COMMISSION 
AGENDA MEMORANDUM                        Item No.          10a 
ACTION ITEM                            Date of Meeting       May 25, 2021 
DATE:    May 25, 2021 
TO:        Stephen P. Metruck, Executive Director 
FROM:    Dave McFadden, Managing Director Economic Development Division 
Stephanie Jones Stebbins, Managing Director Maritime Division 
Kyra Lise, Director, Real Estate Development 
SUBJECT:  Approval of Ground Lease for Port Property: Terminal 106 

ACTION REQUESTED 
Request Commission authorization for the Executive Director to execute a ground lease with
Trammell Crow Northwest Development in order to develop a multi-story, maritime-related,
light-industrial warehouse facility in the City of Seattle at Terminal 106, for a Project Cost of
$2,750,000 and $3,100,000 in Initial Annual Revenue. 
EXECUTIVE SUMMARY 
Port staff recently completed an RFP to support redevelopment of its Terminal 106 property
along Marginal Way in South Seattle. The firm selected, Trammell Crow Company (TCC), one of
the nation's leading developers and investors in commercial real estate. TCC has developed or
acquired more than 2,600 buildings across the nation valued at more than $60 billion and over
565 million square feet. 
Trammell Crow plans to build a 700,000 square foot, two story light industrial warehouse that
can support key logistics companies and manufacturers within the region.  Tenants may include
e-commerce, manufacturers, and logistics providers that support the maritime industries. This
project supports the Port's Century Agenda objectives to support the region's logistics and
maritime industries.
The proposed development also benefits the Port and the region in numerous ways: 
The project will provide approximately 140 prevailing wage construction jobs during
the build out of the property. At full occupancy, the TC forecasts the facility will
support approximately 650 to 1200 full-time employees with an estimated payroll of
more than $28 million annually.
The developer will provide apprenticeship training opportunities during construction

Template revised January 10, 2019.

COMMISSION AGENDA  Action Item No. _10a_                               Page 2 of 6 
Meeting Date: May 25, 2021 
The design and construction will be completed primarily by locally owned, private
small businesses. TCC has agreed to establish Diversity in Contracting goals for the
development to further WMBE utilization.
The development complements the inventory of warehouse space proximate to the
Port's shipping terminals. Terminal 106 will provide additional best-in-class industrial
inventory that will continue to attract and retain growing firms, keeping jobs within
the City of Seattle and the nearby region. 
The close in and core location of Terminal 106 will help reduce sprawl by creating a
new light industrial facility adjacent to current road infrastructure, highways, and
public transportation. 
The site, located on East Marginal Way and S. Nevada Street, is currently occupied
almost entirely by a dilapidated existing warehouse building which needs to be 
demolished. The warehouse will be torn down at the lessee's expense prior to any
new development.
JUSTIFICATION 
This ground lease, like the Port's aviation land leases, represents another milestone in the Port
of Seattle's real estate development initiatives. Terminal 106's redevelopment advances key Port
priorities and generates important new revenue at a time when the Port's operating and capital
budgets have been negatively impacted by the pandemic.
Located just south of the West Seattle Bridge in the City of Seattle, Terminal 106 is a 15-acre 
property that is zoned General Industrial ("IG1 U/85"). Given its location, redeveloping Terminal
106 will help reduce sprawl by creating new facilities adjacent to current arterials, highways,
freeways, and the Port. 
It is an opportune time to redevelop Terminal 106. The demand for modern Class A warehouse
distribution space close-in to the Port of Seattle continues to be high. The market is now seeing
record highs, per square foot, for shell rents being attained in South Seattle. This demonstrates
the willingness of companies to invest in last mile logistics positions, in addition to traditional
cargo distribution through rail and short and long-haul trucking. 
Like the manufacturing and marine sectors, the growing lack of Class A or Class B distribution
warehouse space has pushed logistics businesses out of the city over the years. Redeveloping
Terminal 106 provides critical space that can help retain and attract key logistics and maritime
suppliers.  Strong national industrial markets support this project and they are augmented by
potential demand increases when the Port completes capacity improvements at Terminal 5 and
other facilities.  The proposed site and building plans at Terminal 106 show a commitment to
supporting regional logistics demands. Conceptual design specs allow for high racking layouts
and an ample amount of truck maneuvering for a high number of trucks at one time. 
The T106 development will play a role in supporting the cargo handling and logistics sector of the
Port's maritime operations. Located only a half-mile from our shipping terminals, this facility will

Template revised June 27, 2019 (Diversity in Contracting).

COMMISSION AGENDA  Action Item No. _10a_                               Page 3 of 6 
Meeting Date: May 25, 2021 
be the closest state-of-the-art warehouse facility to these facilities. Prospective users will include 
e-commerce and logistic companies, which will benefit from the proximity by way of lower
drayage costs. From a regional traffic standpoint, by shortening the distance from the container
terminal to a last-mile destination, the building's location will limit the number of trucks
freighting cargo down I-5 from Seattle to as far as south of Tacoma, managing traffic, noise and
air pollution in the region. Port staff will be introducing TC Northwest Development to Northwest
Seaport Alliance staff as the lease is executed to ensure we explore beneficial relationships that
support our key operations.
Ground leasing Terminal 106 and supporting its redevelopment provides a positive financial
return to the Port. Base rent for the new warehouse will be $3,150,955/year.  This translates
into a $71 million Net Present Value for the project and a 12 percent return on the Port's
investment over the course of the ground lease.
Diversity in Contracting 
TC Northwest Development also agrees to collaborate with the Port to develop aspirational goals
for the participation of Women and Minority Business Enterprises (WMBE) in the design and
construction of the project. TC Northwest will also develop an agreed upon outreach strategy to
ensure these goals are met. 
Project Labor Agreement 
Staff encouraged Trammell Crow Northwest Development to consider the benefits of using a
Project Labor Agreement to promote labor harmony during facility construction.  TC Northwest
Development evaluated the benefits of using a Project Labor Agreement (PLA) on the T106
project and ultimately decided not to use a PLA. TC intends to follow the practices it used to
promote labor harmony on the Port's Des Moines Creek North development project in SeaTac.
On this project they hired a general contractor that routinely works with union subcontractors.
They also used nonunion subs, but the GC was able to manage the project sensitively without 
labor disruptions.  TC Northwest is committed to other Port Resolution 3725 requirements,
including  payment  of  prevailing  wages  and  establishment  of  apprenticeship  utilization
requirements.

BACKGROUND 
Through its RFP process, the Port reached out to 30+ qualified real estate developers with records
of accomplishment in industrial, maritime and air cargo related development. The RFP document
invited each developer to present offers based on a variety of related building types  
distribution, manufacturing, and business park/incubator. Seven developers submitted offers to
the RFP and included a Letter of Intent ("LOI"). Each offer and LOI was analyzed based on
evaluative criteria that included economic benefits, development team experience, support for
maritime operations and regional logistics, project debt/equity financing, and development
concept. 

Template revised June 27, 2019 (Diversity in Contracting).

COMMISSION AGENDA  Action Item No. _10a_                               Page 4 of 6 
Meeting Date: May 25, 2021 

The basic terms of the ground lease are as follows: 
Terminal 106 
1.  Term - Initial term of fifty (50) years with three (3) ten-year options to extend. 
2.  Base Rent from the day after expiration of the Due Diligence period: 
o  $0.38 per square foot or $249,450/year. 
3.  Base Rent from Substantial Completion or day 1 of the 18th month of the term, whichever
occurs first: 
o  $4.80 per square foot or $3,150,955/year. 
4.  Base Rent Adjustments: The applicable Base Rent will increase by twelve percent (12%)
throughout the Term and any Extension Term beginning at the sixth (6th) Agreement Year
and then every five (5) years thereafter. 
5.  Base rent Adjustments reflecting Fair Market Value Re-appraisals and after the Base
Rent Adjustments: 
o  For the twenty-first (21st), thirty-first (31st), forty-first (41st), and fifty-first (51st)
Agreement years, 
o  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: 
o  less than one hundred percent (100%) of the then current Base Rent or 
o  more than one hundred and ten percent (110%) of the then current Base Rent. 
7.  Prevailing wage and apprenticeship utilization required. 

Schedule 
Activity 
Commission Lease authorization                                        Q2 2021 
Completion of Due Diligence Period, DD Waived and Lease               Q2 2023 
Commencement 
Warehouse Demo and Construction Rent Commencement              Q2 2023 
Full Rent Commencement                                           Q3 2024 
Certificate of Occupancy and Building Delivery                             Q4 2024 
ALTERNATIVES AND IMPLICATIONS CONSIDERED 
Alternative 1  Do not sign the lease. 
Cost Implications: The loss of over $3.1m in initial annual revenue. 
Pros: 
(1)   The property could remain available for an unknown maritime operational purpose. 

Template revised June 27, 2019 (Diversity in Contracting).

COMMISSION AGENDA  Action Item No. _10a_                               Page 5 of 6 
Meeting Date: May 25, 2021 
(2)   There could be some other use identified that could align with the Port's long-term
goals. 
Cons: 
The loss of $3.1m in annual revenue that is equal to more than $265 million in cash flow over the
life of the lease (50 years, without exercising renewals) 
(1)   The loss of 140 prevailing wage construction jobs. 
(2)   The loss of up to 650 to 1200 permanent jobs. 
This is not the recommended alternative. 
Alternative 2  Port of Seattle redevelops property 
Pros: 
(1) Retains property for other immediate leasehold needs 
(2) Provides temporary laydown area for local construction crews 
(3) Could provide some on-site covered storage 
Cons: 
(1) Missed opportunity to remove dilapidated property 
(2) Missed opportunity for maximizing highest and best use in a hot market 
(3) Missed opportunity to engage with local development partner on a property that we are
not maximizing to its full potential 
This is not the recommended alternative. 
Alternative 3  Approve ground lease with TC Northwest Development 
Cost Implications: $3.1m in initial annual revenue.
Pros: 
(1)   $3.1m in annual revenue. 
(2)   The creation of 140 prevailing wage construction jobs. 
(3)   The creation of up to 650 to 1200 permanent jobs. 
Cons: 
(1) The property would not be made available for an  unknown maritime logistics or 
operational purpose. 
(2) There could be some other unidentified use that could more align with the Port's longterm
goals. 

This is the recommended alternative. 


Template revised June 27, 2019 (Diversity in Contracting).

COMMISSION AGENDA  Action Item No. _10a_                               Page 6 of 6 
Meeting Date: May 25, 2021 
FINANCIAL IMPLICATIONS 
The purpose of developing Terminal 106 is to put the property back into productive use with a
maritime logistics supportive and compatible development. To ensure a Fair Market Rent for the
land, the Port competitively offered the property to the development community. This ensured
the Port has a strong basis to evaluate proposals for financial implications and aspirational goals. 
The proposal being presented exceeds the financial expectations and addresses the aspirational
goals set by Commission. 
Financial Analysis and Summary 
Project cost for analysis              $2,750,000 (includes $2.5M remediation credit and
$250K in due diligence costs) 
Business Unit (BU)                   Maritime Portfolio Management 
Effect on business performance    This project will increase the Net Operating Income by
(NOI after depreciation)             $3,150,956 on the first stabilized year (2025). 
IRR*/NPV*                      NPV = $71 million 
MIRR = 12% 
Payback = 1.5 years 
CPE Impact                       N/A 

Future Revenues and Expenses (Total cost of ownership) 
This project will generate the Net Cash Flow of $265 million over the life of the lease (50 years). 
There are no financial requests being made as part of this ground lease approval. 
ATTACHMENTS TO THIS REQUEST 
(1)   Slide Presentation 
(2)   Draft Long-Term Ground Lease with TCC 
(3)   Neighborhood map graphic and site survey 
PREVIOUS COMMISSION ACTIONS OR BRIEFINGS 
None 




Template revised June 27, 2019 (Diversity in Contracting).