COMMISSION 
AGENDA MEMORANDUM                Item No.       6a 
ACTION ITEM                   Date of Meeting   November 22, 2016 
DATE:    October 28, 2016 
TO:     Ted Fick, Chief Executive Officer 
FROM:   Dave McFadden, Managing Director Economic Development Division 
Jeffrey Utterback, Director Real Estate & Economic Development 
SUBJECT:  Approval two ground leases for the Northeast Redevelopment Area ("NERA"). 
ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to execute (1) a ground lease
with Seattle Gateway 2 LLC to develop aviation-related facilities in Northeast Redevelopment
Area 2 in the city of Burien and (2) a ground lease with Seattle Gateway 1 LLC to develop
aviation-related facilities in Northeast Redevelopment Area 3 in the city of Burien. 

EXECUTIVE SUMMARY 
The Port and City of Burien have been working collaboratively for a number of years preparing
the NERA area for development. Work has included zoning, master planning, development of a
regional storm water facility and obtaining a grant from the Federal Aviation Administration for
$5 million to plan all necessary improvements required for development. These two leases,
along with the City's adjacent project, represent the fruition of all the work preparing for
development. 
The Port reached out to 25 qualified developers with records of accomplishment in industrial
and air cargo related development. Five developers submitted a Letter of Intent. The
evaluation included financial benefits, labor harmony, and small business participation.
Panattoni has created two limited liability companies to lease each of the sites. 
JUSTIFICATION 
This project is a large step forward in pursuing the Century Agenda Strategy of "Positioning the
Puget Sound region as a premier international logistics hub." In addition, it furthers the
airport's strategic goal of maximizing non-aeronautical income. 
The proposed development of the two properties by Panattoni Development Company will
create approximately 425,000 square feet of manufacturing, office, and supporting warehouse
functions across the NERA 2 & 3 sites. Tenants will include food processors, manufacturers,

Template revised September 22, 2016.

COMMISSION AGENDA  Action Item No. 6a                       Page 2 of 4 
Meeting Date: November 22, 2016 
and supporting logistics providers including Washington Distribution Services ("WDS") as lead
tenant. WDS currently employees 50+ with an average wage of $18.00/hr. with a full range of
benefits. The other, yet undisclosed, tenants are anticipating up to 500-600 family wage jobs.
Construction of the site will be completed at Prevailing Wage and there will be an outreach for
apprentice and small business participation. 

DETAILS 
The basic terms of the lease are as follows: 
NERA 2 
1.  TERM- Initial term of fifty-five (55) years with two (2) ten year options to extend. 
2.  Base rent from the day construction begins or April 1, 2017 whichever occurs first- 
$0.075 per square foot  approximately $23,196.00/year 
3.  Base rent from substantial completion or January 1, 2018, whichever occurs first- $0.88 
per square foot  approximately $272,163.00/year. 
4.  Base rent adjustments: The applicable Base Rent will increase by ten percent (10%)
throughout the Term and any Extension Terms beginning at the sixth (6th) Agreement
Year and then every five (5) years thereafter. 
5.  Fair Market Rent appraisals for the twenty-first (21st), thirty-first (31st), forty-first (41st),
and fifty-first (51st) Agreement years and the sixty -first (61st) and seventy -first (71st)
Agreement years if the options are exercised. 
6.  In no event will the Fair Market Rent adjustments be less than ninety-five percent (95%)
of the then current base rent or more than one hundred ten percent (110%) of the then
current base rent. 
NERA 3 
1.  TERM- Initial term of fifty-five (55) years with two (2) ten year options to extend. 
2.  Base rent from the day construction begins or April 1, 2017 whichever occurs first- 
$0.075 per square foot  approximately $62,400.00/year 
3.  Base rent from substantial completion or January 1, 2018, whichever occurs first.- 
$0.88 per square foot  approximately $732,156.00/year. 
4.  Base rent adjustments: The applicable Base Rent will increase by ten percent (10%)
throughout the Term and any Extension Terms beginning at the sixth (6th) Agreement
Year and then every five (5) years thereafter. 
5.  Fair Market Rent appraisals for the twenty-first (21st), thirty-first (31st), forty-first (41st),
and fifty-first (51st) Agreement years and the sixty -first (61st) and seventy -first (71st)
Agreement years if the options are exercised. 
6.  In no event will the Fair Market Rent adjustments be less than ninety-five percent (95%)
of the then current base rent or more than one hundred ten percent (110%) of the then
current base rent. 

This version as revised 9/16/2016

COMMISSION AGENDA  Action Item No. 6a                       Page 3 of 4 
Meeting Date: November 22, 2016 
Scope of Work 
The execution of all necessary documents related to the two proposed leases. 
Schedule 
The leases are anticipated to be signed by November 30, 2016. 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Do not sign the two leases. 
Cost Implications: The loss of over $1,000,000 in initial annual revenue. 
Pros: 
(1)   The property would be available for some yet unknown airport operational purpose. 
(2)   There could be some other use identified that could more align with the Port's long
term goals. 
Cons: 
(1)   The loss of $1,000,000 in annual revenue equal to more than $200 million over the life
of the lease with baseline escalations. 
(2)   The loss of Leasehold Excise Tax of $123,093 per year (not including lease revenue
escalations) to the State. 
(3)   The loss of construction jobs. 
(4)   The loss of up to 500-600 family wage jobs. 
This is not the recommended alternative. 
Alternative 2  Sign the two leases. 
Cost Implications: $1,000,000 in annual revenue. 
Pros: 
1.  $1,000,000 in annual revenue equal to more than $200 million over the life of the lease
with baseline escalations. 
2.  Leasehold Excise Tax of $123,093 per year (not including lease revenue escalations) to
the State. 
3.  The creation of construction jobs. 
4.  The creation of up to 500-600 family wage jobs. 
Cons: 
1.  The property would not be available for some yet unknown airport operational purpose. 
2.  There could be some other use identified that could more align with the Port's long
term goals. 
This is the recommended alternative. 

This version as revised 9/16/2016

COMMISSION AGENDA  Action Item No. 6a                       Page 4 of 4 
Meeting Date: November 22, 2016 
FINANCIAL IMPLICATIONS 
The development of these two sites is tied to the Federal Aviation Administration's (FAA)
funding of the purchase of the many residential sites under the Part 150 Noise Program. The
sites were acquired because of the noise impact to the residences.  The FAA provided
significant grants that allowed the purchase, relocation, and demolition of the homes.
The purpose of redevelopment is to put the property back into productive use with an airport
compatible development. It is a requirement under the FAA grant assurances. To ensure a Fair
Market Rent for the land the Port appraised the property in its current condition and then
competitively offered the property to the development community. This ensured the Port has
a strong basis to evaluate proposals for both financial implications and aspirational goals. The
proposal being presented exceeds the financial expectations and addresses the aspirational
goals set by Commission. 
Future Revenues and Expenses (Total cost of ownership) 
The total estimated revenue is equal to more than $200 million over the life of the leases (75
years.) The Port will pay to the City of Burien approximately $775,000 to acquire the street
easements located within NERA 2. This funding request is not part of this approval and will be
submitted at a later date. 
ATTACHMENTS TO THIS REQUEST 
(1)   NERA 2 & 3 Map 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None 







This version as revised 9/16/2016