`_1 `, Reviewed by: Debbie Bowers, Dep y Executive Director

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1 1 MT I 0 Los Angeles World Airports 01 REPORT TO THE BOARD. FA -Pe RT COMMISSIONERS k 12,A1-z4 largird2m12.). Approved,, Ramon Olivare, Director s Leasin.nd Development `_1 `, Reviewed by: Debbie Bowers, Dep y Executive Director Meeting Date: CAO Review: 7/16/2015 D Completed Pending N/A / cj /M 1 Reviewed for Date Approval Status ay City At orn Capital Budget 6/24/2015 NY N NA DS ' / ' Operating Budget 6/23/2015 I]YN N DNA RW jí CEQA 6/23/2015 OY N AE 'nt - Executive Director Procurement 6/25/2015 Y ON N Cond Guest Experience 7/3/2015 Y LIN BY SUBJECT: Approval of Five -year Lease with SOCAL MRO, LLC for a Maintenance Facility at LA /Ontario International Airport Approval of a five -year Lease with SOCAL MRO, LLC and approval of the building rental rates for the facility located at 1800 East Airport Drive at LA/Ontario International Airport that will generate $269,125 in revenue in the first year of the term and approximately $1,413,300 over the five -year term. RECOMMENDATIONS: Management RECOMMENDS that the Board of Airport Commissioners: 1. ADOPT the Staff Report. 2. DETERMINE that this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Article Ill, Class 1 (18)(c) of the Los Angeles City CEQA Guidelines. 3. APPROVE the Lease and the building rental rate for SOCAL MRO, LLC as referenced in this report, which will generate approximately $1,413,300 over the five -year term, exclusive of CPI adjustments. 4. AUTHORIZE the Executive Director to execute the Lease after approval as to form by the City Attorney. Page 1

2 DISCUSSION: 1. Purpose Allow SOCAL MRO, LLC (SOCAL) to provide aircraft maintenance, repair, overhaul, and charter services at LA/Ontario International Airport (ONT). 2. Prior Related Actions None 3. Current Action On September 18, 2014, staff initiated a competitive process by releasing a Request for Expressions of Interest (EOI) from parties interested in leasing various on- airport properties at ONT, including three 33,600 square foot hangars located at 1800 East Airport Drive. The hangars have been vacant since the late 1990's. The only response to the EOI for the hangars was submitted by Zangeneh Aeronautics Consulting, Inc. which partnered with several aviation professionals to form SOCAL. The newly- formed company's senior management has over 60 years combined experience in the maintenance, repair and overhaul business, and are currently working in various areas of the aviation industry. SOCAL will be the only maintenance, repair, and overhaul business (MRO) at Ontario Airport. SOCAL's employees will perform aircraft heavy maintenance and repair, including work on the engines, accessories, landing gear, and fuselage. In addition, they will service the interior and exterior of the aircraft as well as offer avionics services. SOCAL estimates that 20 new jobs will be created in the first year of operations and approximately 100 new jobs by the end of the third year at ONT. The building rental rate of $2.79 per square foot fairly reflects market rental values in the region and was negotiated based upon market comparables (see attached rent comparison table). Page 2

3 The table below provides a summary of the key element of the ar000sed Lease: PROPOSED LEASE SUMMARY USE: Aircraft maintenance, repair, overhaul and charter operations TERM: Total Lease period Commencement Date Expiration Cancellation Provision 5 years Upon approval and execution of Lease by Executive Director 5 years from Commencement Date 6 -month notice by City for operational or safety reasons DEMISED PREMISES: Hangar 25 Office /Shop Space Hangar 19 Total Building Area Unpaved Land 33,600 SF 5,472 SF 33,600 SF 72,672 SF 72,672 SF Land paved for aircraft Total Land Area 20,000 SF 92,672 SF RENT: Hangar 19 and Hangar 25 Office and shop space Unpaved land Land paved for aircraft Annual Adjustment Periodic Market Rent Adjustment Annual Rent (first year) OTHER: Maintenance and Repair $2.79 PSFPY $2.79 PSFPY $0.71 PSFPY $1.39 PSFPY Based on Consumer Price Index, with a minimum of increase of 2% LAWA's standard 5 -year market rate adjustment $269,125 SOCAL is responsible for all maintenance and repairs related to the demised premises. Page 3

4 Action Requested Staff requests the Board approve the five -year Lease with SOCAL MRO, LLC, as well as the proposed building rental rates, and authorize the Executive Director to execute the Lease after approval as to form by the City Attorney. Fiscal Impact Approval of this Lease will generate $269,125 in revenue in the first year of the term and approximately $1,413,300 over the five -year term. 4. Alternatives Considered Take No Action Taking no action is not recommended. Approval of the proposed Lease will generate additional revenue for LAWA from currently vacant facilities and enable SOCAL to provide aircraft maintenance, repair, overhaul, and charter services at ONT. APPROPRIATIONS: Approval of this action will have no impact on LAWA's Capital or Operating Budgets and no appropriation is requested. STANDARD PROVISIONS: 1. 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 Ill, Class 1 (18)(c) of the Los Angeles City CEQA Guidelines. 2. This item is subject to approval as to form by the City Attorney. 3. Actions taken on this item by the Board of Airport Commissioners will become final pursuant to the provisions of Los Angeles City Charter Section SOCAL will comply with the provisions of the Living Wage /Service Contractor Worker Retention Ordinances. 5. The Small Business Enterprise Program does not apply to leases. 6. SOCAL will comply with the provisions of the Affirmative Action Program. 7. SOCAL must submit a Business Tax Registration Certificate number prior to execution of the Lease Agreement. 8. SOCAL will comply with the provisions of the Child Support Obligations Ordinance. Page 4

5 9. SOCAL will have approved insurance documents, in the terms and amounts required, on file with Los Angeles World Airports prior to execution of the Lease Agreement. 10. This action is not subject to the provisions of City Charter Section 1022 (Use of Independent Contractors). 11. SOCAL has submitted the Contractor Responsibility Program Questionnaire and Pledge of Compliance and will comply with the provisions of the Contractor Responsibility Program. 12. SOCAL must be determined by Public Works, Office of Contract Compliance, to be in compliance with the provisions of the Equal Benefits Ordinance prior to execution of the Lease Agreement. 13. This action is not subject to the provisions of the First Source Hiring Program. 14. SOCAL has submitted the Bidder Contributions CEC Form 55 and will comply with its provisions. Attachments: Site Maps Lease Comparison Table Page 5

6 Site and Location Maps 1I Empir,e fr;4"l MVO ":9 S qtamat ino PtVy, 4 E;(.3 as G u'alt.9., i le.." i», Le 't,/,7 I, '4r-4i,, IIVP2,, 11V? ( ' it; *'''. -, ill! i',' ', ll,-r * V itt,i2tj... ill.,...1,1frift I i4 SA41 Ix lit -;.. iii 20 ir2 Opo\ g., I,. a 0. No 0 M I 1 r...,, - Tr. oz: MI, is m Ogi -ws -II rikila.'7 o.oitint Location Ma X I HANGAR if 25 HANGAR 19 I a-. a t 4 3 :IiiiilLtatut:' JI II Site Map 34''0:3'33.30' N 1-1q*q7:95.99!' Í;k100i 't71-t6"--gudem Page 6

7 Rental Rate Comparison Table Tenant Name & Lease Number Property Address/Airport Improvement Type Building Area /SF Rental Rate /Building (PSFPY) Multiple Tenants 8352 Kimball Ave /Chino Hangar 26,000 $2.77 Cinco Air Charter 2161 E. Avion Drive /ONT Hangar /office 20,400 $3.49 Jet Systems International 2161 E. Avion Drive /ONT Hangar /office 12,450 $3.52 Guardian Air Service 1150 S. Vineyard Ave /ONT Hangar 33,659 $3.18 Note: The first comparable in the chart is from Chino Airport and consists of 4 hangars constructed by Lockheed in 1976 and is very similar to the subject property. The actual rental rate is $3.48 per square foot per year, but that rate includes land. After allocating a land rate, the adjusted building rate is $2.77. Page 7