Agenda Item AGENDA STAFF REPORT ASR
Control 18-000092 |
||
MEETING DATE: |
02/27/18 |
|
legal entity taking action: |
Board of Supervisors |
|
board of supervisors
district(s): |
2 |
|
SUBMITTING
Agency/Department: |
John Wayne Airport
(Approved) |
|
Department contact
person(s): |
Barry A. Rondinella (949) 252-5183 |
|
|
Dave Pfeiffer (949) 252-5291 |
|
Subject: Award Advertising Concession
Lease
ceo CONCUR |
|
Clerk of the Board |
||||||||
Concur |
Approved Agreement to Form |
Discussion |
||||||||
|
|
4/5 Vote |
||||||||
|
|
|
||||||||
Budgeted: Yes |
Current Year Cost:
N/A |
Annual Cost:
N/A |
||||||||
|
|
|
||||||||
Staffing Impact: |
No |
# of Positions:
|
Sole Source:
N/A |
|||||||
Current Fiscal Year Revenue: See Financial Impact Section
|
||||||||||
Prior Board Action: 12/05/2017
#13 |
||||||||||
RECOMMENDED ACTION(S):
1. |
Find that the proposed project is categorically exempt
from the California Environmental Quality Act (CEQA), Class 1 (Existing
Facilities) pursuant to CEQA Guidelines, Section 15301. |
2. |
Award Advertising Concession Lease for John Wane Airport to Lamar Airport Advertising and execute Lease for a term of 10 years, effective March 1, 2018. |
SUMMARY:
Awarding a lease to Lamar Airport Advertising will allow John Wayne Airport to provide a professionally designed and managed advertising concession.
BACKGROUND INFORMATION:
On December 5, 2017, the Board of Supervisors (Board) authorized John Wayne Airport (JWA) to issue a Request for Proposal, (RFP) for an Advertising Concession. The RFP was posted to BidSync on December 6, 2017, and responses were required by January 8, 2018. A non-mandatory preproposal meeting and tour of Thomas F. Riley Terminals A, B and C was conducted on December 14, 2017. Three national advertising companies attended the preproposal meeting and tour: Intersection Media, LLC (Intersection); JCDecaux Airport, Inc.; and Lamar Airport Advertising (Lamar).
Proposers were required to submit an advertising program for locations designated within Terminals A, B and C and a supplemental advertising program for additional locations and types of displays. The Board-approved RFP also outlined that the phasing and installation plan by the proposer be completed within six months of the lease commencement date. JWA is seeking interactive concession wayfinding signage with three locations at the main security checkpoints and three freestanding two-sided units, one in each terminal. The RFP required the proposal to include a comprehensive mix of digital and static displays, inclusive of six car/exhibit areas. Designs submitted will be subject to JWA final approval and must be compatible with terminal colors and finishes and consistent with JWA architectural standards.
The term of the advertising concession lease (Attachment A) is 10 years beginning on March 1, 2018, with an annual rent at the greater of: (a) $1,400,000 Minimum Annual Guarantee (MAG); or (b) 60% of gross receipts from advertising sales conducted from the leased premises. The awardee will be required to complete a midterm concession refurbishment, with a minimum capital investment of up to 50% of the initial concession investment, subject to Airport Director review and approval. The midterm concession refurbishment will help ensure that the advertising program and technology at JWA remain contemporary and competitive with current trends and methods. The MAG shall be adjusted annually to the greater of (a) 85% of the annual rent paid by Tenant for the preceding annual period; or (b) the MAG adjusted in proportion to changes in the Consumer Price Index. These terms are specified requirements in the RFP and are non-negotiable.
Below are the Board-approved rating criteria with the allotted points that were used in the evaluation of the proposals received under the advertising concession RFP:
Evaluating Criteria for Advertising Concession
Criteria |
Points |
Experience and Qualifications |
15 |
Financial Viability |
15 |
Proposed Investment |
15 |
Proposed Advertising Display
Program |
20 |
Sales & Management Plans Proposer Interview |
10 25 |
Total Points |
100 |
PROPOSALS RECEIVED
On January 8, 2018, JWA received proposals from Intersection and Lamar. JWA also received email correspondence from Clear Channel and JCDecaux Airport, Inc. stating that they would not be submitting proposals.
Each of the proposals included the required $25,000 proposal deposit. The deposit of the unsuccessful proposer will be returned when the Board awards and executes the successful proposer's lease.
Intersection
A. |
Proposer Background Intersection is the privately held wholly owned operating subsidiary of Intersection Holdings, LLC. Intersection Holdings, LLC is the result of a consortium of private investors led by Sidewalk Labs. Headquartered in New York, NY, Intersection was formed from the merger between Titan and Control Group. Intersection entered the airport advertising arena in 2011 and secured its first airport contract with JWA in 2012. Intersection is currently the sole advertising concessionaire at JWA. In 2013, Intersection was awarded a five-year contract at Charlotte-Douglas International Airport. Intersections's other airport experience includes exclusive media representation for United Airlines since 2013 and JetBlue Airlines since 2015. |
B. |
Proposer Financial Commitment Intersection proposed and estimated to make a capital investment of $900,000 over the 10-year term – inclusive of the mid-term refurbishment. Outlined in the proposal, the initial investment will be $603,000 and the mid-term refurbishment amount committed by Intersection is $297,000. Over the course of the 10-year contract, the $900,000 commitment equates to $90,000 per year. Intersection’s installation plan proposed to complete all new digital displays by the end of the first lease year. The Board-approved RFP required that the new advertising program phasing be completed within six months of lease commencement date. The omission of payroll, payroll taxes and employee benefits on the pro forma template submitted by Intersection did not demonstrate the dedicated presence of a local account manager to oversee the advertising concession at JWA. |
C. |
Advertising Program Details Intersection proposed to install digital wayfinding signage at each checkpoint, additional digital wayfinding displays at Flight Information Display Systems (FIDS), digital baggage claim screens, escalator digital displays and a variety of spectaculars, fabric banners, graphic wraps and floor exhibits. To grow local and national advertising, Intersection proposes 21 large format digital wayfinding and advertising screens. Included in the digital program is 1xNConnect, which is a municipal platform that connects authorities to its customers, and it is a central touchpoint to publish content in real time. The proposal did not identify utility requirements, nor did it clearly identify specific quantities and locations of new or existing signage upgrades. The Board-approved RFP required a detailed summary of utility requirements, types of displays and locations for each proposed advertising display unit. Intersection clarified in their oral interview their commitment to responding to maintenance and repair issues within 24 hours of notifications, although the Board-approved requirement is to address and repair maintenance issues within three hours of notification, as noted in the lease. |
Lamar
A. |
Proposer Background Lamar Advertising, the parent company of Lamar, is a publicly traded advertising corporation (NASDAQ: LAMR) and has served airports for two decades. Lamar has held Las Vegas’ McCarran Airport Advertising Concession contract since 1999 along with 20 other airport advertising contracts. Notably, by total annual airport passenger traffic, Lamar is contracted with Phoenix (PHX), Salt Lake City (SLC) and Portland International (PDX). Additionally, Lamar’s local contracts include Burbank (BUR), Ontario (ONT) and Palm Springs (PSP). Over the course of 20 years in the airport industry, Lamar has established an extensive advertising database from which to draw. |
B. |
Proposer Financial Commitment Lamar proposed two options for capital investment and mid-term refurbishment: a) a capital investment of $2,049,357 with a $1,024,679 mid-term refurbishment investment and b) a capital investment of $1,948,687 with a $974,344 mid-term refurbishment investment. Over the course of the 10-year contract, Option A equates to approximately $307,000 per year and Option B equates to approximately $292,000 per year. Lamar’s installation plan proposed to complete all new signage by August 2018, thus meeting the RFP requirement for completing the new advertising program phasing within six months of the lease commencement date. Although the estimated rent percentage listed on the pro forma is less than what Intersection is proposing, Lamar is proposing a much higher initial capital investment and mid-term refurbishment to improve and expand the advertising concession program at JWA. In addition, the payroll portion of the pro forma indicates that Lamar intends to have a strong local presence. Lamar highlights in its proposal a dedicated JWA General Manager to execute on local, regional and national advertising sales and promote the interests of Orange County and Southern California. |
C. |
Advertising Program Details Lamar proposes the installation of concourse digital gate pylons, escalator digital walls, interactive wayfinding to include two touchscreen directories on each unit, wayfinding tablets on FIDS, freestanding directories, tension fabric banners, wraps, television hold-room media, and a variety of exhibit/showcase sponsorships such as nursing rooms, pet relief areas, healthcare booths and photo booths. To grow local and national advertising, Lamar proposes a dedicated sales executive with roots in Orange County, with deep relationships with local business and tourism stakeholders. Packages of digital, experiential and static locations will be custom-created to fit each potential advertiser’s goals and budget. The proposal provides a complete equipment summary page identifying each type of advertising media, quantity, location and utility requirements meeting the RFP requirement of providing a detailed summary of utility requirements, types of displays and locations for each proposed advertising display unit. Lamar is committed to meeting the BOS-approved requirement to address and repair maintenance issues within three hours of notification, as noted in the lease. |
The proposers' financial terms are summarized below:
PROPOSER |
Intersection |
MAG commencing second annual period |
$1,400,000 (RFP requirement) |
Percent of gross receipts |
60% (RFP requirement) |
Projected rent for first annual period |
$1,815,344 |
Projected revenue to County for 5-year Pro forma |
$11,271,664 |
Initial capital investment |
$603,000 |
Mid-Term Refurbishment |
$297,000 |
Installation Plan (Board approved plan 6 months) |
Within 1 year |
PROPOSER |
Lamar |
MAG commencing second annual period |
$1,400,000 (RFP requirement) |
Percent of gross receipts |
60% (RFP requirement) |
Projected rent for first annual period |
$1,800,000 |
Projected revenue to County for 5-year Pro forma |
$10,020,000 |
Initial capital investment |
$2,049,357 |
Mid-Term Refurbishment |
1,024,679 |
Installation Plan (Board approved plan 6 months) |
Within 6 months |
Evaluation Committee Proposal Review Scores:
The total scores for the two proposers are summarized below. Individual evaluators' score sheets are provided as Attachment B.
PROPOSER |
RATER #1 |
RATER #2 |
RATER #3 |
RATER #4 |
TOTAL SCORE |
Intersection |
57 |
60 |
60 |
60 |
237 |
Lamar |
89 |
90 |
90 |
90 |
359 |
JWA conducted due diligence on Lamar, by completing reference checks with Burbank-Glendale-Pasadena Airport Authority and City of Dallas, Department of Aviation, which were both satisfactory.
JWA recommends that the Board
award the advertising concession lease to Lamar, based on the higher overall
scores it received.
Compliance with CEQA: The proposed project is Categorically Exempt (Class 1) from the provisions of CEQA pursuant to Section 15301, because it provides for the exemption of projects involving the leasing of existing public facilities involving negligible or no expansion beyond that existing at the time of the lead agency's determination.
FINANCIAL IMPACT:
The newly awarded concessionaire will pay the County annually the greater of: a) the MAG of $1,400,000 or; b) Percent Rent at 60% of gross receipts. Rent commences with the lease commencement date of March 1, 2018.
Revenues related to the lease will be included in the budgeting process for future fiscal years.
The lease contains language which allows the County to terminate the lease for cause upon 120 days' written notice.
STAFFING IMPACT:
N/A
ATTACHMENT(S):
Attachment A - Advertising Concession Lease
Attachment B - Score Sheets
Attachment C - Terminal Map