Item Number: 21
City Council / Board of Directors
Written Communications
Meeting of: August 19, 2025
Submitted By:
James Murawski, Airport Director
Subject:
Standard Sublease Agreement for Buildings 676, 677 and 678 by and between the Southern California Logistics Airport Authority and The Boeing Company Recommendation:
That the Southern California Logistics Airport Authority (“SCLAA”) Board of Directors:
(1) Approve entering into a Standard Sublease Agreement for Buildings 676, 677 and 678 (“Agreement”), by and between the SCLAA and The Boeing Company, (“Boeing”); and
(2) Authorize the Executive Director to execute said Agreement; and (3) Adopt Resolution No. SCLAA 25-011 amending the 2025/2026 budget increasing budgeted revenue in Airport account 4501111A-45200 by $9,881.40 and budgeted revenue in Airport account 4501112A-45200 by $50,052.02 and decreasing budgeted revenue in Airport account 4501110A-45200 by $110,915.98.
Fiscal Impact:
The Agreement presented herein will generate approximately $21,763,399.91 in gross lease revenue over the initial term (September 01, 2025 – August 31, 2035). A maximum rent credit of $3,000,000 is contained in this lease for specific tenant improvements, which if fully realized will reduce the net income generated by this Agreement to approximately $18,763,399.91. The table below outlines the fiscal impact of the initial 4 years of the Agreement with the rent credits commencing in November of 2028.
Fiscal
Year
FY 2025-26
September 25 – June 26
FY 2026-27
July 26 – June 27
FY 2027-28
July 27 – June 28
FY 2028-29
July 28 – June 29
Revenue $1,582,027.00 $1,945,893.21 $2,004,270.01 $2,064,398.11 4 2
5 4
Rent
Credit $0 $0 $0 $(666,666.67)
Net
Income $1,582,027.00 $1,945,893.21 $2,004,270.01 $1,397,731.44 The revenue associated with this Agreement increases budgeted revenue established for Buildings 677 and 678 for fiscal year 2025/2026 and thereby requires an additional revenue appropriation for Building 677 in the amount of $9,881.40 in account 4501111A- 45200 and $50,052.02 in account 4501112A-45200 for Building 678. The Agreement decreases budgeted revenue established for Building 676 by $110,915.98 in account 4501110A-45200. The current budgeted revenue for Building 676 contains revenue for an additional building that has been bifurcated out of the Agreement presented herein, thereby causing the reduction to budgeted revenue for Building 676.
Resolution No. SCLAA 25-011 is presented herein for the purpose of requesting approval of the required budget adjustment as outlined below.
Current FY25/26 Budget
Revenue Expense
Account 4501111A-45200 Building 677 $0 $0
Account 4501112A-45200 Building 678 $977,000 $0
Account 4501110A-45200 Building 676 $975,654 $0
Proposed FY25/26 Budget
Revenue Expense
Account 4501111A-45200 Building 677 $9,881.40 $0
Account 4501112A-45200 Building 678 $1,027,052.02 $0
Account 4501110A-45200 Building 676 $864,738.02 $0
Future appropriations for the subject Agreement will be considered at the time the annual budget is approved.
This Agreement contains provisions for tenant improvements and rent credits. The agreed upon tenant improvements include a new HVAC system, a major electrical system upgrade that includes the installation of new wiring, the conversion of existing high energy consumption lights to energy efficient LED light fixtures, and the replacement of aged transformers and circuit breakers with modern equipment, hangar door system repairs and/or replacement, a restroom remodel, and office carpet replacement.
Rent credits are issued in accordance with the terms of the Agreement following substantial completion of the Tenant Improvements, after a thorough review of all cost documentation, including proof of payment, and documented pre and post tenant improvement inspections by SCLAA staff. In the case of this Agreement, the tenant has until August 31, 2028, to substantially complete the contemplated improvements. 4 2
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The rent credits for the anticipated tenant improvements are scheduled to begin in November of 2028 and will be budgeted for in the appropriate fiscal years. The maximum amount of rent credits allowed in this Agreement are fixed at a not to exceed amount of $3,000,000, which shall be applied over 36 consecutive months in an amount not to exceed $83,333.33 per month. Actual rent credits could be substantially lower, depending on what work is completed. Staff is confident the tenant improvements listed in this Agreement will add considerable long-term value to the hangars.
Strategic Plan Goal:
The City of Victorville Strategic Plan 2023-2026 identifies multi-year strategic goals and various strategies to work toward achieving those goals. Goal A fosters fiscal health through disciplined long-term planning, cost control, increased revenues, and cost recovery.
Background:
Boeing is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. Boeing also provides leasing and product support services. Boeing is among the largest global aerospace manufacturers; it is the fourth-largest defense contractor in the world based on 2022 revenue and is the largest exporter in the United States by dollar value. Boeing stock is included in the Dow Jones Industrial Average and Boeing is ranked 54th on the Fortune 500 list.
Since 2003, Boeing has been one of the largest companies to maintain operations at the Southern California Logistics Airport (“SCLA”). Given a number of positive attributes associated with the SCLA and the surrounding airspace, Boeing started performing aircraft flight tests at the SCLA in 2010. Boeing has steadily expanded operations at the SCLA to include aircraft financing via the Boeing Capital Corporation, flight test operations, and Maintenance Repair and Overhaul (“MRO”) services for its Aircraft on Ground (“AOG”) and Fleet Care divisions.
With approximately 790 employees, Boeing is the largest employer at the SCLA. Since executing their first lease agreement in 2003, Boeing has grown to its current leasehold estate that includes seven SCLA owned buildings and a ground leasehold interest.
Boeing has leased Building 676 since February 2019 and Building 678 since November 2013.
Discussion:
Boeing continues to thrive at the SCLA and desires to renew and combine their agreements for office, hangar and ramp space. The proposed Agreement for Buildings 676, 677 and 678 entails an initial term of ten-years with a commencement date of September 1, 2025. The Agreement also contemplates two additional, five-year, option terms. The Subleased Premises consist of Building 676 which is comprised of approximately 83,070 square feet of office and hangar space, Building 677 which is comprised of 3,366 square feet of storage space, and Building 678 which is comprised of 117,323 office, hangar and ramp space. Boeing has agreed to pay $158,202.70 per 4 2
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month with an annual 3% inflator. This amounts to $.85 per square foot per month for Building 676, $.23 per square foot per month for Building 677, and $.74 per square foot per month for Building 678, which is comparable with similar SCLA buildings. The rent rates for Buildings 676 and 677 will not increase with this agreement and are kept at their current lease rates while Building 678’s rate has been increased by 10% from Boeing’s current $0.67 per square foot rate.
Because the Standard Sublease Agreement will maintain local employment, produce a steady revenue stream, and will maintain airport operations, staff recommends that the Southern California Logistics Airport Authority Board approve the Standard Sublease Agreement with The Boeing Company for Buildings 676, 677 and 678 and authorize the Executive Director to execute said agreement. Such approval is being requested, subject to any minor, non-substantive modifications to the Sublease Agreement as approved by the Southern California Logistics Airport Authority Legal Counsel and the Southern California Logistics Airport Authority Executive Director.
Staff remains available for any questions or comments you may have.
Prepared By:
Lilly Franco, Airport Administrative Manager
Sam Evans, Airport Business Analyst
Jose Gutierrez, Airport Business Technician
Attachments: A. General Site Map
B. Standard Sublease Agreement for Buildings 676, 677 and 678 C. Resolution No. SCLAA 25-011