PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA               Item No.      6b 
ACTION ITEM 
Date of Meeting     August 11, 2015 
DATE:    August 4, 2015 
TO:      Ted Fick, Chief Executive Officer 
FROM:   Wayne Grotheer, Director, Aviation Project Management Group 
James Schone, Director, Aviation Business Development 
SUBJECT:  Building Expansion for New Delta SkyClub (CIP #C800690) 
Amount of This Request:       $13,655,000   Source of Funds:   Airport Development
Fund and 2015
Est. Total Project Cost:         $13,725,000 
Revenue Bonds 
Est. State and Local Taxes:        $981,000 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to: 1) authorize $11,791,755
of tenant reimbursement budget between the Port and Delta Air Lines (Delta) for the design and
construction of an additional floor on an existing building located between Concourses A and B
to house a new Delta SkyClub at Seattle-Tacoma International Airport; (2) execute a Tenant
Reimbursement Agreement (TRA) with Delta for this purpose under the Airport's AV-2 Policy;
and (3) authorize $1,933,245 of non-tenant reimbursement budget for Port-completed utility
work and other Port costs including overhead associated with this project. This request seeks a
single Commission authorization to proceed with design, abatement, and construction. The total
cost to the Port for this project shall not exceed $13,725,000. 
SYNOPSIS 
To support its growing operations at the Airport, Delta has proposed to construct a new centrally
located Delta SkyClub lounge located between Concourses A and B. Using a TRA, the Port
would reimburse Delta the cost to construct the building shell and core utilities. Delta would also 
construct the interior of the new club using its own funding. The total cost to the Port would be
$13,725,000. Delta anticipates completing construction and occupying the club in July 2016.
This project was not included in the 2015  2019 capital budget. The budget for this project will
be transferred from the Aeronautical Allowance CIP resulting in no net change to the Aviation
capital budget. 



Template revised May 30, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
August 4, 2015 
Page 2 of 8 
BACKGROUND 
To address the growing need for lounge space between Concourses A and B, the Port has chosen
to expand the concourse level over an existing, one-story outbound baggage handling building to
create additional leasable space. Delta has committed to lease this new space and has requested
to design and construct the project. As this project makes material improvements to the terminal
building, Delta has also requested to receive a reimbursement for the cost of designing and
constructing the building shell through a TRA. Delta will be responsible for the entire cost of the
SkyClub interior tenant improvement, including finishes, furniture and equipment. The Port will
reimburse Delta for the construction of the building shell and basic infrastructure only, following
Aviation Procedure on Tenant Improvements AV-2. 
Delta has proposed an approximately 23,000 square foot second floor and mezzanine for its new
SkyClub. Delta has been proceeding at risk with the project design since January 2015 in order to
achieve its preferred construction schedule and occupancy date of July 2016. The design is
currently 60% complete. 
This project's TRA is similar to the ones that have been successfully used for the Delta SkyClub 
at the South Satellite and for the Delta Zone 3 Flow-Through Ticketing projects in the Main
Terminal. As part of the Port's TRA requirements, Delta will be paying prevailing wage on the
construction contract. 
Both Delta and the Port have taken steps in order to address the risk of cost growth. Delta has
hired a Construction Manager at Risk (CMR) to complete design and construction of the
SkyClub. The CMR has presented a preliminary guaranteed maximum price as part of the
selection process. The CMR will work with Delta's designers in order to fully understand the
project and then prepare a final guaranteed maximum price to Delta as design is completed. Any
cost growth past this point would be at the risk of the CMR. 
To establish the amount of the TRA, Port staff reviewed the 60% design and preliminary cost
from the CMR to determine an estimate of total cost to the Port. This estimate includes design
and construction contingencies. Delta understands and agrees that the design contingency can
only be used to fund changes in scope related to the design progressing from 60% to 100%, and
the construction contingency can only be used to pay for Port approved non-discretionary change
orders that arise during the course of construction. The TRA is subject to further increase only if
a non-discretionary construction change order exceeds the amount of the Project Contingency. 
The initial TRA amount of $11,791,755 includes design and construction contingencies. The
difference between the TRA and the total project cost of $13,725,000 includes contingencies,
Port soft costs and the cost to bring utilities to the tenant lease area.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
August 4, 2015 
Page 3 of 8 
PROJECT JUSTIFICATION AND DETAILS 
At present there is not adequate space in the terminal to accommodate Delta's need for a large
lounge to support current and projected passenger loads at the Airport. This project presents a
strategic opportunity to create new leasable space on the concourse level that will meet an
important airline's operational needs, while generating increased aeronautical revenue for the
Airport. This project expands the terminal footprint by building on top of an existing structure.
Early in design it became apparent that the initial design concept for the location of the project's
Heating Ventilation and Air Condition (HVAC) system on the building roof would require
structural upgrades to the existing building that would significantly impact existing airline
baggage operations. A new site was chosen adjacent to the structure. This required an expansion
of the building by nearly 1,600 square feet and increased the project budget by $525,000. 
The Port will use an existing Indefinite Delivery Indefinite Quantity (IDIQ) Architectural and
Engineering contract to complete the design to bring the necessary utility infrastructure to the
lease line of the new club. Port Construction Services (PCS) will manage the construction of the
utility connections using their Port-wide on-call mechanical and electrical contractors. Delta is 
responsible for the entire cost of their interior tenant build-out which is in the $8.5 to $9.0
million range. 
The Port forecasts an increase of approximately $3.8 million per year in revenue from this lease
with Delta.
Schedule 
Commission Authorization of TRA and project                     3rd Quarter 2015 
Early Structure Steel Package Issued                             3rd Quarter 2015 
Building Permit Issued/Construction Begins                       4th Quarter 2015 
Construction Complete/Grand Opening                         3rd Quarter 2016 
Delta is pursuing an aggressive design, review and construction schedule to achieve their desired
occupancy date of July 2016. 
FINANCIAL IMPLICATIONS 
Budget/Authorization Summary              Capital     Expense   Total Project 
Original Budget                      $13,725,000          $0   $13,725,000 
Previous Authorizations                   $70,000          $0      $70,000 
Current request for authorization            $13,655,000          $0    $13,655,000 
Total Authorizations, including this request    $13,725,000          $0    $13,725,000 
Remaining budget to be authorized               $0          $0          $0 
Total Estimated Project Cost             $13,725,000          $0   $13,725,000

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
August 4, 2015 
Page 4 of 8 

Project Cost Breakdown                     This Request       Total Project 
Design Phase                             $1,663,000         $1,663,000 
Construction Phase                         $11,081,000        $11,081,000 
Sales Tax                                  $981,000          $981,000 
Total                                     $13,725,000         $13,725,000 
Budget Status and Source of Funds 
This project was not included in the 2015-2019 Capital Budget and Plan of Finance. The budget
for this project will be transferred from the Aeronautical Allowance CIP (C800404) resulting in
no net change to the Aviation capital budget.  The Funding sources will include the Airport
Development Fund and 2015 revenue bonds. While this is an aeronautical project, it is exempt
from majority-in-interest (MII) review under article 6.5.1(c) of the Signatory Lease and
Operating Agreement since the project is needed to accommodate the expansion of Delta and
existing space was not available. 
Financial Analysis and Summary 
CIP Category             Revenue/Capacity Growth 
Project Type              New Business Development 
Risk adjusted discount rate     8% 
Key risk factors             Risks that may affect performance and financial returns,
as displayed below, include: 
-schedule delays may impact rent payments 
-risk due to SLOA expiration 12/31/17 
-shifting lounge business dynamics at Sea-Tac Airport 
-gate allocation changes may result in airline moves 
-new lounge may reduce revenues at the Port's Club at
SEA on concourse A which is used by Delta 
Project cost for analysis        $13,725,000 
Business Unit (BU)          Terminal Building 
Effect on business performance  Lease payments are assumed to begin 8/1/16. Annual
lease payments will start at approximately $3.8 million
based on 23,000 square feet for the lounge. Within five
years lease payments total approximately $5 million per
year.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
August 4, 2015 
Page 5 of 8 
IRR/NPV             5-year analysis (assumes 5-year lease with Delta with
SLOA renewals): 
NPV: $2.7 million 
IRR: 14% 
Payback: 4 years 
30-year analysis (based on probable asset life,
independent of tenant): 
NPV: $39.9 million 
IRR: 29% 
Assumptions: 
-lease rate of $164.77 per square foot per year in 2016
increases to $235.64 in 2024 and then is held flat
thereafter 
-lease space of 23,000 square feet. 
-lease year of 8/1 through 7/31. 
CPE Impact             .04 in 2017 
Lifecycle Cost and Savings 
The major assets this project will install are a 23,000 square foot second floor and mezzanine on
top of an existing building and an adjacent HVAC mechanical tower. Aviation Maintenance
anticipates there will be some incremental costs associated with the mechanical and electrical
utilities added for this facility, as well as some building envelope maintenance costs (roof,
electronic glazing units, and exterior wall maintenance). The impact can be better estimated at
the completion of the design phase of the project. The Port will be responsible for maintaining
the building shell/exterior and associated utilities. The building envelope will have a useful life
span of 50 years. The roof and HVAC system will have a useful life span of 20-25 years. 
STRATEGIES AND OBJECTIVES 
This project supports the Port's goals of: 
Advancing the region as a tourism destination and business gateway by providing the
improved facilities and amenities that are expected by international and business travelers 
Operating a world class airport by anticipating and meeting the needs of our tenants and
passengers 
Environmental Responsibility 
This project will support the Port's commitment to environmental stewardship and the Century
Agenda objective to be the greenest and most energy efficient port in North America by: 
Making use of the existing one-story building footprint

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
August 4, 2015 
Page 6 of 8 
Encouraging the use of locally procured and/or renewable materials as well as the use of
items containing both pre and post-consumer recycled content 
Specifying the use of energy efficient materials and equipment to include: 
Low E, electronically dimming exterior glazing units to reduce the size of HVAC
equipment thereby lowering energy consumption and cooling costs 
Installation of EnergyStar compliant equipment 
Even though the project is being completed by Delta, it is being designed and built to established
Port of Seattle standards and specifications which stipulate  the use of environmentally
sustainable materials and construction practices. 
Small Business Opportunities 
In addition to having their own robust MWBE program, Delta has expressed their ongoing
support of the Port's Small Contractor and Supplier (SCS) goals. Toward this end Delta has
pledged to work closely with their consultants, contractors and their subcontractors to achieve
the highest level of MWBE/SCS participation possible on this project.
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1)  Have Delta use the common use 'Club on A' instead of building a new club. At
present nearly 50% of the patrons using this club are Delta passengers who do not have
convenient access to a Delta branded club on Concourses A and B. 
Additional Cost:    $0 for the Port/Unknown for Delta 
Pros: 
The 'Club on A' is already built and functioning as a lounge. 
Cons: 
The 'Club on A' is located at the south end of Concourse A and is not well situated for
Delta's operations at the north end of Concourse A or on Concourse B. 
The space would require extensive remodeling and modification to bring to Delta's
standards. 
It is less than 5,000 square feet and only expandable to approximately 6,200 square feet,
which is not nearly large enough to accommodate either Delta's current or projected
passenger growth. 
The common use 'Club on A' currently generates an average of $60,000/month of nonaeronautical
revenue, and is intended to serve passenger from other carriers who do not
have their own clubs. Delta's exclusive lease of this facility would eliminate this current
revenue stream and preclude the use of other international airlines if/when gates on
Concourse A are connected via the new International Arrivals Facility. 
This is not the recommended alternative.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
August 4, 2015 
Page 7 of 8 
Alternative 2)  Have the Port take over the design and construct the basic building shell for a
new lounge and provide core utilities on the second floor of the existing one-story building as a
capital project after which Delta would lease the space and complete their tenant improvement
work. 
Additional cost:     $500,000 for the Port/Unknown for Delta 
Pros: 
Delta would still be able to lease space at the junction of Concourses A and B for a Delta
SkyClub. 
The Port would have primary control and actively manage the design, procurement and
construction of the new space. 
Cons: 
The project would take longer to design as the Port designer would need to review
Delta's project design progress in order to take over the design.  Also, current
circumstances mean that a designer would not be available immediately as well. This
would likely add 9 months to the design process. 
Delta would have to wait until the Port's project was complete prior to beginning interior
construction and fit out. This would likely add at least an additional 6 months to the
construction schedule. 
This is the costliest of the alternatives. 
This is not the recommended alternative. 
Alternative 3)  Not reimburse Delta for costs associated with the construction of the new
lounge's base building terminal expansion 
Additional Cost:    $0 for the Port/$12,567,000 for Delta 
Pros: 
This would be the least cost option, with Delta bearing 100% of the costs to expand the
terminal and build out the space for their lease. 
Cons: 
This would put financial burden on Delta, making them pay for the costs of both the
landlord (Port) and tenant (Delta) improvements.
Although the Port has made no formal commitment for reimbursement, pending
Commission approval of this action, not reimbursing Delta for this work is not consistent
with past practice and Port policy (AV-2). 
This is not consistent with industry norms, whereas the Landlord is responsible for costs
associated with the development costs of building the base shell, and therefore charges
rent to a tenant based on the recovery of those costs, plus the operation and maintenance

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
August 4, 2015 
Page 8 of 8 
of that facility. If reimbursement was not made, Delta would have to pay the high capital
costs, but still be obligated to pay the high rental rates associated with leasing the space
based on their current SLOA agreement. 
This is not the recommended alternative. 
Alternative 4)  Authorize a TRA with Delta to complete the design and construction of the new
lounge space at the existing one-story building between Concourses A and B. 
Cost:  $13,725,000 
Pros: 
The design and construction schedule durations align with Delta's desired occupancy
date of July 2016. 
The location will provide easier access to Delta's passengers throughout Concourses A
and B vs. alternative 1, and also allow for access for passengers in route to the South
Satellite. 
The 'Club on A' will continue to serve passengers from other airlines that do not have
lounges, as well as future international flights associated with the future International
Arrivals Facility. 
Cons: 
This alternative would cost more than Alternatives 1 and 3. 
This is the recommended alternative. 
ATTACHMENTS TO THIS REQUEST 
Tenant Reimbursement Agreement and associated support documents 
Computer slide presentation 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None