Item 6c Memo

PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA             Item No. ___6c______ 
Date of Meeting  December 15, 2009 

DATE:    December 8, 2009 
TO:     Tay Yoshitani, Chief Executive Officer 
FROM:    Phil Lutes, Deputy Managing Director Seaport 
Michael McLaughlin, Senior Manager Cruise and Industrial Properties 
SUBJECT:  Amendments to CityIce Cold Storage Company and Seafreeze Acquisition 
LLC Leases 
ACTION REQUESTED: 
Approval of a Letter of Intent authorizing the Chief Executive Officer to execute final
lease amendments for CityIce Cold Storage Company (CityIce) lease agreements 131,
594, 842 and 1481 at Terminal 91 and Seafreeze Acquisition LLC (Seafreeze) lease
agreement 1532 at Terminal 115 and all other documents required to close the
transaction. No funds are required. 
SYNOPSIS: 
CityIce is a long-term tenant of the Port of Seattle (Port) at Terminal 91, currently
holding five leases with the Port for land, cold storage facilities and dry warehouse
buildings (four leases in the Seaport Division portfolio and one month-to-month lease in
the Real Estate Division portfolio). CityIce's operation provides 250 full time jobs.
Seafreeze Acquisition LLC (Seafreeze), a Port tenant holding a land lease at Terminal
115, owns and operates a large, full service seafood processing plant and frozen food
warehousing and distribution facility, which is positioned to service both domestic and
international markets. Seafreeze's operations provides 600 full time jobs. 
CityIce now is selling its business to Bay Grove Capital, LLC (Bay Grove) which is the
parent company of Seafreeze. CityIce has requested that all current leases with the Port
be amended to reflect the change in control of their business concurrent with the closing
of the sale. 
CityIce and Seafreeze will continue to operate as separate business entities under one
owner and a common management structure made up of the proven leadership team that
has been in place at CityIce for 21 successful years at Terminal 91providing cold

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 8, 2009 
Page 2 of 6 

storage facilities and services to the northwest commercial fishing industry. In addition,
the new owner requests an extension of term periods of the leases. 
This requested action is a good deal for the Port for the following key reasons: 
Immediate rate increases to all current term leasesresulting in a positive NPV
for the port 
Opportunity to revise lease language in the Ports favoradopting new port lease
language standards 
Extension of Seaport revenue streams beyond current agreements 
Support of the growth of the cold storage business in our Port
Continuation of the on-dock services CityIce provides to our Factory Trawler
customers 
The combination of these companies will create benefits for the Port, our customers, the
business customers they serve and the large number of employees who hold jobs at these
facilities. This proposed merging of local competing business interests provides the
ability for Seattle to compete with larger competitors located in other Puget Sound
ports creating a better competitive position for Seattle in an industry which is
consolidating regionally.
The attached Letter of Intent (LOI) outlines the terms of the amendments. Following is
a brief summary of the major lease provisions that have been negotiated: 
Extension of lease terms, including future renewal options and staggered lease
ending dates. This would extend the current lease base terms with lease end dates
2017 - 2024 and options from 0  20 years, to base terms ending in 2027  2039
with options of 20  30 years. 
Standardization of several major lease provisions including:
Assignment/Sublease; Environmental; Insurance and Indemnity; Maintenance and
Repair; Damage and Destruction; and Leasehold Mortgage 
Initial increase in rent for all lease agreements, with annual CPI or fixed
percentage adjustments and scheduled periodic rate re-negotiation. 
STRATEGIC OBJECTIVES: 
The Seaport's strategy in supporting this proposal is to advance the Port's position and to
increase Seattle's market share of the northwest regional cold storage business. This will
retain local jobs and support future growth in the cold storage industry, which supports
our core container terminal business. In addition, the Port will obtain immediate value
from granting the request while delaying assessment of market rates until a more
favorable economic climate. The objectives also include:

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 8, 2009 
Page 3 of 6 

Standardization of lease languagestrengthening the Port's position by reducing
risk 
Better definition and reduction of the Port's maintenance responsibility 
Increased rates in all lease agreements to make them more competitive within the
local market 
No additional Port capital investment 
ALTERNATIVES CONSIDERED/RECOMMENDED ACTION: 
Alternative 1: Amend the leases. 
This alternative supports the business strategies of two of the Port's major customers by
partnering in a long term commitment to extend the base lease terms and provide future
options. In addition, the Port will maintain a market share of the regional cold storage
business which also supports our Seaport core container business within the harbor,
providing economic value, protecting jobs, and generating revenue for the Seaport for an
extended amount of time. This is the recommended alternative. 
Alternative 2: Do not amend the leases. 
This alternative would prevent our tenants from accomplishing their business strategies
and would prevent the Port from taking this lease renegotiation opportunity to extend the
terms, increase the rates and standardize major provisions across these lease agreements. 
FINANCIAL ANALYSIS: 
Previous Authorizations (Planning CIP)                              $0 
Current request for authorization                                    $0
Total Authorizations, including this request                             $0 
Remaining estimated budget to be authorized                          $0 
Source of Funds: 
No funds needed. 
Financial Analysis Summary 
CIP Category   N/A 
Project Type    N/A 
Risk adjusted   7.0% - CityIce current leases 
Discount rate    8.0% - proposed lease amendments with Bay Grove

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 8, 2009 
Page 4 of 6 

Key risk       The proposed lease amendments acknowledge the transfer of ownership of
factors         CityIce to Bay Grove. A new entity, West Coast Cold, LLC, will be
created as a holding company for CityIce and Seafreeze Acquisition, LLC.
Key risk factors associated with the transfer of ownership include: 
1)  West Coast Cold, LLC is a holding company, limiting the Port's
ability to secure the leases with individual investors of Bay Grove.
This risk is partially mitigated by a requirement to increase the
lease surety for the CityIce leases from six months to twelve
months, which is an increase of approximately $600,000. The lease
surety for Seafreeze was increased in the December 2008 lease
amendment to a twelve month requirement.
2)  The Port has limited landlord/tenant experience with Bay Grove.
Bay Grove purchased Seafreeze LP, a Port tenant at Terminal 115,
in December 2008 and has continued to operate the business and
has been in full compliance with the lease since the assignment. 
3)  Bay Grove has stated an intention to purchase 100% of the
outstanding CityIce stock. The Port has not been provided access to
the Purchase and Sale Agreement to confirm the terms of this
transaction. The Purchase and Sale Agreement will be finalized
upon execution of the proposed lease amendments. This risk will
be mitigated by the Port's verification that the terms of the Purchase
and Sale Agreement are substantially similar to the terms that have
been represented to Port staff to date. 
4)  Bay Grove has stated an intention to finance the acquisition of
CityIce with debt. As a result, tenant debt to equity ratios could be
significantly higher under the new ownership structure than
presently exist under the current CityIce ownership.
5)  Bay Grove will be given the ability to mortgage its leasehold
premises. The Port has not been provided access to documents
confirming the lending agreement. Financing is to be finalized
upon execution of the proposed amendments. 
6)  Because of privacy concerns by the individual investor group, the
Port has not been provided documentation confirming the financial
capability of Bay Grove investors to provide a) equity financing
related to the purchase or b) capital funds required to continue to
operate CityIce. 


Key risk factors associated with changes in lease terms:

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 8, 2009 
Page 5 of 6 

1)  The lease base terms and option periods in the proposed
amendments could enable all CityIce leases to expire in 2039 and
the Seafreeze lease to expire in 2037. The vacancy risk is mitigated
by the assumed integration of CityIce and Seafreeze at the time of
lease expirations and the benefit of an extended contractual base
term of up to twenty years. 
2)  The estimated financial impacts for these proposed lease
amendments include defined percentage increases, estimated annual
CPI increases and market lease rate assumptions at the lease
negotiation dates defined in the attached LOI. Actual financial
performance could be lower or higher, if future comparable market
lease rates vary significantly from those assumed in the analysis. 
Project cost for  None 
analysis 
Business Unit   Industrial Properties 
(BU) 
Effect on      The proposed lease amendments include defined rent increases, annual
business      Consumer Price Index (CPI) adjustments, and periodic base rent lease rate
performance    renegotiations.
A cash flow analysis was prepared with assumptions for rent renegotiation
results and CPI rates as stated below.
Renegotiation of base rent for #594 in 2014 resulting in an assumed
10% increase in base rent 
Renegotiation of base rent for #1532 in 2013 resulting in an assumed
increase of 5% 
Renegotiation of base rent for all other leases in 2013 resulting in an
assumed increase of 2.5% 
Month-to-month lease #443 excluded from analysis 
There are no incremental operating expenses or capital investment
obligations to the Port related to the proposed lease amendments. The
estimated incremental impact to Net Operating Income Before
Depreciation for Year 1 through Year 5 is shown below. 
NOI (in $000's)         2010     2011     2012     2013     2014
Revenue           $74     $85     $100    $137    $173
Expenses          $0     $0     $0     $0     $0
NOI Before Depreciation   $74      $85     $100     $137     $173
There is no incremental depreciation associated with these proposed lease
amendments. 
IRR/NPV     The following NPV represents the incremental impact to value as a result

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
December 8, 2009 
Page 6 of 6 

of the assumed base rent increases throughout the original term of the
CityIce lease agreements.
NPV    IRR
(in $000's)    (%)
$350     N/A
For the purpose of comparability, the time period considered in the NPV
analysis was limited to the terms of the existing CityIce leases.
A risk adjusted discount rate of 7.0% was used to determine the NPV of
cash flows currently obligated by CityIce.
A risk adjusted discount rate of 8.0% was used to determine the NPV of
cash flows associated with the proposed assignment to Bay Grove, to
reflect the additional risk associated with the uncertainties described above
in the key risk factors.
TRIPLE BOTTOM LINE SUMMARY: 
Approval of the proposed lease amendments will have positive financial impact for the
Port. It will also provide our tenants with a more competitively positioned business in the
harbor and support long-term retention of jobs. The Port will also benefit by maintaining
long-term occupancy of these existing facilities without any capital investment by the 
Port, increasing the lease rates to make them more competitive and standardizing lease
language provisions. 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS: 
Below are the most recent actions taken on these leases: 
Fourth Amendment to CityIce Lease #131 approved by Commission on August
25, 2009 
Seventeenth Amendment to Seafreeze Lease #1532 approved by Commission on
March 24, 2009 
CityIce Lease #1481 approved by Commission on September 9, 2008 
First Amendment to CityIce Lease #594 approved by Commission on April 26,
2005 
CityIce Lease #842 approved by Commission on April 26, 2005

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