Item No.: 5A_Supp Date of Meeting: May 1, 2018 Terminal 7, Berth D (East Sitcum) Term Lease with Ports America Washington, Inc. Presenter: Tom Bellerud Director, Business Development
Action Requested Request Managing Members of the Northwest Seaport Alliance (NWSA) to authorize the Chief Executive Officer or his delegate to sign the Fourth Amendment to the Lease and Operating Agreement between the Northwest Seaport Alliance and Ports America Washington, Inc.
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Background • This is a customer-driven request, in that Westwood Shipping prefers to keep their current Marine Terminal Operator, Ports America. • Westwood Shipping has been a long-term tenant of the NWSA gateway with terminal operations in either Seattle or Tacoma since 1983. • In 2016, the NWSA invested approximately $2.3 million in refurbishing the Terminal 7 warehouse, where Westwood is the primary tenant. • The availability of the warehouse on this terminal was a primary factor in determining the best terminal location for Westwood, supporting their project cargo and break-bulk line of business. • In July 2017, when Ports America leased the terminal previously occupied by Olympic Container Terminals (OCT) / Yang Ming, they were offered a term lease at $75,000 per acre. • Due to uncertainty around what business would be calling at the East Sitcum terminal, Ports America requested a month-to-month lease, which we offered at a higher monthly rate.
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Background • For the past 10 months, Ports America has enjoyed the combined cargo volumes from Westwood, plus the AL5 string from THE Alliance. • In May 2018, the AL5 string will relocate to Terminal 18 in Seattle, leaving only Westwood volume at East Sitcum moving forward. • Due to the imminent loss of the AL5 business, as well as certain limitations of the facility, such as the aged 30-year old cranes and portions of the wharf being unusable, Ports America states the remaining Westwood volumes do not support the current lease rates. Ports America has requested a lease rate reduction that will provide a rate more commensurate with the Westwood volumes. • We are proposing a term lease of 14 months at a blended rate of $75,000 per acre, per year. • Per standard NWSA lease terms, any late payments received beyond the due date will be assessed interest charges at a rate of 1.5% per month.
Financial Implications Financial Impact The 2018 budget and 2019-2022 forecast were developed assuming the $75,000 per acre rate in 2018 (with CPI escalation in later years). The budget assumed 54 acres, so the increase to 57 acres has a positive impact to the budget of approximately $225,000 per year. No capital investment is required to secure this revenue stream, and no alternative use with higher income was identified. The use and proposed rate are consistent with the East Sitcum terminal assumptions of contributed value to the formation of the NWSA.
Action Requested Request Managing Members of the Northwest Seaport Alliance (NWSA) to authorize the Chief Executive Officer or his delegate to sign the Fourth Amendment to the Lease and Operating Agreement between the Northwest Seaport Alliance and Ports America Washington, Inc.
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