8b. Memo

STOC Port Leases and CAM Expenses

AGENDA MEMORANDUM                        Item No.          8b 
ACTION ITEM                            Date of Meeting     February 27, 2024 

DATE :     February 2, 2024 
TO:        Stephen P. Metruck, Executive Director 
FROM:    Kyra Lise, Director, Real Estate Development 
Rick Duncan, Director, AV Business & Properties 
SUBJECT: SeaTac Office Center (STOC) Changes in Port Lease and CAM Expenses 
Amount of this request:                 $700,000 
Total Estimated Lease Costs:               $9,818,285 
Previously authorized Lease Costs: $      9,118,285 
Incremental Lease Costs Requested:       $  700,000 

Request Commission authorization for $700,000 in additional funds to support costs associated
with the current approved Port of Seattle’s lease and occupancy of the SeaTac Office Center 
(AKA International Place). These funds have already been approved within the 2024 Budget and
now require additional Commission authorization to increase the authorized funding for
contract payments through the remainder of the current lease term. 
Since 2015, the Port of Seattle has leased approximated 47,000 sf of office space (noncontiguous
) at SeaTac Office Center (AKA International Place) an office property opposite the
SEA Terminal property currently owned by STOC OWNER, LLC. The office and related parking
supply leased by the Port has supported various Aviation related capital projects, mainly for
Airport Building Department, Aviation Project Management, Port Construction Services, Central
Procurement Office, Engineering teams and Port contractors. This leased location allows the
Port to provide a flexible, near-terminal accommodation for employees and contractors 
supporting AV project delivery, in particular IAF and related capital upgrade projects for the
Terminal. The original lease term was for 5 years and included provisions for both rent on a per
square foot basis as well as Common Area Maintenance (CAM) costs of which the Port was
responsible for its pro-rata share.

Template revised January 10, 2019.

            COMMISSION AGENDA – Action Item No. 8b                                 Page 2 of 5
Meeting Date: February 27, 2024 
The Port has authorized rent and CAM expenditures at STOC over the years in various annual
budgets and has also renewed and modified the original the lease terms under various
amendments; currently under a 7th amendment to the original 2015 lease. 
The funding requests for this lease previously authorized by Commission were based on historic
estimations of annual increases in CAM expenses, modelled parking utilization based on historic
parking usage, and leased space premises durations based on capital project schedules. Actual
inflation impact on CAM expenses in recent years have exceeded historic averages and as a
result actual annual pro-rata CAM expenses over recent years have exceeded the estimates in
the previous Commission funding authorizations. In addition, actual parking utilization by Port
users of this leased office space have exceeded initial estimates, and leased premises for some
capital projects have been extended due to changes in project schedules – notably the IAF
timeline. All these factors have contributed to the need to request an increase in total contract
funding for this lease. 
This request for $700,000 is a one-time request to increase the total authorization for lease
contract payments through the remaining term of the current lease. Without the additional
$700,000 funding increase, contractual lease payments will deplete the remaining authorized
funding in March 2024 – well before the end of our existing lease terms which continue through
August 31st of 2024.
This authorization request allows the Port to meet its existing obligations under the STOC office
lease for CAM expenses, leased premises, and incremental parking utilization. Per the terms of
the lease, CAM expenses are not capped but represented real costs of Port occupancy. Over the
years of this lease, the Port pursued some time extensions in leased space within the building,
as well as a modest increase in additional parking usage. This incremental funding authorization
request will enable the Port to pay current lease obligations through the remaining term of the
existing lease. 
Diversity in Contracting 
No new contracting opportunity applies to this request. 
As this authorization deals with complying to the terms and conditions of an already executed
contract, the STOC lease, there are no alternatives that will allow us to exit the lease obligations
without legal and financial consequences to the Port. Section 3 of the lease broadly requires us
to pay for our pro-rata share of the operating costs of the building; common area utilities and
maintenance costs, insurance, janitorial expenses and so forth. Section 18 of the lease puts us
in default of the lease contract if we do not pay according to its terms.  We do not offer any

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

            COMMISSION AGENDA – Action Item No. 8b                                 Page 3 of 5
Meeting Date: February 27, 2024 
alternative that would put us in default of the lease. If we were to continue non-payment, the
STOC ownership not only could successfully pursue full payment of the current terms in a court
of law, but the Port may also engender additional monetary damages to compensate the
Alternative 1 – Negotiate with the STOC building ownership for an extension of time to pay the
Cost Implications: $700,000
(1)   Would provide the Port more time to socialize the obligation of lease payments
among the departments who are obliged to pay for this lease expense. 

(1)   The Port intends to continue its occupancy of the STOC property past the current term
provision under a new lease.  Were we to delay payment, this might sour ongoing
discussions of the Port’s new lease. 
(2)   Property owners may still require immediate payment of the existing terms of the
lease, even if building management were to agree to wait for payments, and could
trigger additional costs due to default. 
(3)   Delayed payment may further complicate accounting for payment internal to the Port
and trigger a bad audit finding. 
This is not the recommended alternative. 
Alternative 2 – Authorize funds to meet the obligations due per the lease terms. 
Cost Implications: $700,000 
(1)   Allows us to meet our financial and contractual obligations per our existing lease. 
(2)   Allows us to continue our relationship with STOC management in good order. 
(1)   There are no additional potential risks associated with this recommended alternative. 
This is the recommended alternative. 
Authorization History 
The total of all previous authorizations related to this existing STOC  lease agreement is

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

             COMMISSION AGENDA – Action Item No. 8b                                  Page 4 of 5 
Meeting Date: February 27, 2024 
This includes the initial authorization in July 2015 of $1,995,285 for a four-year lease agreement
for International Arrivals Facility (IAF) Program Management office space, an additional 
authorization in November 2017 of  $6,829,000 to add additional space for the Capital
Development Department (CDD) and Central Procurement Office  (CPO) Major Works
Department through August 2024, and an additional authorization of $294,000 from the
Executive Director in August 2023 to add supplemental parking stalls for the Employee Parking
cost recovery program over one year. 
Initial Authorization – April 2015                      $1,995,285 
Additional Authorization – November 2017         $6,829,000 
Additional Authorization – August 2023               $294,000 
Cumulative Authorizations                        $9,118,285 
Authorization Request 
Based on an analysis of remaining expense obligations anticipated through the August 31, 2024
end of this lease agreement, we are expected to require additional funding beyond the
$9,118,285 already authorized - by a minimum of $673,717. To ensure that we will not require 
further authorization before the end of this lease period, we are requesting total additional
one-time Commission authorization of $700,000 to sufficiently cover this shortfall. 
Previous Authorizations                             $9,118,285 
Current Request for Authorization                    $700,000 
Total Authorizations, Including this Request        $9,818,285 
Remaining Amount to be Authorized                      $0 
The table below shows the key elements that contributed to this $673,717 shortfall – the gap
between the $9,118,285 previously authorized and a $9,792,002 minimum anticipated need. 
SUMMARY OF VARIANCES (Cumulative through 2024) 
Cumulative Authorizations                                       $9,118,285 
Plus: Higher Operating & Common Area Maintenance Charges       $388,834 
Plus: Longer Duration of Rented Space for IAF                        $173,357 
Plus: Supplemental Parking Spaces Used by Port Employees           $92,484 
Plus: Other Miscellaneous Costs                                      $19,043 
Minimum Anticipated Need through August 31, 2024            $9,792,002 
Plus: Additional Contingency Included in this $700,000 Request        $26,283 
Total Authorizations, Including this Request                       $9,818,285 

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

            COMMISSION AGENDA – Action Item No. 8b                                 Page 5 of 5
Meeting Date: February 27, 2024 
The single largest contribution to this higher anticipated funding need is from Operating and
Common Area Maintenance charges, which have increased faster than originally contemplated
due to a much higher inflationary environment than initially estimated. The estimates from
2017 assumed a 2.0% annual growth rate for these charges, while several years included actual
increases between 5% and 10% that have compounded over time.
The next largest contributor was a longer duration of space usage for the IAF Program
Management, as the timeline for substantial completion of the project extended further than
initially planned. 
During the COVID-19 pandemic, there was also a greater demand for parking stalls that
exceeded the quantity assigned in our lease agreement, resulting in supplemental parking
charges incurred.
Annual Budget Status and Source of Funds 
Approving this request will have no incremental impact to the 2024 Budget. All space rent,
operating expense, common area maintenance expense, and parking expense have already
been anticipated and captured in the 2024 Budget that was adopted in November 2023. This
funding request is needed to allow contractual lease payments under the remaining lease term,
with no additional expense in this year’s operating budget. 
(1) Lease (Fully Executed, dated 7-1-2015; this is the main body of the current lease agreement
which currently has 7 amendments in it’s current form, however all lease issues referenced
in this authorization are contained herein.)
August 1, 2023 – The Executive Director approved, under delegated authority, a $294,000 
amendment to the existing STOC lease agreement for the lease of additional parking
stalls for employee parking through August 31, 2024
November 14, 2017 – The Commission authorized the Executive Director to approve a lease
amendment for office space for two additional departments to move into the SeaTac
Office Center (STOC) for $6,829,000 
October  24, 2017 – The Commission was  briefed  on a proposal to  execute  a lease
amendment for office space for two additional departments to move into the SeaTac
Office Center (STOC) for $6,829,000 
April 28, 2015 – The Commission was briefed on, and authorized, a request to execute a
four-year lease agreement to provide office space for the IAF Program Management
Group in the SeaTac Office Center (STOC) for $1,995,285 

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


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