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Los Angeles World Airports
TM
RESOLUTION NO. 26090
BE IT RESOLVED that the Board of Airport Commissioners approved the amended & restated Lease with PNF-LAX, Inc. to enable premises flexibility, modify the term, simplify rent structure, to plan and phase improvements at Los Angeles International Airport, as referenced in the Board-adopted staff report attached hereto and made part hereof; and
LAX
LA/Ontario
Van Nuys
City of Los AngelesBE IT FURTHER RESOLVED that the Board of Airport Commissioners authorized the Chief Executive Officer to execute the amended and restated Lease upon approval as to form by the City Attorney and upon approval by the Los Angeles City Council; and
Eric Garcetti Mayor
Board of Airport Commissioners
BE IT FURTHER RESOLVED that this action is being taken pursuant to Charter Section 371(e)(10) because competitive bidding would be undesirable, impracticable or impossible;Sean 0. Burton
Presidentand
Valeria C. Velasco Vice President
BE IT FURTHER RESOLVED that the issuance of permits, leases, agreements, gate and space assignments, and renewals, amendments or extensions thereof, or other entitlements granting use of existing airport facilities or its operations is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Article III Class 1 (18)(c) of the Los Angeles City CEQA Guidelines; and
Jeffery J. Daar Gabriel L. Eshaghian Beatrice C. Hsu Nolan V. Rollins Dr. Cynthia A. Telles
Deborah Hint Chief Executive Officer
BE IT FURTHER RESOLVED that actions taken on this item by the Board of Airport Commissioners will become final pursuant to the provisions of Los Angeles City Charter Section 606.
oOo
I hereby certify that this Resolution No. 26090 is true and correct, as adopted by the Board of Airport Commissioners at its Special Meeting held on Thursday, October 20, 2016.
Sandra J. Miller - SecretaryBOARD OF AIRPORT COMMISSIONERS
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1 World Way Los Angeles California 90045-5803 Mail RO. Box 92216 Los Angeles California 90009-2216 Telephone 310 646 5252 Internet www.lawa.aero
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REPORT TO THET COMMISSIONERS
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BOARD OF AIRMeeting Date:
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Reviewed by: Debbie Bowers, Deputyjtxecutive Director PendingCAP Review:
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SUBJECT: Approval of Amended and Restated Lease with PNF-LAX, Inc.
Approve the Amended and Restated Lease with PNF-LAX, Inc. to enable premises flexibility, modify the term and simplify the rent structure.
RECOMMENDA TIONS:
Management RECOMMENDS that the Board of Airport Commissioners:
1. ADOPT the Staff Report.
DETERMINE that this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Article III, Class 1 (18)(c)ofthe Los Angeles City CEQA Guidelines.
2.
APPROVE the Amended and Restated Lease with PNF-LAX, Inc. to the City of Los Angeles, Los Angeles World Airports, as referenced in this report.
3.
FIND that this action is being taken pursuant to Charter Section 371 (e)(10) because competitive bidding would be undesirable, impracticable or impossible.
4.
AUTHORIZE the Chief Executive Officer to execute the Amended and Restated Lease after approval by the Los Angeles City Council and approval as to form by the City Attorney.
5.
Page 1PNFAmended and Restated Lease
DISCUSSION:
1. Purpose
To allow Los Angeles World Airports (LAWA) to have control over the Park One parking lot leased by PNF-LAX, Inc., (PNF), providing LAWA flexibility to plan and phase improvements at Los Angeles International Airport (LAX).
2. Prior Related Actions
• June 22,2009 - Board Order No. AO-5129 for Purchase and Sale Agreement LAA-4357 The Board of Airport Commissioners (Board) approved the Purchase and Sale Agreement and Escrow Instructions for this commercial real property located at 6351 West Century Boulevard. In conjunction with the property acquisition, LAWA assumed the Lease with PNF, which operates the Park N’ Fly parking services on the premises and includes a sublease with Regency Outdoor Advertising, Inc. (Regency) for six advertising billboards within the PNF premises.
3. Current ActionPNF currently leases approximately 19.6 acres adjacent to Terminal 1 used for a parking operation at LAX, benefiting passengers due to its close proximity to the terminals. The Lease includes a sublease to Regency for six billboards within the PNF premises.
As a means to increase LAWA’s flexibility to plan future projects on the premises and avoid scenarios that may require wholesale Lease termination, staff recommends the Board approve the Amended and Restated Lease with PNF to:
• Provide LAWA options to reduce the premises needed for future planned projects while providing uninterrupted continuous parking services for LAX passengers;
• Allow LAWA the ability relocate the PNF operation while continuing to realize substantial revenue arising from the Lease;
• Provide an option to delete the Regency sublease from PNF’s premises, and assign the sublease to LAWA allowing for direct control of activities on the site by LAWA.
Additionally, the Amended and Restated Lease will:
• Include LAWA’s standard leasing provisions;
• Include all standard Los Angeles City administrative requirements for leases; and
• Delete all references in the Lease to the former property owner, West Century LLC for clarity and reference purposes.
The following table summarizes the proposed Amended and Restated Lease with PNF:
Page 2PNFAmended and Restated Lease
CURRENT LEASE PROPOSED AMENDED
AND RESTATED LEASE
13 years from Commencement of the Restated Lease
5 years, with 4 additional five-year options to renew
Term
Upon execution by CEOJanuary 1, 2003Commencement
December 31, 2017 (the 2nd of four options)
December 31,2029Expiration Date
19.62 acres
2,685 parking spaces
6 billboards and footings, subject to a LAWA deletion option
Premises 19.62 acres
2,685 parking spaces
6 billboards and footings
Premises may be reduced at LAWA’s discretion; more than one reduction can occur during term.
LAWA Parking Premises Reduction Option
None
LAWA may relocate the operation within a defined area east of Sepulveda. However, any LAWA relocation space must provide at least 1,500 contiguous parking spaces, unless otherwise agreed to by the parties.
LAWARelocationOption
None
Lease may be terminated by LAWA with a six-month written notice to PNF with termination fees paid by LAWA:
• On or before December 31, 2022: $1 million
• After December 31, 2022, or before December 31, 2027: $750,000
• After December 31, 2027: $500,000
Lease may be terminated by LAWA upon a 30-day notice under certain circumstances
LAWATerminationRights
Upon 6-month notice if LAWA has reduced the Premises to less than 1,500 contiguous parking spaces
90-day notice if PNF incurs net losses of $590,000 or more from payment of base rent; or if an occurrence adversely affects air traffic at LAX, resulting in losses of excess of $590,000
Termination Option by PNF
Page 3PNFAmended and Restated Lease
Current Rent* (adjusted annually) is equal to the greatest of the following components annually:
• Monthly Base Rent: $718,973
• Percentage Rent: 70% gross receipts in excess of breakpoint
• Annual Breakpoint: $1,211,792
‘Includes rent from both PNF and Regency
Proposed Rent is equal to the greatest ofthe following components annually:
• 2016 Monthly Scheduled Minimum Rent: $720,873 pre-billboard removal $637,539 post billboard removal
Monthly Minimum Rent escalation factor thru Term: .3%
• Percentage Rent: 65% gross receipts in each calendar year
• Variable Minimum Rent: 90% of the prior Calendar Year rent (suspended the year the billboard removal option is exercised by LAWA)
Rent
One-time credit of $370,000 for preapproved improvements undertaken by PNF
NoneRent Credit
Upon a 30-day notice by CEO:
• Reduction of the billboard footprints in the Premises with the concurrent assignment of the Regency Billboard sublease to LAWA
PNF to allow the billboard operator site access for operation and maintenance; LAWA to retain air rights easement over the Premises for all billboards
NoneRegencyBillboardPremisesRemoval andAssignmentOption byLAWA
$200,000NoneFaithfulPerformanceGuarantee
Action Requested
Staff requests the Board approve the proposed Amended and Restated Lease, and authorize the Chief Executive Officer to execute the Lease after approval by the City Council and approval as to form by the City Attorney.
Fiscal Impact
PNF currently pays LAWA approximately $9.8 million annually, which makes PNF LAWA’s best performing parking asset. Under the original Lease, LAWA’s only option to secure a portion of the premises for other purposes would be to terminate the Lease in its entirety, which would extinguish this revenue. While it is possible that LAWA could, after such termination, enter into a new agreement with a replacement operator, staff finds this path would deliver substantially less net income and the associated procurement process would
Page 4PNFAmended and Restated Lease
not be warranted given the probable useful life of the site for public parking. Additionally, LAWA’s relocation rights in the Amended and Restated Lease provides a path where LAWA can relocate the PNF business, within defined areas, and preserve the favorable payment terms for LAWA.
4. Alternatives Considered
• Take No Action
This action is not recommended. If LAWA does not modify the Lease to provide LAWA with greater flexibility to reduce the premises, terminating the lease will ultimately be LAWA’s only option and this would be done at a high cost.
APPROPRIATIONS:
Approval of this action does not require an appropriation.
STANDARD PROVISIONS:
The issuance of permits, leases, agreements, gate and space assignments, and renewals, amendments or extensions thereof, or other entitlements granting use of existing airport facilities or its operations is exempt from the requirements of the California Environmental Quality Act (CEQA) pursuant to Article III, Class 1 (18)(c) of the Los Angeles City CEQA Guidelines.
1.
This item is subject to approval as to form by the City Attorney.2.
Actions taken on this item by the Board of Airport Commissioners will become final pursuant to the provisions of Los Angeles City Charter Section 606.
3.
This action is not subject to the provisions of the Service Contractor Worker Retention and Living Wage Ordinances.
4.
This action is not subject to the Small Business Enterprise Program.5.
This action is not subject to the provisions of the Affirmative Action Program.6.
This action does not require a Business Tax Registration Certificate number.
This action is not subject to the provisions of the Child Support Obligations Ordinance.
This action is not subject to the insurance requirements of the Los Angeles World Airports.
7.
8.
9.
10. This action is not subject to the provisions of Charter Section 1022 (Use of Independent Contractor).
11. This action is not subject to the provisions of the Contractor Responsibility Program.
12. This action is not subject to the provisions of the Equal Benefits Ordinance.
Page 5PNF Amended and Restated Lease
13. This action is not subject to the provisions of the First Source Hiring Program.
14. This action is not subject to the provisions of Bidder Contributions CEC Form 55.
Page 6PNF Amended and Restated Lease