Real Estate Strategic Plan Memo
COMMISSION AGENDA MEMORANDUM Item No. BRIEFING ITEM Date of Meeting October 27, 2020 DATE: September 25, 2020 TO: Stephen P. Metruck, Executive Director FROM: Dave McFadden, Managing Director, Economic Development Division Kyra Lise, Director, Real Estate & Economic Development SUBJECT: Real Estate Strategic Plan Update EXECUTIVE SUMMARY Staff is working with Heartland LLC (HTLand) to update the Port of Seattle's Real Estate Strategic Plan. The project is currently at the midpoint which, when completed, will deliver a comprehensive plan to advance Port Real Estate development efforts over the next five years. Heartland and staff will brief the Commission on the work to-date including an analysis of Portowned property development opportunities. Port staff will also highlight work ahead including potential future land acquisition strategies, as well as novel financing tools to help the Port support real estate development projects in the future. The final report will be delivered to Commission in February 2021. CURRENT PLANNING EFFORT The draft recommendations presented at Commission will address certain key questions and issues related to the Port's real estate portfolio: 1. Identify the key properties in the Port's development portfolio and evaluate them against current market trends for industrial property within the Puget Sound region and key Seattle submarkets (Ballard/Interbay and SODO). 2. Provide recommendations to the Commission on principles and strategies that make the best use of Port real estate under a "highest and best use" standard for key Port properties Identify development objectives and outcomes for each property based on observation and analysis supported by market data and discussion with internal and external stakeholders associated with the planning effort. Update plans, strategies and timelines for each property. Provide specific implementation recommendations that support the Port's ongoing Real Estate development initiatives in-line with the Century Agenda and portwide goals and reflecting the new realities for the real estate market due to COVID19. Recommend whether any Port properties should be sold/traded. Template revised April 12, 2018. COMMISSION AGENDA Briefing Item No. ___ Page 2 of 5 Meeting Date: October 27, 2020 Properties Being Evaluated The Economic Development Division has taken a comprehensive look at the Port's real estate portfolio to determine which sites merit investment. Staff is focusing the real estate strategic plan on every Port property that can support industrial or commercial development. This does exclude Seaport Alliance terminals, sites impacted by the SAMP, sites nearing development like T106 and Des Moines Creek West, several sites which are part of separate processes already underway to support other projects (Pier 2, CEM) and a few small sites (ex. Terminal 16/17). The following properties will be evaluated during the strategic planning process: Salmon Bay Marina Fishermen's Terminal Terminal 91 Uplands Pier 69 Harbor Marina Corporate Center World Trade Center West For a variety of reasons, the following properties will not be evaluated: SAMP impacted: 55 acre, L -Shape, 13 acre and SASA NWSA properties: Terminals 5, 10, 18, 25, 30, 46, 103, 104, 105, 107, 108, 115 and 117 Current/pending RFPs: Des Moines Creek West, CEM, Pier 2 and Terminal 106 Timelines/Milestones The current strategic planning schedule included input from internal and external advisors and is intended to wrap up by the end of the year (2020) with the final report presented to the Commission in early January 2021. Kick off Mid-point Final March 20 Oct 20 Feb 9 This is the second of three Commission briefings that have been scheduled during the planning effort. BACKGROUND Successful real estate development initiatives can help support the Century Agenda and top Port goals: Grow as an international logistics hub. Template revised September 22, 2016. COMMISSION AGENDA Briefing Item No. ___ Page 3 of 5 Meeting Date: October 27, 2020 Sustain fishing, cruise and other maritime industries. Advance equitable economic development. Enhance and protect industrial lands. Advance sustainability and energy efficiency. Generate income to help sustain Port operations and investments. Heartland has proposed a set of guiding principles to direct the Port staff's effort to realizethe benefits of proactive real estate investment decisions on existing Port properties. These principles are derived both from existing strategic documents and frameworks, as well as foundational Port practices when it comes to the use and development of real estate. These principles are: Manage for the Mission: Setting clear objectives and goals for each property and development project established in close connection to the Century Agenda and the Port's operational missions, as well as larger strategic frameworks more recently established such as sustainability and equity principles. Leverage Expertise: Whenever possible, identify opportunities to realize multiple Port policy objectives within our real estate development and investment efforts to enhance the impact of our leadership in areas where we have the greatest expertise. Partner to Amplify Impact: In this time of declining revenues and economic adjustment look outside the Port to find financial and policy partners to support our real estate objectives so we can maintain the positive momentum we've gained delivering on Real estate development projects in recent years. In addition to these guiding principles, Heartland has developed a simple classification framework that allows us to consider properties according to the strategic role that may play towards realizing Port goals and support a method of priority setting for real estate projects. Those categories are: Operational properties: Properties whose primary role is to support Port operations or to optimize operational capacity for the Port and its industry partners and tenants. Cashflow properties: Properties whose primary purpose is to generate net cash flow in order to reinvest in other key priorities of the Port. Opportunity properties: Properties with underrealized market or mission value generally on underdeveloped Port land. This classification framework recognizes that properties usually represent a hybrid of two or more of the types and that property classifications can and do change over time. Having a Template revised September 22, 2016. COMMISSION AGENDA Briefing Item No. ___ Page 4 of 5 Meeting Date: October 27, 2020 classification framework will allow us to develop appropriate evaluation metrics to determine if we've met our objectives. Using this succinct framework, Heartland provides profiles for each of the seven properties analyzed for this plan along with a set of strategic recommendations for each based on the principles noted earlier for each of the properties. Fishermen's Terminal: Following on the Commission's 2016 Strategic Plan for Fishermen's Terminal (FT), Heartland notes the important operational role the property has played historically and continues to play as the homeport of the North Pacific Fishing fleet and those enterprises that support the fleet. The profile is based on a thorough review of FT's existing building's overall operational and financial performance, while looking at the real estate development opportunities considering current market conditions, including the COVID19 crisis which has disrupted the conventional wisdom about real estate generally and industrial development. Salmon Bay Marina: Adjacent to FT and the Port's most recent acquisition (2017), the profile considers the opportunities to connect uplands development to in-water uses and expanding the footprint of operations at FT. T91 Uplands: Development of light industrial buildings is underway, and the property can support more development to support maritime industries with additional infrastructure investments. These facility investments recognize the key role the T91 Uplands has played for maritime operations and points to strategic opportunities the property plays for the future of maritime industrial development. Harbor Marine Corporate Center (HMCC): While a successful Marina operation continues the waterside, HMCC's value with its location directly under the West Seattle Bridge has been greatly impacted by the bridge's recent structural failure, as well as a high level of vacancy. The building's operational and financial future is intimately tied to the health of the bridge. Recommendations are made to consider selling or repositioning this property to serve public users working on the bridge itself. World Trade Center West (WTCW): WTCW was a significant property for the Port's vision for establishing an international business hub along the Seattle waterfront and symbolic of the significant role the Port has played in international trade. Today the office building has been impacted by both slow growth during a period of heavy construction at the central waterfront and the COVID economy. Recommendations include reviewing the continued relevance to current Port missions and operations and consideration of whether the property should be sold. Pier 69: The much beloved Pier 69 has served as the Port headquarters since 1993 and represents a major investment by the Port in the City's waterfront revitalization, aswell as serving as an important depot for the West Coast Clipper fleet on the waterside. Recommendations are to consider how continued teleworking post-COVID may impact the need for Port-used office real Template revised September 22, 2016. COMMISSION AGENDA Briefing Item No. ___ Page 5 of 5 Meeting Date: October 27, 2020 estate and open the conversation about adding additional tenants, along with the reconsideration of the now vacant Clipper Caf space. ATTACHMENTS TO THIS BRIEFING (1) Presentation slides PREVIOUS COMMISSION ACTIONS OR BRIEFINGS March 10, 2020 The Commission was briefed on the Real Estate Strategic Plan. Template revised September 22, 2016.
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