PORT OF SEATTLE
MEMORANDUM
COMMISSION AGENDA             Item No.      5d
ACTION ITEM
Date ofMeeting __J_u_ne_2_6~,_2_0_12__

DATE:   June 18, 2012
TO:     Tay Yoshitani, ChiefExecutive Of_fl~.,e~ - I .
FROM:  Craig Watson, General Counsel (_JWIV
Elizabeth Leavitt, Director, Aviation Planning and Envirorunental Programs~
SUBJECT: Purchase offour adjacent tax lots owned by Nick Properties LLC and located
northwest ofSea-Tac International Airport in 15400 block ofDes Moines Memorial Drive for
fair market value of$1 ,238,000.00, with closing contingent on release ofclaims filed against the
Port by RST Enterprises Inc.
Amount of This Request:  $1,600,000  Source of Funds:  Airport Development Fund
Est. State and Local Taxes: $17,000    Est. Jobs Created: 10
Est. Total Project Cost:   $1,600,000
ACTION REQUESTED:
Request Commission authorization for the ChiefExecutive Officer to (1) settle claims filed by
RST Enterprises Inc. through authorization ofthe purchase offour adjacent tax lots owned by
Nick Properties LLC for fair market value of$1,238,000.00, with closing contingent on release
ofclaims; and (2) execute all documents necessary for purchase and conveyance ofsaid property
as well as authorize the post-acquisition costs related to demolition ofexisting improvements on
said property and site stabilization/restoration in the amount of$362,000 for total authorized
amount of$1,600,000. The terms ofthe purchase and sale agreement for which approval is
requested shall be as substantially set forth in the attached agreement; the property proposed for
purchase is described in exhibits A-1, A-2, A-3, and A-4 to the proposed agreement; and the
terms ofthe release ofclaims shall be as substantially set forth in exhibit B to the proposed
agreement.
SYNOPSIS:
This request for Commission authorization for purchase and post-acquisition costs arises out of
the General Counsel'srecommendation to settle claims filed by RST Enterprises Inc. The four
tax lots that are the subject ofthe acquisition are adjacent to the Port-owned Vacca Farm
Mitigation Site which the Port acquired more than eight years ago to meet wetland mitigation
requirements related to construction ofthe third runway at the Airport. RST filed a tort claim and
threatened to file a lawsuit complaining about flooding, drain pipe maintenance and drainage
issues, as well as the Port'swetland mitigation activities related to the Port'sThird Runway

COMMISSION AGENDA
Tay Yoshitani, ChiefExecutive Officer
June 18, 2012
Page 2 of5
Project and issues outlined in the Cherry Creek Environmental Report offindings following a
hydrologic evaluation in February 2008.
The General Counsel'srecommendation is to settle the claims and obtain a release from RST
Enterprises Inc. and Nick Properties LLC by purchasing the subject property for fair market
value of$1,238,000.00.
The cost ofthe settlement was included in the 2012-2016 capital budget and is being funded by
an open Third Runway CIP.
BACKGROUND:
Over the last five-plus years, Port staffhas evaluated RST'sclaims, considered alternatives to
resolving RST'scomplaints and, since receiving RST'sformal claim in February 2010, have also
evaluated the Port'sliability exposure and the potential cost ofdefending litigation. The Port
obtained an updated appraisal from MAl appraiser Christopher Eldred for a valuation ofthe
property at $1,238,000 as ofMay 5, 2012. The Port has also completed environmental due
diligence.
Until July 2010, RST owned the subject property, but RST conveyed the subject property to
Nick Properties LLC, a related entity. James Terrile is the President and CEO ofRST as well as
the Managing Member ofNick Properties LLC and would have authority to sign on behalfNick
Properties LLC for sale ofthe subject property to the Port and would also have authority to sign
on behalfofboth entities to provide the release ofclaims. Closing ofthe real estate transaction
would be contingent on the Port obtaining a release and documents establishing authority to sign
and convey property. Closing is anticipated by or before August 31,2012.
RST and Nick Properties LLC will provide notice to their tenants and the property will be
acquired free oftenancies, or any encumbering leases or other agreements. The subject property
is being acquired without environmental indemnification since the environmental due diligence
did not find contamination ofconcern to the Port.
The Port anticipates that the subject property will be useful to meet wetland mitigation
requirements for future projects in the event wetlands are affected and mitigation is required or
to meet additional mitigation requirements arising out ofpast projects. Land for wetland
mitigation is scarce in the Miller Creek basin so the subject property has value beyond its fair
market value in that it serves the Port'sstrategic objectives ofenvironmental stewardship.
In addition, the Port anticipates that some ofthe subject property could be useful as construction
laydown area for materials and equipment and for staging future construction projects and may
have development potential. This serves the Port's strategic objective ofensuring Airport
vitality.
The subject property consists offour adjacent tax lots located along the east side ofDes Moines
Memorial Drive, in the 15400 block ofthis arterial, adjacent to the Port-owned Vacca Farm

COMMISSION AGENDA
Tay Yoshitani, ChiefExecutive Officer
June 18, 2012
Page 3 of5
Mitigation Site. King County records indicate that the overall site area totals 148,892 square feet,
or 3.42 acres. The existing structures are, or have been, used for recycling and vehicle
maintenance as well as residential use.
A wetland technical report for most ofthe subject property was prepared by ESA Adolfson
(ESA) in October 2010, which found that the property is in the upper portion ofthe Miller Creek
drainage basin and that ofthe property'stotal area, approximately 66,330 square feet ofthe
northern and eastern portions ofthe site is encumbered by wetland, wetland buffer, and stream
buffer. The presence ofthese sensitive areas limits the site'spotential for commercial
development, but does not totally preclude development. Most ofthe property is located within
the 100-year flood plain as established by the Federal Emergency Management Agency (FEMA).
Under zoning, no structures may be built in the 100-year flood plain unless they conform with
requirements in the zoning code.
The appraisal performed by Chris Eldred is based on 82,562 square feet ofusable land (not
counting the portions ofthe subject property encumbered by wetland, wetland buffer, and stream
buffer). The value conclusion is thus 82,562 sf@ $15 per sfor $1,238,000.00.
PROJECT JUSTIFICATION:
Project Objectives:
Settlement and release of claims while avoiding the cost ofdefending litigation.
Purchase ofsubject property for fair market value.
Environmental stewardship by acquisition ofsubject property useful to meet future
wetland mitigation requirements.
Ensuring Airport vitality by acquisition ofsubject property useful for construction
laydown area for future construction projects.
Preparing subject property for Port'sintended uses by demolishing existing
improvements, restoring and stabilizing the site by removing any weeds and doing any
necessary planting.
PROJECT SCOPE OF WORK AND SCHEDULE:
Scope ofWork:
Acquisition is pending based on Commission authorization. Demolition and site stabilization
will follow.
Schedule:
Acquisition                August- 2012
Demolition/Site Stabilization     September-December 2012

COMMISSION AGENDA
Tay Yoshitani, ChiefExecutive Officer
June 18, 2012
Page 4 of5
FINANCIAL IMPLICATIONS:
Budget/Authorization Summary:              Capital  Expense      Total
proJect.
Original Budget                       $1,600,000      $0  $1,600,000
Previous Authorizations                        $0      $0        $0
Current request for authorization              $1,600,000       $0   $1,600,000
Total Authorizations, including this request       $1,600,000       $0   $1,600,000
Remaining budget to be authorized                 $0      $0        $0
Total Estimated Project Cost                $1,600,000      $0   $1,600,000
P.roJect'   Cost Breakdown:                          Th'lS Request         Toat 1 PrOJeCt.
Acquisition                             $1,238,000        $1,238,000
Construction                             $260,000         $260,000
Construction Management                    $40,000         $40,000
Design                                  $0            $0
Project Management I Environmental              $40,000         $40,000
Permitting                                 $5,000           $5,000
State & Local Taxes (estimated)                   $17,000          $17,000
Total                                  $1,600,000        $1,600,000
Budget Status andSource ofFunds:
While the Third Runway became operational in November 2008, the Port has maintained open
CIPs recognizing that not all project obligations have been met. CIP #C001760, New Runway
Land Acquisition, was included in the 2012-2016 capital budget and plan offinance with
adequate remaining budget to meet this requested action. The source offunding for this project
is the Airport Development Fund (ADF).
FinancialAnalysis and Summary:
CIP Category            Compliance
Project Type             Environmental
Risk ad.iusted discount rate     N/A
Key risk factors          N/A
Pro.iect cost for analysis        $1,600,000
Business Unit (BU)         Airfield
Effect on business performance  NOI after debt service will increase
IRRINPV            NIA
CPEimpact          CPE will increase by less than $.01, but no change to
business plan forecast as this project was included.

COMMISSION AGENDA
Tay Yoshitani, ChiefExecutive Officer
June 18, 2012
Page 5 of5
STRATEGIC OBJECTIVES:
Environmental stewardship by acquisition ofsubject property useful to meet future
wetland mitigation requirements.
Ensuring Airport vitality by acquisition ofsubject property useful for construction
laydown area for future construction projects.
ENVIRONMENTAL SUSTAINABILITY:
Acquisition ofthe subject property promotes environmental sustainability in that most ofthe
property will likely become wetland and be protected and preserved for wetland mitigation. It is
adjacent to the Port'sVacca Farm Mitigation site and lies within the Miller Creek basin where
land for wetland mitigation is scarce.
BUSINESS PLAN OBJECTIVES:
Not Applicable. This is an acquisition that is part ofa settlement ofclaims so mainly addresses
legal risk but has the benefit ofan acquisition for wetland mitigation and other uses that are
consistent with the Port'senvironmental stewardship objective.
TRIPLE BOTTOM LINE SUMMARY:
Legal risk is addressed, release ofclaims obtained, and defense oflitigation costs are avoided. At
the same time, the Port purchases for fair market value property that the Port anticipates will be
useful to meet future wetland mitigation requirements associated with Port projects that ensure
the vitality ofthe Airport. Port coincidentally protects and preserves the subject property for
future wetland mitigation, exhibiting environmental stewardship.
ALTERNATIVES CONSIDERED AND THEIR IMPLICATIONS:
Alternatives have been considered as discussed in attorney-client privileged communications.
OTHER DOCUMENTS ASSOCIATED WITH THIS REQUEST:
Purchase and Sale Agreement with legal descriptions ofthe four adjacent tax lots at
exhibits A-1, A-2, A-3, and A-4.
Terms ofrelease [ofclaims] at exhibit B to purchase and sale agreement.
Map ofarea showing property.
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS:
None.