REPORT/RECOMMENDATION TO THE BOARD OF SUPERVISORS
OF SAN BERNARDINO COUNTY
AND RECORD OF ACTION
August 9, 2022
FROM
TERRY W. THOMPSON, Director, Real Estate Services Department
JAMES E. JENKINS, Director, Department of Airports
SUBJECT
Title
Revenue Lease Agreement with Threshold Technologies, Inc. for Hangar, Shop, and Office Space at Chino Airport for the Department of Airports
End
RECOMMENDATION(S)
Recommendation
CONTINUED FROM TUESDAY, JULY 26, 2022, ITEM NO. 46
Approve a 10-year revenue Lease Agreement with Threshold Technologies, Inc., for the retroactive period of August 1, 2022 through July 31, 2032, with one five-year option to extend the term of the lease, for Commercial Hangar No. 2, F-340, consisting of approximately 44,060 square feet of hangar space, 7,098 square feet of shop space, and 1,062 square feet of office space, at Chino Airport for the Department of Airports for total revenue in the amount of $2,132,433.
(Presenter: Terry W. Thompson, Director, 387-5000)
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COUNTY AND CHIEF EXECUTIVE OFFICER GOALS & OBJECTIVES
Operate in a Fiscally-Responsible and Business-Like Manner.
FINANCIAL IMPACT
Approval of this retroactive item will not result in the use of Discretionary General Funding (Net County Cost). The total revenue to be received by the Department of Airports (Airports) during this 10-year lease agreement is $2,132,433 and will be deposited into Airports budget (6315001000). Annual revenue, including an initial three-month rent-free construction period followed by a three-month rent deferment to be paid over the next four years, for the retroactive period of August 1, 2022 through July 31, 2032, is as follows:
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Period |
Annual Lease Cost |
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August 1, 2022 - July 31, 2023 |
$ 193,776 |
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August 1, 2023 - July 31, 2024 |
$ 209,924 |
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August 1, 2024 - July 31, 2025 |
$ 213,800 |
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August 1, 2025 - July 31, 2026 |
$ 217,753 |
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August 1, 2026 - July 31, 2027 |
$ 205,637 |
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August 1, 2027 - July 31, 2028 |
$ 209,749 |
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August 1, 2028 - July 31, 2029 |
$ 213,944 |
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August 1, 2029 - July 31, 2030 |
$ 218,223 |
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August 1, 2030 - July 31, 2031 |
$ 222,588 |
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August 1, 2031 - July 31, 2032 |
$ 227,039 |
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Total Revenue |
$2,132,433 |
BACKGROUND INFORMATION
The recommended action will provide for a new 10-year revenue lease agreement for the retroactive period of August 1, 2022 through July 31, 2032, with one five-year option to extend the term of the lease with Threshold Technologies, Inc. (TTI) for the use of approximately 44,060 square feet of hangar space, 7,098 square feet of shop space, and 1,062 square feet of office space for a total of 52,220 square feet, known as Commercial Hangar No. 2 (F-340), at Chino Airport for aircraft Management, Maintenance, Repair, Overhaul (MRO) operations, disassembly and reassembly, and painting; parts storage; aircraft charter; fixed base operations; aircraft fuel sales; and aircraft hangar storage and parking.
On November 14, 2014 (Item 36), the Board of Supervisors (Board) approved three 10-year revenue lease agreements with TTI from October 1, 2014 through September 30, 2024, for Commercial Hangar No. 3 consisting of 42,807 square feet of hangar space, 4,220 square feet of shop space, 12,858 square feet of office space and 52,670 square feet of ramp space (Lease Agreement No. 14-888); Commercial Hangar No. 4 consisting of 44,104 square feet of hangar space and 8,584 square feet of office space (Lease Agreement No. 14-889), and Fuel Storage Area consisting of 21,018 square feet of ramp space (Lease Agreement No. 14-890) at the Chino Airport.
On July 28, 2022 (Item 54), the Board approved a 10-year revenue Lease Agreement No. 20-629 with TTI from August 1, 2020 through July 31, 2030, with one five-year extension option, for Commercial Hangar No.1, F-330, consisting of approximately 42,807 square feet of hangar space and 8,072 square feet of office space, at Chino Airport.
TTI business continues to expand, and has a need for additional hangar, office, and storage space to accommodate the growth of its business.
On March 31, 2021, Airports requested that the Real Estate Services Department (RESD) initiate a Solicitation of Proposals (SOP) process to obtain proposals from qualified aviation-related users for the lease of Commercial Hangar No. 2 at Chino Airport. The SOP was issued from March 13, 2020 through April 20, 2020. RESD received two proposals from SoCal MRO, LLC and TTI.
On June 7, 2021, based on the evaluation criteria set forth in the SOP, a review committee consisting of representatives from RESD, and Airports recommended the proposal received from TTI. The Airport Commissioners were informed of the recommendation at the June 17, 2021, Airport Commission Meeting.
On January 12, 2022, Airports requested that RESD negotiate a new 10-year revenue lease agreement with TTI. The new 10-year revenue lease agreement provides TTI with use of 52,220 square feet at Chino Airport for a period of August 1, 2022 through July 31, 2032, with one five-year option to extend. The lease provides for an initial three-month rent-free construction period followed by a three-month rent deferment period. The deferred amount of $48,444 will be repaid over the next three years of the term for the period August 1, 2023 through July 31, 2026, at a rate of $1,345 per month, which shall be in addition to the regular monthly rent due. All water and sewer charges will remain payable as due from the commencement date of the lease and will not be waived or deferred.
Staff has reviewed the recommended action pursuant to the California Environmental Quality Act (CEQA) and has determined that it does not constitute a project. Accordingly, no further action is required under CEQA.
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Summary of Lease Terms |
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Lessor: |
Threshold Technologies, Inc. (Mark D. Dilullo, Chief Executive Officer) |
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Location: |
Commercial Hanger No. 2 at Chino Airport |
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Size: |
Approximately 44,060 square feet of hangar space and 7,098 square feet of shop space, and 1,062 square feet of office space |
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Term: |
10 years commencing August 1, 2022 through July 31, 2032, retroactively |
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Options: |
One five-year option to extend |
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Rent: |
Monthly: $16,148* Annual: $193,776 *Subject to initial three-month rent-free construction period followed by three months of rent deferment |
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Annual Increases: |
Fixed two percent commencing August 1, 2024 |
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Improvement Costs: |
Tenant responsible for all improvement costs |
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Custodial: |
Provided by Tenant |
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Maintenance: |
Provided by Tenant, except HVAC, roof, and hangar doors provided by County. |
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Utilities: |
Provided by County |
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Insurance: |
The Certificate of Liability Insurance, as required by the lease, is on file with RESD |
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Right to Terminate: |
None except due to default |
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Parking: |
N/A |
PROCUREMENT
On March 12, 2021, RESD issued a SOP pursuant to County Policy 12-04, Leasing County Airport Real Property to solicit proposals from qualified aviation-related users for the lease of Commercial Hangar No. 2 at Chino Airport. TTI submitted a response and the proposal from TTI is recommended based on the evaluation criteria set forth in the SOP.
REVIEW BY OTHERS
This item has been reviewed by County Counsel (Kristina Robb, Principal Assistant County Counsel, 387-5455) on June 27, 2022; Airports (James E. Jenkins, Director, and Maureen Snelgrove, Assistant Director, 387-8812) on June 1, 2022; Purchasing (Bruce Cole, Supervising Buyer, 387-2148) on June 27, 2022; Finance (Elias Duenas, Administrative Analyst, 387-4052, and Carl Lofton, Administrative Analyst, 387-5404) on July 7, 2022; and County Finance and Administration (Diana Atkeson, Deputy Executive Officer, 387-4376) on July 7, 2022.
(LD: 453-5349)