Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No.
10b
ACTION ITEM
Date of Meeting
April 16, 2024
DATE: April 3, 2024
TO: Stephen P. Metruck, Executive Director
FROM: Jeff Wolf, Director, Aviation Commercial Management
Eileen Francisco, Director, Aviation Project Management Group
SUBJECT: Concourse A Duty Free – Tenant Reimbursement Agreement (TRA) and
Pre-construction Services
Amount of this request:
$10,100,000
Total estimated project cost:
$46,431,000 – $60,000,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to 1) execute a TRA with the
selected Duty-Free Operator and 2) authorize $10.1M for design and pre-construction services
for the Concourse A Duty-Free project. The estimated total project cost is between $46M - $60M.
EXECUTIVE SUMMARY
This project will renovate a portion of Concourse A and create approximately 12,000 square feet
of new leasable space for Duty-Free operations. With the addition of the International Arrivals
Facility (IAF), gates on Concourse A are now internationally capable, making it the ideal location
to provide expanded Duty-Free services to the traveling public and increasing SEA’s non-
aeronautical revenue.
With prior Commission approval, the project has completed a Project Definition Document
(PDD), developed 15% designs, solicited for, and awarded a Duty-Free Operator.
JUSTIFICATION
Duty-Free at SEA has been an underperforming category within the Airport Dining & Retail (ADR)
program due to a lack of required square footage necessary to attract and secure brand names
to meet international passenger demands. SEA’s existing Duty-Free amenities currently ranks 13
out of 22 for Duty-Free operations within U.S. large hub airports. This project, combined with the
South Concourse Evolution Project, will meet passenger and international airline partner demand
COMMISSION AGENDA – Action Item No. 10b Page 2 of 6
Meeting Date: April 16, 2024
Template revised June 27, 2019 (Diversity in Contracting).
for Duty-Free operations, increase passenger amenities, and aligns with the Port’s Century
Agenda goal to strengthen SEA’s competitiveness in both the regional and global markets.
Today’s request is to execute a TRA contract between the Port and the selected Duty-Free
Operator such that the Duty-Free Operator may execute their respective design and General
Contractor/Construction Management (GCCM) contracts to further project designs.
Furthermore, under a TRA and GCCM project delivery method, the Port is requesting $10.1M to
support and reimburse design and pre-construction services for base building work.
Diversity in Contracting
This project has set a Women-and-Minority Owned Business Enterprise goal of 14% for design
and 15% for construction services.
DETAILS
Under this TRA, the cost of design, construction, and associated soft costs of the Concourse A
base building improvements and modifications will be reimbursable. The Duty-Free Operator will
be responsible for the cost of design, construction, and associated soft costs of all individual
tenant improvements within Concourse A and the forthcoming shell and core space in the south
satellite, provided by the S Concourse Evolution Program.
On October 26, 2021, Commission authorized the completion of the PDD, preliminary design
development, and continued exploration of using a TRA to complete the base-building work. Due
to the substantial amount of base-building work needed to complete the renovation on
Concourse A, the Port determined a TRA was the preferred option to deliver the project.
Commission authorization for design was originally anticipated in Q3 of 2022 but due to extended
COVID impacts and a protracted rebound of international passenger traffic, the project was
delayed by 18 months. ADR’s solicitation for a Duty-Free Operator was advertised in July of 2023,
concluded in October of 2023, and was awarded in March of 2024.
The selected respondent has provided preliminary TRA costs as part of the solicitation. Estimated
TRA costs are currently under evaluation by the Port’s Project Management/Project Controls
teams and will not be fully validated until 100% designs to ensure greater cost accuracy.
This $10.1M request will provide for design, pre-construction, ADR Owner’s Rep, and Port project
and construction management services.
In addition to the Port’s capital investment for Concourse A, the Duty-Free Operator will also
complete various tenant improvements throughout Concourse A, S and N. This expansion of
COMMISSION AGENDA – Action Item No. 10b Page 3 of 6
Meeting Date: April 16, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Duty-Free Operations is anticipated to create over 150 jobs in design, construction, and
operations.
Scope of Work
The project area is located on Concourse A adjacent to the exit from the IAF and Gina Marie
Lindsey Hall (GML). It includes concourse circulation and multiple retail, food, and beverage
concepts. This existing space will be converted into a Duty-Free area and the layout will be
configured such that passengers can flow through both the Duty-Free and Duty-Paid concepts,
maximizing revenue. The new Duty-Free space will be in the center of the concourse between
Gates A1 through A6. This central location will include ADR space, a customer information hub,
a music stage, and Flight Informational Displays throughout.
The new Duty-Free will require a “lid” or structural slab above the existing concourse for support
and to maintain the required security separation from the GML arrivals. In doing so, it will create
a new expanded, fully renovated mezzanine space for SEA’s Conference Center. This additional
conference space will also generate new non-aeronautical revenue for the Port.
A new egress stair from the mezzanine level will exit into baggage claim. Directly behind the
egress stair is a proposed storage room for lifts and/or a potential baggage claim office location.
All existing exits from GML hall will be maintained throughout the project. The future design will
be responsible for confirming that all exit egress pathways are maintained.
This project will require a focused, multi-phased construction sequencing plan to coordinate
projects within the Concourse A footprint and across the larger airport campus. Additionally,
extensive, and constant communication will be required to inform all required Port stakeholders
throughout the project’s duration to ensure impacts to the Port and passenger experience are
limited to the extent practicable.
Additionally, the selected Operator, under a normal tenant improvement, will also complete the
design and construction of a new Duty-Free location within the South Concourse Expansion.
Construction of the South Concourse Duty-Free location is anticipated to begin as early as 2027.
Schedule
Design Start
2024 Q3
Full Project Authorization
2025 Q4
NTP for Construction
2025 Q4
In-use date
2027 Q3
COMMISSION AGENDA – Action Item No. 10b Page 4 of 6
Meeting Date: April 16, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Cost Breakdown
This Request
Total Project
Design
$8,600,000
$10,346,000
Preconstruction Services
$1,500,000
$1,500,000
Construction
0
$34,585,000
Total
$10,100,000
$46,431,000 - $60,000,000
The $46.4M listed above represents the low range of the estimated total project value. Once all
costs have been vetted against the 100% design package, the project team will seek Commission
approval for the full project authorization, including the total TRA value.
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – Do not increase the total leasable square footage of Duty-Free operations. Under
this alternative the Port would not move forward with any improvements/modifications to
Concourse A.
Cost Implications: $549,360 (actual costs to date)
Pros:
(1) Remaining estimated capital budget of $45,881,640 could be saved.
(2) This is the lower cost alternative.
Cons:
(1) Current project costs would be wasted.
(2) Loss of opportunity to expanded Duty-Free square footage, maximize non-aeronautical
revenue, and struggle to meet current and future international passenger demands.
(3) Does not increase SEA’s competitiveness within regional and global markets or improve
SEA’s current Duty-Free ranking among large-hub U.S. airports.
This is not the recommended alternative.
Alternative 2 – Re-evaluate the overall project to implement partial elements of the scope
identified in the PDD and forgo the execution of a TRA to complete Concourse A
improvements/modifications.
Cost Implications: $549,360 (actual costs to date)
Pros:
(1) The reevaluated scope could potentially alleviate project conflicts and construction
phasing impacts with Checkpoint #1.
(2) Potential to reduce impacts to operations at the airport.
Cons:
(1) Significantly delays the overall project schedule to reevaluate critical scope and
construction phasing.
COMMISSION AGENDA – Action Item No. 10b Page 5 of 6
Meeting Date: April 16, 2024
Template revised June 27, 2019 (Diversity in Contracting).
(2) ADR will need to recompete the Duty-Free RFP as the business model and offering will
have changed and the economics associated with the proposals are no longer justified
without the full amount of square footage available to the operator. With reevaluation
of options there will be additional cost implications for rework of PDD efforts to date.
(3) Completing any necessary base building modifications in the future would likely be
more costly.
This is not the recommended alternative.
Alternative 3 – Execute the TRA contract between the Port and Duty-Free Operator and Approve
the necessary funds to support and reimburse for design development preconstruction services.
Cost Implications: $10.1M
Pros:
(1) Meets Port’s Century Agenda to strengthen the competitiveness of SEA in both the
regional and global marketplaces.
(2) Provides expanded Duty-Free footprint to meet current and future international
passenger demands.
(3) Maximizes Port’s non-aeronautical revenue.
Cons:
(1) Impacts to the passenger experience during construction with a project this size and
complexity.
(2) Increased project-to-project coordination with adjacent Checkpoint #1 project and
increased passenger impacts because of multiple project closures in the Concourse A
vicinity.
(3) Large capital investment. Current estimated total project value is $46M - $60M.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Estimates included in the table below are represented as the low end of the current total project
value of $46M - $60M. Completion of the 100% design will inform more accurate project costs
and drive the forthcoming request to lock in both the TRA value and the total project costs.
Cost Estimate/Authorization Summary
Capital
Expense
Total
COST ESTIMATE
Original estimate
$33,366,000
$0
$33,366,000
Current change
$12,565,000
$500,000
$13,065,000
Revised estimate
$46,431,000 -
$60,000,000
AUTHORIZATION
Previous authorizations
$1,746,071
0
$1,746,071
COMMISSION AGENDA – Action Item No. 10b Page 6 of 6
Meeting Date: April 16, 2024
Template revised June 27, 2019 (Diversity in Contracting).
Current request for authorization
$9,600,000
$500,000
$10,100,000
Total authorizations, including this request
$11,346,071
$500,000
$11,846,071
Remaining amount to be authorized
$35,100,000 -
$48,700,000
Annual Budget Status and Source of Funds
This project, CIP C801206, was included in the 2024-2028 capital budget and plan of finance with
a budget of $45,931,000. The funding sources will include the Airport Development Fund and
revenue bonds.
Financial Analysis and Summary
Project cost for analysis
$46 - $60 million
Business Unit (BU)
Commercial Management
Effect on business performance
(NOI)
Over the course of the term for Duty Free, NOI will range
from $90 million-$110 million depending on project cost.
New additional non-aeronautical revenue will ramp up
from approximately $5.6 million to $10.1 million in year
20. Breakeven is expected from 9 to 11 years depending
on project cost.
NPV
$5.7 million-$23.5 million (depending on project cost)
CPE Impact
N/A
Future Revenues and Expenses (Total cost of ownership)
Non-aeronautical revenues are estimated to be approximately $5.6M (year 1) - $10.1M (year 20)
based on projected Duty-free sales per international enplaned passenger and long-term
passenger traffic forecasts.
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
October 24, 2023 – Lease and Concession Termination Agreements for Concessionaries
Concourse A (Duty-Free Construction)
October 26, 2021– Complete Project Definition Document and release the RFP to select a
Duty-Free Operator
