HomeMy WebLinkAbout7/16/2008 - STAFF REPORTS - 5.A. ANTON
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CITY COUNCIL STAFF REPORT
DATE: JULY 16, 2008
SUBJECT: AMENDMENT NO. 2 TO AGREEMENT 4158 WITH PALM SPRINGS
ANTON AIRFOOD, INC. FOR FOOD AND BEVERAGE CONCESSIONS
AT THE PALM SPRINGS INTERNATIONAL AIRPORT
FROM: David H. Ready, City Manager
BY: Aviation Department
SUMMARY
This action seeks City Council approval of a contract amendment with the Palm Springs
Airport's current food and beverage concessionaire, Palm Springs Anton AirFood, Inc.,
which would expand the concession space, improve customer service, provide new
"branded" products, and generate additional revenues. On April 9, 2008, the Airport
Commission reviewed the program and voted to recommend its approval by the City
Council.
RECOMMENDATION:
1. Approve Amendment No. 2 to Agreement No. 4158 with Palm Springs Anton
AirFood, Inc.
2. Authorize the City Manager to execute all necessary documents.
STAFF ANALYSIS
Recognizing that an airport's food and beverage concession program significantly
influences travelers' overall "travel experience", the Palm Springs Airport and the
Airport's Food and Beverage Concessionaire, Palm Springs Anton AirFood, Inc. (AAI)
are proposing to create an expanded and upgraded concessions program. About
seventy percent of Palm Springs' Airport users are visitors for whom the Airport and its
services provide the important "first" impression of the City of Palm Springs.
The lease amendment provides for the implementation by the City and Palm Springs
AAI of a new food and beverage concessions program which will feature more space for
concessions, nationally recognized brands, and a higher caliber of product and services
for all Airport users.
ITEM N0-_� it
City Council Staff Report
July 16, 2008 -- Page 2
Anton Airfood A4156, Amendment 2
The current lease with Anton Airfood, Inc., which continues through 2014, does not
have a sufficient term remaining to amortize the necessary investment by the
concessionaire to complete tenant improvements required to accommodate national
brands. After considerable discussion and negotiation between parties, agreement has
been reached on the terms of a lease amendment whereby Anton AirFood, Inc. will
expend $2.5 million for tenant improvements in exchange for a five-year extension of
the lease term. Through the lease amendment, the Airport will acquire brands such as
Starbucks Coffee, La Brea Bakery, Zia, and Dewar's Clubhouse Bar and Grille. Other
notable features provided in the lease amendment include a bar in the new concourse
and a new, free-standing building in the large courtyard complete with restrooms,
Starbucks, and a seasonal wine-bar.
FISCAL IMPACT:
There are two significant aspects to the financial impact of this agreement amendment:
First, in exchange for a five-year extension of the contract, Anton AirFood, Inc. is
committing to expend at least $32 million towards the improvement of capital facilities —
$2.5 million up- front in tenant improvements, and $700,000 in a mid-term refurbishment
or 'spruce-up' by the end of 2015. The City is obligated to expend approximately
$700,000 for new concession space and for the expansion of current space. The budget
for these City projects is already in place and the work is in progress.
Second, the terms for determining the rental income have changed for the better. Under
a worst-case scenario (that would include a continued slide downward in airline activity),
at a minimum the amount of rental income to the City increases from 5% of gross sales
under the old contract to 6% under the amended contract. If airline activity picks up and
gross sales increase, even higher percentages may be triggered. Over time anticipated
increases in rental income will help recoup the City's initial $700,000 contribution for site
renovations and expansion. It should be noted that the new rental income terms will not
begin until Anton AirFood, Inc. has completed its initial $2.5 million capital improvement
investment.
Overall these two factors alone make this a prudent investment for the City.
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�C;tlhomas Nol Executive Director, Airport U
David H. Ready, City anager
Attachment: Amendment 2 to A4158
AMENDMENT NO.2 TO LEASE AGREEMENT FOR CONCESSIONS
AT THE PALM SPRINGS INTERNATIONAL AIRPORT, AGREEMENT NO. 4158
THIS AMENDMENT NO.2 TO LEASE AGREEMENT FOR CONCESSIONS AT
THE PALM SPRINGS INTERNATIONAL AIRPORT, AGREEMENT NO, 4158 ("Second
Amendment") is made and entered into on this day of
2008, by and between the CITY OF PALM SPRINGS ("City") and PALM SPRINGS AAI,
INC., a wholly owned subsidiary of Anton Airfood ("Tenant")
RECITALS
WHEREAS, City is the owner of the Palm Springs International Airport ("Airport"),
and operates thereon the Palm Springs Airport Terminal building ("Terminal");
WHEREAS, City and Tenant entered into a Lease Agreement for Concessions at
the Airport, Agreement No. 4158, dated November 1, 1999 ("Lease") for food and
beverage concession services at Palm Springs International Airport.
WHEREAS, City and Tenant entered into a First Amendment to the Lease dated
September 5, 2001 to grant tenant additional concession space;
WHEREAS City and Tenant wish to enter into this Second Amendment to extend
the Lease term through November 30, 2019; revise the provision on pricing, modify the
Percentage Rent; require Tenant to remodel Celebrity Bistro, convert Desert Grille to
Dewar's Clubhouse Bar & Grille and Palm Springs Coffee Company to a Zia facility by
Freshen's, and construct and operate Starbucks, Seasonal Wine Bar and Le Brea
Bakery; and
WHEREAS, design and construction of said facilities and improvements will
require Tenant to invest or cause to be invested not less than $2,500,000.00 and
Tenant has agreed to commit to such investment; and
WHEREAS, Tenant has further agreed to reinvest within the Premises and
expend or cause to be expended an additional $700,000-00, separate and apart from
the $2,500,000.00 in facilities and improvements, no later than December 31, 2015; and
WHEREAS, City and Tenant desire to alter Exhibit "B" to the First Amendment to
the Lease dated September 5, 2001 to delete space that no longer exists and add new
space.
AGREEMENT
NOW THEREFORE, in consideration of the mutual promises of the parties
hereto and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, City and Tenant agree as follows:
Anton A4158, Amendment 2 1
1. Subsection 1.3.5 in the Lease shall be amended in its entirety to read as follows,
with all other provisions of Section 1.3 remaining unchanged and in full force and effect:
"1.3.5 Pricing. All prices charged for goods and/or services supplied to the
public on or from the Lease Area shall be fair and reasonable, based upon the market
prices charged by other competing and/or comparable businesses. Notwithstanding the
above, prices of said items shall not exceed one hundred fifteen percent (115%) of the
prices found in comparable facilities in the City of Palm Springs."
2. Subsection 2.2 in the Lease shall be amended in its entirety to read as follows,
with all other provisions of Section 22 remaining unchanged and in full force and effect:
"2.2 Percentage Rent Upon the completion of the $2,500,000 facilities and
improvement investment the Percentage Rent for the Lease Area shall be calculated
using the following percentages of gross receipts from business operations conducted
on or from the Lease Area:
6% rent for total annual gross receipts below $3,500,000.00
7% rent for total annual gross receipts from $3,500,000,01 to $7,500,000.00
8% rent for total annual gross receipts above $7,500,000,00
3. Section 6 in the Lease shall be amended in its entirety to read as follows:
116. TERM This Lease shall commence upon execution of the Lease by City.
Unless earlier terminated in accordance with Section 7 below, the term of this Lease
shall run through and until November 30, 2019 ".
4. Section 8 in the Lease is amended to revise subsection 8.5 and to add
subsections 8.8 and 8.9 as follows, with all other provisions of Section 8 remaining
unchanged and in full force and effect:
"8.5 Tenant's Failure to Timely Complete Construction. If Tenant fails to meet
any or all of the commitments and/or requirements set forth in subsections 8.8 or
8.9 within the required time as provided therein, Tenant hereby acknowledges
and agrees that it shall be deemed to be in default of this Lease pursuant to
subsection 27.1.10 and that all rights and remedies of the City under this Lease
and applicable law shall be available to City to address said default.
"8.8 Improvements during Renewal Term. Tenant agrees to perform or have
performed certain improvements or modifications to the Lease Area in
accordance with all existing and applicable rules, ordinances. codes, and laws
and further with the approval of the City in its sole discretion, including
remodeling the Celebrity Bistro, converting the Desert Grille to Dewar's
Clubhouse Bar & Grille and converting the Palm Springs Coffee Company to a
Zia facility by Freshen's, and to construct and operate a Starbucks, a Seasonal
Wine Bar and a Le Brea Bakery. Tenant agrees to expend not less than the sum
Anton A4158, Amendment 2 2
of$2,600,000.00 for the design and construction of the facilities listed in this
subsection 8.8. Said designs shall be submitted to the City for its approval which
shall not be unreasonably withheld. Tenant further agrees that said
improvements/modifications mentioned above shall be completed no later that
December 31, 2009."
"8.9 Mid-term Refurbishment. Tenant agrees that, separate and apart from the
$2,500,000,00 it shall expend for the improvements/modification mentioned in
Section 8.8, it shall expend not less than the sum of $700,000.00 for mid-term
refurbishment by December 31, 2015. Any designs/plans prepared for said mid-
term refurbishment shall be submitted to the City for its approval prior to
construction. Said City approval shall not be unreasonably withheld."
5. Exhibit "B" which was attached to Lease shall be amended and modified to
reflect the following deletions and additions:
Delete 869 SF as follows:
Sp 13 — Coffee Cart— 154 SF
Sp 16 — Coffee Stand --400 SF
Sp 2 — Cocktail Lounge - current 450 SF, new 145 SF (-305 SF)
Add 3,395 SF as follows:
Sp 12 — Outside Seating —700 SF
Sp 20 — Coffee House (Starbucks) — 1,135 SF
Sp 21 —Wine Bar-- 308 SF
Sp 22 — La Brea Bakery— 1,252 SF
The amended Exhibit "B" shall be attached to this Amendment No. 2 and shall
replace and supplant the current Exhibit "B" attached to the Lease and to Amendment
No. 1.
5. Due Execution. The person(s) executing this Amendment on behalf of the
parties hereto warrant that (i) such party is duly organized and existing, (ii) they are duly
authorized to execute and deliver this Amendment on behalf of said party, (iii) by so
executing this Amendment, such party is formally bound to the provisions of this
Amendment, and (iv) the entering into this Amendment does not violate any provision of
any other agreement to which said party is bound.
Anton A4158, Amendment 2 3
6. Full Force and Effect. The parties further agree that, except as specifically
provided in this Amendment, the terms of the Lease shall remain unchanged and in full
force and effect.
(EXECUTION PAGE FOLLOWS)
Anton A4158, Amendment 2 4
i r
IN WITNESS WHEREOF, the parties have executed and entered into this Agreement as of the date first written
above.
ATTEST. CITY OF PALM SPRING
a municipal corporation
By: By:
City Clerk City Manager
APPROVED AS TO FORM.
By:
City Attorney
CONTRACTOR: Check one: Individual Partnership_Corporation
Corporations require two notarized signatures: One from each of the following: A. Chairman of Board, President, or
any Vice President:AND B Secretary,Assistant Secretary,Treasurer,Assistant Treasurer, or Chief Financial
Officer.
BY' By
Signature (notarized) Signature (notarized)
Name: Name:
Title: Title,
State of State of
County of County of
On before me, On before me,
personally appeared personally appeared
who proved to me on the basis of satisfactory who proved to me on basis of satisfactory
evidence to be the person(s)whose name(s) evidence to be the person(s)whose name(s)
is/are subscribed to the within instrument is/are subscribed to the within instrument and
acknowledged to me that he/she/they and acknowledged to me that he/she/they
executed the same in his/her/their authorized executed the same in his/her/their authorized
capacity(ies), and that by his/her/their signature(s) capacity(ies), and that by his/her/their signature(s)
on the instrument the person(s), or the entity upon on the instrument the person(s) or the entity upon
behalf of which the person(s)acted, executed behalf of which the person(s) acted, executed the
instrument. instrument.
I certify under PENALTY OF PERJURY I certify under PENALTY OF PERJURY
under the laws of the State of California that under the laws of the State of California that
the foregoing paragraph is true and correct, the foregoing paragraph is true and correct.
WITNESS my hand and official seal. WITNESS my hand and official seal.
Notary Signature: Notary Signature:
Notary Seal: Notary Seal
Anton A4158, Amendment 2 5