SR 03-01-2016 3A
City Council
Report
City Council Meeting: March 1, 2016
Agenda Item: 3.A
To: Mayor and City Council
From: Martin Pastucha, Director, Public Works, Airport Division
Subject: First Modification to Contract #3022 with Aeroplex Group Partners, LLC for
Property Leasing and Management Services
Recommended Action
Staff recommends that the City Council:
1. Authorize the City Manager to negotiate and execute a first modification to
professional services agreement No. 3022 (CCS) in the amount of $325,000 with
-based corporation, to
provide additional commercial real estate leasing, consulting, and property
management services for the Santa Monica Airport. This will result in a one year
amended agreement expiring on June 30, 2016 in the amount of $404,990 with
two one-year options to renew in the amount of $325,000 in FY 2016-17 and
$325,000 in FY 2017-18 at the sole discretion of the City for a total amount not to
exceed $1,054,990 with future year funding contingent on Council budget
approval.
2. Authorize budget changes as outlined in the Financial Impacts & Budget Actions
section of this report.
Executive Summary
On July 13, 2015, the City entered into a Professional Services Agreement (PSA) with
Aeroplex to provide assistance to City staff with commercial real estate leasing and
property management services for aviation properties at Santa Monica Airport.
Agreement No. 3022 expires on June 30, 2016, with two one-year options to renew at
the sole discretion of the City.
Staff anticipates that the need for commercial real estate leasing and property
management services for City-owned real estate assets in the current and future fiscal
years will exceed the current agreement amount of $79,990. Based on Council
direction, City staff is currently analyzing policy toward master tenancies. One of them,
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Gunnell Properties, is leaving on February 29. They had previously subleased to
approximately 75 subtenants. Should the City continue with any of those uses past
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departure, additional property management services will be
required since the Airport is not currently staffed to manage that large a cohort of direct
tenants . Therefore, staff recommends a first modification to increase the agreement
with Aeroplex by $325,000 with two annual renewals of $325,000 in FY 2016-17 and
$325,000 in FY 2017-18 for a total agreement amount not to exceed $1,054,990 for
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additional commercial real estate leasing and property management services for the
Santa Monica Airport.
Background
On March 24, 2015 (Attachment A) Council directed staff to contract for real estate
brokerage services and property management firms to assist city staff with commercial
real estate leasing and property management services for City-owned properties at the
Santa Monica Airport. On July 13, 2015, the City entered into Professional Services
Agreement No. 3022 (CCS) with Aeroplex for an amount not to exceed $79,990 to
provide assistance to City staff in negotiating leases for City-owned properties located
at Santa Monica Airport, including brokerage services for vacancies that might arise
within the contract period, and to provide real estate consulting and property
management services for those properties.
At present, there are a total of 306 tenants at the Airport that are directly managed by
City staff. Six of these tenants are master tenants, which have a total of approximately
323 sub-tenancies. Certain buildings that were leased by tenants became City assets
on July 1, 2015 (see Attachment A). The decision of whether we use City staff or a
property management firm to manage the additional new tenants that will come under
the direct control of the City has yet to be finalized. The property that was formerly
under the management of Gunnell will be managed by Aeroplex as of March 1, 2016
due to the immediacy of the situation.
The current agreement with Aeroplex provides for commissions for completing any
renewal, new lease, or other occupancy agreement at the Santa Monica Airport during
the contract period. The commission for a month-to-month lease term is a one-time
for longer lease terms is calculated at 5% of the gross rent and fees paid by the tenant
to the Santa Monica Airport for the term of the lease or agreement. For property
management services Aeroplex will receive a fee of 5% of the gross rent. Aeroplex will
be reimbursed for any out-of-pocket expenses that are authorized by the City related to
property management. All expenditures for the maintenance and capital improvements
from properties managed by Aeroplex will be the responsibility of the City.
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Discussion
Based on market valuations of real estate properties at the Airport, the current
contractual terms with Aeroplex, and the cost of the additional services required, will
exceed the present contracted amount of $79,990.
Leasing needs at the Airport are fluid, dynamic, and somewhat unpredictable, therefore
service and that they are available if and when the need arises beginning with the
property formerly managed by Gunnell Properties. Under the direction of City staff,
Aeroplex will use their expertise to attract new tenants, negotiate optimal lease terms in
and manage Airport properties as directed to ensure consistency with city policies. It
should be noted that commissions are paid on services rendered and the funds
requested in this contract modification are based on anticipated lease vacancies that
may occur during the contract period, specifically the imminent departure of Gunnell.
If and when master tenancies are phased out, staff anticipates additional expenditures
related to property management and leasing to increase with staff returning to Council
for additional modifications to this contract as need arises. It is also anticipated that
revenues from direct leasing will increase and offset the increased expenditures
incurred for the services described in this agreement.
Fees for commercial real estate leasing and property management services (such as
marketing and showing vacancies, responding to tenant inquiries, coordinating routine
and on-call maintenance, and responding to emergencies regarding the property) for
City owned real estate assets include $175,000 per annum for anticipated expenses
associated with property management costs. Costs to be reimbursed include, but are
not limited to, minor repairs to the leased properties, marketing costs, and costs for
approved employees hired by Aeroplex to exclusively manage properties at the Airport.
Additionally, maintenance and capital improvement costs are not included in the
services provided by Aeroplex, however, such costs will be borne by the City and
l Improvement budgets.
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Consultant Selection
On April 1, 2015, the City published a Request for Proposals for commercial real estate
firms to act as a leasing and property management agent. The RFP was posted on
-line bidding site, and notices were advertised in the Santa Monica Daily
Press in accordance with City Charter and Municipal Code provisions. One hundred and
thirty four (134) vendors were notified, 21 vendors downloaded the RFP. Five firms
(Aeroplex Group Partners, CBRE Group Inc., Corporate Realty Group, PAR
Commercial Brokerage, and Property Management Associates) responded. Responses
to the RFP were received and publicly opened on May 11, 2015.
The Airport Division of the Public Works Department and Housing and Economic
Development staff evaluated proposals based on the criteria in SMMC 2.24.073 and
listed in the RFP, including real estate, leasing, and property management experience,
references, project work plans and timelines, management team qualifications, vast
knowledge and experience of the aviation market place, proven experience in the area
of negotiating, broker, and property management services for Airport properties, and
competitive price. Aeroplex currently manage two Airport facilities in the Southern
California region, one at Van Nuys Airport and one at Long Beach Airport. Based on
these criteria, staff selected Aeroplex as the best qualified firm to assist City staff in
negotiating Airport leases at the Santa Monica Airport, including broker and property
management services for vacancies that might arise within the contract period.
Financial Impacts and Budget Actions
The agreement modification to be awarded to Aeroplex is $325,000 with two annual
renewals of $325,000 for FY2016-17 and $325,000 for FY2017-18 at the sole discretion
of the City for a total amount not to exceed $1,054,990.
Award of the agreement modification requires the following FY 2015-16 budget change:
Appropriate $325,000 from the Airport Fund to account 33431.555060 in FY 2015-16 to
fund the agreement modification.
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Future year funding is contingent on Council budget approval.
Prepared By:
Stelios Makrides, Airport Manager
Approved Forwarded to Council
Attachments:
A. March 24 2015 Santa Monica Airport - City of Santa Monica (weblink)
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Reference:
Agreement
No.10262
(CCS)