PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA                      Item No.         6a 
ACTION ITEM                   Date of Meeting   December 11, 2012 

DATE:     December 6, 2012 
TO:        Tay Yoshitani, Chief Executive Officer 
FROM:    Michael Burke, Director, Seaport Leasing and Asset Management 
SUBJECT:  Authorization of 13th amendment to the Lease with Total Terminals, Inc. at
Terminal 46 
ACTION REQUESTED: 
Request Commission authorization for the Chief Executive Officer to execute the 13th 
amendment to the lease for Terminal 46 with Total Terminals, Inc., substantially as drafted in the
attached amendment. 
SYNOPSIS: 
This proposed amendment to the Terminal 46 lease would extend the lease term by ten years to
December 31, 2025. As part of this proposed amendment, the land rent for Terminal 46 changes
to a minimum annual guarantee (MAG) of revenue per acre plus a container volume lift rate fee,
when applicable, to the Port of Seattle (Port). This represents a strategic realignment of the
Port's container terminal lease rate making the Port of Seattle more competitive. This
amendment also transfers ownership of the container cranes at Terminal 46 to the tenant and also
commits the Port to certain capital improvements to the terminal. 
BACKGROUND: 
Total Terminals, Inc. (TTI) is the current tenant at Terminal 46. Hanjin Shipping Lines is the
majority owner of TTI. Hanjin leased Terminal 46 in 1990, and later in 2003 assigned that lease
to TTI. Hanjin is part of the CKYH alliance, which also includes COSCO, K-Line and Yang
Ming. K-Line and Yang Ming operate terminals in the Port of Tacoma. 
Terminal 46 is an important component of the container terminal inventory, generating
approximately 20% of the container cargo passing through the Port. Cargo volumes at Terminal
46 are currently estimated to annually generate 3200 direct, induced and indirect jobs. In
addition, current activities at the terminal are estimated to annually generate over $370,000,000 
in business revenue and over $24,000,000 in state and local taxes. Maintaining Terminal 46 as
an operating container terminal is key to the Port meeting its Century Agenda strategies of
increasing container volume in Seattle to 3.5 million teu's and doubling the value of exports
from Seattle.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
December 6, 2012 
Page 2 of 8 
TTI's lease for Terminal 46 expires on December 31, 2015. TTI has an option for a ten year
extension that expires at the end of this year if not executed. This option calls for lease rates to
continue at the rate that currently applies to all of our international container terminals (the
"Eagle Rate," based on the T-5 lease that first established this rate with Eagle Marine Services).
TTI has made it clear to the Port that it would not extend its lease at the "Eagle Rate", in part
because lease rates in Tacoma increase at a slower rate than the Eagle Rate. 
With the global economic downturn, carriers and terminal operators are losing money with their
operations and actively seeking to reduce these losses, hence cost is a key driver. There is
overcapacity in both the vessel fleet and in North American terminals that is driving decision
making around reducing losses. Container volumes in the Pacific Northwest (PNW) are off their
record levels of a few years ago. We do not see carriers and terminal operators making
investments and expanding operations in the PNW. The port has already seen the shift of a
substantial piece of container business in 2012 to a Tacoma terminal operator based on the
ability to realize cost reductions there. The fact that the Puyallup tribe and their partner SSA
have been unable to find a customer for their proposed terminal in Tacoma demonstrates the
weak demand for terminal space. It is considered critical to retain TTI as a tenant of Terminal 46
so that it remains an active cargo terminal. Given the above, it is not likely that the Port would
find a replacement tenant in the 5-10 year horizon. 
The proposed lease amendment for Terminal 46 will extend the lease by ten years. The land rent
will change from a per acre rent based on the Eagle Rate to a per acre MAG rent plus a container
volume lift rate fee, when applicable. This proposed rate will be less than the Eagle Rate over
the long term, but will keep the Port competitive with the market rates in the PNW.  Due to the
transparency of leases at public ports, it is common that lease rates be kept in line with each
other within a port. Port of Seattle's "most favored nations" (MFN) clause in our other container
leases will mean that this rate will also be offered to Terminals 5, 18 and 30.
This lease extension represents a strategic realignment of the Port's container terminal lease rate,
commonly known as the Eagle Rate; this shift to a volume-based rate structure better aligns port
and tenant goals to increase cargo volumes. This simultaneously yields a more marketcompetitive
position to sustain and grow the Port container business in the face of growing West
Coast and global competition. 
The proposed amendment also transfers ownership of the container cranes at Terminal 46 to the
tenant for a nominal fee. Again, due to the MFN clause, this crane incentive causes a lesser 
impact to Port revenues than lowering the basic land rent even more. This also supports the 
industry trend and the Port's long term strategy of getting out of the obligation to purchase and
maintain cranes, allowing the Port to use scarce capital funds for more critical needs. Three of
the cranes at Terminal 46 are approximately 10 years old, half way through their useful life
without upgrades, and two are at the end of their useful life and are too small for many of the
ships that call at Terminal 46.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
December 6, 2012 
Page 3 of 8 
As is normal for a lease extension agreement, this proposed lease amendment commits the Port
to a number of capital improvements and changes some of the maintenance responsibilities with
the aging infrastructure of the terminal. These are detailed below. 
Per the MFN clause in our other container leases, this new land rent will be offered to our other
terminal operators. Any changes to these leases will be part of future Commission actions
specific to those leases. 
PROPOSED LEASE TERMS: 
1.  The lease term will be extended by ten years to December 31, 2025. 
2.  As compensation for the extensive impacts and disruptions from the highway
construction near the terminal, the Port will pay TTI $4,000,000 upon execution of the
amendment to the lease. This amount will be funded from Seaport operating revenues. 
3.  The rent will be based on a MAG per "billable" acre plus a container volume lift rate fee,
when applicable, starting on January 1, 2013. A billable acre is based on the recognition
that some terminal acres are not suitable for container yard operations and are thus
assigned a fraction of a full MAG acre. These fractions are added together to create
billable acres Initially, the MAG is based on 2100 container lifts per billable acre which
equates to a $50 per container lift rate (Note: Lessee must pay not less than the MAG per
billable acre, regardless of how many container lifts per billable acre pass through). The
container volume lift rate fee starts at $15 per container at any point in the year when the
container lifts exceeds the MAG volume for that year from all billable acres. The MAG
beginning in 2013 is $105,000/acre. The MAG volume rises to 2300 boxes per acre in
2016. The MAG and container volume lift rate fee increase every year as described in
the attached copy of the draft lease amendment. 
4.  The Port will sell to TTI the five active cranes currently at Terminal 46 for $1.00/crane as
of January 1, 2013. TTI will have the option to request and reimburse the Port for 
purchase of two new Super Post Panamax cranes. The Port will construct any electrical
upgrades necessary to accommodate these new cranes. TTI will reimburse the Port for its
total costs for the new cranes and related improvements, including purchase and
construction costs, related taxes, engineering and management costs, and overhead costs,
through a special improvement rent. The special improvement rent will be based on a
twenty year return on investment to the Port with an interest factor calculated at the
Port's cost of capital plus 3%, with the resulting interest rate not less than 6%. TTI must
exercise this option by January 1, 2018.
5.  The Port will construct capital improvements to the terminal, including extending the
upgraded container dock by 200 feet, overlaying pavements sections in need of repair on
the terminal, upgrading the terminal lighting control system, adding three crane pin down
points and putting covers over existing fender system to improve line handling. The Port
will also construct capital improvements to the storm water system to meet current
standards. TTI will be responsible for operational and maintenance measures to meet

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
December 6, 2012 
Page 4 of 8 
those standards. These capital improvements are estimated to cost between $20 to $35
million dollars.
6.  The Port agrees to take over maintenance of the underground electrical and water
systems, as well as, the electrical switch gear on the terminal. This amendment also
confirms the Port's responsibility to maintain the dock structure, which has always been
the regular practice of the Port. 
7.  The Port will change the leasehold tax formula calculation to match how the Port of
Tacoma calculates that tax. 
8.  The Port, at its option, can accelerate the January 1, 2018, standard for drayage trucks
serving the container terminals to January 1, 2016. 
9.  The Port will not pursue any claim against TTI concerning the recent transformer failure
at the terminal. 
10. Repayment of the 2009 shortfall balance is delayed to 2015. 
11. The tenant's obligation to pay two $600,000 payments if the tenant did not achieve
certain minimum volumes in at least two of the next four years is eliminated. The tenant
was expected to achieve this requirement in any event. 
12. Additionally, the Port and Lessee recognize the potential threat to Lessee's operations
posed by the possible construction of a new multi-purpose indoor sports arena in the
Stadium District (Arena). Lessee is concerned about the impacts such a facility would
have on traffic congestion in the area and that such congestion could have a negative
impact on the Premises' operations. The Port and the Lessee will work together to
protect Lessee's efficient operations at the Premises that are affected by the Arena.
Lessee and the Port will devise other measures, as mutually agreed between the parties, to
lessen the discernible impacts of the Arena if it is built. 
FINANCIAL IMPLICATIONS 
Source of Funds 
The proposed lease amendment requires funding of a one-time $4 million operating
expense, capital investment obligations estimated between $20 million and $35 million, 
and incremental maintenance operating expenses initially estimated at $200,000 per year.
The tenant also has the option to request the Port to purchase two new cranes and provide
necessary electrical upgrades to Terminal 46 to accommodate those new cranes, with an
estimated cost of $25 million fully installed (subject to TTI reimbursement as explained
above in Proposed Lease Terms, item 4 ).

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
December 6, 2012 
Page 5 of 8 
The $4 million impact fee is payable to TTI upon execution of the lease amendment,
which is expected to occur in early 2013. Th e $4 million impact fee and the $200,000 in
incremental maintenance expenses were not anticipated in the 2013 operating budget.
These costs will be funded by the General Fund. In future years, the Port obligation for
incremental maintenance expense will be included in the annual operating expense
budget.
The Port's obligation for capital improvements to the terminal under the terms of the
lease amendment are estimated between $20 million and $35 million. If the tenant
exercises the option for (2) new cranes, the Port's capital improvement obligation
increases by an additional $25 million. The 2013 Budget included $40 million under CIP
# C102554 for Terminal 46 development associated with leasing the terminal after the
current lease term ends on December 31, 2015. These projects will be funded from the
general fund. 
Financial Analysis Summary
CIP Category      N/A  the request for funding authorization to construct the capital improvements required
by the lease amendment will be presented in a subsequent Commission Memo 
Project Type       N/A 
Risk adjusted
9.0% 
Discount rate 
Key risk factors     Key risks of MAG program: 
The MAG program reduces guaranteed revenue to the Port and increases
volatility in Port container terminal revenue.
Lower guaranteed revenue and increased volatility will reduce the future
borrowing capacity of the Seaport Division. 
Revenue to the Port will not exceed MAG unless terminal cargo volume
exceeds the Annual Premises MAG Lifts (defined as: Billable Acres x
MAG Lifts per Billable Acre) in a given year.
Revenue to the Port is expected to be lower under the MAG program than
the revenue that would have been achieved under the Eagle Rate, even if
cargo volumes grow significantly. The differential in earnings under the
proposed MAG program is due to the lower initial MAG rate per acre in
2013 and due to the lower annual rate escalation structure in this MAG
program compared to the scheduled contractual increases in the Eagle
Rate lease structure. 
The box rates under the MAG program are subject to annual CPI rate
increases: 
For years 2014-2018: fixed annual increases of 2% 
For years 2019-2025: annual increases will be the greater of two
percent (2%) or fifty percent (50%) of the Consumer Price Index, but
not to exceed 5% per year. 
MFN clauses in the other three Seattle container terminal leases obligate

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
December 6, 2012 
Page 6 of 8 
the Port to offer the lower MAG lease rate structure to all current Port
international container terminal tenants. 
The proposed MAG program may not provide enough incentive in the
current economic climate to retain or significantly increase cargo volume
in the Seattle harbor. 
Credit Risk:
The lease amendment replaces a requirement for a corporate surety bond
or other security which secured the full performance of all terms and
conditions of the Lease including the payment of all amounts payable to
the Port with a corporate guaranty by Hanjin Shipping Company, Ltd. 
Hanjin Shipping Company, Ltd operates in a highly competitive market
that is characterized by over capacity, cyclical rates and volatile petroleum
prices. 
Information available suggests that Hanjin Shipping Company is more 
highly leveraged than other comparable companies which will give it less
flexibility in the event of market turndowns. 
Project cost for      $20 - $35 million for capital improvements specified in the amendment 
analysis              An additional $25 million investment if the tenant requests (2) new cranes 
Business Unit
Container Operations 
(BU) 
Effect on           Following is an estimate of the incremental impact of the 13th amendment to
Business           the Terminal 46 lease on NOI after Depreciation. The results shown below
Performance       for years 2013 through 2018 reflect the initial six years of the thirteen year
program. Incremental impacts are calculated by comparing the new MAG
program to the current lease (at Eagle Rate) which terminates on 12/31/2015.
Net Operating Income  without new cranes: 
NOI (in $000's)                2013      2014      2015      2016      2017      2018
Incremental Revenue       (4,687)    (5,204)    (5,075)   10,513    10,898    11,184
Incremental Expense       (4,200)     (205)     (210)     (215)     (221)     (226)
NOI Before Depreciation    (8,887)    (5,409)    (5,286)   10,297    10,677    10,957
Depreciation - -    (535)  (1,130)  (1,724)  (2,319)
NOI After Depreciation       (8,887)    (5,409)    (5,821)     9,168      8,953      8,639
Estimated annual depreciation is based on the $35 million capital investment
(high end of the range). Actual depreciation may be lower, if the required
terminal improvements can be constructed at a lower cost in the range of
estimates provided.
In addition, the sale of the existing Terminal 46 cranes to TTI will result in a
non-operating loss on retirement of assets of approximately $10 million in
2013. 
If this lease extension does not occur, it is expected that Terminal 46 will
become vacant when the current lease ends on 12/31/2015.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
December 6, 2012 
Page 7 of 8 


Key Assumptions Used in Analyses 
Estimates for CPI increases effective for years 2019-2025: 
Estimates of future box rates under the MAG program included the full
range of annual rate increases allowed under the program parameters.
The "most likely" scenario assumes the minimum annual increase of 2.0%
over the proposed 13 year program. The 2% minimum is deemed the
most likely increase, since the annual adjustment is fixed at 2% through
2018 and is limited to the greater of 2% or 50% of CPI in years 2019-
2025. This assumption is based on historical average CPI increases of
2.1% to 2.9%, which when subject to the 50% limitation would likely
result in a factor lower than the minimum annual increase of 2%. 
Estimates for cargo volume during the T-46 lease term (2013-2025): 
Estimates of future container volume patterns were developed on a
terminal specific basis, using a variety of scenarios and a range of volume
growth assumptions. 
The "most likely" volume scenario shown in this Effect on Business
Performance section is based on current terminal volume, growing at 2%
annually.
Any new cargo service or larger vessels calling at the terminal would
generate additional revenue to the Port, due to the Container Volume Lift
Rate Fee applicable to cargo in excess of the Annual Premises MAG Lifts. 
IRR/NPV         The incremental impact of the 13th amendment to the Terminal 46 lease is
shown below. The analysis includes the MAG program from 1/1/2013
through 12/31/2025. Not included in the below calculations is the opportunity
cost for land or possible future investment in facilities. 
Financial Impacts  without new cranes 
Terminal 46 Impact Only      NPV       IRR    Payback
(range of required investment)     (in $million's)               (in years)
$20 million capital investment     $22.2       18.6%        8
$35 million capital investment     $9.9       12.7%        9
Financial Impacts  with (2) new cranes 
Terminal 46 Impact Only          NPV       IRR    Payback
(includes investment in new cranes)        (in $million's)               (in years)
$20M capital investment + $25M cranes*    $13.5      13.9%       9
$35M capital investment + $25M cranes*     $1.3       9.4%       10
* Based on estimated timing: assumes tenant request for (2) new cranes received in early
2016, with an in-service date for new cranes in January 2019. Special improvement rent for
the new cranes commences when the new cranes are certified and available for use.

COMMISSION AGENDA 
Tay Yoshitani, Chief Executive Officer 
December 6, 2012 
Page 8 of 8 
Financial impacts due to MFN implications in other container terminal leases
have been thoroughly reviewed with Commission. Separate Commission
action will be required to amend leases at the other container terminals, in
order for this MAG program to be implemented throughout the harbor. 
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS: 
1.  Hold to the Eagle Rate at Terminal 46: This alternative would mean that TTI would not
continue to lease Terminal 46. Most likely the existing container business would move to
Tacoma. It is also very unlikely the Port would be able to find any potential terminal
operator for Terminal 46, given the economic climate.
2.  Redevelop Terminal 46 into other uses. This alternative would result in loss of cargo
capacity and family wage jobs in Seattle making it difficult for the Port to achieve the
Century Agenda strategies. Most viable alternative uses of Terminal 46 can be located in
other areas but the container cargo capacity cannot be replaced in the Seattle area. 
3.  Amend the Terminal 46 lease as proposed. This alternative results in maintaining the
economic and job benefits from the cargo business at Terminal 46 in the Seattle area.
This is the recommended alternative. 
OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST: 
Draft Lease Amendment