Los Angeles World Airports

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RESOLUTION NO. 26084

BE IT RESOLVED that the Board of Airport Commissioners approved a Second Amendment to Contract DA-4877 with Total Commercial Real Estate, Inc. to extend the term for three (3) years, subject to termination with thirty (30)-day notice and increase the contract amount by $4,000,000, covering property management services for Los Angeles World Airports, as referenced in the Board-adopted staff report attached hereto and made part hereof; and

LAX

LA/Ontario

Van Nuys

City of Los Angeles

Eric Garcetti Mayor BE IT FURTHER RESOLVED that the Board of Airport Commissioners authorized the Chief

Executive Officer to execute said Second Amendment upon approval as to form by the City Attorney and upon approval by the Los Angeles City Council; andBoard of Airport

Commissioners

Sean O. Burton President BE IT FURTHER RESOLVED that the Board of Airport Commissioners found that this action

is exempt from competitive bidding under City Charter Section 371(e)(10) and Administrative Code Section 10.15(a)(10) as the competitive process is impractical at this time; andValeria C. Velasco

Vice President

Jeffery J. Daar Gabriel L. Eshaghian Beatrice C. Hsu Nolan V. Rollins Dr. Cynthia A. Telles

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; andDeborah 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 373.

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I hereby certify that this Resolution No. 26084 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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Los Angeles California 90045-5803 Mail PO. Box 92216 Los Angeles California 90009-2216 Telephone 310 646 5252 Internet www.lawa.aero1 World Way

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SUBJECT: Approval of Second Amendment to Property Management Agreement

Approve the Second Amendment to the property management agreement with Total Commercial Real Estate, Inc. (DA-4877) to extend the term for three years, subject to termination with 30-days’ notice and increase the contract amount by $4 million.

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) of the Los Angeles City CEQA Guidelines.

2.

FIND that this action is exempt from competitive bidding under City Charter Section 371(e) (10) and Administrative Code Section 10.15(a) (10) as the competitive process is impractical at this time.

3.

APPROVE the Second Amendment to the agreement between Los Angeles World Airports and Total Commercial Real Estate, Inc. (DA-4877) to extend the term for three-years, subject to termination with 30-days’ notice and increase the contract amount by $4 million.

4.

Page 1SECOND AMENDMENT TO PROPERTY MGMT FORLAX MANCHESTER SQUARE & AIRPORT/BELFORD

5. AUTHORIZE the Chief Executive Officer to execute the Second Amendment upon approval as to form by the City Attorney and upon approval by the Los Angeles City Council.

DISCUSSION:

1. Purpose

Allow for the continued management of Los Angeles World Airports’ (LAWA) residential properties and land located in Manchester Square, and provide for the management of any additional properties acquired in Manchester Square and Airport/Belford (Program Areas) east of Los Angeles International Airport (LAX).

Prior Related Actions2.

• January 13, 2014 - Resolution No. 25316The Board of Airport Commissioners (Board) approved award of a three-year property management agreement (DA-4887) to Total Commercial Real Estate, Inc. (TCRE) after a competitive process.

• February 19, 2015 - Resolution No. 25630The Board approved the First Amendment (DA-4887A) to add management of 35 multi­family properties in Manchester Square acquired by LAWA.

3. Current Action

TCRE currently manages 37 single- and multi-family properties and vacant land in the Manchester Square area. Given TCRE’s familiarity with the property portfolio and issues specific to the Program Area, staff recommends TCRE continue property management services until LAWA completes the residential acquisition and relocation program within the next 24 to 36 months. The terms of the Second Amendment are described below:

Page 2SECOND AMENDMENT TO PROPERTY MGMT. FORLAX MANCHESTER SQUARE & AIRPORT/BELFORD

Provision Current Proposed

Expiration Date Expires January 31, 2017 Expires January 31, 2020

Single- and multi-family properties and vacant land in the Manchester Square area (419 units)

Existing portfolio and additional acquisitions in the Program Areas (additional 265 units)

Portfolio

Monthly fee for property management services (Base Fee)

$72,1941$71,437

Monthly fee increase or reduction for addition/removal of a property - varies based on number of units

$130-$599 $133-$611

Monthly fee increase or reduction for addition/ removal of a vacant lot

$75 $77

Annual adjustment to fees None 2%

Repairs to acquired properties (Initial Repairs)

Reimbursement of actual costs incurred by contractor No change

Administrative fee on Initial Repairs (Administrative Fee)

None 7%

'Estimate of year one Base Fee; Actual year one Base Fee will be determined based on the size of the portfolio upon commencement of the extension term.

The Base Fee, noted above, is an adjustable monthly fee that fluctuates based on the number and types of properties in the contractor’s property management portfolio. The Base Fee covers all property management services including but not limited to: rent collection, individual repairs costing less than $3,000, trash disposal, and relocation and acquisition support (e.g. inspections, estoppel reviews). Repairs costing $3,000 or more are paid by LAWA.

Upon acquisition of new properties, LAWA may require TCRE to perform repairs to correct health and safety issues identified through the inspection process (Initial Repairs). The actual costs incurred by TCRE to complete the repairs are paid by LAWA.

The 35 multi-family properties acquired as-is by LAWA required substantial repairs, most of which were subcontracted by TCRE. The extensive scope necessitated an increase in TCRE’s level of management for the duration of the repair project which caused TCRE to incur unanticipated administrative costs. The proposed 7% Administrative Fee covers administrative costs associated with Initial Repairs.

Page 3SECOND AMENDMENT TO PROPERTY MGMT. FORLAX MANCHESTER SQUARE & AIRPORT/BELFORD

Provided below is the projected cost for year one of the extension term. The projected cost takes into account the gradual removal of properties due to completion of relocation activities, most of which are scheduled to occur later in the term, as well as future acquisitions.

Projected Costs Year One of Extension Term

$815,000Base Fee

Additional Services (e.g. potential tree removal, fencing installation, equipment replacement)

$200,000

$8,300Initial Repairs (i.e. 9520 Belford Ave.)

Administrative Fee(i.e. 35 properties acquisition and 9520 Belford Ave.)

$21,100

$203,900Pass-thru expenses (e.g. utilities)

$110,000Contingency for management of additional acquisitions

$1,358,300Total

Action Requested

Staff requests the Board approve the Second Amendment and authorizethe Chief Executive Officer to execute the Second Amendment after approval as to form bythe City Attorney and upon approval of the Los Angeles City Council.

Fiscal Impact

Costs related to this contract will be reimbursed from the LAX Passenger Facility Charge Fund

4. Alternatives Considered

• Reduced Amendment Term

Staff considered a shorter amendment term, but wanted consistency in property management through acquisition and relocation of all owners and residents. The 30-day notice cancellation allows LAWA the flexibility needed to terminate services once all tenants are relocated and buildings are under LAWA contract to demolish.

• Conduct a Competitive Procurement Process

Staff considered conducting a competitive procurement process but determined it is better for tenants to have consistent management through the challenges of the current Program Areas situation and the relocation process.

Page 4SECOND AMENDMENT TO PROPERTY MGMT. FORLAX MANCHESTER SQUARE & AIRPORT/BELFORD

APPROPRIATIONS:

Property management services for the Manchester Square and Airport/Belford Program Areas have been approved by the Federal Aviation Administration to be funded from Passenger Facility Charge funds. Therefore, it is requested that up to $1,154 million be appropriated and allocated from the LAX Passenger Facility Charge Fund to WBS Element 1.01.00019-71R as may be required. In addition, staff requests that funds for Program Area utilities in the amount of $165,000 be appropriated from the LAX Passenger Facility Charge Fund and allocated to LAX Cost Center 1140015 - Residential Acquisition, Commitment Item 523 - Utilities. Utilities funding for subsequent years will be requested through the annual Operating Budget process.

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 373.

3.

Total Commercial Real Estate is required by contract to comply with the provisions of the Living Wage Ordinance.

4.

Procurement Services Division has reviewed this action (File #7946) and established a mandatory 20% Small Business Enterprise goal. Total Commercial Real Estate committed to 22.03% SBE participation and has achieved 26.13% to date.

5.

Total Commercial Real Estate is required by contract to comply with the provisions of the Affirmative Action Program.

6.

Total Commercial Real Estate has been assigned Business Tax Registration Certificate number 0000538495- 0001 -1.

7.

Total Commercial Real Estate is required by contract to comply with the provisions of the Child Support Obligations Ordinance.

8.

Total Commercial Real Estate has approved insurance documents, in the terms and amounts required, on file with the Los Angeles World Airports.

9.

10. Pursuant to Charter Section 1022, staff determined the work specified on the proposed contract can be performed more feasibly or economically by an Independent Contractor than by City employees.

11. Total Commercial Real Estate has submitted the Contractor Responsibility Program Pledge of Compliance and will comply with the provisions of the Contractor Responsibility Program.

Page 5SECOND AMENDMENT TO PROPERTY MGMT. FORLAX MANCHESTER SQUARE & AIRPORT/BELFORD

12. Total Commercial Real Estate has been determined by Public Works, Office of Contract Compliance to be in compliance with the provisions of the Equal Benefits Ordinance.

13. Total Commercial Real Estate will be required to comply with the provisions of the First Source Hiring Program for all non-trade Airport jobs.

14. Total Commercial Real Estate has submitted the Bidder Contributions CEC Form 55 and will comply with its provisions.

Page 6SECOND AMENDMENT TO PROPERTY MGMT. FORLAX MANCHESTER SQUARE & AIRPORT/BELFORD