COMMISSION 
AGENDA MEMORANDUM                        Item No.          6b 
ACTION ITEM                            Date of Meeting    September 12, 2017 
DATE:     September 1, 2017 
TO:        Dave Soike, Interim Executive Director 
FROM:    Susie Archuleta, Real Estate Manager 
Melinda Miller, Director, Portfolio and Asset Management 
SUBJECT:  Washington Technology Industry Association New Lease Approval 
Amount of this request:                 $205,184 
Total estimated project cost:            $205,184 
ACTION REQUESTED 
Request Commission authorization for the Executive Director to 1) enter into a new 7-year
lease with Washington Technology Industry Association (WTIA) in the World Trade Center West
Building (WTCW), which will expand their existing premises; 2) terminate the existing WTIA
lease; and 3) terminate the existing lease of the adjacent expansion premises, currently being
leased by Astamed, Inc. 
EXECUTIVE SUMMARY 
The purpose of this request is to provide WTIA, an existing WTCW tenant, the ability to expand
their office space.  Staff negotiated a new lease with a 7-year term at market rates for the
expanded premises.
JUSTIFICATION 
Staff is proposing this new lease to support the stabilization of WTCW occupancy and revenues.
Staff also strives for market rates in all lease negotiations and was able to achieve market rates
in the proposed WTIA lease.  After expansion, WTIA will be leasing 13% of the total building, so
the 7-year term and market rate successes apply to a material portion of the property.
In addition to furthering internal goals, this lease supports the ongoing success of one of its
valued tenants, WTIA.  WTIA  recently created two new programs, Apprenti which is an 
apprenticeship program, and HR Benefits, Inc., which provides human resource benefits for
Washington tech companies. WTIA's current office space is not large enough to accommodate
the operations of these new programs, creating the need for their expanded office premises.
Apprenti, was recently awarded a $7.5M contract from the Department of Labor to expand its
services nationally.   This long term growth requires more space than their current WTCW
office can accommodate.

Template revised September 22, 2016.

COMMISSION AGENDA  Action Item No. 6b                                  Page 2 of 5 
Meeting Date: September 12, 2017 

DETAILS 
WTIA was founded in 1984 and is a Washington non-profit trade association serving the
technology industry in Washington State. Their mission is to inform and motivate industry,
education  and  government  professionals  about  the  technology  industry; collaborate
productively in building technology focused education systems, physical infrastructure and
business climate and; ensure that the region continues as one of the world's most influential
technology hubs.  They consolidate the power of member companies to solve technological
business problems they cannot easily solve alone. Their guiding principle is to help Washington
residents gain access to tech-industry jobs. 
WTIA recently created two new programs. The first is a new apprenticeship program, Apprenti,
initially funded with $3.5 million in grants spread over five years from the US Department of
Labor and Washington State Labor and Industries. A subsequent award of $7.5 million from the
US Department of Labor brought the total funding so far to $10 million, and secured the
establishment of the Apprenti  program. Funding of this program is also provided by
foundations and the program itself, which earns $2,500 for each apprentice placed. The second
new program is HR Benefits, Inc., organized as a for profit corporation. HR Benefits, Inc. also
supports the tech industry by providing human resource benefits (medical, 401(k), etc.) to over
300 tech companies mainly located in Washington State but recently expanded to also serve
Colorado State. These two programs need additional office space because of staffing (the staff
count for expected to double by year end and double again by 2019) and also their heavy use of
meeting rooms for interviews, orientations, etc. As they expand operations, they prefer to stay
in their current WTCW location because it is centrally located to more than 75 percent of their
member base.  Also, remaining in WTCW means they avoid any disruption to employee
commuting habits. Consequently, WTIA now wishes to expand from their current 6,641 square
foot office to a 9,155 square foot office.
Apprenti aims to diversify the tech workforce and find workers to fill the talent gaps. It focuses
on opening a pathway into the tech workforce for minorities, including Hispanic and African
American employees, women and veterans. Only about 20 percent of tech workers are female,
less than three percent are Hispanic or African American, and even fewer are veterans.
Apprenti's new students join a two- to six- month training program in database administration,
project  management,  network  security  administration,  software  development  or  web
development.  The program is partnering with Code Fellows and other education centers in
Washington State for this training, which is currently offered to students for free.  The
apprentices are then placed in a one-year, full time internship with one of the organization's
partner companies, where they are paid 60 percent the salary of a fully qualified employee.
Working with partner companies that include Microsoft, F5 Networks, Accenture and Impinj, its
initial goal is to train and place 600 tech workers. 
As WTIA identified a need for more WTCW office space, the adjacent office suite coincidentally
became vacant. That suite is still currently under lease by Astamed, Inc., but Astamed moved

Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. 6b                                  Page 3 of 5 
Meeting Date: September 12, 2017 
out of their office in May 2016.  WTIA started subleasing Astamed's office and then began
negotiations with staff for a new lease that would combine their existing premises with the
adjacent sublease premises. The initial lease negotiations for a 5-year term provided a tenant
improvement allowance that WTIA rejected as insufficient. In order to provide WTIA the level
of tenant improvement allowance they wanted at the market rent rates that staff wanted, staff
lengthened the lease term from five to seven years. The proposed new lease allows WTIA to 
expand by terminating both the WTIA and Astamed existing leases, and creating a new WTIA
lease for the combined expanded premises. Astamed will pay an early termination fee, which
approximately covers rent, tax and operating expenses for their space during WTIA's
abatement period. 
Market Conditions 
The overall Seattle office market is strong, with vacancy rates continuing to fall in 2017 while
rents continue to rise. By comparison, the Seattle Belltown/Denny Regrade submarket, where
the WTCW building is located, is better described as sluggish. Vacancy rates in this submarket
increased slightly from 5.3% Q1 of 2017 to 5.8% in Q2 while asking rents remained nearly flat,
hovering around $21 per square foot (triple net) in both Q1 and Q2 (JLL).
The WTCW building's triple net rent is in line with the market range of $18-$23 per square foot 
(triple net) recommended by our broker. This property's close proximity to railroad tracks
(always a concern for prospective tenants), lack of public transportation, no tenant parking
within the building, and negative impacts of the current seawall and tunnel construction along
the waterfront tend to keep it at the lower end of the market range. Despite these challenges,
WTIA will pay a market rate of $19 triple net that escalates by $1 per year. 
Proposed key lease terms 
Term                         Seven years 
Lease Commencement Date     October 1, 2017 
Premises                       9,155 square feet of office space 
Initial Base Rent (triple net)       $19.00 per square foot per year plus 12.84% leasehold 
excise tax 
Rent Increases                   $1.00 per square foot per year 
Rent Abatement               up to 6 weeks on 2,156 sf expansion space only 
Operating Expenses             Pro rata share of all the building's operating expenses 
Tenant Improvements          $137,325, which is $15.00 per square foot 
Security Deposit                  $50,360, which is the average of three (3) months' rent 
over the term of the lease but not compliant with Port
Policy 
Broker Fees                     $67,859 (Inside and Outside Brokers) 
This proposed new WTIA lease will require the termination of two existing office leases: 
(1)  WTIA: 6,641 square feet, expiring August 31, 2019 
(2)  Astamed: 2,448 square feet, expiring March 31, 2018 

Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. 6b                                  Page 4 of 5 
Meeting Date: September 12, 2017 
Termination of these leases will be at midnight immediately prior to commencement of the
new lease. 
Cost Breakdown                                     This Request           Total Project 
Tenant Improvement Allowance                          $137,325             $137,325 
Broker Fees                                                 $67,859                $67,859 
Total                                                           $205,184                $205,184 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Status Quo  Do not approve the new WTIA 7-year lease. 
Cost Implications: No initial cost. 
Pros: 
(1)    No Port funds are required this year for a tenant improvement allowance or broker
commissions. 
(2)    No terminations of existing leases are required. 
Cons: 
(1)   Existing tenant will be forced to find a second, separate office space to support the
expansion of their business operations, eroding the goodwill of an existing tenant and
risking their future tenancy. 
(2)   Port will need to find a new tenant for the Astamed office upon their March 31, 2018
lease termination. 
o  Risk of reduced revenue during lease up period. 
o  New lease will likely incur expenses for a tenant improvement
allowance  and  broker  commission,  possibly  higher  than  those
provided to WTIA. 
This is not the recommended alternative. 
Alternative 2 WTIA new 7-year lease of expanded premises. 
Cost Implications: $205K ($137K TI allowance + $68K broker commission) 
Pros: 
(1)    Stabilize WTCW occupancy by securing 13% of building for 7 years. 
(2)    Support WTIA's long term growth and mission, creating goodwill and continuity. 
(3)    Minimal revenue disruption - abating rent only of expansion space until substantial
completion or 6 weeks, whichever is sooner, to accommodate construction of tenant
improvements. 
(4)    Simplify WTIA's lease management by requiring one lease instead of two, which is
their preference. 


Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. 6b                                  Page 5 of 5 
Meeting Date: September 12, 2017 
Cons: 
(1)   Highest upfront costs. 
This is the recommended alternative. 
FINANCIAL IMPLICATIONS 
Cost Estimate/Authorization Summary              Capital        Expense           Total 
COST ESTIMATE 
Original estimate                                          $0               $0               $0 
Current change                                   $137,325         $67,859       $205,184 
Revised estimate                                  $137,325         $67,859        $205,184 
AUTHORIZATION 
Previous authorizations                                    0                0                0 
Current request for authorization                  $137,325         $67,859        $205,184 
Total authorizations, including this request         $137,325         $67,859        $205,184 
Remaining amount to be authorized                    $0             $0             $0 
Annual Budget Status and Source of Funds 
Funds for the capitalized tenant improvements will be provided by 2017 Plan of Finance
Committed CIP C800126 Tenant Improvements. The unbudgeted broker fees will be offset by
lower than budgeted spending by Portfolio Management in the in the 2017 Operating Budget. 
Financial Analysis and Summary 
Project cost for analysis            $205,184 
Business Unit (BU)                Portfolio and Asset Management 
Effect on business performance   Incremental Revenue is generated by expanding WTIA
(NOI after depreciation)           lease premises 2,516 sf and extending WTIA's lease term 5
years and 1 month. Incremental expense of $67,859 is
generated by broker's fees. Depreciation will increase
approximately $20K per year based on a 7 year lease term. 
The basis for establishing the market rate for this lease is
described in the memo under "Market Conditions." 
IRR/NPV (if relevant)              NPV of cash flows from the incremental revenue generated
from the new lease: $675K 
ATTACHMENTS TO THIS REQUEST 
(1)   Substantially Negotiated Lease Agreement. 
(2)   PowerPoint Presentation. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None 

Template revised September 22, 2016; format updates October 19, 2016.