City Council Memorandum
TO: HONORABLE MAYOR AND CITY COUNCIL DATE: APRIL 18, 2023 FROM: GENERAL SERVICES DEPARTMENT WARD: 3
SUBJECT: FIRST AMENDMENT TO GROUND LEASE AGREEMENT WITH RIVERSIDE AIR SERVICE, INC. FOR MULTI-UNIT AIRCRAFT HANGAR COMPLEX DEVELOPMENT AT RIVERSIDE MUNICIPAL AIRPORT TO EXTEND DESIGN PHASE TO JULY 30, 2023, WITH AN OPTION TO EXTEND THE DESIGN PHASE FOR AN ADDITIONAL THREE MONTHS TO OCTOBER 30, 2023 ISSUE:
Approve the First Amendment to Ground Lease Agreement with Riverside Air Service, Inc. for multi-unit aircraft hangar complex development at Riverside Municipal Airport to extend design phase to July 30, 2023, with an option to extend the design phase for an additional three months to October 30, 2023.
RECOMMENDATIONS:
That the City Council:
Approve the First Amendment to Ground Lease Agreement with Riverside Air Service, Inc. for multi-unit aircraft hangar complex development at Riverside Municipal Airport to extend design phase to July 30, 2023, with an option to extend the design phase for an additional three months; and Authorize the City Manager, or his designee, to execute the First Amendment to Ground Lease Agreement with Riverside Air Service, Inc., including making minor and non-substantive changes, including Amendments for term extensions through October 30, 2023.
BACKGROUND:
On March 25, 2021, the City of Riverside (City) issued Request for Proposals (RFP) No. 2088 for the development of an aircraft hangar complex at the Riverside Municipal Airport (Airport). On April 15, 2021, the City received one response to the RFP. The RFP response was evaluated by a panel consisting of two Airport Commissioners, the General Services Director and the Airport Manager, and determined that Riverside Air Service, Inc., met all requirements set forth in the RFP.
On June 15, 2021, the City Council approved a Ground Lease Agreement with Riverside Air Service Inc. (Riverside Air Service) for approximately 50,094 square feet of land located at 6591 Flight Road, at the corner of Flight Road and Gemende Drive, for the purpose of developing a multi-unit hangar complex. The Ground Lease Agreement term is for 35 years, with one 10-year option to extend. Monthly rent from this Agreement is shown in the phase schedule below, for an estimated revenue of $624,505 over the initial term of the Agreement.
At the end of Phase B, annual rent will increase by the annual increase in the Riverside-San Bernardino-Ontario Consumer Price Index for all Urban Consumers (CPI-U), or 2%, whichever is greater at the end of Phase B. Riverside Air Service anticipates investing approximately $2,000,000 in this project. A condition included in the RFP is the requirement for the successful bidder to attract new tenants to the Airport.
Phase
Term
Rental Rate
Phase A – Design
Up to 18 months
$0/month
Phase B – Construction
Up to 24 months
$556.60/month
Phase C – Post Construction
Up to 24 months
$834.90/month
Phase D – Remaining Term of Lease
354 months (29.5 years)
$1,669.80/month
DISCUSSION:
The Ground Lease Agreement with Riverside Air Service was entered into on September 1, 2021, with Phase A – Design Phase to be completed within 18 months, or on or before March 2023. Riverside Air Service requires additional time to complete Phase A – Design due to the current economic uncertainties with regards to material pricing, availability, and delivery scheduling.
With City approval, Riverside Air Service, Inc. (Lessee) may extend the Design Phase for an additional three months to October 30, 2023, provided the Lessee gives thirty (30) days’ written notice to the Airport Manager.
All other terms and conditions of the Ground Lease Agreement with Riverside Air Service, Inc. shall remain in full effect.
STRATEGIC PLAN ALIGNMENT:
This item supports Strategic Priority No. 3 Economic Opportunity, and Goal No. 3.3 - Cultivate a business climate that welcomes innovation, entrepreneurship and investment.
This item aligns with EACH of the five Cross-Cutting Threads as follows:
Community Trust – This airport hangar development opportunity was posted publicly in adherence with City procurement policy and the resulting Ground Lease Agreement was approved by the City Council, ensuring transparency.
Equity – All interested parties had an opportunity to submit a proposal for consideration.
Fiscal Responsibility – The Ground Lease Agreement with Riverside Air Service, Inc. will generate approximately $624,505 in Airport revenues over the initial 35-year term.
Innovation – This Ground Lease Agreement with Riverside Air Service, Inc. provides an innovative means of furthering Airport development and bringing new tenants to the Airport through private investment.
Sustainability & Resiliency – Revenues generated by the Ground Lease Agreement with Riverside Air Service, Inc. will support Airport operations and maintenance, helping to ensure the Airport’s business and financial sustainability.
FISCAL IMPACT:
The fiscal impact of this action is $624,505 in revenue during the initial term of thirty-five years. Revenue will be deposited into the Airport Fund, Airport Building & Ground Rental revenue account 0000530-346120.
Prepared by: Carl Carey, General Services Director
Certified as to
availability of funds: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/Treasurer Approved by: Edward Enriquez, Interim Assistant City Manager/Chief Financial Officer/Treasurer
Approved as to form: Phaedra A. Norton, City Attorney
Attachments: First Amendment
Riverside Air Service, Inc. – First Amendment ● Page 2