Template revised January 10, 2019.
COMMISSION
AGENDA MEMORANDUM
Item No. 10a
ACTION ITEM Date of Meeting April 8, 2025
DATE: April 1, 2025
TO: Stephen P. Metruck, Executive Director
FROM: Jeff Wolf, Director, Aviation Commercial Management
Eileen Francisco, Director, Aviation Project Management Group
SUBJECT: Tenant Airport Dining and Retail Shell and Core Renovations (CIP #C801427)
Amount of this request: $10,073,000
Total estimated project cost:
$10,373,000
ACTION REQUESTED
Request Commission authorization for the Executive Director to take all steps necessary to
complete the Tenant Airport Dining and Retail (ADR) Shell & Core Renovations (TASCR) project at
the Seattle-Tacoma International Airport (SEA or Airport), for a total project authorization of
$10,373,000.
EXECUTIVE SUMMARY
The TASCR project includes the demolition of a total of 18 ADR tenant spaces upon lease
expiration from 2026 to 2028, and if warranted, updates to critical base building infrastructure
to current Port standards and applicable building codes. Upon completion, the Port will provide
future ADR tenants lease spaces with standardized base building conditions ready for
construction, known as a “cold” shell, to ensure known conditions for the subsequent build-out
of new lease spaces. Currently, the Port anticipates most of the scope within the 18 spaces to be
design and demolition only; however, potential construction may be required and will be
evaluated as each space is demolished and accurate as-is conditions are revealed to better inform
any necessary repairs/modifications. All design and demolition costs will need to be expensed,
while any improvements to base building infrastructure will be capitalized.
JUSTIFICATION
The TASCR project is a Commission-approved initiative intended to lower tenant project costs
and remove barriers to entry by providing tenants with a cold shell for buildout. Historically,
tenants would receive new ADR leased spaces under an “as-is” condition. Spaces in these as-is
conditions were inconsistent among leased spaces, included outdated/noncompliant base
COMMISSION AGENDA – Action Item No. 10a Page 2 of 6
Meeting Date: April 8, 2025
Template revised June 27, 2019 (Diversity in Contracting).
building infrastructure in need of repair, or contained abandoned tenant infrastructure not
represented in as-builts. These conditions significantly contributed to increased tenant buildout
costs or prohibited tenants from bidding on spaces due to the financial investment required to
bring all Port-leased spaces up to current and applicable building codes.
Diversity in Contracting
The project will aspire to an 11% women-and minority-owned business enterprise (WMBE) goal
for design and 16% WMBE goal for construction (to be delivered under a Job Order Contract
[JOC]).
DETAILS
On December 14, 2021, the Commission adopted Order 2021-15, a “Tenant Build-Out Analysis”
recommendation from staff for ADR New Best Practices. These best practices included ADR
master planning efforts, a review of current Port standards, for the purposes of creating ADR
specific buildout standards, and finally the Port requirement to demolish expired leased spaces,
address outdated/non-compliant base building infrastructure, and provide the tenants with a
cold shell for their buildout.
On March 8, 2022, Commission approved lease extensions for the impacted tenants as identified
in the Build-Out Analysis and approved the best practices summarized above. In response, staff
initiated the TASCR project.
TASCR Project Development
From 2024 to 2025, the Port completed preliminary site investigations and developed a baseline
scoping document for the required demolition and potential base building upgrades in each
designated space. During design, the Port will make reasonable attempts to accurately identify
risks behind walls and ceilings through as-built document review and additional on-site
investigations; however, these scope assumptions can only be validated when existing tenant
lease agreements expire, and the Port can complete full interior demolition and expose existing
conditions.
There is a high risk of encountering unforeseen circumstances because the project has limited
and inaccurate as-built information to properly inform project estimates. To account for this risk,
a higher construction contingency has been requested to address these potential unknown base
building modifications.
To further mitigate project risks, the Port plans to solicit and award a project-specific design-
specific contract and use an existing JOC for construction. Delivering the project under these
contracting mechanisms will provide the best opportunity for consistency over the two-year
period and to help mitigate risks with the potential construction.
COMMISSION AGENDA – Action Item No. 10a Page 3 of 6
Meeting Date: April 8, 2025
Template revised June 27, 2019 (Diversity in Contracting).
The project anticipates a 25% capital, 75% expense split.
Item Original Estimate Current Estimate
Preliminary funds $300,000 $300,000
Design & Soft Cost (expense) $1,759,000 $2,547,000
Design & Soft Cost (capital) $405,000 $399,000
Construction – demolition (expense) $5,672,000 $5,658,000
Construction – infrastructure improvements (capital)
$2,064,000 $1,868,000
TOTAL
$10,200,000 $10,373,000
Scope of Work
The project scope is separated into two distinct categories: known demolition and potential
construction:
Known demolition scope includes the removal of storefront finishes, signage, interior
drywall and ceiling to expose metal studs, demolition of floor sinks and drains (back to
the source), and the removal of food service equipment and hood systems. All 18 spaces
will undergo full interior demolition.
Potential construction scope includes the evaluation and/or upgrades to fire suppression
systems, tenant demarcation units for tenants’ digital and analog communications
systems, grease waste piping, and any other upgrades needed for code and/or standards
compliance.
Construction will occur in three phases in conjunction with lease expirations.
Schedule
Activity
Commission design & construction authorization
2025 Quarter 2
Design start 2026 Quarter 1
Construction start 2027 Quarter 1
Phase 1 spaces In-use date 2027 Quarter 4
Phase 2 spaces In-use date 2028 Quarter 4
Phase 3 Spaces In-use date 2029 Quarter 2
Cost Breakdown This Request
Total Project
Preliminary funds $0
$300,000
Design & Soft Cost (expense) $2,148,000
$2,148,000
Design & Soft Cost (capital) $399,000
$399,000
Construction – demolition (expense) $5,658,000
$5,658,000
Construction – infrastructure improvements (capital) $1,868,000
$1,868,000
COMMISSION AGENDA – Action Item No. 10a Page 4 of 6
Meeting Date: April 8, 2025
Template revised June 27, 2019 (Diversity in Contracting).
Total $10,073,000
$10,373,000
ALTERNATIVES AND IMPLICATIONS CONSIDERED
Alternative 1 – ADR tenants receive an equitable monetary payment to address expenses
associated with the required repairs/modification to outdated/noncompliant base building
infrastructures.
Cost Implications: Unknown but could total several million dollars.
Pros:
(1) Project cost of $10,073,000 could be saved as only preliminary funds ($300,000) have
been incurred to develop the Notebook.
Cons:
(1) This may still result in significant financial impact to the Port as this would require
payment to tenants for the base building infrastructure upgrades.
(2) Elongates tenant design and construction process to incorporate base building
infrastructure design, procurement, and construction.
(3) The tenants would be responsible for the revenue loss if they are performing the base
building infrastructure work. The tenants would front design and construction costs for
the TASCR work that the Port would eventually reimburse.
This is not the recommended alternative.
Alternative 2 – ADR tenants receive equitable lease extensions to address expenses associated
to outdated/noncompliant base building.
Cost Implications: No additional monetary cost to the Port.
Pros:
(1) Tenants would be granted additional term to more equitably amortize their
investments to offset any additional unforeseen costs associated with updating base
building infrastructure. Revenue continues to be generated at the Airport with no out
of pocket expense to the Port, except for the $300,000 preliminary costs already
incurred.
Cons:
(1) The lease extensions would delay future new concepts from coming into the Airport.
(2) This will limit opportunities for new business entry within the ADR program due to
higher up-front costs for future tenants.
(3) Does not meet the Commission-approved framework established for future ADR space
turnover.
(4) This model does not ensure future spaces have consistent base building conditions
meeting Port standards as each tenant does their own demolition/build-out.
This is not the recommended alternative.
COMMISSION AGENDA – Action Item No. 10a Page 5 of 6
Meeting Date: April 8, 2025
Template revised June 27, 2019 (Diversity in Contracting).
Alternative 3 – Provide ADR tenants with a cold shell and address any necessary base building
conditions.
Cost Implications: $10,373,000.
Pros:
(1) Reduces tenant costs and removes the responsibility to update/repair base building
infrastructure within tenant lease lines.
(2) Removes barriers to entry for new businesses by providing tenants with a cold shell for
buildouts.
(3) Accomplishes Commission direction through Order 2021-15 passed in 2021 and relief
granted to tenants in March 2022.
Cons:
(1) Port incurs the expense and capital cost to demolish the existing spaces and update
outdated base building infrastructure.
This is the recommended alternative.
FINANCIAL IMPLICATIONS
Cost Estimate
/Authorization Summary Capital
Expense
Total
COST ESTIMATE
Original estimate $10,200,000
$0
$10,200,000
Current change ($7,633,000)
$7,806,000
$173,000
Revised estimate $2,567,000
$7,806,000
$10,373,000
AUTHORIZATION
Previous authorizations $300,000
0
$300,000
Current request for authorization $2,267,000
$7,806,000
$10,073,000
Total authorizations, including this request $2,567,000
$7,806,000
$10,373,000
Remaining amount to be authorized $0
$0
$0
Annual Budget Status and Source of Funds
This project, CIP 801427, was included in the 2025-2029 capital budget and plan of finance with
a budget of $10,200,000. Staff subsequently determined that most of this scope does not qualify
for capitalization. The Capital budget decrease of $7,633,000 was transferred to the Non-
Aeronautical Allowance CIP C800754, resulting in no net change to the Airport's capital budget.
The funding sources for the remaining capital portion of this project include the airport
development fund and revenue bonds.
COMMISSION AGENDA – Action Item No. 10a Page 6 of 6
Meeting Date: April 8, 2025
Template revised June 27, 2019 (Diversity in Contracting).
Since this project was initially assumed to qualify for capitalization, it was not included in
operating expenses in the 2025 Budget. The forecasted expense portion amount of
approximately $90,000 in 2025 will be an unbudgeted expense.
The total estimated expense portion of this project is $7,806,000. The planned expense spending
for subsequent years will be included in future annual operating budgets. The expense portion
of this project will be funded from the airport development fund.
Future Revenues and Expenses (Total cost of ownership)
The TASCR project will ensure the continuity of future lease revenues associated with the 18 ADR
locations within the terminal, reduce risk to future tenants during the build-out phase of their
leased space, and shorten the associated tenant build-out construction timelines. The Port’s
investment in preparing the tenant space to meet current Port standards and applicable building
codes will directly reduce Non-Aeronautical NOI by the incremental operating expenses
estimated by year as shown below.
Estimated Expense Timing
(in $millions)
2025
Budget
2026
Budget
2027
Budget
2028
Budget
2029+
Budget
Total
Expense
Operating Expense portion (TASCR) $0.1 $1.9 $3.2 $1.6 $1.0 $7.8
ATTACHMENTS TO THIS REQUEST
(1) Presentation slides
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS
December 14, 2021 – Commission approved a Motion (now called an Order, Order 2021-15)
directing the Executive Director to evaluate the levels of financial impacts experienced by
Airport Dining and Retail Tenants and recommend appropriate relief.
March 8, 2022 – The commission approved a new Best Practice to address additional costs
for Airport ADR tenant buildouts.
