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Home My WebLink About9/29/1999 - STAFF REPORTS (2)DATE: September 29,1999 TO: City Council FROM: Director of Aviation ASSIGNMENT OF IAMB AND CONSENT RECOMMENDATION: That the City Council approve an Assignment of Lease and Consent between the City of Palm Springs ("City"), Signature Flight Support - California, Inc. a California corporation ("Lessee"), Signature Flight Support Corporation, aDelaware corporation ("Signature") andFahn Springs no, Inc., aDelaware limited liability company ("Assignee") d.b.a. Million Air, subject to final approval by the City Attorney and City Finance. BACKGROUND: An Assignment of Lease and Consent has been prepared by the City Attorneys office in coordination with staff and the reference parties relating to the requested transfer of Jesse from Signature to a newly formed company. A newly formed company has been formed to own and operate the Fixed Based Operator (FBO) to be purchased from Signature. The shareholder will provide the funds to purchase the assets from Signature (s4.0 million) and provide the binds for closing costs and liquidity reserves. The primary business ofthis FBO is the sale ofiet fueL Most fuel is sold by credit card transactions, tlmereforethis FBO does not carry a large accounts receivable balance. They anticipate a positive cash flow as in the past years of the business and further believe that S4o0,000, liquidity reserves should be adequate. The shareholders that currently own and operate La Quints. Aviation at the Desert Resorts Airport (Thermal) will provide equity. The new proposed owner indicated in a letter to the Director of Aviation that the shareholders as a group have the ability to provide virtually any amount of additional fiords for either operating needs or to build leasehold improvements. Mr. Jeffrey W. Ross will be the president of the new company. Mr. Ross has supervised the management ofthe VaiVBeaver Jet Center and La QW[MIRAviation FBO's. At a meeting held with KIMSignatureandPalraSpringsFBO. Signahueexph medtheprocesswherebytheyhadsolimted proposals:ffir the sale Ofthc facility and received approximately 34 company interest. They then had a short list of four to five firms and selected a newly formed company proposal. Included in the shareholders list are six senior executives of KSL Recreation. KSL Recreation owns and operates five large internationally recognized destination resorts including La Quinta Resort and PGA West. Since the proposed owner was not a nationally lmovmno in the industry, staffrequested that they be prepared to address the potential or perceived potential of general aviation corporate and private air traffic diversion to La Quinta Aviation; name identity in the industry; and their marketing program concepts. Additionally, as a newly formed company (shell corporation) what where their management capabilities and experience. With regard to potential impacts of the existing FBO at Desert Resorts Airport on the proposed operation at Palm Springs International Airport (PSP) the staff and Airport Commission would be concerned with the possibility of common control having adverse effects on any aspect of the general aviation business and PSP. The shareholders in the new company are essentially the same as the shareholders of La Quints, Aviation. W. Ross responded in a letter to the Director that their MI September 29,1999 Assignment of Lease and Consent Page 2 investors have no reason to attempt to divert business to the Thermal location in that they have a substantmUylargeri vestmenimthePalmSprmgsfamhty.Additionally,PalmSpringsnameishow the Coachella Valley is known to visitors and its reputation is important to tourist related business. They stated that approximately 50% of La Quinta Resort and Chrb's quest arrive at PSP, therefore they have many reasons to support its operation and reputation. Mr. Russ Knowles (existing general manager at PSP) will continue in his current position and that an important portion of his compensation is an incentive bonus tied to the top and bottom line perfomrauce ofthe Palm Springs FBO. He has no incentive to direct business to Tbemal FBO and similarity, thegerimalmangerof Thmmalhas abonusplanbased eatirelyonthepmfomuaum ofthat facility. For nationally (mown name identity they will once again operate the facility as a "Million Air" facility- The positive reputation of Million Air previously at PSP they believe will quickly restore the facility the Airport leadership position once enjoyed. Their marketing effort will primarily consist of a comprehensive effort to attract new business (pilots and aircraft owners) to PSP. Much emphasis will be placed on their customer service representatives that will be professionally skilled. To attract new customers they will benefit from their assomation with Million Air primarily in the area of industry trade associations, advertising and an established customer base. Additionally, Million Air will provide name recognition m the aviation community, provide established staff training programs, quality control and executive staff support. It is the intent of Palm Springs FBO, to establish a maintenance facility able to perform on turbine aircraft which they believe is a needed and growing business that should be well received at PSP. Improvement plans in the first year will focus on customer attraction and retention and providing expanded aircraft maintenance services. After the first year of operations, they will decide whether to pursue plans to build additional hanger space on undeveloped leasehold land. It is their intention to resurface the ramp area next summer, which is desperately needed. With regard to airport operations, Mr. Ross acknowledged and addressed issues of daily concern at a commercial service airport such as airport security, safety, and airline and airport cooperation. At its meeting of September 1, 1999, the Airport Commission unanimously voted to recommend City Council approval ofthe proposed Assignment ofLease and Consent subject to approval by am City Attorney and also subject to a positive financial review by the Director of Finance. The Commission further supported stags recommendation for a corporate guarantee or similar instrument to insure performance and financial obligations. �1 f II i it r Attachment: 1. Minute Order �4:a. Signature Flight Support - California, Inc. Assign of Lease & Consent AGREEMENT #1764 M06494.9-29-99 Related ASSIGNMENT OF LEASE AND CONSENT This ASSIGNMENT OF LEASE AND CONSENT ("Assignment") is made and entered into as of the _a!day of September, 1999 ("Effective Date"), between the CITY OF PALM SPRINGS, whose principal place of business is 3200 East Tahquitz Canyon Way, Palm Springs, California ("City"), SIGNATURE FLJGHT SUPPORT-CALIFORNIA, INC. a California corporation ("Lessee") and PALM SPRINGS, FBO, LLC, a Delaware limited liability company ("Assignee") with reference to the following facts and purposes: RECITALS A. City and Lessee are parties to that certain Indenture of Lease and Aeronautical Concession Agreement dated December 15, 1981, a memorandum of which was recorded on July 11, 1989, as Instrument No. 229437, Official Records of Riverside County, California, as duly amended, supplemented, assigned and extended (collectively the "Lease") covering a portion of those certain premises known as Palm Springs International Airport ("Airport") as more particularly described as Exhibit "A" attached hereto and incorporated herein by reference (the "Premises"). B. Pursuant to the Lease, Lessee owns the airport facility improvements that are a part of the Premises during the term of the Lease (the "Improvements"). C. Under the terms of the Asset Purchase Agreement dated August 31, 1999 attached hereto as Exhibit "B", Assignee, as buyer acquired all of Lessee's right, title and interest in the Lease ("Purchase Agreement"), As a result of the Purchase Agreement, Assignee desires to purchase substantially all of the assets relating to the business operation conducted by Lessee on the Premises pursuant to the terms of the Lease, including all of Lessee's rights and privileges under the Lease which will be transferred and assigned by Lessee to Assignee pursuant to the terms of the Purchase Agreement. D. Lessee and Assignee desire to obtain the City's specific consent to the assignment of all of Lessee's obligations under the Lease and Assignee's purchase of the Improvements. E. Assignee and City wish to negotiate an amendment to the Lease by extending the term of the Option Agreement executed by and between City and Lessee's predecessor, Jimsair Aviation Services, Inc. dated September 18, 1986 ("Option Agreement"), a copy of which is attached hereto as Exhibit "C", for approximately 5 acres at the Airport property fronting Gene Autry Trial, described as Parcel 4 and as specifically described in the Option Agreement ("Option Property"). e271014aw MA13292m5 i ARMW -I- MINUTE ORDER NO. 6 / r / APPROVING AN ASSIGNMENT OF LEASE AND CONSENT BETWEEN THE CITY OF PALM SPRINGS ("CITY"), SIGNATURE FLIGHT SUPPORT - CALIFORNIA INC., A CALIFORNIA CORPORATION ("LESSEE°), SIGNATURE FLIGHT SUPPORT CORPORATION, A DELAWARE CORPORATION ("SIGNATURE') AND PALM SPRINGS FBO, .., A DELAWARE LIMITED LIABILITY COMPANY ("ASSIGNEE-) D.B.A. MILLIONAIR, SUBJECTTO FINALAPPROVAL BY THE CITY ATTORNEY AND CITY FINANCE. I HEREBY CERTIFY that this Minute Order approving an Assignment of Lease and Consent between the City of Palm Springs (`City'), Signature Flight Support - California Inc., a California Corporation ('Lessee'), Signature Flight Support Corporation, a Delaware Corporation ('Signature' and Palm Springs FBO,JF14, a Delaware limited liability company (°Assigneel d.b.a. Million Air, subject to final approval by the City Attorney and City Finance, was adopted by City Council of the City of Palm Springs, California in a meeting thereof held on the 29th day of September, 1999. PATRICIA A SANDERS . ., City Clerk