PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA                      Item No.         4d 
ACTION ITEM 
Date of Meeting        July 22, 2014 
DATE:     July 3, 2014 
TO:        Tay Yoshitani, Chief Executive Officer 
FROM:    Patricia Spangler, Real Estate Manager 
Melinda Miller, Director, Portfolio and Asset Management 
SUBJECT:  First Amendment to Lease with Arctic Storm Management Group at Pier 69 

ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to execute First Amendment
to Lease with Arctic Storm Management Group to revise the current lease period to 12 years and 
three months, including an early termination and a five-year option to extend and provide Port
funding of $114,000 for additional tenant improvements plus $65,643 for a tenant broker
commission fee. 
SYNOPSIS 
The lease amendment would provide the tenant with a longer initial term of 12 years, three
months vs. five years, three months, revising the lease expiration date to May 31, 2022, and
provide an option to extend for five years. It would also provide Port funding of $114,000 for a
tenant improvement allowance to refresh the premises that would include but not be limited to
new carpet and paint. The amendment would include a termination period commencing in year
11 up to six months prior to the lease expiration date of May 31, 2022.  Arctic Storm
Management Group (ASMG) may sell their business after year ten and it would be of benefit to
have the additional term to solicit for a buyer. ASMG has requested the option to extend their
lease for five years either for themselves or for the potential buyer to occupy in an established
location of the business at Pier 69. 
Port staff proposes a First Amendment to the lease to provide changes to the initial lease as
described in Attachment A to this memo. 
BACKGROUND 
Arctic  Storm  Management  Group  (ASMG)  was  formed  in  October  2001  and  provides
management services to the fishing vessels Arctic Storm Inc., Arctic Fjord Inc., Sea Storm, and
Neahkahnie and has been a long-term customer of the Port, mooring vessels at other Port
properties. ASMG employs approximately 400 people on an annual basis and currently employs
25 people at Pier 69.  Annual wages for their entire operations fluctuate depending on the value
of the catch. ASMG is forecasting annual wages in excess of $20,000,000 for 2014. ASMG

Template revised May 30, 2013.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 3, 2014 
Page 2 of 5 
practices conservation and sustainability of the fisheries in which they participate, including
participation in the Sea Processors Association, Marine Stewardship Council, Genuine Alaska
Producers, and Sea Share. ASMG has been a tenant at Pier 69 since June of 2010. ASMG's
current lease expires May 31, 2015, unless ASMG provides written notice to the Port to exercise 
its option to extend for five years no later than September 30, 2014. 
ASMG, through their broker, approached Port staff to discuss their desire for a potential sale of
their business beyond the five-year option period provided in their current agreement and have
requested the following: 
a)  to modify the existing five-year option to extend to become a seven year option to
extend; 
b)  an early termination period of 18 months commencing in the sixth year of the modified
seven-year option to extend; 
c)  an additional, second option to extend for five years; 
d)  a Port contribution of $114,000 toward the cost to refresh the premises, primarily for new
paint and carpet to be installed sometime within the modified seven-year extension
period; and 
e)  reduction of the current security deposit obligation from $125,258 to $75,004. 
Port staff negotiated amending the existing term, which expires May 31, 2015, to add seven
years to the initial term under their current agreement for a revised term of 12 years and three
months, expiring May 31, 2022, and provided a new first option to extend for an additional five
years. 
MARKET CONDITIONS 
Under ASMG's current agreement, the rent for the first option to extend period is to be
negotiated at a fair market rate. To determine the fair market rate, the Port referred to an existing
appraisal from the recently negotiated lease with Clipper Navigation (CNI); and which was from
services of a real-estate appraisal firm engaged through our IDIQ contract. The Port considered
the appraisal for CNI since ASMG and CNI each have similar administrative office and
storage/warehouse uses.  The Port staff negotiated a fair market rate of $21.50 per rentable
square feet for the office and $6.81 per rentable square feet for the storage/warehouse. Annual
rent increases of $.50 for the office and 3% for the storage/warehouse are included to keep the
rent within the range of market rates through the modified initial term. The rent for the first
option to extend period will be negotiated to the then fair market rate. 
FINANCIAL IMPLICATIONS 
Project Cost Breakdown                               This Request           Total Project 
Tenant Improvement Allowance                          $114,000              $114,000 
Tenant Broker Commission                               $65,643               $65,643 
Total                                                          $179,643                $179,643

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 3, 2014 
Page 3 of 5 
Budget Status and Source of Funds 
Of the expenses listed above, only the first half of the broker commission, in the amount of
$32,822, will be paid in 2014.  It is expected that lower spending on other budgeted broker
commissions will offset this unplanned 2014 expense. Both the remaining broker commission
and the entire tenant improvement allowance will be paid in 2015. These expenses will be
included in the 2015 operating budget.
The source of funds will be the Real Estate General Fund.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 3, 2014 
Page 4 of 5 
Financial Analysis and Summary 
CIP Category               N/A 
Project Type                 N/A 
Risk adjusted discount rate   7.0% 
Key risk factors               Risk of tenant default, which is partially mitigated by: 
Security deposit totaling $75,004 (reduced from the
previous $125,258 requirement) 
Good standing status as a current tenant of the Port 
Risk of early termination, which is partially mitigated by: 
Termination fee of $76,771 (3 months' rent) 
Project cost for analysis       $179,643 
Business Unit (BU)           Portfolio Management, Real Estate Division 
Effect on business            The incremental impact of the First Amendment of this lease on
performance                Net Operating Income (NOI) for Year 2014 through Year 2018: 
Incremental Incr/(Decr)
NOI (in $000's)          2014   2015   2016   2017   2018
Revenue                $0    $159   $276   $283   $290
Expense                 $33    $147    $0     $0     $0
NOI                 ($33)   $12   $276   $283   $290
Incremental revenue is generated by extending the original
lease term an additional 7 years, for a total term of 12 years and
3 months. Incremental expense is generated by the Tenant
Improvement allowance (paid in 2015) and the Broker
Commission (first half paid in 2014, second half paid in 2015). 
Note that the table above captures only the first five years of
incremental impacts, which continue through May 31, 2022. 
IRR/NPV                Assuming the tenant stays for the full term of the amended
lease, which expires May 31, 2022: 
NPV     IRR   Payback
(in $000's)     (% )       Years
$1,357        NM         1
If tenant exercises its right of early termination during the
allowed period of June 01, 2020, through November 30, 2021: 
NPV      IRR    Payback 
(in $000's)      (%)       Years 
$1,019       NM          1 
The NPVs are based on incremental net cash flows generated
by the lease and do not factor in the underlying value of the
land and improvements. The basis for establishing the market
rates for the lease is described in the memo under "Market
Conditions."

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
July 3, 2014 
Page 5 of 5 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1)  Should the Port not enter into a First Amendment to Lease, ASMG may 
exercise their option under the current agreement to extend for five years. However, the Port
would risk losing ASMG or its potential purchaser as a longer term tenant. The Port would also
lose the potential revenue related to the additional two years of the extended initial term.  The
tenant and/or buyer may choose to relocate operations leaving the space vacant for the Port to
secure a new water-dependent tenant.  The Port would incur loss of revenue during the down
time to secure a new water-dependent tenant, costs for broker commissions and concession fees
such as abated rent and higher tenant improvement costs.  This is not the recommended
alternative. 
Alternative 2)  Port staff proposes to enter into a First Amendment to Lease that would provide 
additional revenue to the Port for seven years.  The additional two years would allow ASMG
time to solicit and sell to another water dependent tenant during which time the Port, should
ASMG vacate, would receive a termination fee of $76,771, which is equivalent to three months
of the June 2020 rent. Two alternatives are possible should ASMG be successful in selling their
business: 1 ) ASMG would assign the lease to the purchaser and purchaser  would exercise the
First Option to Extend, 2) ASMG would terminate the lease after year 11, paying a termination
fee of $76,771. 3) It is also possible , should ASMG not acquire a purchaser, ASMG would
exercise the First Option to Extend under the new First Amendment to Lease and continue to
occupy.  By ASMG securing an Assignee, the Port would benefit by not incurring a broker
commission or concession fee such as abated rent or the cost for additional tenant improvements. 
This is the recommended alternative. 
ATTACHMENTS TO THIS REQUEST 
First Amendment to Lease 
Attachment A 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
February 23, 2010  The Commission approved for the Port to enter into a new Lease
with Arctic Storm Management Group for a term of five years and three months with
one five-year option to extend and Port funded tenant improvements in the amount of
$228,000.00.