TITLE
Recommendation to authorize City Manager, or designee, to execute any and all documents necessary for the Second Amendment to Lease
No. 27940 (Parcels J8A and J8B) with Pacific Jet Center, LLC, a California limited liability company, for City-owned property at 2601 East Spring Street at the Long Beach Airport. (District 5)
DISCUSSION
On August 8, 2017, the City Council authorized the First Amendment to Lease No. 27628 (Parcel J9) and the First Amendment to Lease No. 27940 (Parcels J8A and J8B) with Pacific Jet Center, LLC (Tenant). Both amendments provided for the assignment of the leases to Tenant with certain provisions to bring both agreements in line with the most current version of the Airport’s Minimum Standards for Aeronautical Activities (Airport Minimum Standards).
Currently, the City and Tenant wish to consolidate the leaseholds covered under both agreements into one lease and include several modifications to increase the efficiency and safety of the development. Specifically, the proposed Second Amendment will incorporate the Parcel J9 leasehold into Lease No. 27940, provide for a safer and more efficient reconfiguration of the Airport Perimeter Road around the development, include requirements for removal of the below ground storage tanks to reduce the likeliness of future soil contamination, and modify the use provisions to further conform with the Airport Minimum Standards.
Negotiations between the City and Tenant have resulted in a proposed Second Amendment to Lease No. 27940 containing the following major terms and conditions:
• Landlord: City of Long Beach, a municipal corporation.
• Tenant: Pacific Jet Center, LLC, a California limited liability company.
• Leased Premises: Approximately 3.75 acres of land at 2601 East Spring Street at the Long Beach Airport.
• Term: The lease shall remain unchanged and terminate as scheduled on March 11, 2039.
• Rent: The initial rent for the Leased Premises shall be $9,324 per month ($0.057 per square-foot), which is based upon a blended rental rate of the two existing leases. The rent shall continue to be subject to annual adjustments based on the Consumer Price Index (CPI) and scheduled fair market adjustments as provided for in the current lease.
• Permitted Uses: Based on recent changes to the Airport Minimum Standards, the leasehold will no longer qualify nor be classified as a Fixed Base Operator (FBO), due to it not meeting the minimum acreage requirements. As such, Tenant shall no longer be permitted to sell fuel to aircraft at the Airport.
• Fuel Tank Removal: Within 90 days following the mutual execution of the Second Amendment, all remaining below ground fuel tanks on the Leased Premises shall be removed in accordance with applicable law.
• Fuel Tank Removal Credit: Upon final approval by the City evidencing the successful removal of the fuel tanks, Tenant shall be entitled to a rent credit totaling $108,000, which shall be credited against the monthly rent payable by Tenant in the amount of $3,000 per month over a 36-month period. This credit is provided to assist with mitigating losses from the exclusion of fuel sales to outside entities on a going forward basis.
• Fuel Storage: Fuel may continue to be stored on the Leased Premises in either a City-approved above-ground storage tank or a fuel truck with secondary containment, as required by law, for the sole purpose of fueling aircraft based at the Leased Premises.
• Perimeter Road Modifications: The Airport shall be responsible for relocating the section of the Airport Perimeter Road adjacent to the leasehold so that it is further away from the aircraft movement area, to provide a safer separation between vehicles and taxiing aircraft. The Airport shall reserve the right to make future modifications to this section of the Airport Perimeter Road, on an as needed basis, and the Leased Premises and corresponding rent shall be adjusted accordingly.
Upon execution of the Second Amendment and the consolidation of the adjacent leaseholds, Lease No. 27628 (Parcel J9) will terminate. The exact square footage of the Leased Premises and corresponding ground rent is subject to adjustment based upon verification by a formal survey.
All other terms and conditions of Lease No. 27940 shall remain in full force and effect.
This matter was reviewed by Deputy City Attorney Richard F. Anthony on August 28, 2018 and by Budget Analysis Officer Julissa José-Murray on August 29, 2018.
TIMING CONSIDERATIONS
City Council action is requested on September 18, 2018, to allow for important safety related improvements provided in the Second Amendment to be made in a timely manner.
FISCAL IMPACT
Annual revenues of approximately $111,888 will accrue in the Airport Fund (EF 320) in the Airport Department (AP) and will be subject to annual CPI increases and periodic fair market adjustments. Under the previous lease agreements, the total annual revenues were approximately $106,308. The proposed amended lease will result in an approximate increase in annual revenues in the amount of $5,520. There is no local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
JESS L. ROMO, A.A.E.
DIRECTOR, LONG BEACH AIRPORT
APPROVED:
PATRICK H. WEST
CITY MANAGER