6h Presentation Duke's Chowder House Lease Amendment
Item No. 6h supp Date of Meeting June 23, 2020 Third Amendment to Ground Lease with Duke's Chowderhouse, LLC. June 23, 2020 Maritime/EDD Tenant Relief Program Terms approved by Commission/ED and within our Delegation of Authority Defer all rent and other charges for four months (April-July) without interest. " Tenant required to make commercially reasonable efforts to remain in operation and/or reopen consistent with public health orders. " Tenant certifies it has been significantly impacted by COVID-19 Deferred payment plan commencing on 10/1/20 with payback in 12 months but also negotiate payment plans to fit unique circumstances. " Offer lease extension if tenant lease term is too short to payoff reasonably Proposed relief consistent with what done across the Port Extended terms Deferred rent Waiver of MAG (percentage rent only) 2 Background All restaurants closed by Governor's first order, March 23 Duke's 7 locations Seattle, Bellevue, Kent, Southcenter, Tacoma Long-term lease (20+ years remaining) Seriously affected by COVID-19 and escalating construction costs Participating in deferral program with hope of lease amendment Duke's Current Ground Lease (as amended) Full Service Restaurant (9200 SF ground lease) Amended twice to enlarge development pad as design evolved Rising construction costs and COVID-19 impacted feasibility Construction costs than doubled over two+ years of design $4.3 million to $8.3 million COVID-19 closed all restaurants, working with 8 landlords Committed to developing a smaller, more flexible facility 4 Revised Proposal for Duke's Chowderhouse Revise business model and proposed development concept COVID-19 is accelerating changes to restaurant industry Smaller, contemporary "multi-modal" service (table served, mobile, and takeout) Have requested three years+ for redesign, permitting, and construction plus some buffer for uncertainties due to COVID-19 Revised Terms for Ground Lease Proposed terms Reduce square footage 9200 SF to +-4500 SF Defer construction rent for three years and pay back over lease term (effective 4/1/20), Post-construction rent will start no later than 4/1/23 or Substantial completion, whichever is earlier. Same base terms: Rent per square foot, expiration, etc. Risks and Benefits Risks Continued economic downturn may prevent Duke's from completing Benefits Likely the only viable restaurant option at Shilshole Highly desired amenity for Shilshole customers and will bring new visitors to SBM Essentially no financial risk to Port since Duke's is financing Retains revenue stream for this property 7
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