Ij oc.' Los Angeles World Airports REPORT TO THE

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1 Pending I Ij oc.' Los Angeles World Airports REPORT TO THE BOAR O AIR ' ORT COMMISSIONERS / Meeting Date: Rein i l,, eher Approved b Ramon Olivares, Dire! : r of eas' and Development 5/7/2015 Reviewed by: Debbie Bowers, D-:uty Executive Director li J " An CAO Review: x 1 Completed - /` M 0 Reviewed for Date Approval Status By City At orn - Gina 1 arie Lindsey - Executive D rector ter_/, - _- Capital Budget Operating Budget CEQA Procurement 4/21/15 4/22/15 4/21/ ,-/Iri x Y N NA x Y N DNA NY N NY N Cond DS RW VW livcr SUBJECT: Approval of Five -year Lease with Nippon Cargo Airlines Co., LTD. for Cargo Facility at Los Angeles International Airport Approve a five -year Lease with Nippon Cargo Airlines Co., LTD. and approve the building rental rates for the cargo facility located at 6501 West Imperial Highway at Los Angeles International Airport that will generate $1,954,507 in revenue in the first year of the term and approximately $10,004,000 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 III, Class 1 (18)(c) of the Los Angeles City CEQA Guidelines. 3. APPROVE the five -year Lease and the building rental rate for Nippon Cargo Airlines CO., LTD. 4. AUTHORIZE the Executive Director to execute the Lease after approval as to form by the City Attorney and upon approval by the Los Angeles City Council. Page 1

2 DISCUSSION: 1. Purpose To allow Nippon Cargo Airlines Co., Ltd. (NCA) to continue its cargo operations at Los Angeles International Airport (LAX). 2. Prior Related Actions March 7, 1995, Board Order No. AO (Lease No. LAA -7486) The Board of Airport Commissioners (Board) approved a 20 -year lease agreement with NCA for the property located at 6501 West Imperial Highway. 3. Current Action NCA operates an all- freighter aircraft cargo business at LAX using mainly the newer Boeing 747-8F aircraft which has a 16% greater carrying capacity and is slightly larger than their older F aircraft. NCA operates seven to nine flights per week from Asia. NCA had a 16% increase in tonnage over last year and processed over 69,000 tons of cargo through their facility in The table below provides a summary of the proposed Lease: PROPOSED LEASE SUMMARY Term: Commencement/Effective Date: Expiration: Cancellation Provision: Demised Premises: Land - Cargo /Maintenance Building Auto Paving Rental Rates: Land - Cargo /Maintenance Building Paving - Auto Parking Current 20 -year Ground Lease May 12, 1995 May 11, ,625 SF 48,872 SF $3.17 /SF/YR $3.00 / SF/YR Proposed Lease 5 years May 12, 2015 May 11, 2020 LAWA may cancel for safety or security reasons. NCA may cancel if it ceases operation at LAX. 212,625 SF 72,339 SF* 133,092 SF* $ 3.17 /SF/YR ** First year - $17.00 /SF/YR * ** Second year - $17.80 /SF/YR * ** Third to Fifth year - CPI Adjustment $ 0.37 /SF/YR * ** Annual Rent: $811,850 $1,954,507 Annual Adjustment: Based on the Consumer Price Index, with a Minimum increase of 2 %. Notes to this chart appear on next page. Page 2

3 *Building area: As required in the prior lease, NCA refurbished the existing building space and built additional warehouse and office space, therefore NCA was only charged a nominal building rate for the existing building space of $3.00 PSFPY during the lease term. All improvements have reverted to LAWA, and NCA is required to pay market rent for the building area. * *Paving area: As required in the prior lease, NCA repaved most of the leased area and therefore was not charged for paving during the lease term. In the proposed lease, NCA is required to pay the Board -approved paving rate. ***Land and paving rates are based on Board -approved rates (Resolution No and No respectively) and are rounded. The proposed initial building rates of $17.00 in year 1 and $17.80 in year 2 fairly reflects market rates for comparable facilities. Action Requested Staff requests the Board approve the five -year Lease, and the proposed building rental rates, and authorize the Executive Director to execute the Lease after approval as to form by the City Attorney and upon approval by the Los Angeles City Council. Fiscal Impact Approval of this action will have no impact on LAWA's Capital or Operating Budgets. Approval of this Lease will generate $1,954,507 in revenue in the first year of the term and approximately $10,004,000 over the five -year term. 4. Alternatives Considered Take No Action Taking no action is not recommended. Approval of the proposed Lease will enable NCA to continue their cargo operations at LAX. 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 NCA will comply with the provisions of the Living Wage /Service Contractor Worker Retention Ordinances. Page 3

4 5. The Small Business Enterprise Program does not apply to leases. 6. NCA will comply with the provisions of the Affirmative Action Program. 7. NCA must submit a Business Tax Registration Certificate number prior to execution of the Lease Agreement. 8. NCA will comply with the provisions of the Child Support Obligations Ordinance. 9. NCA 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. NCA has submitted the Contractor Responsibility Program Pledge of Compliance and will comply with the provisions of the Contractor Responsibility Program. 12. NCA 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. NCA 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. Attachments: Site Map Lease Comparison Table Page 4

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6 Rental Rate Comparison Table Tenant Name & Building Land Property Address Improvement Type Lease Number Area /SF Area /SF Rental Rate /Building (PSFPY) Rental Rate /Land (PSFPY) China Airlines Ltd - Cargo Aviation Blvd., LAX Cargo Warehouse 54, ,750 $18.59 $3.17 LAA Swissport Cargo Services LP Aviation Blvd., LAX Cargo Warehouse 50, ,514 $17.50 $3.17 LAA -4747A Korean Airlines 6101 West Imperial Hwy Cargo Warehouse 158, ,955 $16.00 $3.17 Aerovias Empresa De Cargo S.A W. Imperial Hwy Cargo Warehouse 61, ,887 $14.50 $3.17 De C.V.., R :' t Page 6