management, and stormwater).
COMMISSION AGENDA – Action Item No. 8g Page 4 of 6
Meeting Date: November 19, 2024
Template revised June 27, 2019 (Diversity in Contracting).
• Lessee Repair and Maintenance:
o At its sole cost and expense, keep the Premises, together with all Alterations,
equipment and installations – in good order, condition and repair at all times,
and replacements, except for those items specified under Lessor’s responsibility.
o The Port may request proof of maintenance and/or repairs from Lessee, which
Lessee shall provide within ten (10) days of written request by Port. If Lessee fails
to maintain the Premises as required the Port at is sole discretion, may upon
thirty (30) days prior written notice to Lessee, elect to perform maintenance and
repair to building operational systems which are otherwise Lessee’s obligation at
Lessee’s sole cost and expense.
o Lessee to perform repair and maintenance of the Kingspan UniQual
polycarbonate panels (or subsequent replacements) along the west facing wall of
the Premises, except that the Port shall reimburse Lessee 50% of the
replacement cost (only).
• Lessor Repair & Maintenance:
o Lessor shall repair, maintain, and replace generally the exterior systems of the
Building to include, but not limited to, the roof (both structure and
covering/membrane), exterior walls, foundation and building structure, exterior
lighting, exterior security camera and LBC related systems serving the building
(water cistern and related infrastructure, the building Energy Management
System (EMS); solar panels; the blackwater treatment system, and submeters
associated with LBC systems), except that during LBC Certification Period and
any warranty period Lessor shall perform the HVAC monitoring and maintenance
at Lessee’s sole cost and expense.
o Lessor to Perform, at Lessee’s sole cost and expense, the maintenance and repair
of the elevator, elevator alarm, fire suppression, and backflow prevention
systems.
o Lessor to perform replacement of the HVAC/Mechanical and Fire Suppression
systems with the amortized capital costs to be billed back to Lessee monthly.
• LBC Excess Costs:
o For those maintenance, repair and replacements costs that may be in excess of
the cost of standard operational repair, maintenance and replacement items as a
result of the LBC Requirements (“LBC Excess Costs”), Lessee may provide written
request and backup documentation of LBC Excess Costs for reimbursement.
Upon Port’s reasonable discretion, Port may elect to reimburse the LBC Excess
Cost but not more than 50% of the Total maintenance, repair, or replacement
cost.
• Sustainability/Environmental: Lessee to continue to comply with Port sustainability and
environmental requirements and initiatives once LBC certification is met.
• Living Building Certification:
COMMISSION AGENDA – Action Item No. 8g Page 5 of 6
Meeting Date: November 19, 2024
Template revised June 27, 2019 (Diversity in Contracting).
o Lesse shall comply with LBC requirements with its tenant improvements and
ongoing LBC imperatives related to operational compliance through LBC
certification (LBC Performance Period) detailed in Exhibit C Living Building
Challenge Addendum of the Lease.
o During the LBC Performance Period or contained in any Sustainability
Requirement, upon notification by Lessor, Lessee shall have 30-days to remedy
any Sustainability Deficiency. If unable to remedy, Lessee, Lessor and LBC
consultant in good faith, use commercially reasonable efforts to cooperate and
remedy such breach in a timely and cost-effective manner.
o If Port does not pursue LBC Certification or is denied Certification Port shall
notify Lessee and certification shall no longer apply. If Port does not purse
certification at its own discretion, then Port shall reimburse Lessee $300,000 for
Lessee’s associated LBC Construction Costs.
Diversity in Contracting
WMB tenant improvement must meet the Living Building Certification standard, which includes
20% design and/or construction contracts and 10% of maintenance contracts must be with JUST
organizations that meet MWDBE organizations or international equivalent.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
The intent is to have the new MInC building fully leased prior to completion of the construction
project in order to have no delay in revenue generation.
Alternative 1 – Do not lease to WMB.
Cost Implications: No revenue generation until a future tenant is found.
Pros:
(1) Potential to lease to a private company to pay slightly higher base rent.
Cons:
(1) Loss of revenue – unforeseen amount of time.
(2) Potential for alternative tenant not to promote maritime innovation and small
business support.
This is not the recommended alternative.
Alternative 2 – Approve the term lease with WMB.
Cost Implications: Approximately $4.2M revenue during primary term including application of
tenant reimbursement.
Pros:
(1) Current tenant at Fishermen’s Terminal with proven rental history.
COMMISSION AGENDA – Action Item No. 8g Page 6 of 6
Meeting Date: November 19, 2024
Template revised June 27, 2019 (Diversity in Contracting).
(2) Committed to a long-term lease of the MInC upon completion of building construction
with no loss of rental income for the Port.
(3) Willing to invest in tenant improvements that stay with the building.
(4) Promotes the Port’s century agenda to invest in economic growth of the region and all
its communities through advancing maritime industries through innovation and
strategic investment.
Cons:
(1) Non-profit organization reliant upon fundraising, grants and rental income from
accelerator and other program revenue.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
The value of the primary term is approximately $4.2M including the application of tenant
improvement reimbursement. The tenant improvement reimbursement funds will be
recovered by the base rent revenue during the first 2.1 years of the primary term.
Financial Analysis and Summary
Tenant Improvement Allowance: $989,100
Portfolio Management
The lease generates approximately $4.2M over the
course of the primary term (10 yrs).
NPV= $3.2M
Payback=2.1 years
NA
ATTACHMENTS TO THIS REQUEST
(1) Draft Term Lease
(2) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
(1) None