` /1- -O " T BOARD COMMISSIONERS REPORT. /) /n/1 Reviewed for Date Approval Status By ity Atto TO THE. r a. .-.rila

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1 .-.rila 1 NM 1 MT BOARD! / /F. / ' :!1 ' Los Angeles REPORT A -O " T World Airports TO THE Approved b, Ra on Oliva -s, Dir ce-, Proper Services ` /1- _Ai. Reviewed by: D -.bie Bowers, Dep ' y Executive Director i' Deb. ah COMMISSIONERS Meeting Date. CAO Review: 9/21/2016 :?_ i r úeß i Tyr 111 Completed Pending X N/A r a /) /n/1 Reviewed for Date Approval Status By ity Atto ey lint - Chief Executive Officer Capital Budget Operating Budget CEQA Procurement Guest Experience 8/31/16 Y N NA 8/26/2016 i xy N El NA 8/26/16 NY N 08/26/16 NY N Cond 8/26/2016 OY N SUBJECT: Approval of a Lease with Polar Air Cargo Worldwide, Inc. and Building Rental Rate at Los Angeles International Airport Approve a four -year Lease with Polar Air Cargo Worldwide, Inc. and building rental rate for a cargo facility at 5761 West Imperial Highway at Los Angeles International Airport that will yield approximately $1,421,078 in the first year, and approximately $5,392,310 in net revenue over the 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 III, Class 1(18)(c) of the Los Angeles City CEQA Guidelines. 3. APPROVE the Lease with Polar Air Cargo Worldwide, Inc. and building rental rate, as referenced in this report. 4. AUTHORIZE the Chief Executive Officer to execute the Lease between the City of Los Angeles and Polar Air Cargo Worldwide, Inc. upon approval as to form by the City Attorney. I NE RW BY Page 1

2 DISCUSSION: 1. Purpose To provide a cargo facility for Polar Air Cargo Worldwide, Inc. (Polar) to conduct its cargo operations at Los Angeles International Airport (LAX). 2. Prior Related Actions None 3. Current Action Polar, a subsidiary of Atlas Air Worldwide Holdings, Inc., is an all -cargo airline that has operated a freighter aircraft cargo business at LAX for many years. Polar operates weekly flights at LAX using and freighter aircraft, and processes approximately 50,214 tons of cargo. Polar, currently a client of a cargo ramp handler at LAX, is seeking its own facility and has requested to lease the facility located at 5761 West Imperial Highway to facilitate its growing business. The facility is comprised of 70,919 square feet (SF) of warehouse /office space and 86,702 SF of land. Another cargo operator currently uses a small portion of the largely vacant facility, under a Use Terms and Conditions (UTC) permit and will relocate when Polar occupies the facility. Due to excess office space in the facility, the proposed Lease provides that Polar will not use or occupy second floor office space but requires Polar to be responsible for maintenance of the entire facility. The proposed building rental rate is based on current market rates for comparable on- airport facilities. Additionally, as the facility's heating, ventilation and air- conditioning (HVAC) system is in disrepair, the Lease requires Polar to replace the HVAC system, and provides a rent credit to Polar for HVAC replacement, which is not to exceed $292,000, paid over the 12 months following completion of work. The table below provides a summary of key elements of the proposed Lease: Page 2

3 LEASE SUMMARY Proposed USE: Air cargo operations TERM: Total Lease period Commencement Date Expiration Cancellation Provision Four years Upon execution by Chief Executive Officer Four years after commencement City may terminate the Lease with 180 days' prior written notice DEMISED PREMISES: Land (Maintenance) Building Aircraft Paving Auto Paving 86,702 SF 70,919 SF 28,305 SF 10,200 SF RENT: Land Rate' Building Rate Aircraft Paving Rate' Auto Paving Rate' Monthly Rente Annual Rent2,3 $ 3.29 $19.00 $ 0.76 $ 0.39 $118,423 $1,421,078 Notes: 1. Land and Paving rates are Board -approved rates. All rates are per square foot per year, and are rounded. 2. Polar will not use or occupy 2nd floor office space (approx. 12,120 SF). 3. Exclusive of any HVAC rent credit provided to Polar during the first year of the Lease. Action Requested Staff requests the Board approve the proposed Lease and authorize the Chief Executive Officer to execute the Lease after approval as to form by the City Attorney. Page 3

4 Fiscal Impact Approval of this item will generate approximately $5,392,310 in net revenue, exclusive of rental adjustments during the four -year term. 4. Alternatives Considered Take No Action Not leasing the premises would be an option if LAWA needed to use the site for its own purposes. At this time, LAWA does not need the premises. Additionally, leasing the facility to Polar will result in incremental revenue to LAWA, as the facility is currently only 30% occupied. 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 involving negligible or no expansion of use and /or alteration or modification of the facilities or its operations beyond that previously existing or permitted 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 Polar Cargo Worldwide, Inc. will comply with the provisions of the Living Wage Ordinance. 5. The Small Business Enterprise Program does not apply to leases. 6. Polar Cargo Worldwide, Inc. will comply with the provisions of the Affirmative Action Program. 7. Polar Cargo Worldwide, Inc. has been assigned Business Tax Registration Certificate number Polar Cargo Worldwide, Inc. will comply with the provisions of the Child Support Obligations Ordinance. 9. Polar Cargo Worldwide, Inc. 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). Page 4

5 11. Polar Cargo Worldwide, Inc. has submitted the Contractor Responsibility Program Questionnaire and Pledge of Compliance and will comply with the provisions of the Contractor Responsibility Program. 12. Polar Cargo Worldwide, Inc. 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. Polar Cargo Worldwide, Inc. will be required to comply with the provisions of the First Source Hiring Program for all non -trade Airport jobs. 14. This action is not subject to the provisions of the Bidder Contributions CEC Form 55. Page 5

6 . Rental Rate Comparison Table Tenant Name & Lease Number Property Address Improvement Type Building Area /SF Land Area /SF Rental Rate /Building (PSFPY) Rental Rate /Land (PSFPY) American Airlines Inc - Cargo UTC 5950 Avion Drive, LAX 117, ,892 $20.51 China Airlines Ltd - Cargo LAA -8534A Aviation Blvd., LAX 54, ,750 $19.34 Mercury Air Cargo Inc. LAA -8388A 6040 Avion Drive, LAX 135, ,017 $18.78 US Airways Inc - Cargo LAA International Way, LAX 30, ,227 $18.40 Swissport Cargo Services LP LAA -4747A Aviation Blvd., LAX 50, ,514 $ FA3fr jd a i Page 6

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