COMMISSION 
AGENDA MEMORANDUM                Item No.       8c 
ACTION ITEM                   Date of Meeting     January 9, 2018 
DATE:    January 2, 2018 
TO:     Dave Soike, Interim Executive Director 
FROM:   Melinda Miller, Director, Portfolio & Asset Management 
Steve Sawyer, Real Estate Property Manager 
SUBJECT:  Ground Lease Amendment #1 with Duke's Shilshole Bay Chowder House, LLC at
Shilshole Bay Marina 
ACTION REQUESTED 
Request Commission authorization for the Executive Director to execute the first amendment
to the ground lease with Duke's Shilshole Bay Chowder House, LLC to change the following: (1) 
to increase the square footage of the original ground lease by 1,522 square feet for a total of
8,022 square feet; (2) to increase the monthly rent during the Construction Phase from
$2,605.00 to $3,216.00 and during the Post-Construction Phase from $10,420.00 to $12,864.00;
and (3) to change the commencement date of the Construction Phase from June 1, 2018, to
August 1, 2018, and commencement of Post-Construction Phase from June 1, 2019, to August 
1, 2019. 
EXECUTIVE SUMMARY 
After Commission approval, a ground lease between The Port and Duke's was executed in May,
2017 for 6,500 square feet at Shilshole Bay Marina for 20 years with one 10-year extension. 
After several months of diligently proceeding with design development, Duke's has concluded
that additional space is needed to create the flagship venue proposed. Port staff has reviewed
the designs and considered the impact on Shilshole operations. The revised design will
eliminate three parking spaces. Parking capacity is a sensitive issue at Shilshole and thus we do
not take any reduction lightly, even a minor one. Staff believes that the trade-off is necessary
and that the expanded restaurant will create a positive amenity for our stakeholders. 
Duke's is requesting an increase in square footage of 1,522 square feet, for a total of
approximately 8,022 square feet in which to build their restaurant. This will result in an increase
in overall rent revenue. The revised plan will also push the construction and post-construction
start dates forward by two months. 


Template revised September 22, 2016.

COMMISSION AGENDA  Action Item No. __8c__                     Page 2 of 5 
Meeting Date: January 9, 2018 
JUSTIFICATION 
In May 2017, The Port decided to enter into a ground lease with Duke's. Duke's proposal was
attractive, and surpassed the Port's expectations and intent for this site. Following the lease
execution Duke's began an extensive  and focused  design process, during which it was
determined the ground lease area of 6,500 square feet would not completely accommodate
the restaurant's concept. A larger area would ensure the proper flow and facility operation.
Incorporating the many sustainable elements integral to the Shilshole site also required a larger
area. 
This restaurant location will serve as the benchmark for all other Duke's restaurants operating
now and those in the future. Based on the additional effort and time needed to complete the
full design, it is important that Duke's is permitted an extension of two additional months, by
moving the initial Commencement Date of the ground lease to August 1, 2018 and the date of
operations to August 1, 2019. 
DETAILS 
Project Objectives 
Execution of an amendment to the ground lease at Shilshole Bay Marina will increase the
revenue generated for this ground lease by approximately 23 percent, increasing to $12,864.00
per month after construction. 
This amendment will further ensure the following benefits: 
Supports Maritime's goal of creating a "Destination Marina" 
Meets marina customers desire for a full-service restaurant 
Creates an additional community meeting place 
Proposes sustainability practices that support Port environmental goals 
Draws new patrons and customers to the Marina and upland businesses 
Creates additional visibility for Shilshole Bay Marina 
Tenant bears construction cost, however building will become a Port asset 
Generates lease revenue for the Port 
Placing a premier restaurant at the Marina will not only bring additional revenue from the
lease, but is anticipated to result in increased operational revenue from greater numbers of
guest moorage customers and new visitors to the marina. 
The recreational boating industry is seeing higher cost of ownership, fewer new boat owners,
stricter environmental standards, and an evolution toward Boatshare or boating partnershiptype
operations. To continue to be competitive, a destination marina needs to provide multiple
upland amenities and activities for boaters. A restaurant will potentially increase monthly
moorage customer retention and bring new potential customers to the Marina and upland

Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. __8c__                     Page 3 of 5 
Meeting Date: January 9, 2018 
businesses. Customer feedback has been consistent in requesting a restaurant be built at the
Marina. 
Additional benefits may include increased security, collaboration with marina events,
community meeting space, increased marina customer satisfaction, and an increased
awareness of Shilshole Bay Marina. 
Revised Lease Terms 

Premises:              Adding 1,522 SF for a total 8,022 square foot restaurant pad 
Construction Rent:        $3,216 per month from August 1, 2018  until Temporary
Certificate of Occupancy 
Post Construction Rent:    $12,864 per month, $154,368 annually. 
No later than August 1, 2019 or Substantial Completion whichever
is sooner 
Scope of Work by Tenant 
Duke's will now construct an approximate 8,022 square foot full-service, casual, waterfront
restaurant of contemporary design. This will consist of an approximately 6,522 square foot
restaurant/bar and 1,500 square foot outdoor deck and seating area. The structure will be
constructed to give their dining patrons the most appealing view of Puget Sound, the Olympic
Mountains, and boating activities in the marina. The restaurant will be designed to reflect the
Northwest aesthetic and will complement the site plan of the Shilshole Bay Marina. Duke's
estimated cost for the building and Furniture, Fixtures & Equipment (FF&E) is approximately
$2.5  $3 million. 
Schedule 
Final design and permitting work will continue through mid-2018. Restaurant construction
should commence mid-2018. Restaurant opening is estimated in mid-2019. 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Do not permit Duke's to expand the original ground lease area from 6,500 to
8,022 square feet. 
Cost Implications: Forgo an annual increase in lease revenue of $29,328. 
Pros: 
(1)   Port preserves the additional area needed in the drive lane for traffic flow and general
operations. 
(2)   Adjustments to traffic flow will not need to be made. 

Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. __8c__                     Page 4 of 5 
Meeting Date: January 9, 2018 
Cons: 
(1)   Port forgoes long term additional revenue stream of $29,328 annually. 
(2)   Port forgoes opportunity to allow Duke's to build their restaurant using the most
efficient and forward-thinking design. 
(3)   Port will force Duke's into a design configuration that will not provide the best
amenities to our customers or allow for the most efficient operation. 
This is not the recommended alternative. 
Alternative 2  Amend the ground lease at Shilshole Bay Marina with Duke's 
Cost Implications: Approved site preparation costs estimated at $500,000  offset further by
additional revenues of $29,328 annually. (New annual revenue will increase from $125,000 to
$154,368 with annual CPI escalations). 
Pros: 
(1)   Additional net revenue to the Port will increase by $29,328 (including CPI escalations). 
(2)   The restaurant will be the most efficient and best amenity that could be built on the
Marina site. This should further ensure the attraction of new customers and retain 
existing Port customers  supporting long term financial goals for the Port. 
(3)   Altering the traffic flow of the drive lane east of the restaurant pad may actually
increase pedestrian safety since traffic will only be travelling in one direction in front
of the restaurant. 
Cons: 
(1)   Port will lose a portion of the drive lane east of the restaurant site making the lane 
one-way rather than two-way traffic. 
(2)   Removal of three  parking spaces to accommodate new design may create the
perception that parking is further impacted negatively at the marina. 
This is the recommended alternative. 
FINANCIAL IMPLICATIONS 
Cost Estimate/Authorization Summary          Capital      Expense        Total 
COST ESTIMATE 
Original estimate                        $500,000          $0      $500,000 

AUTHORIZATION 
Previous authorizations                   $500,000           0      $500,000 
Current request for authorization                  0           0           0 
Total authorizations, including this request      $500,000           0      $500,000 

Template revised September 22, 2016; format updates October 19, 2016.

COMMISSION AGENDA  Action Item No. __8c__                     Page 5 of 5 
Meeting Date: January 9, 2018 
Remaining amount to be authorized             $0         $0         $0 
Annual Budget Status and Source of Funds 
No funds requested. 
Financial Analysis and Summary 
Project cost for analysis         $500,000* 
Business Unit (BU)            Maritime Portfolio Management 
Effect on business performance   The initial post-construction lease revenue for this
(NOI after depreciation)         amendment will produce more than $29K of additional
revenue. 
The project is expected to generate more than $130K of
NOI after depreciation annually.
IRR/NPV (if relevant)           NPV: This amendment will generate a marginal NPV of
over $350K for a total NPV of $1.4M over the initial
20-year lease term. 
IRR: 13.8% 
CPE Impact                N/A 
*Cost of site improvements approved May 9, 2017 
Future Revenues and Expenses (Total cost of ownership) 
This project is expected to require minimal annual maintenance expense by the Port. Future
revenues will be generated based on lease rates and terms stated above. 
ATTACHMENTS TO THIS REQUEST 
(1)   PowerPoint Presentation 
(2)   Draft Ground Lease Amendment 
(3)   Copy of Original Ground Lease 

PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
May 9, 2017  The Commission approved a Port investment of $500,000 for restaurant pad
site improvements and a Ground Lease with SBM Restaurant Developer/Operator,
Duke's Shilshole Chowder House, LLC. 



Template revised September 22, 2016; format updates October 19, 2016.