Proposed Amendments for Palomar Airport Center dba Premier Jet

1. Proposed Amendments forPalomar Airport Centerdba Premier Jet Abbreviated Presentation Palomar Airport Advisory Committee June 15, 2006

2. Background • This item originally discussed at meeting on May 18, 2006 • Some PAAC members said they did not have enough information to vote to recommend approval • PAAC voted 4 to 3, with 1 abstention, against recommending Board approval

3. Options • Drop the proposed amendments • Move forward with the statement that PAAC did not vote to recommend Board approval in the letter to the Board • Bring the item back to PAAC for additional information and discussion

4. Why a Special Meeting? • Staff calls special meetings Advisory Councils for various reasons, for example time sensitive matters or those needing detailed discussion • For issues involving complex financial analysis it can be preferable to have daytime meeting on one topic. • Some members were interested in discussing this item in more detail, so it was determined a special meeting would be best option.

5. Covered at Special Meeting • Background • Special Workshop/Meeting • Proposed Amendments • Premier Jet • Commercial vs. Non-commercial Tenants • Aviation Uses • County’s Analysis • Types of Rent • Spreadsheets • Question and Answer Period • Motion and Vote – No quorum

6. Overview of Proposed Amendments • Staff and Premier Jet have agreed to amend, subject to Board approval, two of the 5 Premier Jet leases, Lease 2 County Contract Number 75628R and Lease 3, Contract Number 75629R

7. Overview of Proposed Amendments - continued • Clarify the amount of additional rent the County will receive from long term prepaid subleases. • Upfront- Prepaid Rents • Ongoing – Operating Expenses • If additional term ever granted in future • Set County Processing fees for these types of agreements

8. Issue • There was a disagreement between the County and Premier Jet on how to handle additional rent to County for long term prepaid subleases according to the existing leases • Staff and Premier discussed differences and settled on the terms in the proposed Lease amendment, subject to Board approval

9. Staff Interpretation • Considers agreements Subleases – Premier Jet pays 5% of all prepaid rent for commercial subleases and ground rent subleases • The estimate of this amount varies depending on the percentage of commercial subleases: • At 33% $ 523,156 • At 50% $ 785,085 • At 60% $ 942,102 • At 75% $ 1,177,628 • At 100% $ 1,570,171

10. Difficult to Administer for County • There is a grey area between private use and commercial, County would have to investigate each sublease’s business prior to consent • Use could change over time and additional rent is paid upfront. It would be difficult to go back and collect once escrow is closed.

11. Other Aviation Leases • Other County leases for prepaid long term subleases or “sale hangars” typically provide alternate formula resulting in monthly payments based on square footage • Premier had agreed to share a percentage of long term prepaid subleases in exchange for other favorable terms.

12. Premier Jet Interpretation • Considered agreement transfers • Premier anticipated paying 5% on net profit only • Construction costs (approximately 78%) were to be deducted • Additional rent to County currently estimated at $352,077

13. Construction Costs • Construction costs estimated at $181.64 or 78% of total price ($181.64 cost psf vs. sale price of $225-235 psf) • Costs have risen over earlier estimates due to increased cost of materials • These numbers are estimates, not final

14. Cost to Construct (#1)

15. Clear Misunderstanding • Clearly there was a misunderstanding, because Premiers loan docs and business performas show a maximum of 5% on 1/3 of total sale price • Premier Jet had previously estimated to County that it’s additional rent for the prepaid sublease would be approximately $400,000

16. Problem’s with this Option • Leases as currently drafted are subleases not transfers • Due to cost of improvements this amount is lower than anticipated by County

17. Proposed Solution • Staff and Premier Jet have agreed to amend the lease, subject to Board approval, to clarify that long-term prepaid sublease additional rent to County will 5% of 1/3 of the total prepaid rent • Staff believes this is a fair and reasonable compromise between the 2 interpretations

18. Benefits of Proposed Amendment • More revenue to County than previously anticipated • County receives revenue now when needed for capital projects at CRQ • The amendment will relieve the County of the need to determine commercial/ non-commercial uses and validate construction costs

19. Additional Rent to County In addition to ground rent The estimated additional rent to County would be: • 5% of 1/3 of all prepaid rent = $539,981 (up front one time) • 5% of total short term commercial subleases = $11,168 (annually) • 5% of operating expenses = $10,000 (annually) • First year total $561,149

20. Premier Jet Current Monthly Ground Rent (#2)

21. Total Ongoing Premier Jet Rent (#3)

22. Compared to Other FBOs at CRQ (#4)

23. Premier Jet • Commercial vs. non-commercial mix • Types of uses