PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.       6f 
ACTION ITEM 
Date of Meeting    November 5, 2013 
DATE:    October 28, 2013 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:   Patricia Spangler, Real Estate Manager 
Melinda Miller, Director, Portfolio and Asset Management 
SUBJECT:  New Ten-Year Term Lease at Terminal 34 with Masters, Mates and Pilots
Maritime Advancement Training, Education, and Safety Program d.b.a. Pacific
Maritime Institute 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to execute a lease for a tenyear
term with one five-year option substantially as drafted in Attachment 1 and according to the
terms laid out in the memorandum at a fair market rate, with Masters, Mates and Pilots Maritime
Advancement Training, Education, and Safety Program d.b.a. Pacific Maritime Institute at
Terminal 34. 
SYNOPSIS 
Pacific Maritime Institute provides advanced education and training for masters, mates and pilots
supporting the mission of the Port to promote the maritime industry. Pacific Maritime Institute is
a current tenant with the Port occupying industrial flex space that includes 15,084 square feet of
industrial flex space and 29,545 square feet of improved land at Terminal 34. Pacific Maritime
Institute wishes to enter into a new lease with the Port at the expiration of their current ten-year
lease term, expiring March 31, 2014. Port staff has negotiated a new ten-year lease that includes
one five-year option to extend; terms discussed later in this memo. Port staff determined an
initial market rate of $9.40 per square foot for the industrial flex space and $2.90 per square foot
for the improved land.  The total rent received over the term of the lease is approximately two
million dollars. This lease obligates the Port to $85,000 of tenant improvement allowance and a 
broker commission fee of $93,602 for a total amount of $178,602. 
BACKGROUND 
The building and improved parking lot on Terminal 34 was constructed in 1950 and consists of a
15,084 square foot single-story masonry commercial building and a 29,545 square foot improved
parking lot. In 1993, the Port purchased Terminal 34, located at 1727 Alaskan Way, from Flint, 
Inc. The facility remained vacant for several years. In 2003, the Port signed a ten-year lease
with Pacific Maritime Institute (PMI). At that t ime the facility was in very poor condition. Prior
to occupancy the building was substantially renovated with PMI contributing $350,000 and the
Port funding $400,000 toward the improvements.

Template revised May 30, 2013.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 28, 2013 
Page 2 of 5 

PMI's importance to the maritime industry should not be understated. It is a leader in maritime
training and education and helps mariners maintain and advance their qualifications, assists 
individuals who would like to enter the maritime profession, and provides operational research
services for the maritime industry. PMI also provides sophisticated simulation services with
specialties in the areas of simulation databases and operational research models. PMI's full
mission ship simulator is one of only three on the West Coast. For many of the courses offered,
there are no equivalent alternatives north of the San Francisco Bay Area.
MARKET CONDITIONS 
Port staff met with PMI early in the first quarter of this year to discuss their interest in
negotiating a new lease at the end of their current term. PMI decided to work with a tenant
broker and issued a request for proposal to the brokerage community. At that time, Port staff
contacted the United States Coast Guard (USCG), occupying the west parcel on Terminal 34 
adjacent to the PMI parcel. The USCG was interested in the property; however, to enter into a
purchase or lease was not an option due to the current sequester limiting federal funds. The
USCG referred Port staff to the Exchange. The Exchange is a supplemental department of the
military funded by their retail sales and not reliant on federal funding. The Exchange supports 
the Seattle USCG currently located on the USCG base on Terminal 34. The Exchange was
looking to expand the size of their current facility and considered the PMI parcel an option to
relocate. Ultimately, the E xchange decided their current location would work for their expansion
plan. 
In order to establish the market rate for Terminal 34 industrial flex space, Port staff engaged the
services of a real estate appraisal firm through an existing IDIQ contract.  The appraisal
evaluated recent lease transactions of other similar office and industrial properties in the Seattle
area and concluded that the market rate for the office building was $7.95 per square foot per
year, triple net and $2.40/sf./yr. triple net for the improved yard area. The Port negotiated rates
in line with the appraisal rates of $9.40/sf./yr. triple net for the office building and $2.90/sf./yr. 
triple net for the improved yard with annual two and a half percent (2.5%) increases and
renegotiated rent commencing the sixth year. 
TERMS OF PROPOSED LEASE 
The major elements of the proposed term lease are outlined below: 
Term:          Ten years commencing April 1, 2014 
Use:            Administrative office and classrooms providing the education and training
for the maritime industry and parking for approximately 54 vehicles. 
Premises:         Premises consists of approximately 15,084 square feet of industrial flex
space and 29,545 square feet of improved land used for parking.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 28, 2013 
Page 3 of 5 
Base Rent:        15,084 square feet of industrial office @ $9.40 per square foot = $141,790 
29,545 square feet of improved land @ $2.90 per square foot = $85,681 
Rent Increase:      The Base Rent shall be adjusted on the anniversary of the rent
commencement date and annually thereafter through year five by two and
a half percent. The rent will be renegotiated in year six to the then fair
market rental value and shall increase annually through year ten by two
and a half percent.
Option to Extend:    PMI has an option to extend for one five year term. The rental rate the
option term will be at the then market rate. 
Operating Expenses:  PMI shall be responsible for all utilities, repairs and maintenance of the
building and the improved land.
Port Improvements:  The Port will provide a tenant improvement allowance not to exceed
$85,000 toward the cost of one new HVAC unit and new carpet. 
Security Deposit:    The Port requires a security deposit in the amount of $127,421.72; equal to
the average of six month's rent over the term of the lease. 
Remove Easement 
for Ingress/Egress:   PMI shall cause the removal of the exiting Ingress/Egress Easement that
granted access through Port owned Jack Perry Park to the parking lot
located on the west side of the property directly behind the office building. 
License for Temporary 
Occupancy or Use:  The Port will enter into a License for Temporary Use and/or Occupancy to
grant PMI ingress/egress to PMI's parking lot located behind the building
with the only means of access through Port owned Jack Perry Park from
the south side.
FINANCIAL IMPLICATIONS 
Budget/Authorization Summary              Capital     Expense   Total Project 
Original Budget                            $0          $0          $0 
Previous Authorizations                       $0          $0          $0 
Current request for authorization                  $0      $178,602      $178,602 
Total Authorizations, including this request           $0      $178,602      $178,602 
Remaining budget to be authorized               $0          $0          $0 
Total Estimated Project Cost                    $0     $178,602     $178,602

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 28, 2013 
Page 4 of 5 
Project Cost Breakdown                     This Request       Total Project 
Tenant Improvement Allowance                  $85,000          $85,000 
Leasing Broker Commission                     $93,602          $93,602 
Other                                          $0               $0 
Total                                       $178,602           $178,602 
Budget Status and Source of Funds 
The operating expense portion of the project costs will be included in the 2014 Operating
Expense Budget and the portion of the tenant improvements qualifying for capitalization are
provided for in Committed CIP C800126 Tenant Improvements.
The source of funds will be the Real Estate General Fund.
Financial Analysis and Summary 
CIP      N/A 
Category 
Project Type  N/A 
Risk      7.0% 
adjusted
discount rate 
Key risk    Risk of tenant default, which is partially mitigated by: 
factors          Security deposit in the amount of $127,423 
Good standing status as a current tenant of the Port 
Project cost   $178,602 
for analysis 
Business    Portfolio Management, Real Estate Division 
Unit (BU) 
Effect on    Net Operating Income After Depreciation for the period Year 1 through Year
business     5 is shown below: 
performance  NOI (in $000's)      2014    2015    2016    2017    2018
Revenue          $171    $232    $238    $243    $250
Expenses         ($134)    ($4)     ($4)     ($4)     ($4)
NOI            $36    $228    $234    $239    $245
Depreciation          ($4)      ($5)      ($5)      ($5)      ($5)
NOI After Depreciation    $33     $219     $225     $231     $236
Lower Net Operating Income in Year 1 is primarily a reflection of the
payment of Broker Commissions ($94K) and the expensed portion of the
tenant improvements ($38K). Depreciation is based on the capitalized portion
of the tenant improvements (HVAC unit cost of $47K) depreciated over a 10
year useful life.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 28, 2013 
Page 5 of 5 
IRR/NPV     NPV    IRR   Payback
(in $000's)    (%)      Years
$1,613     NA      2
The NPV is based on incremental net cash flows generated by the lease and
does not factor in the underlying value of the land and improvements. The
basis for establishing the market rate for the lease is described in the memo
under "Marketing Conditions". 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1) Not enter into a new lease with PMI; Pursing a new Tenant. 
Port staff could advertise through a request for proposal in pursuing another potential tenant for
Terminal 34. This option has several risks: the Port may receive proposals with lower rental
rates than currently negotiated with PMI, no revenue to the Port during the downtime between
vacating PMI and new tenant's start, and the new Tenant would likely require higher funding by
the Port for tenant improvements.  PMI would relocate elsewhere which is no easy task,
interrupting their scheduled education and training courses that support the maritime industry.
This is not the recommended alternative. 
Alternative 2)  Keeping with the current use of the property as currently improved by
proceeding with the proposed lease agreement that will increase the revenue to the Port. In
addition PMI as a long-term tenant of the Port will continue to provide education and training to
the maritime industry supporting the mission of the Port and aligns with the Commission's 
interest in retaining maritime related jobs and training facilities. This is the recommended
alternative. 
ATTACHMENTS TO THIS REQUEST 
Draft Term Lease 
PowerPoint presentation