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Home My WebLink About6/19/2002 - STAFF REPORTS (4) DATE: June 19, 2002 TO: City Council FROM: Assistant Director of Aviation via Executive Director- Airports CONSENT TO ASSIGNMENT OF LEASE NO. 1764 RECOMMENDATION: That the City Council approve a Consent to Assignment of Lease No. 1764 between the City of Palm Springs ("City'), and Palm Springs FBO TWO, LLC dba Million Air, Palm Springs ("Assignee") subject to a form approved and reviewed by the City Attorney. SUMMARY: This action will consent to the assignment of lease No. 1764 between the City of Palm Springs ("City") and Palm Springs FBO TWO, LLC dba Million Air, Palm Springs ("Assignee"). BACKGROUND: Million Air is trying to stabilize and continue to make their operation viable in the general aviation industry. Past practice has involved the sale of this facility every few years which has not allowed the operation to grow and prosper as it should. The current local investors are looking to sale their interest in the operation to Merced Partners Limited Partnership. Merced Partners financial statements indicate they have assets of approximately 600 million dollars, and they are looking to assist the proposed "Assignee" develop the property. The new entity ("Assignee") will be directed by Jeff Ross, President and CEO, Palm Springs FBO TWO, LLC, who is presently the President and CEO of Million Air, Palm Springs. He will keep the same administrative staff and will partner with Merced Partners, who share the belief that general aviation at the Palm Springs International Airport represents an attractive investment opportunity. Under Mr.Ross's direction,Million Air has seen a 26% higher operating profit over the prior fiscal year's income and expects this trend to continue and improve under the new arrangement. The"Assignee" has proposed making investments of approximately$9.6 million dollars in improvements. This will come from three sources: Rollover equity from Jeff Ross, Russ Knowles - Vice President and Penn! Nelson - General Manager, plus new equity from Merced Partners and debt provided by US Bank. The US Bank debt will amount to approximately on half of the total amount invested. n City Council Meeting (6/19/02) Consent to Assignment of Lease No. 1764 Page -2- The Consent to Assignment agreement prepared by the City Attorney's office, in coordination with staff and the referenced parties, is attached for your review. The Assignment will incorporate: that the new entity will assume all obligations of the Lease; that the City's consent of the Assignment is subject to the purchase of assets and other related requirements of the Lease in connection with the transactions contemplated by the Asset Purchase Agreement and is being transferred and assigned pursuant to the terms of the Asset Purchase Agreement. The proposed "Assignee" will also cover all legal expenses related to this transaction. The City Attorney's office and the Director of Finance have reviewed the financial statements and draft Asset Purchase Agreement. At its June 5, 2002 meeting the Airport Commission recommended approval the Consent to Assignment of Lease No. 1764 subject to City Attorney review and recommendation of approval to the City Council. IF ,[%,((l AL EN F. SMOOT, A. A. E. AssistaaDireltor of Aviation Executive Director -Airports APPROVED City Man�o� Attachment: 1. Consent to Assignment 2. Minute Order REVIEWED BY DEPT. OF FINANCE CONSENT TO ASSIGNMENT OF LEASE NO. 1764 This CONSENT TO ASSIGNMENT OF LEASE NO. 1764 ("Consent") is made and entered into as of the day of June, 2002, between the CITY OF PALM SPRINGS ("City"), PALM SPRINGS, FBO, LLC, a Delaware limited liability company, ("Lessee") and PALM SPRINGS FBO TWO, LLC, a Delaware limited liability company, d.b.a. Million Air, Palm Springs ("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 that certain parcels of real property within the Palm Springs International Airport ("Airport"), which parcels are more particularly described as Exhibit"A" attached hereto and incorporated herein by this reference ("Premises"). B. Pursuant to the Lease, Lease, Lessee owns the airport facility improvements that are a part of the Premises during the term of the Lease ("Improvements"). C. Under the terms of the Asset Purchase Agreement by and between Lessee and Assignee ("Purchase Agreement') a copy of which is on file with the Airport offices, Assignee, as buyer acquired all of Lessee's right, title and interest in the Lease. 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 terns of the Lease, including all of Lessee's rights and privileges under the Lease which will be transferred and assigned by Lessee to Assignee under the Purchase Agreement. D. Under the Lease, Lessee has certain rights to assign the Lease, subject to the written consent of the City. As such, Lessee and Assignee desire to obtain the City's specific consent to such assignment subject to the terms of this Consent. E. Assignor and Assignee have represented to the City that Assignee will be adequately capitalized and will be managed by the same management team that has been operating Lessee's business operation under the Lease, and thus the expertise and financial capabilities of Assignee to provide the services under the Lease are the same as those of Assignee. F. Based upon such representations, City wishes to consent to such assignment subject to the terms of this Consent. IRV#22326 yr 3 � 3 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, Lessee and Assignee agree as follows: 1. Representations. Lessee represents and certifies the following: a. To the best of Lessee's knowledge, no default presently exists under the Lease and no state of facts exist which would constitute a default under the Lease. b. That all of the above recitals are true and correct. 2. Consent and Related Aereements. a. Assignee acknowledges that it has received a copy of the Lease and is fully familiar with its terns. b. Effective as of the date of the Closing Date of June 30, 2002 referenced in the Purchase Agreement ("Closing Date"), City specifically consents to the assignment of the Lease to Assignee, including all rights and obligations of Lessee thereunder and transfer of the Improvements to Assignee, subject to the terms of the Lease. C. Upon the Closing Date, Assignee shall assume all obligations of Lessee under the Lease and shall perform all duties and obligations required to be performed under the Lease. d. Assignee acknowledges and agrees that the Lease shall control the obligations of Assignee and City, and that the Lease shall control over any inconsistent provision in any agreement that may exist between Lessee and Assignee. 3. Payment of City Costs. In consideration for City's review and consideration of the Purchase Agreement and assignment. as proposed by Lessee and Assignee. Assignee shall pay to City, within five (5) days of the date of this Consent, the sum of Nine Hundred Dollars ($900) ("Review Fee"), which Review Fee reflects, and Lessee and Assignee acknowledge and agree reflects, the City's actual cost and attorneys' fees of reviewing all documents in connection with the assignment contemplated hereunder. Assignee acknowledges that should Assignee fail to pay the Review Fee as required under this Section 3, this Consent shall be void and of no further force or effect. 4. Due Execution. The person(s) executing this Consent 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 Consent on behalf of said party, (iii) by so executing this Consent, such party is formally bound to the provisions of this Consent, and(iv) the entering into this Consent does not violate any provision of any other agreement to which said party is bound. 5. Full Force and Effect. The parties further agree that, except as specifically provided in this Consent, the terns of the Lease shall remain unchanged and in full force and effect. IRV#22326 vI _2_ 3Ay IN WITNESS WHEREOF, the parties hereto have executed and delivered this Consent as of the date written above. "City" ATTEST: CITY OF PALM SPRINGS, a California municipal corporation City Clerk City Manager APPROVED AS TO FORM: City Attorney "Lessee" PALM SPRINGS, FBO, LLC, a Delaware limited liability company By Its By Its "Assignee" PALM SPRINGS FBO TWO, LLC, a Delaware limited liability company, d.b.a. Million Air, Palm Springs By Its By Its (Corporations require two signatures; one for each of the following: A. Chairman of Board,President or Vice President;AND B. Secretary,Assistant Secretary Treasurer,Assistant Treasurer or Chief Financial Officer.) IRV#22326 vl _3_ MINUTE ORDER NO. APPROVING A CONSENT TO ASSIGNMENT OF LEASE NO. 1764 BETWEEN THE CITY OF PALM SPRINGS ("CITY"), AND PALM SPRINGS FBO TWO, LLC DBA MILLION AIR, PALM SPRINGS ("ASSIGNEE") SUBJECT TO A FORM APPROVED AND REVIEWED BY THE CITY ATTORNEY. I HEREBY CERTIFY that this Minute Order, approving a assignment of lease No. 1764 between the City of Palm Springs ("City'), and Palm Springs FBO Two, LLC dba Million Air, Palm Springs ("Assignee') subject to a form approved and reviewed by the City Attorney,was adopted by the City Council of the City of Palm Springs, California, in a meeting thereof held on the 191" day of June, 2002. PATRICIA A. SANDERS City Clerk