PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA                      Item No.         6b 
ACTION ITEM 
Date of Meeting        July 22, 2014 
DATE:     July 16, 2014 
TO:        Tay Yoshitani, Chief Executive Officer 
FROM:    Michael Burke, Director, Leasing and Asset Management
SUBJECT:  Lease Termination Agreement for Terminal 5 and related amendments to crane
and lease agreements for Terminal 18 and Terminal 30. 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to (1) execute the Terminal 5
Lease Termination Agreement with Eagle Marine Services, Ltd. and (2) execute a conditional
consent to sublease agreement and amendments consistent with the draft letter of intent in the
attached exhibits to the Terminal 18 Crane and Terminal leases with SSA Terminals LLC and
Terminal 30 lease with SSA Terminals (Seattle) LLC, due to negotiations associated with the
most favored nations clause in the respective terminal leases triggered by the Port's Terminal 46
lease extension with Total Terminals International LLC (TTI). 
SYNOPSIS 
With the upsizing of vessels calling in the Pacific Northwest by the G6 shipping alliance, most of
the container business currently being handled at Terminal 5 can no longer call at that terminal
due to the size of the container cranes there.  The crane size cannot be increased without a
significant structural rebuild of the dock.  With larger vessels, any major dock upgrade project
would significantly limit vessel activity during construction.  The current tenant at Terminal 5,
Eagle Marine Services, Ltd. (EMS), would like to transition operations to Terminal 18. 
Container operations at Terminal 5 currently generate over 5,000 direct, indirect, and induced
jobs for the region. Almost all of these jobs would be preserved if the container business stays in
the Port of Seattle. In order to preserve this business activity, and the related jobs, staff proposes
that the Port execute the Terminal 5 Lease Termination Agreement with EMS, and a Conditional
Consent to Sublease to allow SSA Terminals LLC (SSAT) at Terminal 18 to sublease to EMS.
These agreements provide the Port a volume guarantee to keep the cargo and related benefits in
Seattle. Without this guarantee, the volume could shift to other gateways such as Southern
California or British Columbia. These agreements will also allow the Port to modernize the dock
system at Terminal 5 for the larger container cranes needed to handle current and anticipated
vessels expected to call Seattle. 
BACKGROUND 
Terminal 5 began operating as a container terminal in 1964. Since that time, the Port invested in
significant environmental cleanup and facility improvements to create a 182-acre state-of-the-art
Template revised May 30, 2013.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 16, 2014 
Page 2 of 8 
international container terminal, which was completed in 1997.  The site is currently leased and
operated by EMS, a subsidiary of American President Lines (APL). The current lease expires in
2028.
Vessels calling to the Port of Seattle have grown in size from 4,800 TEUs (twenty-foot
equivalent units) in 1997 to 10,000 TEUs today with 18,000+ TEUs currently operating globally.
To maintain the Port's competitive position and preserve jobs, dock and infrastructure upgrades
are needed to modernize the terminal for handling current and future classes of container vessels
including  the  capability  for  installing  larger  dual-hoist  cranes.  These  improvements  will
significantly reduce the capacity of the terminal during construction by limiting the terminal to
only one berth for several years. 
Recently, the shipping lines APL, MOL, Hyundai, OOCL, NYK, and Hapag-Lloyd have formed
the G6 container shipping alliance.  The G6 plans to upsize the vessels calling in the Pacific
Northwest to the 8,000 TEU class and above.  This size vessel cannot be handled with the
current size cranes at Terminal 5 and EMS believes it cannot feasibly operate the terminal. EMS
also faces additional costs to meet current stormwater treatment regulations if the terminal
remains in operation, further reducing the feasibility of remaining open. EMS has requested we
work out a termination agreement of their lease. They have also indicated that a key issue in any
lease settlement is how the financial accounting is handled in a long-term commitment. 
EMS has previously filed a most favored nations (MFN) claim for additional concessions from
the Port related to the recent TTI Terminal 46 lease extension. While our legal analysis indicates
some claims had merit and others did not, any settlement could substantially reduce the financial
benefit of the current lease at Terminal 5.  In addition, the current lease requires the Port to
maintain five functional cranes at Terminal 5 and the existing cranes are at (or close to) the end
of their useful life. Due to the current dock limitations, any replacement cranes would have to be
of similar capacity to the existing cranes and thus not be able to handle the larger ships planning
to call in the Pacific Northwest. Replacement cost of these cranes could be $50  million-
$60 million. 
Staff is proposing the Port enter into a termination agreement with EMS that is a combination of
an annual termination payment and a volume guarantee for container volume in the Port of
Seattle.  In addition, this agreement would facilitate the Port being able to upgrade the dock and
related infrastructure at Terminal 5 so that the terminal could handle the largest ships expected to
call in the Pacific Northwest in the future and eliminate the Port's obligation to provide five
functional cranes. As part of the termination, EMS wants to e nter into a sublease agreement at
Terminal 18 to handle the volume required by its volume guarantee. 
The lease amendments for Terminal 18 and Terminal 30 are required to modify the MFN clauses
in the respective Terminal 18 and 30 leases and to settle claims related to the MFN clauses for
rent and cranes. As discussed in the December 6, 2012 , Commission memo and presentation to
the Port Commission, the new land rent structure for the Terminal 46 lease with TTI required
that the Port offer this new land rent structure to its other container terminal customers.  Other
MFN elements of the amendments are discussed further below.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 16, 2014 
Page 3 of 8 
SUMMARY OF PROPOSED AGREEMENT TERMS 
Listed below is a summary of the key terms of the agreements. 
Proposed Terminal 5 Lease Termination Agreement: 
EMS Terminal 5 Lease terminates effective July 31, 2014. 
EMS commits to a 10-year volume guarantee of 150,000 lifts per year to the Port of
Seattle. 
All APL, G6, Westwood Shipping Line, and other volume from customers currently
using Terminal 5 will count towards the guarantee with penalties of $75/lift for the first
50,000 lifts to $100/lift for shortfall volumes above 50,000 lifts. 
EMS also commits to a vessel call guarantee of 50 vessels per year of a size of 7,500
TEUs or greater with a penalty of $100,000 per shortfall vessel call. 
The vessel shortfall penalty payable by EMS to the Port shall not apply if the number of
lifts exceeds 250,000 during the same Annual Commitment Period. 
The Port's Chief Executive Officer may exercise reasonable discretion to relieve EMS of
one or more vessel call obligations based on force majeure (as defined in the SSAT
Terminal 18 Lease) or dry-docking schedules of APL. 
In addition to all the normal obligations of vacating the Terminal 5 lease premises, EMS
shall be responsible for cleaning out the stormwater system pipelines and catch basins
throughout the premises. 
EMS will transfer its industrial general stormwater permit (IGSP) to the Port, if needed,
to facilitate transition of the IGSP permit when Terminal 5 resumes operations. 
Proposed Terminal 18 Conditional Consent to Sublease Agreement: 
SSAT will pay the Port $9 million a year for 10 years.  It is expected that SSAT will
recover these costs from EMS as part of their sublease with EMS. 
The Port is working with EMS and SSAT to ensure the Port has enforceable rights to
protect its rights to the $9 million annual payments. 
Proposed Terminal 18 Lease Amendment: 
The MFN land rent clause definition would be enhanced to emphasize it is only related to
land rent in Elliott Bay for international container terminals.  The MFN clause is further
amended to be a "mutual" MFN, meaning the lease rate can go both down and up for land
rent if the Port's land rent at Terminal 5 and Terminal 46 (whichever is lower) increases
or decreases during the remaining term of the Terminal 18 lease.  SSAT can opt out of
the application of the MFN clause at any time but once they do, the MFN clause for land
rent is terminated and removed from the Terminal 18 lease. 
Following December 31, 2025 (expiration of the Terminal 46 lease), and every five years
thereafter, the rent structure for determining the per-acre minimum annual guarantee
(MAG) will be subject to a market rate adjustment. 
In between market rate adjustments, the land rent will increase every non-market rate
adjustment year by not less than 2% regardless of CPI, and with the maximum increase
capped at the lesser of the CPI increase or 5%.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 16, 2014 
Page 4 of 8 
The Port and SSAT would handle stormwater infrastructure improvements to meet
SSAT's current stormwater discharge requirements at Terminal 18 in the following
manner: 
o  SSAT will be solely responsible for compliance with its industrial stormwater
permit at Terminal 18. 
o  To the extent required to achieve regulatory compliance, SSAT would undertake
construction of the stormwater infrastructure improvements ("SII") necessary to
comply with its industrial stormwater permit at Terminal 18.
o  The Port, with regard to expenses incurred on or after June 1, 2013, would share
with SSAT, calculated together, the design, and construction costs of the SII at
Terminal 18 as follows: 
i.     $0.00 - $10 million:            SSAT 75%; Port 25% 
ii.     $10 million - $20 million:     SSAT 25%; Port 75% 
iii.     $20 million and over:          SSAT 50%; Port 50% 
Proposed Terminal 30 Lease Amendment: 
An MFN clause will be incorporated into the lease to mirror the Terminal 18 MFN
clause. 
Following December 31, 2025 (expiration of the Terminal 46 lease), and every five years
thereafter, the rent structure for determining the per-acre minimum annual guarantee
(MAG) will be subject to a market rate adjustment. 
In between market rate adjustments, the land rent will increase every non-market rate
adjustment year by not less than 2% regardless of CPI, and with the maximum increase
capped at the lesser of the CPI increase or 5%. 
No stormwater component will be included as part of this lease amendment. 
Proposed Terminal 18 Crane Amendment: 
IHI cranes (three cranes numbers 51, 52, and 53): SSAT will be able to use the IHI cranes free
of charge as long as SSAT performs all necessary maintenance on the cranes. SSAT can request
the Port to remove the cranes and the Port will have 12 months to do so once requested. SSAT is
responsible for any tax liability related to crane use. 
MHI cranes (three cranes numbers 70, 71, and 72):  The Port will transfer ownership of the
cranes to SSAT for $1.00 a crane. The Port and SSAT will equally split the cost of any sales tax
related to the transfer of ownership.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 16, 2014 
Page 5 of 8 
FINANCIAL IMPLICATIONS 
Budget Status and Source of Funds 
The proposed actions reduce sources of cash as assumed in the Port's 2014 Plan of Finance and
will create unfavorable Net Operating Income variances relative to the 2014 Budget and current
2014 Full Year Forecast. The following table summarizes the impact of the actions on August
through December 2014 Net Operating Income for Terminals 5 and 18. 

Without Lease  With Lease
Net Operating Income  $'s 000    Te rmination  Te rmination   Change
2014 Budget (Aug.-Dec.)                   $18,377       $12,377     ($6,000)
2014 Forecast (Aug.-Dec.)                  $16,242       $11,177      ($5,065)

Note:* Forecast is lower than Budget because volumes and related crane
rent and intermodal revenues are based on more current assumptions.

The proposed Terminal 18 Lease and Crane Amendments will also require the Port to contribute
to the design and construction costs of the Stormwater Infrastructure Improvements at Terminal
18 and share in any sales tax obligation for crane transfer. The extent and timing of th e required
investment has not yet been estimated, but this investment requirement was not anticipated in the
2014 Capital Budget. 

CIP Category            Not applicable 
Project Type             Not applicable 
Risk adjusted discount   7.5% 
rate 
Key risk factors 
Tenant is being released from long-term lease agreement
running through August 2028 for a shorter-term volume
commitment and elimination of the Port's potential
obligation to provide 5 new cranes at Terminal 5. 
Lower revenue will reduce the future borrowing capacity of
the Seaport Division and could impact the Port's overall
credit rating. 
Uncertainty with regard to cost of stormwater infrastructure
improvements at Terminal 18 and potential stormwater
related requirements at Terminal 5. 
Uncertainty with regard to potential sales tax liability
associated with not charging crane rent and transferring of
crane ownership at Terminal 18. 
Project cost for analysis   Cost of Terminal 18 Stormwater Improvements not yet estimated 
Business Unit (BU)       Seaport Division  Container Operations

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 16, 2014 
Page 6 of 8 
Effect on business        Following is an estimate of the incremental impacts the Terminal 5
performance            Lease Termination and Terminal 18 Agreement to Sub-Lease will
have on Net Operating Income (NOI) to the Seaport Division for
2014 through 2019: Note that impact is compared against
Alternative 1 whereby Terminal 5 would be held to lease
obligation through August 2028.
NOI (in $million's)  2014    2015    2016    2017    2018    2019
Revenue            ($5.1)   ($15.1)   ($15.1)   ($14.9)   ($15.3)   ($15.8)
Expenses             (0.0)     0.0      0.0      0.0      0.0      0.0
NOI              ($5.1)   ($15.1)   ($15.1)   ($14.9)   ($15.3)   ($15.8)
IRR/NPV             The incremental NPV impact of the proposed Terminal 5 lease
termination and sublease with Terminal 18 is shown below. The
analysis assumes that Terminal 5 current crane minimums are in
place through 2016 for fixed rate cranes and through 2019 for
tariff cranes, and intermodal minimums are in effect for term of
lease. 
Financial Impacts vs. Alternative 1
Agreement Impact Through         NPV in       Nominal $'s
August 2028                     $m illions      in $millions
Terminal 5 Termination
Pref Use and Space Rent             ($202.4)       ($352.7)
Special Improve Rent                    (14.9)          (23.7)
Crane Rent                            (5.0)          (6.0)
IY Revenue                             (6.0)         (10.0)
1st POC Payment                      (4.5)          (7.2)
Stormwater Fees                        (5.4)           (8.7)
Sublease Payments                    66.4          90.0
Sub-Total                         ($171.8)       ($318.3)
Terminal 18 Sublease
Pref Use and Space Rent                  2.4            5.7
Crane Rent                            (3.6)          (3.8)
IY Revenue                              1.5            2.7
MHI Cranes - 50% Sales Tax              (0.4)           (0.4)
Stormwater Infrastructure                   (9.2)           (11.0)
Sub-Total                            ($9.3)          ($6.8)
Total                                  ($181.2)        ($325.1)

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 16, 2014 
Page 7 of 8 
The incremental NPV impact of the lease amendments for
Terminal 18 and Terminal 30 for years beyond 2025 is
summarized below: 
Financial Impact of Change in Post 12/31/2025 Rent Structure
Agreement Impact - Jan 1,         NPV in       Nominal $'s
2026 thru Aug 2, 2039              $m illions      in $millions
Terminal 18                          ($107.3)       ($389.8)
Terminal 30                            (38.4)         (139.6)
Total                                  ($145.8)        ($529.4)

Community Benefits 
These agreements, with their volume guarantee, will help preserve the economic benefits,
including the jobs that are generated by the business that has been using Terminal 5. 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1)  Do nothing and hold EMS to its lease obligations.  EMS will at some point
pursue actions to terminate the lease.  Since EMS is not in bankruptcy, any financial settlement
would likely be substantial and greater than the proposed termination settlement. This could be
reduced by the value of the Port's obligation to replace cranes and any MFN claim settlement.
There would be no volume guarantee and almost all of the current business at Terminal 5, and
the jobs related to that business, would be lost to Seattle and potentially to the region. 
Alternative 2)  Negotiate a pure financial settlement for lease termination.  EMS would not
want to do this immediately with the potential financial accounting issues.  This alternative
would look almost identical to Alternative 1 with that issue. 
Alternative 3)  Proceed with the proposed termination agreement giving the Port some
financial compensation and the volume guarantee to preserve the job benefits from this business.
This does not resolve any MFN claims related to the Terminal 18 and Terminal 30 leases. 
Alternative 4)  Proceed with the proposed termination agreement and related lease and crane
agreement amendments at Terminal 18 and Terminal 30,  giving the Port some financial
compensation and the volume guarantee to preserve the job benefits from this business. This also
settles claims related to MFN clauses for Terminal 18 and Terminal 30 leases and provides a
framework for transitioning out of the MFN clauses in the future. This also allows for
accommodations to help keep Westwood Shipping Lines in the Port of Seattle.  This is the
recommended alternative.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 16, 2014 
Page 8 of 8 
ATTACHMENTS TO THIS REQUEST 
Proposed Terminal 5 Lease Termination Agreement (draft) with EMS. 
Draft Letter of Intent with SSAT related to proposed lease and crane agreement
amendments and consent to sublease agreement. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
May 18, 2014: Commission briefing on the dock upgrade program at Terminal 5 to make 
it "big ship" ready. 
December 6, 2012: Commission meeting presentation of the proposed 13th lease
amendment to the Terminal 46 lease to extend the lease term and change the land rent
structure to a minimum annual guarantee of revenue per acre plus a container volume lift
rate fee. This amendment also obligated the Port to certain capital improvements and
maintenance items for this facility.