PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA             Item No.      6a 
Date of Meeting   September 7, 2010 
DATE:    August 19, 2010 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:    James R. Schone, Director, Aviation Business Development 
Deanna Zachrisson, Manager, Aviation Concessions Business 
SUBJECT: Preparation of Duty Free/Specialty Retail Concessions Spaces within Concessions
Unit Readiness Project (CIP # C800147) 
Amount of This Request: $229,000       Source of Funds: Airport Development
Fund 
State & Local Taxes Paid: $17,000        Jobs Created: 8 (Eight)
Total Estimated Project Cost: $2,087,000

ACTION REQUESTED: 
Request Port Commission authorization for the Chief Executive Officer to authorize Port
Construction Services (PCS) to perform work in conjunction with small works contractors and
issue small works contracts in support of the Concession Unit Readiness Project (CIP# C800147)
at Seattle-Tacoma International Airport (Airport). This authorization is for $229,000 of a total
estimated project cost of $2,087,000. 
SYNOPSIS: 
The purpose of the Concessions Unit Readiness Project (formerly the "Renewal & Replacement
Project") is to reconfigure and prepare concession spaces for new tenancy. The Commission
authorized design for the project in August 2008. This authorization request is for construction
work to prepare two units (in the North Satellite and Central Terminal) for an anticipated new
tenant on January 1, 2011. 
BACKGROUND: 
In August 2008, the Commission authorized $357,000 to design shell space improvements for
specific concession spaces at the Airport. The ten total spaces (eight in-line units and two kiosk
locations) are shown on Exhibit A. All units were intended for use by future specialty retailers.
Shortly after this initial authorization, the economy began to decline which affected consumer

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
August 19, 2010 
Page 2 of 7 

spending, and the Airport also learned of imminent airline relocations. Both of these events
caused Port staff to reevaluate the scope and timing of the project.
While design moved forward, staff planned for delay of construction until economic conditions
stabilized. In a rapidly changing Airport environment, staff also eliminated one in-line and two
kiosk locations from the scope because of changed space use or business considerations. Due to
the changes in the scope of the project, Port staff did not use a portion of the design funds. The
total unused portion of the original authorization is $168,000. Staff would like to retain the
flexibility to engage these design funds, if other units become viable for development as a result
of future airline relocations. 
Both the economy and operational impacts have stabilized in 2010. The interest in new
concessions opportunities also has improved. In light of this improvement, and the significant
opportunity for the Port to increase its revenues, Port concessions staff issued its Request for
Proposals (RFP) in July 2010 for a new concessionaire to offer both duty free and specialty retail
merchandise. The Port plans to make a total of five units available for a new duty free/specialty
retail concessionaire on January 1, 2011 (see Exhibit B). At this point in time, Port staff is
seeking authorization to move forward with construction work on two of the units included in
this RFP. 
Transitions for new tenants into existing spaces are complex. In some cases, a new tenant will
operate in a previous tenant's existing space while planning for renovation of a unit, and then
operate out of a temporary location during construction. In this case, two of the five units in the
duty free/specialty retail RFP are within the scope of the Concessions Unit Readiness Project and
would be subject to initial construction work before the new tenant takes occupancy. The
remaining units would be turned over to the new tenant for occupancy "as-is," but would
undergo tenant renovation at a later date. 
PROJECT DESCRIPTION/SCOPE OF WORK: 
The new duty free/specialty retail concession contract will include five units. Two of these units
are intended to be improved prior to new tenancy within the scope of the Concession Unit
Readiness Project. 
North Satellite: 
This duty free/retail space is 2,019 square feet (Exhibit A, NS-11 and NS-2 combined). It is
occupied by the current duty free operator, and it has not been upgraded since the early 1990s.
The tenant would be required to develop the existing space into two separate spaces. One space
would be 1,344 square feet, and a smaller adjacent space of 675 square feet.
The current unit serves domestic travelers with retail/duty paid merchandise, and international
travelers bound for Canada and Japan with duty free tobacco and alcohol. The flight service to
Japan is operated once-daily by United Airlines. Due to the possibility that the carrier mix in the

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
August 19, 2010 
Page 3 of 7 

North Satellite may change (i.e. United Airlines relocates to another part of the Airport) and
thereby reduce the number of duty free customers, the Port project will add utilities on the
outside wall of the larger shell space to allow for a small duty free wall-unit kiosk which can be
opened or closed for service of a specific flight or time period. This would provide the operator
with the flexibility to focus on specialty retail in both in-line units and duty free on an as-needed
basis, which also would optimize revenue to the Port. 
Since early 2009, enplanement levels have grown dramatically in the satellite as a result of
Alaska Airlines consolidation of operations to the North Satellite and Concourse C. The North
Satellite has no other specialty retail offerings beyond the opportunities afforded by the two
proposed new locations. Two gate area kiosk locations in the original scope of the project
(Exhibit A, NS-12, NS-13) were removed because Alaska Airlines now leases these areas.
The work will specifically include installing utilities (power, electrical meter, communications) 
on the outside wall of unit NS-11 for the wall unit kiosk. Utilities also will be installed in a
nearby Port-controlled area near Gate N9 which could serve as the temporary location for the
duty free business, if necessary. 
Central Terminal: 
The location is an undeveloped concessions space created, but not finished to a shell standard, by
the Central Terminal Expansion project in 2005 (Exhibit A, CT-28). This unit is included in the
recent Request for Proposals for a new duty free/specialty retail operator. It is not currently 
occupied by a tenant. The unit had been under contract with Clear Channel Airports (CCA) as a
planned advertising exhibit space, however, CAA was not successful in securing an advertiser,
and staff recommends that it be developed as a retail concessions space, as originally intended. 
The location is on the northern flank of the Central Terminal, near the confluence of Concourses
C and D, and in close proximity to an existing duty free unit operated by Host (Exhibit A, CD-
15). Due to unpredictable changes in air carrier operations with international service (primarily
to Canada), these two adjacent units provide the new operator the flexibility of offering duty free
merchandise with specialty retail in either of the units. 
The work will specifically include raising the level of the unit floor which is currently 12" below
the granite flooring of the terminal. It will also include the installation of electrical utilities to the
lease line of the unit.
Other Duty Free/Retail Units: 
There are additional locations included in the duty free/specialty retail RFP; however, they are
not in the scope of the Concessions Unit Readiness Project. A 1,600 square foot unit, mentioned
above and located on Concourse D (Exhibit A, CD-15) has been renovated within the last five 
years and thus does not need any base building improvements.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
August 19, 2010 
Page 4 of 7 

The remaining unit is the largest duty free location at the Airport, and is situated at the west end
of the South Satellite (Exhibit A, SS-4). Infrastructure changes in the satellite following the 
relocation of Delta Airlines will impact this unit and result in a loss of square footage. Port staff
plans to return to the Commission in late September with a proposal to address these impacts to
the duty free location, as well as add much-needed new food and beverage restaurant capacity,
and address operational problems presented by the increase in passenger volumes that have
resulted from Delta's move and new international flight service. 
Next Steps: 
Port staff issued an RPF on July 9, 2010 for a new duty free/specialty retail concessionaire.
Proposal responses are due on September 28, 2010. The pre-proposal conference in August drew
a strong group of potential proposers, and staff expects to receive as many as six duty free
companies as proposers. Proposal interviews will be conducted in early October with the intent
to award the business in late October or early November. The current authorization would allow
work to begin in advance of the new tenant's first day of occupancy. In particular, b eginning the
work on the Central Terminal unit as quickly as possible will allow the new operator to complete
their build-out work and begin generating revenue earlier in 2011. While there is a slight risk
associated with beginning work before contract award, it is appropriate to move forward given
the high level of certainty that the Port will be able to select a new concessionaire as a result of
this process. The RFP document designates the spaces with this future configuration, and
proposers are proposing accordingly. 
STRATEGIC OBJECTIVES: 
Ensure Airport and Seaport Vitality 
The purpose of this work is to bring existing base building infrastructure up to Port standards so
a future tenant can complete their construction in ready concession spaces. The new units will
enhance the concession program and generate additional income to the Port. The estimated
payback is five years. 
Exhibit Environmental Stewardship through Our Actions 
This project has no specific impacts to the Port's environmental goals. 
FINANCIAL IMPLICATIONS: 
Budget/Authorization Summary        N. Sat & CT  Total Project 
Original Budget                                  2,231,000 
Budget Decrease                                ($144,000) 
Revised Budget                                 $2,087,000

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
August 19, 2010 
Page 5 of 7 

Previous Authorizations                   $79,000      $357,000 
Current request for authorization              $229,000       $229,000 
Total Authorizations, including this request      $308,000       $586,000 
Remaining budget to be authorized                $0     $1,501,000 

This Request        Total
Authorizations
(including this
Project Cost Breakdown                            request) 
Construction costs                        $178,000          $183,000 
Port furnished equipment                         $0               $0 
Sales tax                                  $17,000            $17,000 
Outside professional services                       $0           $186,000 
Aviation PMG and other soft costs               $34,000          $200,000 
Total                                   $229,000           $586,000 
Source of Funds 
The funding source will be the Airport Development Fund. The project is included in the 2010
capital budget and will be included in the 2011 capital budget. 
Financial Analysis 
Revenue/Capacity Growth 
CIP Category 
Project Type              Business Expansion/New Business Development 
Risk adjusted Discount rate     9% 
Key risk factors             The financial risk is the possibility that the lease-up
does not occur as planned and revenue generation is
delayed.
Project cost for analysis        $229,000 
Business Unit (BU)          Aviation Business Development 
Effect on business performance  NOI after depreciation increases $100K-$200K per
year 
IRR/NPV             Total project NPV of $1,096,739. Based on
projected build-out costs and sales projections,
payback is two (2) years. 
CPE Impact             None.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
August 19, 2010 
Page 6 of 7 

ECONOMIC IMPACTS: 
This project will create new business and employment opportunities. Due to the complex and
highly regulated nature of the duty free business (sales of primarily alcohol, tobacco and luxury
brand goods), the industry is dominated by large, non-U.S. based companies (the predominant
players in the U.S. market are based in the U.K., Spain, Switzerland and Hong Kong). There are
a limited number of U.S.-owned duty free companies operating in large airports, none of which
are located in Washington State. Therefore, this is not anticipated to be an opportunity for a
local small business. However, the Port's Request for Proposals requires proposers to
demonstrate in their proposals how they intend to support the local and small business
community through purchasing, partnerships or other means. Points will be awarded for this part
of the proposal. 
ENVIRONMENTAL SUSTAINABILITY/COMMUNITY BENEFITS: 
There are no negative environmental impacts anticipated as a result of this project. Upgrades
will be constructed using carefully chosen materials with demonstrated long life and durability in
an airport environment. Recycled materials for construction will evaluated and used wherever
appropriate and available. 
TRIPLE BOTTOM LINE SUMMARY: 
This work will develop new economic and employment opportunities by enhancing the
concessions program; generate additional non-aeronautical revenue; and allow for the quickest
possible tenant build-out of new concession concepts. The traveling public will have a greater
range of choice in duty free and retail shopping. 
PROJECT SCHEDULE: 
Commission Authorization to Construct              September 2010 
Construction Complete                       December 2010 
ALTERNATIVES CONSIDERED/RECOMMENDED ACTION: 
Alternative 1: Do not develop these concession spaces. This alternative means that the 
Concessions Unit Readiness Project would not move forward with preparation of these units for
the concessionaire. Port staff would instead issue an addendum to the Airport's current RFP to
eliminate the North Satellite wall kiosk and Central Terminal unit. The Central Terminal unit
would remain unoccupied and without any revenue stream. The RFP addendum could 
necessitate an extension of the bid period, and the extension of the existing duty free agreement
with Host beyond December 31, 2010. Without a lease extension, a loss of current duty free
revenue of approximately $1 million in 2011 could result. Host has already committed to end
the lease of its bonded off-site warehouse, which could make continued operation difficult.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
August 19, 2010 
Page 7 of 7 

Alternative 2: Require the future tenant to make infrastructure improvements. This
alternative would require no Port expenditures. The future tenant would be required to perform
the base building infrastructure improvements, in addition to their concession build-out
construction. This course of action would result in higher costs borne by the tenant. Tenant
sponsored construction could lead to lower proposed rent to the Port over the life of the lease
term, and thus lower the Net Present Value. This alternative would require issuing an addendum 
the RFP to include the new requirement, and also would likely necessitate the extension of the
bidding period and of the existing duty free agreement, similar to Alternative 1. 
Alternative 3: Authorize construction to improve the duty free/specialty retail spaces. The
airport's duty free concession is the last significant business from the former master
concessionaire era that has not benefited from major revitalization. A new operator, along with
new units that appeal to the traveling public, has the potential to substantially increase revenues
to the Port. Additionally, the North Satellite has seen dramatically increased enplanement
activity which bolsters the business opportunity. The investment payback for the three units in
this request is two (2) years. This is the recommended alternative. 
OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST: 
Exhibit A: Units originally included in the project scope for the Concessions Unit Readiness 
Project in August 2008 
Exhibit B: Units included in the Port's 2010 Request for Proposals for Duty Free/Specialty
Retail 
Power Point Presentation 
PREVIOUS COMMISSION ACTION: 
On August 26, 2008, Commission authorized $357,000 for project work on multiple concessions
shell spaces in preparation for new retail concession development.

EXHIBIT A
Concessions Unit Readiness Project
10 Units in Original 2008 Scope




Original 10 units marked
GREEN and BLUE
3 Units marked BLUE
removed from scope
1 Unit marked ORANGE
added to scope

EXHIBIT B
Units Included in 2010 Duty Free &
Specialty Retail RFP





Three units
(NS-2, NS-11,
CT-28 included
in scope