Memo revised February 8, 2010
PORT OF SEATTLE 
MEMORANDUM 

COMMISSION AGENDA    Item No.   6e
Date of Meeting  February 9, 2010 
DATE:   February 8, 2010
TO:     Tay Yoshitani, Chief Executive Officer
FROM:   Michael Burke, Senior Manager, Container Leasing and Operations
Michael Campagnaro, Manager, Container Leasing and Operations
SUBJECT: Term Lease with Kinder Morgan Liquids Terminals, LLC at Terminal 18, Harbor
Island Central.
ACTIONS REQUESTED: 
1.  Request for authorization for the Chief Executive Officer to execute a ten-year lease, with
options to renew for two additional five-year terms, with Kinder Morgan Liquids
Terminals, LLC, at Terminal 18 Harbor Island Central.
2.  Request for authorization for the Chief Executive Officer to execute a Conditional
Consent to Sublease Agreement for Kinder Morgan Liquids Terminals, LLC, at Terminal
18 Harbor Island Central to sublease a portion of the premises to Chevron USA, Inc.
BACKGROUND: 
Kinder Morgan Liquids Terminals, LLC ("KML"), previously known as GATX Terminals, is an
industrial site (petroleum bulk storage and distribution facility) located on Harbor Island. The
facility has been in operation since 1944 under three different owners.
On September 14, 1976, the Port entered into a twenty-five year lease (total term including
renewal options), with Shell Oil Company ("Shell"), a Delaware corporation. On December 16,
1994, GATX Terminals Corporation ("GATX") acquired Shell and assumed the abovereferenced
lease between the Port and Shell. On December 27, 1994, the Port consented to the
subleasing by Shell of a portion the leased premises to Chevron USA, Inc., subject to the
overriding terms and conditions of the lease between the Port and Shell. It is standard Port
practice to only consent to subleasing on a conditional basis. The conditional nature of the
sublease primarily pertains to the Lessee remaining liable and responsible under all terms of the
lease despite the Port's consent of sublease to Lessee.
On December 31, 2002, the above-referenced lease expired and the agreement has been on
holdover since this date. The lease has been on holdover due to ongoing negotiations on specific
lease conditions. The Port has been getting the proposed revenue during the holdover status.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer
February 8, 2010
Page 2 of 5
Therefore, the Port had no reason to compromise with KML for the new lease on conditions.
KML has finally agreed to the Port's standard lease and the Port is ready to finish fulfilling the
2003 agreement with KML.
The lease continued under GATX until 2001. In March 2001, Kinder Morgan Energy Partners,
L.P. ("KMP") completed acquisition of GATX property and pipeline assets held by GATX. In
addition to the new acquisition by KMP, the lease boundaries also changed in 2001 in order to
accommodate the Terminal 18 expansion project.
In 2003, the Port and Kinder Morgan completed a comprehensive agreement to relocate the
Terminal 18 fuel pipelines from the center of Terminal 18 to the north end, fulfilling a lease
commitment to SSA Terminals. In addition, as part of that agreement, Kinder Morgan agreed to
quit claim any rights it had for street right of way in 11th Avenue and the Port agreed to execute a
new lease for the truck fueling area for ten years, with two five year options. The pipeline
agreement and the terms of the general agreement with Kinder Morgan were approved by the
Commission on May 27, 2003 (attached). The new lease for the truck fueling area was to be a
separate Commission action.
Port staff and Kinder Morgan entered in negotiations for the lease of the truck fueling area but
were unable for some time reach agreement on insurance and liability issues. The Port has had
Kinder Morgan on a month-to-month lease for the area paying the same rate as proposed in the
long-term lease. Recently, Kinder Morgan and the Port reached agreement on the long-term
lease conditions. KML is currently paying the rate of $1.80 per square foot per year. Once the
Lease agreement is signed and fully executed, a rent adjustment will be processed to reflect the
new rent amount of $1.9812 per square foot per year effective October 1, 2008.
The Port's Legal Counsel has reviewed the proposed term agreement with Kinder Morgan
Liquids Terminals, LLC ("KML"), subsidiary of KMP. As per the previous agreement, the lease
is a new ten-year lease agreement with option to renew for (2) additional five (5) year terms.
KML also agreed to the environmental terms and conditions required by the Port under the
proposed new lease agreement.
KMP/KML is one of the largest independent pipeline transportation and energy storage
companies in North America with more than 35,000 miles of pipelines and 170 terminals.
KMP/KML transports, stores, and handles energy products such as natural gas, refined
petroleum products, crude oil, ethanol, coal and carbon dioxide (CO2). These products are
essential for generating electricity, heating homes, powering cars and much more.
The major elements of the proposed term lease are outlined below.
MAJOR ELEMENTS OF PROPOSED LEASE: 
Term:         Ten years, effective October 1, 2008, through September 30, 2018.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer
February 8, 2010
Page 3 of 5
Renewal Options:   Option to renew lease for two (2) additional five (5) year terms.
Use:          Storage and distribution of petroleum products.
Area:          119,195 square feet (sf) improved land.
Rental:          119,195 at $1.9812/sf/year = $19,679.09/month.
Rent Increase:     Consumer Price Index increase every twelve months.
Port Improvements:  None.
Termination:      12-month major Port improvement clause.
Maintenance:     All maintenance is the sole responsibility of Lessee.
Utilities:          Except for water surface fees which are billed back to Lessee, all utilities
are paid by Lessee directly to utility suppliers.
Security:         Bond for $118,074.54 (equal to six months' rent).
Insurance/Liability:  $5 million General Liability/ $1 million Auto Liability/ $5 million
Environmental Liability; all with a 45-day cancellation notice.
Assignment/Sublease: Port written consent required. The Port consents to KML's sublease with
Chevron USA, Inc. Sublease is subject to the overriding terms and
conditions of the lease between the Port and Lessee.
ADDITIONAL INFORMATION: 
The Port and KML currently have a separate license agreement for dockage at Terminal 18 for
the operation of the fuel transfer facility for loading and unloading petroleum into and from
tankers, barges, and other vessels. The license is for a ten year term and has (4) renewal options
of five (5) years each. The proposed term lease is critical for KML continued operations at
Terminal 18.
ALTERNATIVES CONSIDERED/RECOMMENDED ACTION: 
Do Nothing: Doing nothing at this time would mean the tenant's current lease agreement
would remain on holdover status. This would not be consistent with the previous
agreement with Kinder Morgan for relocating their pipeline at Terminal 18, nor would it
be consistent with the prior Commission action on May 27, 2003.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer
February 8, 2010
Page 4 of 5
Execute Proposed Lease: Proceeding with the proposed lease agreement will allow the
Port to incorporate environmental, security, and other liability language, which otherwise
the Port will not be able to incorporate without a new agreement or an amendment. In
addition, the new agreement will allow the Port to secure a rent revenue stream. This is
the recommended action. 
FINANCIAL IMPLICATIONS: 
Source of Funds 
No funds needed.
Financial Analysis Summary 
CIP Category      NA
Project Type       NA
Risk adjusted       7.5%
Discount rate
Key risk factors      A potential risk factor of any lease is tenant default, however the risk of
default mitigated for this lease agreement due to the following factors:
Kinder Morgan has been a tenant of the Port since 2001, with
excellent payment history.
Over the term of its tenancy, Kinder Morgan has consistently met its
financial and lease obligations to the Port, provided the required
liability insurance, and maintained the required lease security per
Port lease policy (equivalent to 6 months' rent under this proposed
new agreement).
Project cost for       N/A
analysis
Business Unit (BU)    Container Support Properties
Effect on business     The Net Operating Income (NOI) Before Depreciation for years 2010
performance       through 2014 of the proposed lease is shown below.
NOI (in $000's)         2010 (a)  2011   2012   2013    2014
Incremental Revenue      $265   $244   $250   $256    $262
Incremental OpExpense      $0    $0    $0    $0     $0
NOI Before Depreciation (b)   $265   $244   $250   $256    $262

Note:
(a) Assumes the lease is executed in Feb 2010. 2010 incremental
revenue includes the retroactive rent increase payment due at lease
execution. Revenue received during hold over status not included.
(b) There is no incremental depreciation associated with this lease.
In addition to this Lease Agreement for premises rent, Kinder Morgan is

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer
February 8, 2010
Page 5 of 5
party to a 10 year License Agreement that generates revenue to the Port via
dockage and service & facilities fees based on liquid bulk volume
transported through Kinder Morgan's Terminal 18 facility. The License
Agreement term continues through May 2015. Additional revenue
associated with the License Agreement (of approximately $380,000/yr) is not
reflected in the NOI Before Depreciation shown above.
IRR/NPV         NPV
(in $000's)
$1,643
The Port has no additional investment obligation associated with this lease,
so IRR and Payback are not applicable.

PREVIOUS COMMISSION ACTION 
On May 27, 2003, the Port Commission approved the easement and funding for the relocation of
the Terminal 18 pipeline as part of a comprehensive agreement with Kinder Morgan for issues
related to the Terminal 18 expansion, including a commitment to bring to the Commission for
approval a long-term lease for the truck fueling area.