AGENDA STAFF REPORT

Agenda Item AGENDA STAFF REPORT ASR Control 18-001165
MEETING DATE:	11/20/18
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: Approve Extensions for Five On Airport Rental Car Concession Leases

ceo CONCUR

County Counsel Review

Clerk of the Board

Concur

Approved Agreement to Form

Discussion

3 Votes Board Majority

Budgeted: Yes

Current Year Cost: N/A

Annual Cost: N/A

Staffing Impact:

# of Positions:

Sole Source: No

Current Fiscal Year Revenue: See Financial Impact Section

Funding Source: N/A	County Audit in last 3 years: No

Prior Board Action: 12/13/2016 #10, 05/07/2013 #34

RECOMMENDED ACTION(S):

Approve and execute amendments for extension of Rental Car Concession Leases (On Airport) for one year with the Hertz Corporation; Enterprise Rent-A-Car Company of Los Angeles, LLC d/b/a Alamo Rent A Car and National Car Rental; Avis Rent A Car System; Enterprise Rent-A-Car Company of Los Angeles, LLC d/b/a Enterprise Rent-A-Car; and Budget Rent A Car System, Inc. successor in interest to MCR Orange, LLC, d/b/a Budget Rent A Car of Orange County, effective December 1, 2018, to November 30, 2019.

SUMMARY:

Approving the five on airport rental car concession leases will allow John Wayne Airport to continue to provide airport rental car services to the traveling public.

BACKGROUND INFORMATION:

On May 7, 2013, the Board of Supervisors (Board) awarded six leases for a five-year term, which expire on November 30, 2018, to the Hertz Corporation (Hertz/Dollar); Enterprise Rent-A-Car Company of Los Angeles, LLC d/b/a Alamo Rent A Car and National Car Rental (Alamo/National); Avis Rent-A-Car System (Avis); Enterprise Rent A Car Company of Los Angeles, LLC d/b/a Enterprise Rent-A-Car (Enterprise); Budget Rent A Car System, Inc. successor in interest to MCR Orange, LLC, d/b/a Budget Rent A Car of Orange County (Budget); and Advantage Opco, LLC. successor in interest to Simply Wheelz LLC, d/b/a Advantage Rent A Car (Advantage).

Generally, the rental car concessionaires are responsible for the development, management and operation of on airport rental car concession programs at John Wayne Airport (JWA). The existing programs consist of ready car parking areas and kiosks in the Parking Structure Level Zero and rental car counters in Terminals A and B Level One. The amendments recommended in this Agenda Staff Report extend the term of five of the six separate leases for a period of one-year commencing on December 1, 2018, and expiring on November 30, 2019.

The extension term will allow for additional parking studies and consulting services to be completed prior to the issuance of a Request for Proposal (RFP) for long-term leases at JWA. In reviewing the infrastructure needs in the Parking Structure, and more importantly the planned passenger growth in 2021 and 2026, it was established that there are deficiencies in several areas. Currently, planning and design work is being completed to correct electrical, ventilation and traffic flow deficiencies to ensure that they are adequate not only for now but for future growth of JWA.

In light of these issues and to have a better understanding of the Transportation Network Companies' (TNCs) impact on traffic flow and parking, JWA feels it is prudent to complete the necessary infrastructure work and studies and delay the issuance of the rental car concession RFP. It is anticipated that the studies will be completed and the RFP will be issued in the next 12 months.

Current Operators

Hertz/Dollar is a subsidiary of Hertz Global Holdings Inc., a publicly traded car rental company that provides car rentals, car sales and heavy equipment rentals worldwide. Hertz/Dollar is headquartered in Park Ridge, New Jersey and was incorporated in 1967 as a successor to corporations that have been engaged in the car and truck rental and leasing business since 1918 and the equipment rental business since 1965. Hertz Global Holdings Inc. finalized a deal to acquire Dollar Thrifty Automotive Group (DTAG) in November 2012 for $2.3 billion. DTAG was formed in 1990 by Chrysler as a holding company for both the Dollar and Thrifty Car Rental brands.

Alamo/National was incorporated in 1980 as a subsidiary of Enterprise Holdings, Inc., founded in 1957 and based in Clayton, Missouri. Enterprise Holdings, Inc. is a privately owned company offering car rental, car leasing, car sharing and vanpooling programs. In 2007, Enterprise Holdings, Inc. acquired Vanguard Automotive Group that operated the Alamo Rent A Car and National Car Rental brands.

Avis is a subsidiary of Avis Budget Group, Inc. a publicly traded company that also owns Budget Rent A Car and Budget Truck Rental. Avis and Budget were formed as two separate companies, the former in 1946 and the latter in 1958. Cendant Corporation acquired Avis Global Holdings in 2001 and Budget Rent A Car in 2002, which then spun off both brands into an independent company called Avis Budget Group, Inc. in 2006.

MCR Orange, LLC is wholly owned by MCR California, LLC, which in turn is wholly owned by Marita Car Rentals, Inc., a New York corporation that is a Budget RentA Car franchisee with operations in Western New York. On December 13, 2016, the Board approved Consent to Assignment of Rental Car Concession Lease from MCR Orange, LLC to Budget Rent A Car System, Inc.

Advantage entered into the lease with the County of Orange on May 7, 2013. On January 2, 2014, the United States Bankruptcy Court for the Southern District of Mississippi issued an order approving the sale of Simply Wheelz, LLC d/b/a Advantage Rent A Car to the Catalyst Capital Group, Inc. (Catalyst), including the transfer of the lease. Pursuant to the Assignment and Assumption Agreement dated April 30, 2014, Catalyst assigned its rights to an affiliate, Advantage Opco, LLC. Under the terms of the Agreement, Simply Wheelz transferred all of its interest in the lease to Advantage. On November 1, 2018, JWA was notified that Advantage will cease all operations at JWA effective November 30, 2018, and will not execute the one-year extension term. Their notice to terminate is due to an internal corporate decision.

Key Changes in Amendments

· Each of the five separate leases is to be extended for a one-year term.

· Advantage has provided notice that it will not proceed with the one-year extension agreement and will terminate all operations in Orange County on lease term end date of November 30, 2018.

· The Termination for Convenience clause was modified so that the Airport Director can, for any reason and without cause, terminate the agreement with 90 days' written notice.

· Ready car parking rent in Parking Structure shall be increased from current Consumer Price Index adjusted rate of ($0.27) to ($0.56) per square foot per month. The Ready Car Parking Area Rent is based upon the information JWA received in a survey of 7 airports conducted on January 4, 2018. The average yearly rate per square foot was found to be $8.38 or $.70 a month. Based upon the survey and our current parking rental rates, JWA is using its current rate of $.56.

· Added a marketing fund fee of $10,000 per annum, commencing January 1, 2019.

In light of the additional time it took to complete negotiations of the above amendments, the proposed lease extensions are coming to the Board less than 30 days before their proposed start on December 1, 2018.

Financial Data

The Minimum Annual Guarantee (MAG) and the percentage rent rate of 10% for each of the five rental car operators will remain unchanged during the one-year extension term. The Ready Car Parking rent will be increased to $0.56 per square foot per month. Please see table below itemizing the financials for each of the operators that will be extending their term by one year.

Operator	Annual MAG	Annual Ready Car Parking Rent ($0.27) psf per month	New Annual Ready Car Parking Rent ($0.56) psf per month
Hertz/Dollar	$ 4,010,000.00	$ 139,644.00	$ 289,632.00
Alamo/National	$ 3,002,382.00	$ 113,487.48	$ 235,381.44
Avis	$ 2,875,300.00	$ 110,480.76	$ 229,145.28
Enterprise	$ 1,758,152.00	$ 82,441.80	$ 170,990.40
Budget	$ 981,942.00	$ 63,011.52	$ 130,690.56
TOTAL:	$ 12,627,776.00	$ 509,065.56	$ 1,055,839.68

Compliance with CEQA: The proposed project was previously determined to be Categorically Exempt from the California Environmental Quality Act pursuant to Section 15301 (Class 1) of the CEQA Guidelines, which provides for the exemption of equipment installation and maintenance of an existing facility involving negligible or no expansion of use beyond that already existing on May 7, 2013, when it was originally approved.

FINANCIAL IMPACT:

Revenues for the amended leases of the six original On-Airport rental car operators were included in the FY 2018-19 Budget. The elimination of one rental car operator represents an unanticipated reduction in revenue by an annual MAG rent of $750,000 plus Ready Car Parking Rent of $49,987, for a total reduced revenue of $799,987 (based on current rental rate).

The current MAG rent for the five operators that will extend the term of their leases is $12,627,776 and $509,065.56 for Ready Car Parking Rent. Additionally, the amendments for the same five operators will generate an additional $546,774.12 in Ready Car Parking Rent revenue.

The amended leases contain a Termination for Convenience clause, which allows the County to terminate the agreement with 90 day's written notice for any reason and without cause.

STAFFING IMPACT:

N/A

ATTACHMENT(S):

Attachment A - Amendment to Rental Car Concession Lease (On Airport) with Hertz/Dollar
Attachment B - Amendment to Rental Car Concession Lease (On Airport) with Alamo/National
Attachment C - Amendment to Rental Car Concession Lease (On Airport) with Avis
Attachment D - Amendment to Rental Car Concession Lease (On Airport) with Enterprise
Attachment E - Amendment to Rental Car Concession Lease (On Airport) with Budget