PORT OF SEATTLE 
MEMORANDUM 
COMMISSION AGENDA                      Item No.         6f 
ACTION ITEM 
Date of Meeting      December 2, 2014 
DATE:      November 24, 2014 
TO:         Ted Fick, Chief Executive Officer 
FROM:     James R. Schone, Director, Aviation Business Development 
Jolene Culler, Senior Property Manager, Aviation Properties 
SUBJECT:   ATZ Lease Amendment for Doug Fox Parking Lot 

ACTION REQUESTED 
Request Commission authorization for the Chief Executive Officer to amend the lease with ATZ
Inc. for the operation of the Doug Fox Parking Lot located north of South 170th Street and east of
the Northern Airport Expressway to extend the term nine months, defer increases in the
concession fee and Minimum Annual Guarantee, and provide other modest relief for operational
impacts and delays caused by construction of the Doug Fox Parking Lot Services Upgrades 
Project. 
SYNOPSIS 
On July 9, 2013, the Commission approved the Doug Fox Parking Lot Services Upgrades Project
as well as a lease with ATZ for operation of the parking facility commonly known as the Doug
Fox Parking Lot.  Port staff returned to Commission on October 8, 2014, for additional
authorization to construct this project based on a low bid that was more than 10% over the
engineer's estimate.  Following Commission approval of that request, total project authorization
was $6,503,000. 
The lease with ATZ commenced on October 1, 2013. The lease specified that construction of the
project would be substantially complete by the end of summer 2014. The delay in award of the
contract after Commission authorization for the high bid resulted in the beneficial occupancy
date shifting to the end of September 2014. When compared to later years, the lease included a
lower percentage rent (55%) and Minimum Annual Guarantee (MAG) ($1.5 million) for the first
year to account for the impact of construction on the facility.  Due to a number of reasons, the
project is going to be completed significantly later than expected.  The lease specifies that ATZ
is due relief for construction that materially deviates from the original schedule and negatively
impacts operations. 
ATZ submitted a claim for the harm suffered from changes in the schedule, and the Port and
ATZ have negotiated revised terms that account for the negative impacts of the delayed
construction and that reflect both parties' roles in these delays. With the additional costs
associated with the project (as requested under separate action), the adjustments to the lease

Template revised May 30, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 24, 2014 
Page 2 of 7 
related to relief for ATZ as presented in this request to Commission, and using updated
transaction and revenue forecasts provided by ATZ, the Net Present Value (NPV) for the Port's
investment is now  $1.24  million compared to a NPV of $3.5 million  estimated when
Commission approved the additional project funding on October 8, 2013. 
BACKGROUND 
The Doug Fox Parking Lot is currently operated by ATZ as an off-site surface parking lot at
Seattle-Tacoma International Airport.  The lot has been used primarily for automobile parking
since its development well over 20 years ago. 
In February 2012, the Port Commission authorized the design and construction of the Doug Fox
Site Improvements Project that included stormwater and pavement improvements. In May 2012,
the Commission authorized the design of the Doug Fox Parking Lot Service Upgrades Project
that included pavement restoration, lot lighting, improved signage, and potentially operations and
customer service facilities. At that time, the two projects were consolidated into one combined
project for a total project budget of $6,123,000. The project implementation was based on the
tenant remaining operational during construction. 
Following Commission approval of design funds, staff initiated a public request for proposals
(RFP) process for a new operator in anticipation of the expiration of the then-current lease
agreement. At the conclusion of that RFP process, ATZ was selected and Port staff initiated
negotiations that concluded in early 2013. The Commission approved the new lease with ATZ in
July 2013, and the new agreement commenced on October 1, 2013. That agreement is for five
years with two, five-year options at the mutual consent of both parties. This lease includes lower
percentage fees (55%) and Minimum Annual Guarantee ($1.5 million) for the first year of the
lease (October 1, 2013  September 30, 2014) to account for impacts to operations during the
construction of the project. Starting in year two of the lease, October 1, 201 4  September 30,
2015, the percentage fee increases to 60% with a MAG of $2.5 million. 
The lease also included a provision requiring the owner of ATZ to divest of his interest in
another parking facility located in the City of Tukwila. This was a requirement of the RFP that
stipulated  that  any  respondent  chosen  to  operate  the  lot  could  not  have  a  financial  or
management interest in any other parking facility located within three miles of the Airport. ATZ
did not complete this divestiture within the originally agreed timeframe but has taken significant
steps towards this and has committed to having the divesiture completed by December 1, 2014.
In July 2013, the Port Commission also authorized the construction of the project that included
stormwater management facilities, pavement restoration, lot lighting, improved signage, a new
operations building, a new covered entrance and exiting facility, demolition of the existing
building, and supporting utilities.  In September 2013, the bids were opened for the project, and
since the lowest responsive bid exceeded the engineer's estimate by more than ten percent,
additional authorization by the Commission was required.  In October 2013, the Commission
authorized the additional budget to support the bid, for a total project budget of $6,503,000, and
the contract was executed with the successful bidder on October 29, 2013.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 24, 2014 
Page 3 of 7 
The lease and the project specifications envisioned that construction of improvements to the lot 
would begin in the fall of 2013 and be completed by the end of summer 2014. There have been a
number of issues encountered during construction that will delay completion of the project by up
to six months attributed to value engineering, modular building approvals and inspections, and
anticipated delays with the remaining work that include paving in the winter, possible unknown
conditions, and the complexity involved with completing the new entry while maintaining tenant
operations. 
The lease states that in the event that the Port materially deviates from the project schedule and,
despite  its  commercially  reasonable  efforts,  the  lessee's  operations  are  substantially  and
negatively impacted, the Port agrees to negotiate a further equitable adjustment in the Minimum
Annual Guarantee or to bear reasonable costs of any modifications to the premises reasonably
necessary to permit the lessee to continue to operate its business. The lease also states: "the Port
generally intends to follow the phasing plan set forth in the design documents, with construction
continuing, as weather permits, through the summer of 2014." 
This delay in completion of the project has negatively impacted ATZ's operations. Therefore,
ATZ has requested relief for not only the delay in completion of the project but also for the delay
associated with the completion of specific project elements. At the time the lease was signed, the
project bid documents included five phases for project completion within which key project
elements, specifically signage (Phase 1), a new operations building (Phase 2) and a new entrance 
and exiting facility (Phase 3) were designated for completion. Having these elements completed 
early in the project was critical for ATZ's plan to build the business in anticipation of the
increased percentage fees and higher MAG effective in year two, or October 1, 2014. ATZ had
planned to launch a marketing campaign once the new entrance and exiting facility and signage
work were completed.  However, the signage was not installed until early November 2014, the
operations building was not completed until mid-November 2014, and the new entrance/exit
facility will not be completed until late January or early February 2015  all well after the project
was originally understood by all parties to be completed. 
The Port agrees that the project is going to be completed late and that the phasing plan for
completion of key project elements was essentially inverted resulting in these elements (the
signage, operations building, and entrance and exiting facility) being completed much later than
expected.  Port staff evaluated ATZ's claim for MAG and concession fee relief including both
the Port's and the tenant's role in causing the delays to completion of key project elements and
then tried to quantify the appropriate compensation due ATZ for the delay. To do so, staff used 
the contractor's initial project schedule as the basis for the analysis.  While this schedule was
submitted after lease negotiations were completed, it is the best tool available to assist in
quantifying the amount of relief to be considered. 
Deliverable                   Phasing Plan                Actual               Difference 
Signage                    Mid March 2014       Early November 2014       7  months 
Operations Building         Mid April 2014        Mid November 2014         7 months 
Entrance/Exiting Facility     Mid July 2014       Late Jan/Early Feb 2015        7 months

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 24, 2014 
Page 4 of 7 
The parties have mutually agreed on the proposed terms for relief as summarized below: 
Nine-month extension of the lease term and an equivalent deferral of the increases in the
MAG and percentage fee. This extension is predicated on the currently scheduled
completion of the entrance/exiting facility and is subject to a one-month extension for
each month the facility may subsequently be delayed beyond the end of January 2015. 
With this change, the new MAG and percentage fee would begin July 1, 2015 (rather
than October 1, 2014) and would increase every 12 months thereafter. This deferral is
likewise subject to extension for subsequent delay in the completion of the entrance/exit
facility. This provides relief for the late completion of key project elements and gives
ATZ time to launch a marketing campaign and build the business before the MAG and
percentage fee go up. 
Rent and utility credits for the period April 1, 2014, through October 31, 2014, for a total
of approximately $25,000.  This is due to the delay in providing the new operations
building, which is less square footage, and thus less rent ($1,500 per month compared to
$2,904 per month) than the existing operations building and lower utility charges as it
will be connected to the local sewer system. 
Completion of tenant improvements including infrastructure for the ATZ security camera
system and the upgrade of the two exit control signs to variable message signs. The lease
calls for the Port to provide infrastructure for the ATZ security camera system, and the
upgrade to the variable message signs is a negotiated item. The estimated cost for these
items is $55,000. 
Lease Summary and Financial Analysis: 
Below is a comparison of the key business terms of the current lease and the amended lease. 
Current Lease         Amended Lease 
Term         Five (5) years        Five (5) years plus 9 months 
MAG       Year 1:     $1.5M   Month 1-21       $1.5M 
Year 2:       $2.5M    Month 22-33          $2.5M 
Year 3:       $2.6M    Month 34-45          $2.6M 
Year 4:       $2.7M    Month 46-57         $2.7M 
Year 5:       $2.8M    Month 58-69          $2.8M 
Percentage
Fee             Year 1:       55%      Month 1-21          55% 
Year 2:       60%      Month 22-33          60% 
Year 3:       61%      Month 34-45          61% 
Year 4:       62%      Month 46-57         62% 
Year 5:       63%      Month 58-69          63% 
Building
Rent             $1,500.00           $1,500.00 
Effective On
Occupancy           Effective On April 1, 2014

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 24, 2014 
Page 5 of 7 
The new lease commenced on October 1, 2013 with a base term of five years and additional
provisions for two five-year term extensions. The original financial analysis associated with the
October 8, 2013 memo resulted in an NPV of $3.5 million and was based on activity forecasts
provided by the tenant associated with the original construction completion anticipated for the
end of summer 2014. 
The financial analysis shown below adjusts the October 8, 2013 financial results to include 1) the
increased Project costs for a total of $6.93 Million (requested of the Commission under separate
action), 2) the agreed upon relief included in the proposed Amendment as outlined above, and 3)
updated parking activity forecasts associated with the facility as provided by the tenant which
incorporate the Project delays. The overall NPV remains positive at $1.24 million with an IRR of
9% and payback of 10 years. 
CIP Category               Revenue/Capacity Growth 
Project Type                Business Expansion/New Business Development 
Risk adjusted Discount      8% 
rate 
Key risk factors                Construction risks: the Project may encounter unexpected
delays due to unforeseen issues which may increase the
cost of the project and/or cause schedule delays. 
Financial risks: general economic conditions will impact 
the parking market and if general economic declines
occur in the future, incremental revenues may fall short of
forecasts. 
A timeframe of 15 years was included in the financial
analysis, covering the initial five-year lease and two fiveyear
extensions. There is risk associated with a potential
future conversion of the property to non-parking use, and
lease terms associated with future extensions. 
Project cost for analysis      $6.93 million 
Business Unit (BU)           Landside 
Effect on business           The financial analysis assumes that with construction of the
performance               project improvements at the facility, annual revenues to the
Port will increase. Current revenues to the Port are
approximately $2 million per year. Within five years of
implementation of the improvements, annual revenues are
anticipated to increase by approximately $1.5 
million. Within ten years, annual revenues are anticipated to
exceed $5 million. 
IRR/NPV                NPV: $1.24 million 
IRR: 9% 
Payback: 10 years 
CPE Impact               None

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 24, 2014 
Page 6 of 7 
STRATEGIES AND OBJECTIVES 
This project aligns with the Port's Century Agenda strategy of advancing the region as a leading
tourism destination and business gateway. 
ENVIRONMENTAL SUSTAINABILITY 
Environmental sustainability elements related to this project are described in associated Project
memos. 
BUSINESS PLAN OBJECTIVES 
Approval of this lease amendment authorization request in conjunction with associated upgrade
Project funding request will contribute to achievement of the airport's business plan objective of
"maximizing non-aeronautical net operating income" by generating increased non-aeronautical
revenues. 
TRIPLE BOTTOM LINE SUMMARY 
The project supports economic development by investing in an upgraded parking lot to serve the
public's parking needs at the Airport. Environmental sustainability principles will be employed
consistent with Port policy.
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1)  Do not amend the lease. This would likely result in legal action by the Lessee, 
and the Port's financial responsibility could increase beyond what is proposed.  Further the
Lessee may find the terms untenable and could default on the Lease thus putting the projected
revenues at risk. This is not the recommended alternative. 
Alternative 2)  Negotiate a different lease settlement of less magnitude with ATZ. This may or
may not be successful, and would delay the prompt resolution sought by both parties. It could
result in legal action by the Lessee and the Port's financial responsibility could increase beyond
what is proposed.  Further the Lessee may find the terms untenable and could default on the
Lease thus putting the projected revenues at risk. This is not the recommended alternative. 
Alternative 3)  Authorize this lease amendment. This would enable both parties to proceed in
good faith and give assurance that the financial returns set forth in the business case are realized.
This is the recommended alternative.

COMMISSION AGENDA 
Ted Fick, Chief Executive Officer 
November 24, 2014 
Page 7 of 7 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
October 8, 2013, the Port of Seattle Commission authorized the Chief Executive
Officer to execute a major public works construction contract with the low responsive
and responsible bidder for an additional $1,385,000 for a total authorization of
$6,503,000. 
July 9, 2013, the Port of Seattle Commission authorized the Chief Executive Officer to:
(1) advertise, award, and execute a major public works contract for the Doug Fox Site
Improvements project; and (2) execute a Developer Extension Agreement with the
Valley View Sewer District for an additional $3,322,000, for a total authorization of
$5,118,000. 
July 9, 2013, the Port of Seattle Commission authorized the Chief Executive Officer to
execute a lease with ATZ, Inc., for a term of 5 years with two 5-year extension options
upon mutual agreement. 
June 4, 2013, the Doug Fox Site Improvements project was presented to the Port
Commission but no final action was taken. 
March 5, 2013, the Port Commission postponed consideration of the Doug Fox Site
Improvements project. 
May 22, 2012, the Port Commission authorized the Chief Executive Officer to: (1)
increase the scope of the Doug Fox Site Improvements project to include resurfacing,
lighting, building, and road signage; (2) to execute utility agreements; and (3) to
complete the design of the project for an additional $768,000, for a total authorization
of $1,796,000. 
February 4, 2012, the Port Commission authorized the Chief Executive Officer to
complete the design and to utilize Port Construction Services crews for the construction
of the Doug Fox Site Improvements project in the amount of $1,028,000.