SR 06-12-2018 3B
City Council
Report
City Council Meeting: June 12, 2018
Agenda Item: 3.B
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To: Mayor and City Council
From: Susan Cline, Director, Public Works, Airport
Subject: Award Agreement to Aeroplex Group Partners for Commercial Real Estate
Property Management Services at the Santa Monica Airport
Recommended Action
Staff recommends that the City Council:
1. Award RFP# 163 to Aeroplex Group Partners, a California-based company, to
provide commercial real estate property management and related consultant
services for the Santa Monica Airport;
2. Authorize the City Manager to negotiate and execu te an agreement with
Aeroplex Group Partners in an amount not to exceed $723,692 (including a 10%
contingency) over a two-year period with three one-year renewal options in the
amount of $408,000 in year one, $405,000 in year two and $458,000 in year
three for a contract total amount not to exceed $1,994,692 over a five-year
period, with future year funding contingent on Council approval .
Executive Summary
Santa Monica Airport encompasses more than half a million square feet of leased
space currently devoted to both aviation and non-aviation uses. In pursuing the
Strategic Goal of restoring local control, City Council adopted a leasing policy in 2016
to eliminate the widespread practice of subleasing by airport tenants, substantially
increasing rent to the Airport Fund, but bringing with it greater responsibilities for
managing airport properties. Rather than expand City staff, the City currently contracts
with Aeroplex Group Partners (Aeroplex), a commercial real estate firm, to assist staff
with commercial real estate leasing, property management and consulting services for
City-owned properties at the airport. Staff anticipates the continued need for
commercial real estate property management and consulting services in future fiscal
years. Staff recommends Aeroplex Group Partners to provide these services at the
Santa Monica Airport for an amount not to exceed $1,994,692 over a five-year period.
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Background
Lease and license revenues account for approximately 70% of total annual Airport Fund
revenues which until 2028 remain by Federal law restricted to authorized airport -related
usage. The revenue derived from Airport leasing supports the City’s goals of achieving
a financially self-sufficient Airport. The increase in lease revenue ensures that there will
be no need for subsidies from the General Fund, and allows for repaying the principal
and interest of past General Fund loans.
On March 24, 2015, Council directed staff to, among other things, eliminate subleasing
at the Airport and to contract with 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 Airport (Attachment A).
This has greatly increased the number of properties managed directly by the City and in
July 13, 2015 Council authorized the City to enter into a professional services
agreement with Aeroplex for the leasing and management of some of those properties.
The current Agreement No. 10262 (CCS) with Aeroplex is for a total amount not to
exceed $1,328,340 expiring on June 30, 2018 (Attachment B).
Discussion
Staff anticipates that the need for commercial real estate property management
services for City-owned real estate assets at the Airport will continue. Eliminating sub-
tenancies, including the recent elimination of sub -tenancies at Atlantic Aviation, has
increased the demand for property management services at the Airport beyond the
capabilities of the Airport’s current resources. Under the direction of City staff, Aeroplex
would use their expertise to manage certain additional leasable spaces as directed to
ensure consistency with City policies.
The Airport manages 528 leased spaces of City-owned assets and properties. Of these
leased spaces, staff is currently responsible for 423. Aeroplex is responsible for the
remaining 105 leased spaces, which are composed of 251,000 square feet of office
space and hangars inclusive of common areas.
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The Airport Division has two full-time property management specialists who are
supported part-time by two administrative staff. Their property management tasks
include but are not limited to negotiating and executing new leases, collecting and
recording payments and processing tenant leases and commercial operation permits. In
addition, staff manages the day-to-day communication with tenants regarding repairs
and maintenance needs, and works with the City’s Facilities Maintenance and
Architectural Services divisions to address concerns in a timely and cost-effective
manner. Staff is also responsible for administering events and filming at the Airport.
Staff is currently working at capacity to provide the above services in accordance with
the City’s expectations for customer service.
The commercial real estate property management services that would be provided by
Aeroplex for certain properties at the Airport would include but would not be limited to:
marketing the properties;
negotiating terms of new and renewal leases;
administering such terms;
collecting rent and security deposits;
preparing and providing timely income and expense reports to staff;
responding to tenant inquiries;
coordinating routine and on-call maintenance; and
responding to emergencies.
Additionally, Aeroplex would provide consulting services as requested by the Airport for
property management, operational needs, and leases. Finally, Aeroplex would offer
outside counsel services to process and oversee legal matters related to property
management, such as the eviction of tenants. The outside counsel would work under
the direction of the City Attorney should the need arise to process and oversee unlawful
detainer litigation as it relates to City properties at the Airport.
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Under the proposed agreement, Aeroplex would receive a fee of 5% of the monthly
gross rent for property management services, a commission equal to one month’s rent
for negotiating new month-to-month tenancies, and a commission of 2.5% of the total
value of the term of the lease for negotiating new long-term leases (one year or more).
Additionally, Aeroplex, as part of their property management fee, would provide a
dedicated on-site employee to oversee the facilities they manage.
All expenditures for the maintenance and capital improvements of properties managed
by Aeroplex would be the responsibility of the City, but Aeroplex would provide project
management services for such projects. Consulting and legal services would be
reimbursed on either an hourly or a flat fee basis.
Consultant Selection
On March 12, 2018, the City published a Request for Proposals (RFP) for commercial
real estate firms to act as a leasing and property management agent. The RFP was
posted on the City’s 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 five vendors downloaded the RFP. The following two firms
responded:
Aeroplex Group Partners
Secured Properties Management Group
Responses to the RFP were reviewed by a selection panel of st aff from the Airport
Division of the Public Works Department, Economic Development Division, and the
Office of the City Manager. Proposals were evaluated based on the criteria in SMMC
2.24.073 and criteria listed in the RFP, including experience and techni cal competence,
conceptual plan and approach, quality control, cost of service/cost control, and business
stability and references. Based on these criteria, staff recommends Aeroplex Group
Partners as the best qualified firm.
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Financial Impacts and Budget Actions
The agreement to be awarded to Aeroplex is for an amount not to exceed $1,994,692.
Funds of $352,770 are included in the Proposed FY 2018-19 Operating Budget for
the Airport Division and Public Works.
The agreement will be charged to account 33431.555060 / 57500001-55010. Future
year funding is contingent on Council budget approval.
Prepared By: Kate Schlesinger, Senior Administrative Analyst
Approved
Forwarded to Council
Attachments:
A. March 24, 2015 Council Meeting Minutes
B. January 23, 2018 Staff Report
C. Aeroplex Oaks Initiative Form
City Council
Report
City Council Meeting: January 23, 2018
Agenda Item: 3.D
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To: Mayor and City Council
From: Susan Cline, Director, Public Works, Airport
Subject: Approval of Fourth Modification to Agreement with Aeroplex Group Partners,
LLC. for Santa Monica Airport Commercial Real Estate Management
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a fourth modification to Professional Services Agreement No. 10262 (CCS) in
the amount of $50,325 with Aeroplex Group Partners, LLC (“Aeroplex”), a California -
based corporation. The modification will eliminate provisions for Aeroplex to provide
minor repairs and maintenance of City-owned properties (reducing the contract by
$180,675) and add services for additional commercial leasing, property management
and consulting services for the Santa Monica Airport (increasing the contract by
$231,000, including a 10% contingency). This will result in a three-year amended
agreement, expiring on June 30, 2018, for a new total amount not to exceed
$1,328,340.
Executive Summary
The City currently contracts with Aeroplex to assist City staff with commercial real estate
leasing, property management and consulting services for City-owned aviation
properties at the Santa Monica Airport. Staff anticipates that the need for commercial
real estate leasing and property management services for City-owned real estate assets
in the current fiscal year will exceed the current agreement with Aeroplex.
Currently the City is negotiating a lease with Atlantic Aviation, a former master tenant
located at 2828 Donald Douglas Loop North. Under the proposed lease agreement, the
City would assume control of 22 properties previously subleased by Atlantic Aviation.
Additional real estate brokerage and property management services will be required for
these properties, since the Airport is not currently staffed to effectively manage 22
additional direct tenants. The additional real estate brokerage services and property
management services are estimated to cost $210,000 plus 10% contingency for a total
additional cost of $231,000 in FY 2017-18.
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Staff recommends that Council approve a fourth modification in the amount of $50,325.
The modification would eliminate provisions for Aeroplex to provide minor repairs and
maintenance of City-owned properties (reducing the contract by $180,675) and add
services for additional commercial leasing, property management and consulting
services for the Santa Monica Airport (increasing the contract by $231,000, including a
10% contingency). This would result in a three-year amended agreement, expiring on
June 30, 2018, with a new total amount not to exceed $1,328,340 .
Background
On March 24, 2015, Council directed staff to contract out professional services to
assist City staff with commercial real estate leasing and property man agement services
for City-owned properties at the Santa Monica Airport (Attachment A). Following the
Request for Proposals for commercial real estate firms to act as a leasing and property
management agent and provide real estate consulting, 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 the Santa Monica Airport, including brokerage
services for vacancies that might arise within the contract period, and to provide
property management and consulting services for those properties.
Due to the acquisition of additional properties that required property management
services, on March 1, 2016, Council approved a first modification to the agreement,
increasing the amount to $404,990 for year one with two one-year renewal options 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 (Attachment B).
On September 26, 2016, the City Manager authorized a second modification to
Agreement No. 10262 (CCS), increasing the minimum monthly property management
fee paid to Aeroplex from $4,000 to $15,000 to account for increased workload. The
modification did not require additional funds.
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On July 1, 2016 the City exercised its first option to renew the agreement, adding
$325,000 for brokerage and property management services.
On November 22, 2016, Council approved a third modification to Agreement No. 10262
(CCS), increasing the amount by $223,025 for FY 2017-18, for an amended agreement
total not to exceed $1,278,015 (Attachment C). The modification was requested for
Aeroplex to assume responsibility for minor repairs and maintenance of the City-owned
properties, using its own employee and contracted resources, and to assist the City in
developing a business plan for a City-owned and -operated Fixed-Base Operator (FBO)
at Santa Monica Airport. Of the modification amount, $63,340 was allocation to non-
aviation maintenance, and $16,335 to aviation maintenance in FY 2016-17.
On July 1, 2017 the City exercised its second option to renew the agreement, adding an
additional $99,000 for maintenance and repairs, and $325,000 for brokerage and
property management services.
Discussion
The Airport manages 500 leases and license agreements for City-owned assets and
properties including offices, hangars, and land leases. Of these 500 leases, staff is
currently responsible for 420, and Aeroplex is responsible for the remaining 80
properties. There are four full-time employees on Airport staff dedicated to property
management and various administrative tasks related to properties including
management of events and filming at the airport. The property management tasks
include but are not limited to: acquiring new tenants, negotiating and executing new
leases, generating courtesy notices to tenants monthly; recording of payments;
collection of late fees and security deposits monthly; preparing billing journal entries
regarding lease and license agreements monthly; tracking of tenant insurance
documentation; tracking of lease/license expiration dates; maintaining tenant contact
information; processing tenant leases and commercial operation permits, and assessing
Consumer Price Index increases annually. In addition, staff manages the day-to-day
communication with tenants regarding repairs and maintenance needs, and works with
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facilities and the CIP Project Manager to address concerns in a timely and cost -effective
manner. Airport staff is currently working at capacity to provide the above services in
accordance with the City’s expectations for customer service.
Lease Brokerage and Property Management
Currently the City is negotiating a new lease with Atlantic Aviation, located at 2828
Donald Douglas Loop North. Atlantic Aviation currently holds a master tenancy for the
property. On August 12, 2014, Council approved Airport Leasing Guidelines that,
among other things, requires the phase out of master tenant agreements and prohibits
sub-leasing. Therefore, the negotiations with Atlantic will transfer management of its
subtenants for hangars and office spaces to the direct control of the City. Once the new
lease is executed, 22 previously subleased tenancies will be reverted back to direct
oversight by the City (Attachment D).
The formerly subleased properties consist of 4,000 square feet of office space and
56,887 square feet of hangars.
Staff recommends that Aeroplex negotiate new leases on behalf of the City, and provide
property management services for the said properties. In order to provide brokerage
and commercial property management and consulting services for the additional 22
properties staff anticipates that the need for additional funding in the current fiscal year
will exceed the current agreement amount of $1,278,015.
The current agreement with Aeroplex awards them 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
payment equal to the first month’s rent, but in no case less than $1,000. Commission
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 receives a fee of 5% of the gross rent. Aeroplex is
reimbursed for out-of-pocket property management expenses that are authorized by the
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City. All expenditures for maintenance and capital improvements to properties
managed by Aeroplex would be the responsibility of the City.
Staff anticipates additional brokerage service costs of $155,500 and property
management service costs of $54,500 for a total of $210,000 plus a 10% contingency
for a total additional expense of $231,000 in FY 2017-18.
Maintenance
Staff recommends amending the scope of services to eliminate provisions for Aeroplex
to provide minor maintenance needs for leased facilities at 3100 Donald Douglas Loop
North including, but not limited to minor roof repairs, flooring, painting, addressing mold
issues, fire extinguisher annual maintenance, hangar door repairs, pest control, minor
plumbing repairs, and minor electrical services using its own employees and
contractors, consistent with the City’s procurement policy and procedures and in
accordance with any federal, state and local labor laws. It has proved difficult for
Aeroplex to provide these services, and the funds have largely remained unused. In FY
2016-17, none of the $81,675 in allocated funds were expended. These funds were
rolled over to FY 2017-18. The City exercised its one-year option to renew, adding an
additional $99,000 for maintenance services in FY 2017-18, for total of $180,675. None
of the funds have been expended year-to-date.
On November 13, 2017, the Airport hired a full-time CIP Project Manager whose duties
include supervising the maintenance and repair of City-owned properties at the Airport.
Releasing the funding for maintenance and repairs from this contract would allow staff
to ensure that funds are available to ensure that the work is completed in a timely
manner. Staff recommends that the scope of services be modified to eliminate
Aeroplex’s responsibility for minor repairs and maintenance. This change to the scope
of services would reduce the total contractual amount by $180,675.
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 the
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City’s on-line bidding site, and notices were advertised in the Santa Monica Daily
Press in accordance with City Charter and Municipal Code provisions. Twenty-one
vendors downloaded the RFP. Five firms responded: Aeroplex Group Partners, CBRE
Group Inc., Corporate Realty Group, PAR Commercial Brokerage, and Property
Management Associates Responses to the RFP were reviewed by a selection panel of
staff from 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. Based on these criteria, staff recommended Aeroplex
as the best qualified firm to assist City staff in negotiating Airport leases, 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 $50,325 for an amended
agreement total not to exceed $1,328,340. No budget modification is required for the
elimination of maintenance services as City staff will utilize the budget to perform the
required maintenance.
A budget appropriation for the additional leasing and property management services will
be included in the FY 2017-18 Midyear Budget for Council approval.
Prepared By: Kate Schlesinger, Administrative Analyst
Approved
Forwarded to Council
Attachments:
A. March 24, 2015 Staff Report
B. March 01, 2016 Staff Report
C. November 22, 2016 Staff Report
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D. August 12, 2014 Staff Report Airport Leasing Guidelines
E. 2017-18 Oaks Aeroplex renewal signed
REFERENCE:
Contract No. 10689
(CCS)