PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.      5b 
ACTION ITEM 
Date of Meeting     October 8, 2013 
DATE:    September 30, 2013 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:   Melinda Miller, Director Portfolio & Asset Management 
Rebecca Schwan, Real Estate Manager 
SUBJECT: Term Lease with Fishing Vessel Owners Marine Ways, Inc. at Fishermen's
Terminal 
Revised October 4, 2013 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to execute a lease for a ten 
year term  with two additional five year options  according to the terms laid out in this
memorandum at a fair market rate, with Fishing Vessel Owners Marine Ways, Inc. at
Fishermen's Terminal. 
SYNOPSIS 
Fishing Vessel Owners Marine Ways, Inc. (FVO) is a marine vessel repair and dry dock
operation established in 1919, with a work force of 35 to 48 employees, most of which are union
wage jobs. In addition to providing dry dock services, FVO has a machine shop, welding shop,
wood shop, sand blasting and painting operation and a parts supply store. They also provide
ancillary services to other ship repair operations in the Pacific Northwest. They were the first
tenant of the Port of Seattle and have been serving the commercial fishing fleet for 95 years,
supporting the Port's mission to promote the maritime industry. 
A large portion of the Alaska halibut fleet was built and repaired at the facility. The business
relies on railways and century-old winch equipment to pull boats from the water for dry-dock
repairs. FVO has one 300 ton and one 600 ton marine rail. They can haul out up to a 250 foot 
vessel. Only two other shipyards in the area have marine rails. 
The FVO lease is currently on holdover status. Port staff has negotiated a ten-year lease with
two additional five-year options. The rates are based on the response from a recent request for
proposal that is addressed later in this memo. The lease requires no investment by the Port. 
BACKGROUND 
The Port entered into a lease with FVO in 1919 to manage and operate a commercial shipyard.
The lease was renewed and extended many times throughout the years. In 1978 FVO signed a
25-year lease with the Port. At that time they built what is known as the I-3 Building and the M-

Template revised May 30, 2013.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
September 30, 2013 
Page 2 of 5 
4 building, which housed their office, warehouse, and machine shop. The lease stated that at the
end of the 25-year term, ownership of the two buildings would revert to the Port.
The lease was amended several times over the years, renegotiating the rent and expanding the
lease premises. In 2003, FVO signed a five-year lease. At this time the Port had started Phase 3
of the South Wall Construction Project and acknowledged that the impacts of the project would
be extremely difficult and impracticable to ascertain, so the Port agreed to reduce the rent to
represent a reasonable estimate of the amount of damages that the lessee would suffer as a result
of the project. FVO in turn released the Port from any loss or damages relating to the project.
In 2007, the Port amended the lease and extended the term through September 2009. The lease
then went into holdover status and in 2010 FVO entered into a two-year lease that took into
account the impacts of Phase 4 of the South Wall Construction Project, which would encumber a
portion of their yard for approximately two years. The project was completed in 2012 and the
lease went into holdover.
The following is a list of improvements and upgrades that were performed by FVO over the past
40 years: 
1974  Replaced the old wooden haul out ways and constructed a new steel haul out on
the east side of the dock. 
1979  Replaced the wooden west cradle with steel. 
1983  Installed the electrical system and air system in the yard, building way and dock
3. 
1987  Installed the side track system. 
1987  Installed the overhead crane system in the machine shop. 
1989  Installed new fence around the perimeter of the property ending at the first bridge
column on the south east side of the property. FVO installed the portion that is on its
lease premises. 
1990  Graded yard area and installed asphalt. 
1994  Removed tracks and underwater wood timbers. Installed new piling and installed
underwater steel I-beams and new tracks on east haul out ways. 
1995  Installed more steel cross beams, diamond steel plates and sump pump for water
containment for National Pollutant Discharge Elimination System permit. 
MARKET CONDITIONS 
In 2012, the Real Estate Division obtained an appraisal for the FVO lease site. The Port entered
into negotiations based on the appraisal. The Port was unable to come to terms with FVO on the
rent. Division Management decided to send out a request for proposal for a long-term lease for a
commercial shipyard or boatyard to see what the market reflected as market rate rents for a
commercial shipyard or boatyard. The request for proposal was published on January 26, 2013, 
and the deadline for submittals was April 26, 2013. FVO was the only entity that submitted a
proposal. FVO proposed a monthly rental of $15,071 per month. FVO is currently paying

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
September 30, 2013 
Page 3 of 5 
$14,178 per month. Their proposal asks for zero investment by the Port over the term of the lease
and no free rent. In addition, there are no commission fees associated with this lease. 
TERMS OF PROPOSED LEASE 
The major elements of the proposed term lease are outlined below: 
Term:               Ten years plus two additional five-year options. 
Rent Commencement Date:  November 1, 2013. 
Premises:              Premises consists of multiple industrial buildings located on
approximately 43,866 square feet of uplands and 136,138 square
feet of submerged land.
Base Rent:             2,800 square feet of office @ $10.00 per square foot per year =
$2,333.33 per month. 
15,683 square feet of warehouse @ $5.00 per square foot per year
= $6,534.58 per month. 
28,183 square feet of improved land @ $1.58 per square foot per
year = $3,710.76 per month. 
136,138 square feet of submerged land @ $0.22 per square foot per
year = $2,495.86 per month. 
Total Monthly Rent of $15,074.53. 
Annual Rent of $180,894.36. 
Plus Leasehold Tax. 
Rent Increases:          Base rent shall be subject to annual adjustments in proportion to
the percentage change in the Consumer Price Index for all Urban
Consumers. In addition, rent shall be subject to renegotiation at
the end of the 60th month following the commencement of this
lease and every 60 months thereafter. 
Rent Abatement:        None. 
Operating Expenses:      Lessee is responsible for the utilities and all the repairs and
maintenance within their premises.  Port of Seattle has no
maintenance responsibilities whatsoever. 
Port Improvements:       None. 
Security:               Lessee shall provide a cash deposit, corporate surety company
bond or irrevocable stand-by letter of credit in the amount of
$95,000, which is equal to six months' base rent over the term of
the lease. 
Insurance/ Liability:       $2 million General Liability.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
September 30, 2013 
Page 4 of 5 
Assignment/Sublease:     Conditioned on the Port's prior written consent. 
FINANCIAL IMPLICATIONS 
Financial Analysis and Summary 
CIP Category           N/A 
Project Type             N/A 
Risk adjusted discount rate   7.0% 
Key risk factors           Risk of tenant default, which is partially mitigated by: 
$95,000 Security deposit (6 months base rent) 
Good standing status as an existing tenant of the Port 
Project cost for analysis      N/A 
Business Unit (BU)         Portfolio Management, Real Estate Division 
Effect on business         No incremental expense is generated. Incremental revenue is
performance            as follows: 
NOI (in $000's)   Year 1   Year 2   Year 3   Year 4   Year 5
Revenue       $181   $186   $192   $198   $204
Expenses        $0     $0     $0     $0     $0
NOI         $181   $186   $192   $198   $204
IRR/NPV              NPV    IRR   Payback 
(in $000's)    (%)     Years 
$1,421     NA      NA 
The NPV is based on incremental net cashflows generated by
the lease and does not factor in the underlying value of the
land and improvements. The basis for establishing the rate
for the lease is described in the memo under "Market
Conditions." 
CPE Impact           N/A 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1)  Not enter into a lease with FVO. Port staff could reissue another request for
proposal for a commercial shipyard or boatyard. Judging from the results of our recent request
for proposal for this use, it is likely we would get the same outcome. Even if we did receive
proposals from submitters other than FVO, they could be at less attractive terms for the Port and
we could end up having to invest Port dollars for improvements, which is not the case with the
proposed lease with FVO. In addition, the request for proposal process can take months to
complete and demands a significant amount of time and resources from Port staff. There is also
the issue of environmental clean-up should the shipyard vacate the premises and a new shipyard
or boatyard take its place. Although the current lease addresses this issue, it is likely that this
could fall on the shoulders of the Port. FVO has an Industrial National Pollutant Discharge

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
September 30, 2013 
Page 5 of 5 
Elimination System (NPDES) Permit with the Department of Ecology. A new shipyard or
boatyard would be required to obtain their own permit, which could have more stringent
requirements than the one held by FVO and make it difficult for another shipyard or boatyard
operator to conduct business at the site. This is not the recommended alternative. 
Alternative 2)  Not enter into a new lease with FVO. Port  staff could advertise through a
request for proposal and pursue a non-shipyard tenant for the premises. In doing so the Port
would lose its longest standing tenant and an amenity that attracts and retains many of our
commercial fishing customers. FVO would have to find another location, which we know from
our dealings with the Monorail in 2004 would be extremely difficult, if not impossible. There is
also the issue of environmental clean-up should the shipyard vacate the premises. Although the
current lease addresses this issue, it is likely that this could fall on the shoulders of the Port. The
premises could remain vacant for an unknown time period resulting in loss of revenue to the
Port. Should the Port receive submittals to the request for proposal, these submittals could be at
less attractive terms for the Port and we could end up having to invest Port dollars for
improvements, which is not the case with the proposed lease with FVO. In addition, the request
for proposal process can take months to complete and demands a significant amount of time and
resources from Port staff. This is not the recommended alternative. 
Alternative 3)  Execute the proposed lease with FVO.  Proceeding with the execution of the
proposed lease would secure a maritime tenant that directly supports the commercial fishing
industry for at least another five years. FVO was the first tenant of the Port of Seattle. They
provide living wage union jobs to dozens of highly skilled shipwrights, millwrights, machinists,
metal workers and other skilled workers. By going through the public process of a request for
proposal for a commercial shipyard, the Port has confirmed that the rates in this lease are at 
market for this specific property and use. From an environmental perspective it benefits the Port
to have a continuous use and tenant with knowledge and expertise in the ship repair business on
this site, Ship yards are highly regulated by multiple agencies and requires in-depth knowledge
of such regulations to operate in an environmentally responsible manner.  If the Port does not
execute this lease, we could risk losing commercial fishing moorage tenants who have been loyal
customers of FVO for many years, some for generations. Fishermen's Terminal is the homeport
of the North Pacific Fishing Fleet, the hub of the maritime industry on the Lake Washington Ship
Canal and a significant economic engine for Puget Sound and the region. Fishermen's Terminal
generates jobs and helps the Port to achieve one of its Century Agenda goals of doubling the
economic value of the fishing and maritime sectors. The execution of this lease is in line the 
Port's commitment to the maritime industry. This is the recommended alternative. 
ATTACHMENTS TO THIS REQUEST 
Computer slide presentation. 
Signed Lease. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None.