PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.      6d 
ACTION ITEM 
Date of Meeting    November 5, 2013 
DATE:    October 25, 2013 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:   James R. Schone, Director, Aviation Business Development 
D. Michael Ehl, Director, Aviation Operations 
James Jennings, Manager, Aviation Properties 
SUBJECT:  Thirteenth Amendment to Air Cargo Building Site Lease Agreement with Federal
Express Corporation 

ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to execute a Thirteenth
Amendment to Air Cargo Building Site Lease Agreement with Federal Express Corporation,
substantially in the form attached, to reflect a 15-year extension of the lease term in exchange for
FedEx leasing additional premises and committing to invest $3 million in capital improvements
to the facility during the extended term. 
SYNOPSIS 
FedEx's current lease with the Port is a land lease that will expire on December 31, 2013. At the
end of the current lease term, FedEx's building improvements would revert to the Port. FedEx
has expressed an interest in extending the lease under its present terms for an additional 15 years.
In consideration for extending the land lease, and forgoing a future rental stream for building
rent, Port staff has negotiated with FedEx to lease an additional 60,001 square feet of land, as
well as invest no less than $3 million dollars in capital improvements to the premises. 
BACKGROUND 
FedEx, a global courier delivery service company headquartered in Memphis, Tennessee,
provides next-day air cargo service within the United States, and time-definite international
service to more than 375 destinations in nearly every country each day. FedEx Express, the
cargo airline subsidiary, operates the world's largest cargo airline fleet and is the world's largest
airline in terms of freight tons flown. FedEx is Seattle-Tacoma International Airport's largest
cargo airline with 47.5% total market share in 2012. 
FedEx, as successor in interest to The Flying Tiger Line Inc., has had a lease for the cargo
building located at 2450 S. 161st Street at the Airport since 1974. Under this lease, FedEx has
built a substantial building to process the cargo and mail that they carry as part of their business.
Subsequent to the transfer of the building from The Flying Tiger Line, FedEx has expanded the

Template revised May 30, 2013.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 25, 2013 
Page 2 of 5 
building's footprint, added office space square footage, and installed a sophisticated system of
automated package tracking, sorting and racking infrastructure that allows for a very high
throughput of a variety of sizes of packages to and from multiple destinations.  Upon the
expiration of the lease, ownership of the improvements reverts to the Port. This facility is highly
customized to FedEx's operations, and as such, when the Port receives the building at the 
expiration of the lease, it is anticipated that significant capital investment will be required to
make the building usable by another tenant. 
FedEx desires to continue their operations at the Airport while also continuing to maintain
control and ownership of their facility. Port staff has been engaged with FedEx for close to two
years in trying to understand and address their interests associated with their facilities and lease.
As part of this negotiation, staff developed an analysis of pros and cons related to multiple Port
goals, considering the proposed lease extension, negotiation of a new lease, as well as a potential
re-lease of the facility. Considerations included both the associated revenues the Port would
receive, as well as the associated capital expenditures that would be required in each scenario. In 
this analysis, we also considered the uncertainty surrounding the time it would take to convert
and lease the specialized facility to another user, as well as any revenue impacts to the Port. The 
Port's conclusion was that a lease extension with FedEx was the best approach to balance the
Port's risk, revenue and tenant relationship. The additional rent for the expanded premises and
the $3  million  investment to which FedEx is committing by executing this Thirteenth
Amendment is fair and reasonable compensation for the extended lease term being granted.
LEASE SUMMARY COMPARISON 
Current Lease Terms          Proposed  Amended  Lease
Terms 
Term                  1/1/1974-12/31/2013        1/1/1974  12/31/2028 
Premises (Square Feet)        592,545                  652,546 
Monthly Rent             $75,370.35               $84,370.50 
Capital Investment Requirement  0                      $3M before 12/31/2026 
All other terms and conditions of the current lease will remain including an adjustment in the
land value every five years based on appraisal, which will be documented by future amendments
to the lease.
FINANCIAL IMPLICATIONS 
The lease in its present condition contributes $904,444.20 in annual rent to the Port.  The
proposed Thirteenth Amendment to Air Cargo Building Site Lease Agreement will increase this
to $1,012,446 in annual rent. 
STRATEGIES AND OBJECTIVES 
FedEx is the Airport's largest cargo customer by far in terms of tonnage and flight frequencies,
and, as such, is expected to contribute significantly to the Port's Century Agenda goal of tripling
air cargo volume to 750,000 metric tons. In 2012, FedEx's cargo volumes grew by more than

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 25, 2013 
Page 3 of 5 
6%, compared to overall airport cargo growth of 1.4%. With the airline's newest wide body 
aircraft, the Boeing 777 freighter, deployed on routes to Seattle, FedEx is poised to continue
growth at the Airport. Although their current route network at the Airport is purely domestic, the
airline estimates that international volumes comprise 10 to 20% of their total volume here.
FedEx has recently entered into partnership agreements with several of the Airport's
international carriers to move cargo overseas directly from Seattle, boosting opportunities for the
Airport's existing international carriers to grow.  The extended lease term represents FedEx's
commitment to Seattle to continue their operations here for the next 15 years, which means
additional revenue from landing fees that help reduce overall airline costs per enplanement. 
In addition, this amendment ensures FedEx is committed to its cargo operation at the Airport,
maintaining an important rental revenue stream from the premises to the Port for the next 15
years. The premises under this lease are part of the Airport's Airfield Commercial Area, a
compensatory aeronautical cost center. 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
During the course of this negotiation, Port staff developed multiple scenarios with varying
assumptions and analyzed the financial implications of each scenario. The scenarios can best be
summarized in 3 alternatives. 
Alternative 1)  Negotiate a lease that has the building reverting to Port ownership on December
31, 2013. FedEx would then pay rent on the building as well as the land around the building that
they are currently leasing. This would require the Port to take responsibility for the structural
maintenance of the building. This alternative had the highest financial return to the Port but does
include some elements of risk that include FedEx's reducing the size of the premises from what
they are currently leasing or choosing to relocate their operations to another airport in the region
as well as the required maintenance expenditures being higher than forecasted.
Alternative 2)  Negotiate a lease that has the building reverting to Port ownership on December
31, 2013, but FedEx chooses to leave the Airport. In this scenario, substantial capital investment
would be required to make the facility suitable for re-leasing and there would likely be a
significant amount of time before the facility could be re-leased, two years or longer, with no
rental income during that period. The Port would take on the responsibility for structural
maintenance of the building. This alternative represents the worst financial return to the Port. 
Alternative 3)  Negotiate a lease that allows FedEx to retain ownership of the building for an
additional 15 years but that also requires FedEx to invest no less than $3 million in the facility
during that term as well as pay rent on an additional 60,001 square feet of hardstand that they
would otherwise not have to lease. The responsibility for structural maintenance of the facility
remains with FedEx. This alternative had a financial return that was less than Alternative 1 but
substantially higher than Alternative 2. And this alternative guarantees a significant revenue
stream to the Port while assuring that FedEx, the Airport's largest cargo customer, remains a

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 25, 2013 
Page 4 of 5 
tenant for the next 15 years. The assumptions analyzed in this alternative are reflected in the 13th
Amendment to the Air Cargo Building Site Agreement. This is the recommended alternative. 
ATTACHMENTS TO THIS REQUEST 
Attachment 1 -  Draft Thirteenth Amendment to Air Cargo Building Site Lease
Agreement 
Attachment A  Site Exhibit 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
December 17, 2010  In accordance with the delegation of authority, staff executed the Twelfth 
Amendment to reflect an increase in leased premises effective December 1, 2010 
August 12, 2009  In accordance with the delegation of authority, staff executed the Eleventh
Amendment to reflect an increase in rental rate effective June 1, 2009 
November 14, 2006  Commission authorized staff to execute the Tenth amendment to increase
the leased premises effective December 1, 2006 and extend the lease expiration date to
December 31, 2013; the amendment was fully executed November 27, 2006 
April 12, 2005  Commission authorized staff to execute the Ninth amendment (as part of the
overall land rental rate adjustment at the airport) to reduce the leased premises effective May 15,
2002 and document the rental adjustment effective June 1, 2004; the amendment was fully
executed December 28, 2005 
October 27, 1998  Commission executed the Seventh Amendment to waive FedEx's right of
first refusal 
December 10, 1996  Commission executed the Sixth Amendment to increase the leased
premises and extend the expiration of the lease to December 31, 2008 
May 5, 1994  Commission authorized the Executive Director to execute amendments
implementing the land rental rate adjustments effective June 1, 1994; the Fifth amendment,
which documented the land rental rate adjustment effective June 1, 1994 was executed on
September 30, 1994 
June 26, 1990  Commission executed the Consent to Assignment of Lease to FedEx, as well as
the Fourth Amendment which authorized a reduction in leased premises at a future date to be
determined, increased the leased premises effective September 1, 1989 and documented the
rental rate adjustment effective June 1, 1989. The Eighth amendment to reduce the leased
premises effective August 1, 1999 (as authorized under the Fourth Amendment) was executed on
October 22, 2001.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
October 25, 2013 
Page 5 of 5 
September 23, 1986 Commission authorized execution of the Third Amendment to reflect a
reduction in the lease premises effective November 1, 1986; the amendment was fully executed
on January 5, 1987 
July 24, 1984  Commission executed the Second Amendment documenting the rental rate
adjustment effective June 1, 1984 
November 11, 1980  Commission executed the First Amendment which documented a rental
rate adjustment effective January 1, 1980, as well as changed the dates of future rental rate
adjustments to June 1, 1984, June 1, 1989 and every five years thereafter 
March 4, 1976  Commission executed Consent to Assignment of Lease for Security Purposes 
March 26, 1974  Commission executed the Air Cargo and Building Site Lease with Flying
Tigers