Los Angeles World Airports

Transcription

1 Los Angeles World Airports TM RESOLUTION NO BE IT RESOLVED that the Board of Airport Commissioners approved the First Amendment to Concession Agreement LAA-8587 with CMS Hospitality, LLC to reduce the Airport Certified Disadvantaged Business Enterprise commitment from 100% to 25% that will facilitate the sale of CMS Hospitality s assets to Host, covering food and beverage concession at Los Angeles International Airport, as referenced in the Board-adopted staff report attached hereto and made part hereof; and LAX BE IT FURTHER RESOLVED that the Board of Airport Commissioners approved the Consent to Assignment of the CMS Hospitality, LLC Food and Beverage Concession Agreement to interim assignee, CMS Transaction Company, LLC, upon Los Angeles World Airports receipt of written confirmation of closing of the Purchase Agreement between CMS Hospitality, Inc. and Host International, Inc.; and the further assignment from CMS Transaction Company, LLC to Host International, Inc. upon written confirmation of such assignment; and LA/Ontario Van Nuys City of Los Angeles Eric Garcetti Mayor Board of Airport Commissioners BE IT FURTHER RESOLVED that the Board of Airport Commissioners authorized the Chief Executive Officer to execute the First Amendment to the Food and Beverage Concessions Agreement with CMS Hospitality, LLC and the Consent to Assignment upon approval as to form by the City Attorney and upon approval by the Los Angeles City Council and satisfaction of certain conditions as described in the board report; and Sean 0. Burton President Valeria C. Velasco Vice President Jeffery J. Daar Gabriel L. Eshaghian Beatrice C. Hsu Nolan V. Rollins Dr. Cynthia A. Telles Deborah Flint Chief Executive Officer 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; and 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 606. ooo I hereby certify that this Resolution No is true and correct, as adopted by the Board of Airport Commissioners at its Regular Meeting held on Thursday, August 4, Sandra J. Miller - Secretary BOARD OF AIRPORT COMMISSIONERS ' ' I 1 World Way Los Angeles California Mail PO. Box Los Angeles California Telephone Internet

2 Los Angeles World Airports REPORT TO THE wber Meeting Date: Approved by: tones, rdpei id Concession Services 8/4/2016 Completed Reviewed by: Debbie Bowers, Deputy Executive Director Pending CAP Review: N/A Reviewed for Date Approval Status By City Attorney Capital Budget 7/6/2016 Operating Budget 7/7/2016 ElV N NA BYD N (UNA NE RW CEQA 7/7/2016 I3Y N NM Deborah Flint - Chief Executive Officer Procurement iydne Cnnd MT Guest Experience 7/7/2016 HYDN BY SUBJECT: First Amendment and Approval of Consent to Assignment of the Food and Beverage Concessions Agreement with CMS Hospitality, LLC at Los Angeles International Airport Approve the First Amendment to the Food and Beverage Concessions Agreement with CMS Hospitality, LLC at Los Angeles International Airport to reduce the Airport Certified Disadvantaged Business Enterprise commitment from 100% to 25%. Approve the assignment and assumption of CMS Hospitality, LLC s Food and Beverage Concession Agreement to CMS Transaction Company, LLC and subsequent assignment to Host International, Inc. RECOMMENDA TIONS: 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 First Amendment to the Food and Beverage Concessions Agreement with CMS Hospitality, LLC. Page 1 Amendment and CMS Transfer to Host BR

3 4. 5. APPROVE the Consent to Assignment of the CMS Hospitality, LLC Food and Beverage Concession Agreement to interim assignee, CMS Transaction Company, LLC, upon Los Angeles World Airport s receipt of written confirmation of closing of the Purchase Agreement between CMS Hospitality, Inc. and Host International, Inc. (Closing); and the further assignment from CMS Transaction Company, LLC to Host International, Inc. upon written confirmation of such assignment. AUTHORIZE the Chief Executive Officer to execute the First Amendment to the Food and Beverage Concessions Agreement with CMS Hospitality, LLC and the Consent to Assignment upon approval as to form by the City Attorney, approval of the Los Angeles City Council and satisfaction of certain conditions as described in this report. DISCUSSION: 1. Purpose Facilitate the pale of CMS Hospitality, LLC (CMS) assets to Host International, Inc. (Host). 2. Prior Related Actions May 16, Board Resolution No The Board of Airport Commissioners (Board) approved award of the Food and Beverage Concessions Agreement LAA-8587 to CMS Camacho Ventures to build and operate concessions in Terminals 7 and 8 at Los Angeles International Airport (LAX). June 18, Board Resolution No The Board approved the Consent to Assignment of the Agreement to CMS to facilitate dissolving the CMS Camacho Ventures joint venture agreement and approved the First Amended and Restated Food and Beverage Agreement LAA-8587A (Agreement) to accurately depict unit delivery dates, construction periods and rent commencement dates. 3. Current Action CMS has operated at LAX for over 20 years. CMS began LAX operations as a subconcessionaire to Host, and opened the first Coffee Bean and Tea Leaf and Panda Express locations at LAX. CMS has been an Airport Certified Disadvantage Business Enterprise (ACDBE) throughout its tenure at LAX. In 2010, CMS elected for the first time to bid as a prime concessionaire and was selected to operate the LAX Terminals 7 and 8 food courts concession. As a result, CMS became the first ACDBE to transition to a prime concessionaire at LAX. It is significant that there was no ACDBE goal set for set for this agreement. CMS' owner recently negotiated to sell to Host the following three contracts: Agreement with LAWA for the LAX Terminals 7 and 8 food courts Concession agreement with Westfield Airports, LLC (Westfield) at LAX Concession agreement with McCarran International Airport at Las Vegas Page 2Amendment and CMS Transfer to Host ESR.docx

4 Host, headquartered in Bethesda, Maryland, is an indirect wholly-owned subsidiary of Autogrill S.p.A., an international company with headquarters in Milan, Italy. Host is in 108 airports around the world with over 1,900 food & beverage locations. Prior to implementation of the new concessions program which began in 2010, Host operated 72% of food & beverage units at LAX. To finalize the sale, Board approval is required for two actions related to the Agreement: (i) approval of a proposed First Amendment to the Agreement and (ii) consent to interim assignment of the Agreement to CMS Transaction Company, LLC,; and then (iii) the assignment from CMS Transaction Company, LLC to Host. The sole purpose of the First Amendment to the Agreement is to reduce the ACDBE commitment from 100% to 25%. Impact to LAWA s ACDBE Program LAWA s overall ACDBE goal is 27%, which is established with and reported to FAA. For the period July 2015 to May 2016, LAWA s ACDBE achievement was 24%. The CMS Agreement currently has 100% commitment for ACDBE participation which was a result of CMS s response to a LAWA RFP. Unlike CMS, Host is not an ACDBE certified firm. To facilitate the sale of CMS s assets to Host, CMS requested that LAWA amend the Agreement to reduce the ACDBE commitment from 100% to 25%, to make the transaction acceptable to Host. This proposed 25% goal is consistent with other LAWA concessions agreements goals at LAX. Based on the proposed 25% goal for the Agreement, staff determined that this change would not have a significant impact on LAWA s overall ACDBE Program. If Host achieves the adjusted proposed goal of 25%, and all other concession ACDBE achievements remain' the same as in the reporting period ending in May 2016, LAWA s achievement would remain 22%. As indicated below, Host comprises a significant share of Westfield s food and beverage program. Requiring Westfield s approval to transfer the agreements under Westfield, Host and Westfield are in discussions to choose participation goals in the transferred agreements that will result in Westfield maintaining achievement of its 25% goal to LAWA for the food and beverage component of Westfield s ACDBE requirement. Market Share One of LAWA s major goals when the LAX concession redevelopment program began in 2010 was to have multiple operators to insure competition, both in each terminal and airportwide. This goal was established to realize overall better service and quality of food. The table below shows the change in market share for the agreements directly with LAWA. Page 3Amendment and CMS Transfer to HostBR.docx

5 Table 1 Sales Breakdown (LAWA Direct Agreements - Food and Beverage) Existing Sales Sales if Host buys CMS Concessionaire Sales % Total Sales % Total Areas USA, LAX $70,380,165 50% $70,380,165 50% CMS $16,073,483 11% T Delaware North Corp $27,721,246 20% $27,721,246 20% Host $26,687,843 $42,761,326 19% 30% Total $140,862,737 $140,862, % 100% Note: Annual Sales 06/2015 to 05/2016 Also, both Host and CMS operate concessions pursuant to agreements with Westfield. As shown in Table 2 below, If Westfield approves the assignment its CMS agreements to Host, Host s share of food and beverage sales managed by Westfield will increase from 47% to 69%, and Host s share of total food and beverage sales at LAX will increase from 36% to 47% as a result of the sale. Table 2 Sales Breakdown (All LAX Food and Beverage Agreements) TOTAL F&B Sales Host Existing Sales Sales if Host buys CMS Agreement Type Sales % Total Sales % Total Sales % Total LAWA Direct $140,862,737 56% $26,687,843 19% $42,761,326 30% TCM (Westfield) $109,922,283 44% $64,738,986 59% $76,305,317 69% Total Food & Bev $250,785, % $91,426,829 36% $119,066,643 47% Note: Annual Sales 06/2015 to 05/2016 Staff believes that approving Host to control 30% of food and beverage sales managed through direct agreements with LAWA will sustain competition among the food and beverage concessionaires, keeping service and food at high qualities at LAX. Additionally, staff expects that the increased portion of the Westfield portfolio to be assigned to Host can be effectively managed by Westfield through its agreements, if Westfield approves the assignment of their agreement. LAWA will be competing concession opportunities for the Midfield Satellite Concourse in With competition being one of the major goals for LAX concessions program, staff will design the process to yield a mix of concessionaires that maintains a diverse market share. Page 4Amendmeni and CMS Transfer to Host BR.docx

6 Action Requested Staff requests the Board approve the First Amendment and Consent to Assignment of CMS Agreement to interim assignee, CMS Transaction Company, LLC, and the subsequent further assignment to Host, and authorize the Chief Executive Officer to execute the documents only upon satisfaction of the following conditions: Approval of the First Amendment and Consent to Assignment by the City Council Receipt of a letter satisfactory to LAWA describing the performance and financial responsibilities of each party and the schedule to complete the current redevelopment projects in Tom Bradley International Terminal and Terminals 7 and 8 Payment of the transfer fee of approximately $113,400, which is 5% of the prior 12 months of revenue to LAWA because the transfer includes other agreements besides LAWA s Agreement, (or in the circumstances where only the LAWA Agreement is transferred then 100% of any consideration CMS receives from the sale over the rent and other payments due to City), attorney fees in connection with City s review processing of documents regarding the assignment, and $2,500 administrative processing fee, or receipt of the preliminary closing statement indicating that these amounts will be paid to LAWA upon closing of the transaction Fiscal Impact Pursuant to the Agreement, CMS will pay LAWA an assignment fee of approximately $113,400 (5% of the prior 12 months of revenue to LAWA if the transfer includes other agreements besides LAWA s Agreement,(or in the circumstances where only the LAWA Agreement is transferred then 100% of any consideration CMS receives from the sale over the rent and other payments due to City), attorney fees in connection with City s review processing of documents regarding the assignment and a $2,500 administrative fee. 4. Alternatives Considered Take No Action Not approving the First Amendment to the Agreement will place an unachievable ACDBE commitment because Host is not an ACDBE. Not approving the Consent to Assignment will prevent the sale and transfer of CMS assets to Host. APPROPRIATIONS: Approval of this action will not require an appropriation of funds. 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 Page 5Amendment and CMS Transfer to Host BR.docx

7 Quality Act (CEQA) pursuant to Article III, Class 1 (18)(c) of the Los Angeles City CEQA Guidelines. 2. This agreement will be approved 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 CMS Hospitality, LLC, CMS Transaction Company, LLC, and Host are required by contract to comply with the provisions of the Service Contractor Worker Retention and /or Living Wage Ordinances. 5. Procurement Services reviewed this action. No Airport Concessions Disadvantaged Business Enterprise (ACDBE) Program participation was set for this contract, as no subcontracting opportunities were identified. However, CMS Hospitality, LLC proposed and has achieved 100% ACDBE participation, as it is a certified ACDBE firm. Due to the assignment of CMS Hospitality, LLC s (an ACDBE firm) interest in the Agreement to CMS Transaction Company, LLC and subsequently to Host (a non-acdbe firm), Host proposes 25% ACDBE participation moving forward CMS Hospitality, LLC, CMS Transaction Company, LLC, and Host are required by contract to comply with the provisions of the Affirmative Action Program. CMS Hospitality, LLC has been assigned Business Tax Registration Certificate number CMS Transaction Company, LLC must submit a Business Tax Registration Certification number prior to execution of the Consent to Assignment. Host has been assigned Business Tax Registration Certificate number CMS Hospitality, LLC, CMS Transaction Company, LLC, and Host are required by contract to comply with the provisions of the Child Support Obligations Ordinance. CMS Hospitality LLC has approved insurance documents, in the terms and amounts required, on file with the Los Angeles World Airports. CMS Transaction Company, LLC must have approved insurance documents, in the terms and amounts required, on file with the Los Angeles World Airports. Host has approved insurance documents, in the terms and amounts required, on file with the Los Angeles World Airports. 10. Pursuant to Charter Section 104 (g) staff determined that airport concession agreements are exempt from the provisions of Charter Section 1022 (Use of Independent Contractor). Page 6Amendment and CMS Transfer to Host BR.docx

8 11. CMS Hospitality, LLC has submitted the Contractor Responsibility Program Questionnaire and Pledge of Compliance and will comply with the provisions of the Contractor Responsibility Program. CMS Transaction Company, LLC must submit the Contractor Responsibility Program Questionnaire and Pledge of Compliance and comply with the provisions of the Contractor Responsibility Program prior to execution of the Consent to Assignment. Host must submit the Contractor Responsibility Program Questionnaire and Pledge of Compliance and comply with the provisions of the Contractor Responsibility Program prior to execution of the Consent to Assignment. 12. CMS Hospitality LLC has been determined by Public Works, Office of Contract Compliance to be in compliance with the provisions of the Equal Benefits Ordinance. CMS Transaction Company, LLC 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 Consent to Assignment. Host 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 Consent to Assignment. 13. CMS Hospitality, LLC, CMS Transaction Company, LLC, and Host will be required to comply with the provisions of the First Source Hiring Program for all non - trade LAX Airport jobs. 14. CMS/ Hospitality LLC has submitted the Bidder Contributions CEC Form 55 and will comply with its provisions. CMS Transaction Company, LLC must submit the Bidder Contributions CEC Form 55 and comply with its provisions prior to execution of the Consent to Assignment. Host must submit the Bidder Contributions CEC Form 55 and comply with its provisions prior to execution of the Consent to Assignment. Page 7Amendment and CMS Transfer to Host BR.docx