Item 5c Memo

PORT OF SEATTLE 
MEMORANDUM 

COMMISSION AGENDA             Item No.      5c 
Date of Meeting     February 24, 2009 
DATE:    February 18, 2009 
TO:      Tay Yoshitani, Chief Executive Officer 
FROM:    James R. Schone, Director, Aviation Business Development 
Deanna Zachrisson, Manager, Aviation Concessions Business 
SUBJECT:  Amendment to Lease and Concessions Agreement of Prime Concessionaire
Concessions International (CI) 
REQUESTED ACTION 
Request for authorization for the Chief Executive Officer to execute lease amendments to the
Lease and Concession Agreement of Concessions International. 
SYNOPSIS
This request for term extension, rent reductions and construction credits creates equity between
Concessions International (CI) and other food and beverage concessionaires who received
support in late 2005. 
In December 2005, the Port Commission approved amendments to the prime food and beverage
concessionaire Lease and Concession Agreements of Host International and Seattle Restaurant
Associates. These amendments provided for term extension, rent reductions, construction credits 
and other utility and percentage fee reductions in recognition of higher than anticipated
concessions build-out costs at Seattle-Tacoma International Airport. These relief measures were
provided for both the prime concessionaire-operated units, and units operated by Airport
Concessions Disadvantaged Business Enterprise (ACDBE) subtenants. CI is the Airport's third
food and beverage prime concessionaire. Their agreement includes seven concessions units. At
the time of Commission approval in December 2005, CI had completed only two of its required
unit renovations. Because the relief was intended to mitigate higher than expected build-out
costs, CI was required by the Port to complete all of their renovations before seeking
Commission approval for the relief. With the recent completion of all renovations, CI now has
met the requirement to receive this relief. 
The relief includes a two-year term extension through 2016 for CI and its subtenants, a reduction
in percentage rent for CI and its non-ACDBE subtenant CVC Foods across all categories of sales
by 0.5% through the remainder of the lease term (2016), retroactive to January 1, 2008. CI also
has one ACDBE subtenant operator (BF Foods) which would receive a rent reduction of 2%
through 2009, a 1% reduction through 2010-12 and 0.5% reduction to the remainder of the term

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
February 19, 2009 
Page 2 of 4 

to 2016. In addition, the relief provided all prime concessionaires and their subtenants with
construction credits (applied to rent payments) for certain construction costs related to
infrastructure that primarily benefited the Port. In July 2006, CI requested construction credit for
renovations to two Seattle's Best Coffee units completed in 2005. The Port granted this request
and CI received a partial construction credit of $9,869. CI is now due a construction cost rent
credit of $24,785 for their remaining five units. While this type of relief is the same as was
provided to the other prime food and beverage concessionaires, delays in CI's renovations will
result in a smaller amount of relief paid retroactive to January 1, 2008, and not beginning
January 1, 2006 as with the other prime concessionaires. CI will receive this relief retroactive to
the beginning of year in which renovations were complete (2008), which is the same principle
was applied to the other prime concessionaires that completed their renovations in 2006. 
BACKGROUND 
CI operated prior to January 1, 2005 as an ACDBE subtenant to Host International at Sea-Tac.
The company outgrew its ACDBE status by way of expansion at airports across the country and
became a prime concessionaire. CI was awarded seven units at the Airport as a part of the
negotiated agreements which also maintained Host International's presence in the new
concessions program. CI operates three Seattle's Best Coffee units and a KOBO udon/sushi
quick-serve. Two additional Burger King units are operated by a subtenant, CVC Foods, and the
most recently developed concept, Bigfoot Food & Spirits, is operated by ACDBE subtenant BF
Foods. 
With regard to the required renovations, there were multiple false starts with proposed new
concepts and subtenants in the new prime concessionaire agreement. Consequently, CI was
unable to complete their renovations in a timely fashion. Port staff worked collaboratively with
CI to extend completion dates numerous times for their renovations and support development of
new concepts. 
Sales for CI have improved over the past four years as their units were renovated and/or
developed into new concepts. The redevelopment of the See's Candies/Dreyer's Ice Cream
location in the North Satellite to Bigfoot Food & Spirits under the new ACDBE subtenant was
particularly successful  from sales of $310,000 in 2007 for the See's/Dreyer's concept to $1.2
million for just seven months of operation as Bigfoot in 2008.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
February 19, 2009 
Page 3 of 4 

SCOPE OF WORK 
The Port would enter into lease amendments with CI making the following modifications: 
Term/Effective Date: Two year term extension to address higher than expected build-out costs
due to Port-mandated construction requirements. 
Premises:         Amend space exhibits to address actual square footage of facilities from
initial estimate included in original Lease and Concession Agreement. In
order to address the current needs of the overall concession program; 
1) delete certain spaces, and 2) change the projected concepts of certain
spaces. For example, the Concourse D Burger King has been reduced in
size to create a new adjacent unit for future use as a retail space. 
Rent Credits:      Tenants will receive rent credits to compensate them for certain, specific
construction costs that primarily benefited the Port of Seattle. The Port
will receive releases from the tenants for claims relating to their
construction. 
Rent/MAG:      Reduce percentage compensation by 0.5% (one-half percent) for CI and
subtenant CVC Foods for the duration of the lease term. Reduce
percentage rent for one ACDBE subtenant by 2% (two percent) for 2008-
09, 1% (one percent) for years 2010-2012 and 0.5% (one-half percent)
through the end of the lease in 2016. 
STRATEGIC OBJECTIVES 
This proposal supports the strategy of "Ensuring Airport and Seaport Vitality" by ensuring
business viability for small businesses at the airport and by supporting the mission of the Office
of Social Responsibility. 
ALTERNATIVES CONSIDERED/RECOMMENDED ACTION 
Alternative 1: No authorization of amendments 
While capital investment by any concessionaire carries risk, CI's investment is significant,
particularly in light of operating the fewest number of units of the Sea-Tac prime food and
beverage concessionaires. Without authorization of the amendments, the Port will create an
inequity between CI and the other concessionaires who have received this relief via
Commission approved lease amendments. This is not the recommended alternative.

COMMISSION AGENDA 
T. Yoshitani, Chief Executive Officer 
February 19, 2009 
Page 4 of 4 

Alternative 2: Authorize modified amendments 
Authorizing amendments other than those outlined would also create an inequity between CI
and the other prime concessionaires. This is not the recommended alternative. 
Alternative 3: Authorize amendments 
Authorization of these proposed amendments brings equity to the lease terms of all three
prime food and beverage concessionaires and at Sea-Tac. This is the recommended
alternative. 
FINANCIAL IMPLICATIONS 
Rent credit for construction costs which primarily benefited the Port, such as upgrades to
stainless steel grease waste lines, cost of running pipe further than 50 feet from point of
connection to the tenant unit and fiber-optic cables, is due to Concessions International for the
five units renovated in 2006-2008. This amount totals $24,785. 
Total sales for CI were $7,568,821 in 2008. The retroactive rent credit calculated on 2008 sales
for their units, including subtenants, totals $55,106. 
The total rent relief provided to CI, including both subtenants CVC Foods and BF Foods, is
projected to be $390,253 for the agreement years 2008-16. The present value of the two-year
term extension (original term 2005-2014) is estimated to be $1.8 million. As with previous
projections of this relief for the other prime concessionaires, this projection assumes a modest
average growth in sales of 2% per year across all units. In actuality, some units will perform
better than others, and the demand in some years will provide greater or lesser potential for sales
growth. 
ECONOMIC IMPACTS 
The purpose of the 2005 concessionaire relief was to assure the viability of airport concessions
companies, particularly ACDBE subtenant companies. These amendments fulfill the same goal
as relief granted in 2005. 
PREVIOUS COMMISSION ACTION 
December 13, 2005, Commission passed a resolution authorizing amendments to the lease
agreements of food and beverage prime concessionaires Host International and Seattle
Restaurant Associates which provided financial relief to these prime concessionaires and their
ACDBE subtenant operators at Sea-Tac International Airport.

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